Omnicom Group Inc.

simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I'd like to turn the conference over to Greg Lundberg, Investor Relations. Please go ahead.

Thank you for joining our fourth quarter and full year 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, you will find a press release and a presentation covering the information we'll review today. An archived webcast will be available when today's call concludes. Before we start, I'd like to remind everyone to read the forward-looking statements and non-GAAP financial and other information that we've included at the end of our investor presentation. CERTAIN OF THE STATEMENTS MADE TODAY MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. THESE REPRESENT OUR PRESENT EXPECTATIONS, AND RELEVANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY ARE LISTED IN OUR EARNINGS MATERIALS AND IN OUR SEC FILINGS, INCLUDING OUR 2023 FORM 10-K. DURING THE COURSE OF TODAY'S CALL, WE WILL ALSO DISCUSS CERTAIN NON-GAP MEASURES, AND YOU CAN FIND THE RECONCILIATION OF THESE TO THE NEAREST COMPARABLE GAP MEASURES IN THE PRESENTATION MATERIALS. WE WILL BEGIN THE CALL WITH AN OVERVIEW OF OUR BUSINESS FROM JOHN, THEN PHIL WILL REVIEW OUR FINANCIAL RES After our prepared remarks, we'll open the line for your questions. I'll now hand the call over to John.

Thank you for joining us today. I'm pleased to report our fourth quarter and full year 2024 results were very strong and we were well positioned as we entered 2025. After I finish commenting on the quarter and the year, I'll provide you an update on the proposed acquisition of Interpublic. Organic growth was 5.2% for the quarter. This growth was driven by very strong performance in our three largest disciplines, media and advertising, precision marketing, and public relations. Our strong finish to the year resulted in our organic growth of 5.2% for the full year, which exceeded the high end of our guidance. Adjusted EBITDA margin for the fourth quarter was 16.7%. For the full year, adjusted EBITDA margin was 15.5%, in line with our target. Non-GAAP adjusted diluted earnings per share for the quarter was $2.41, up 6.6% versus the fourth quarter of 2023. In 2024, our cash flow continued to be very strong. We generated almost $2 billion in free cash flow and returned over $900 million to shareholders through dividends and share repurchases. During the year, we continue to expand and deepen our capabilities with the acquisition of Flywheel and the formation of two new strategic practice areas, Omnicom Production and Omnicom Advertising Group. Using our Omni operating platform, our teams across practice areas can connect these services, leveraging high-fidelity data sets and custom AI tools to plan, create, target, optimize, and attribute campaigns with a single workflow. We are the unrivaled leader in linking marketing to sales, allowing us to deliver measurable outcomes that drive substantial growth and ROI for our clients. Our success year after year also leads to our industry recognition. TBWA was recently named Adweek's 2024 Global Agency of the Year. Convergence announced that Omnicom Media Group had the highest billing growth rate among global media groups in 2024. Wins like Amazon, Unilever, and HP fueled over $7 billion in new business. Omnicom Media Group also ranked first in client retention rate for the year. Additionally, Omnicom's Media Group achieved the highest rating in Forrest's 2024 Media Management Services Wave, specifically emphasizing the group's transparent business practices. Finally, for the second year in a row, Omnicom was named Holding Company of the Year by MediaPost. I'm very pleased with our strategic progress and the financial results in 2024. We entered 2025 in a very strong position. Given it's early in the year, we're exercising a level of caution on our outlook for 2025. As of now, we expect organic growth to be between 3.5 and 4.5 percent and adjusted EBITDA margins to be 10 basis points higher than what we achieved in 2024. I want to express my gratitude to our people around the globe for helping us finish the year on a high note. Your unwavering dedication to delivering exceptional work to our clients places Omnicom and its agencies in an excellent position as we enter the new year. Let me now shift to the proposed acquisition of IPG and our progress since the announcement on December 9th. While we are incredibly excited about the combination of the two organizations, I want to emphasize that Omnicom and IPG continue to operate as independent businesses until the transaction is finalized. Omnicom's solid foundation and organizational structure positions us to seamlessly integrate IPG into our group once the acquisition closes. Combined, our complementary cultures in businesses will create an unmatched suite of services and products for our clients, leading to significant revenue growth potential. After closing, we expect diluted earnings per share accretion driven by strong revenues, expanding margins, and a strong balance sheet. Our combined free cash flow will also be substantial. and we expect to increase our historical capital allocations for dividends, share buybacks, as well as investments necessary to maintain our leading position in technology, data, and AI, including the integration of Axiom, Omni, and the Flywheel platform. For decades, Axiom has established itself as the gold standard for managing clients' first-party data in some of the most highly regulated industries. Axiom's client contracts are multi-year, ranging from four to six years. Its clients include seven of the top ten retail banks, nine of the top ten credit card issuers, and three of the top five pharmaceutical manufacturers and several automotive companies. When these leading first-party data management capabilities are integrated with Omni and Flywheel Commerce Cloud, we will provide the most accurate identity solution and comprehensive understanding of consumer behaviors and transactions on the buy side. This platform will drive the industry towards a higher standard of metrics, linking ad spend, sales, and value-based outcomes. Regarding synergies, we're confident in our ability to achieve the projected $750 million goal in run rate cost savings. Importantly, these cost synergies will not impact employees dedicated to servicing our clients and generating revenues. Instead, they will arise from streamlining the holding company, middle office, and regional positions, as well as from eliminating duplicative overhead, back office, and third party expenses across our larger combined global footprint. The combined company will generate approximately 85% of its revenues from its top 10 markets, with the remainder primarily distributed across an additional 40 markets worldwide. After closing, we plan to continue to support IPG's advertising brands in the marketplace while aligning them with the current operating structure of Omnicom Advertising Group. More specifically, in our top 10 global markets, agency brands will continue to be fully present in order to drive growth. The remaining markets will function under a single OAG leader who will manage the agency brands at a local level and report to a regional OAG lead. Similarly, it is our intention that IPG's other advertising and marketing services businesses will be aligned within our respective practice areas. This will enable us to combine and expand our talent, equipping them with dedicated technology and data tools, in a single practice area to optimally deliver services and products to our clients. In assessing talent, we will adopt an approach focused on selecting the best individuals across the organizations irrespective of their current affiliation. With unified practice area leadership teams at a global, regional, and country level, we will eliminate redundant roles, functions, and back-office operations, which we expect will generate cost savings exceeding $130 million. A larger portfolio of clients and businesses will enable us to combine our efforts and leverage a more centralized technology and data platform, significantly improving capital efficiency across a larger enterprise. Additionally, more resources will be available for future investments. We expect this will result in initial savings of approximately $25 million in administrative costs. The largest cost savings will result from merging two publicly traded companies. We will combine and streamline senior leadership and operation teams across finance, accounting, IT, legal, real estate, and HR. Additionally, we will eliminate duplicative G&A costs. We expect to cut approximately 40% of the company's combined corporate expenses, resulting in compensation savings of around $200 million and G&A savings of about $110 million. Establishing a unified procurement organization to maximize benefits from third-party vendors in key areas such as IT software and infrastructure, as well as duplicative third-party research and data, is projected to save more than $150 million. Integrating our internal IT and shared service organizations will improve the way we deliver services to our employees and reinforce our infrastructure and platforms. We expect to realize synergies of approximately $70 million across these areas. Aligning our real estate portfolios following the closing will yield approximately $65 million in savings, which amounts to less than 10% of the combined total rent and occupancy costs. Not included in our synergy projections are the following three areas, revenue opportunities, near and offshoring, and automation. We believe revenue growth opportunities are substantial from the combination. We will expand client opportunities on day one by offering our combined client base a broader suite of products and services. For example, the capabilities of Flywheel, Axiom, and our Precision Marketing Group will be available to a much broader set of clients. Additionally, the combined company will drive greater product and service innovation, creating new revenue streams. Following the closing, we will continue leveraging our near and offshore global centers of excellence to improve service delivery and lower labor costs. In 2024, we established four state-of-the-art centers of excellence in India and expanded our near-shore operations in Latin America. We quickly scaled up teams for Flywheel after that acquisition, and we are now ready to capitalize on a significantly larger opportunity with Interpublic. Omnicom is making significant progress in utilizing automation by leveraging new processes, platforms, and AI. We have a dedicated central team spearheading our automation initiatives and expect to expand our efforts in this area following the closing of the acquisition. As a result, I'm quite comfortable with the $750 million in synergies targeted at the time of the announcement. We anticipate identifying even more savings once the companies are combined. Going forward, we plan to provide regular updates on our progress towards this target. Regarding our efforts to close the transaction, we are well into the shareholder approval and regulatory review process. Our proxy became effective last week, and a shareholder vote to approve the transaction is set for March 18th. We also initiated the process for antitrust approval in the U.S., and we're pleased with the progress we're making. The planning for regulatory approval in 17 other jurisdictions is progressing well. While predicting the exact timing is challenging, we still anticipate the deal closing in the second half of 2025. In the coming months, we will provide further updates on our regulatory approvals. In the meantime, we're committed to maintaining our momentum. We are utilizing the time we have to plan for the integration and keeping it to a small centralized team. This will eliminate distractions for our people and ensure client-facing teams stay focused on their day-to-day roles. Thank you for listening to our call, and I'll now turn it over to Phil.

Thanks, John. As you just heard, we had a strong quarter, and our financial performance positions us well for a solid 2025. Let's begin with a review of our performance in the fourth quarter, beginning with changes in our revenues on slide four. Organic growth in the quarter was strong at 5.2%. The impact on revenue from foreign currency translation decreased reported revenue by 0.6%. If rates stay where they are currently, we estimate the impact of foreign currency translation will reduce revenue by 2 to 2.5% for Q1 2025 and 2% for the full year 2025. The net impact of acquisition and disposition revenue on reported revenue was positive 1.8%. At this time, we expect the impact of acquisition and disposition revenue will be flat for both Q1 and the full year 2025. For the full year 2024, our organic revenue growth was 5.2%, slightly above our stated goal of achieving the higher end of our target of between 4% to 5%. As John mentioned, our expected organic revenue growth in 2025 is a range of 3.5% to 4.5% based on current market conditions. Let's turn to slide 5 and review the Q4 organic revenue growth trends by discipline that are informing our annual outlook. During the quarter, media and advertising was up 7% and primarily reflected growth across our media business, with growth in advertising in the low signal digits. Growth in this discipline was particularly strong in the United States, our largest market. Precision marketing growth of 9% was very strong and benefited from year-end project spend. Overall, this was led by double-digit growth in the U.S., partially offset by mixed performance in other geographies. We expect solid growth in 2025. Public relations grew 10%, also led by double-digit growth in the U.S. as a result of U.S. election spend, which was partially offset by softer performance internationally. This brought annual growth to approximately 4%. We estimate that the benefit from election spend was approximately $25 million in Q4 and $50 million for the year. Experiential growth of 5% was solid, coming off good results from the Summer Olympics earlier this year, especially in Q2 and Q3, as well as Q1. We do not expect to see 2024 growth levels in 2025, given it is not an Olympic year. Execution and support was up 2%, reflecting continued good results in field marketing, offset by declines in our merchandising business. Healthcare revenues were down 4%. We are close to lapping a significant client loss and recent wins should start contributing to improved performance during the second half of 2025. Branding and retail commerce declined by 12%, resulting from reduced client spending in our branding agencies and lower performance in retail commerce, some of which reflects budget allocation where clients move spend to retail media. Turning to organic revenue growth by geography on slide 6, our largest market, the U.S., had organic growth of 10%, finishing off the year on a strong note. Although several markets in Europe, the Middle East, and Asia Pacific delivered strong growth, they were offset by negative performance in other markets within these regions. Our businesses in Latin America delivered strong growth, driven by media and advertising. Slide 7 is our revenue by industry sector for the quarter and year to date. Overall, our portfolio remains stable as well as diversified. The only notable shift is a two-point increase in consumer products for both the quarter and the year, driven by the flywheel acquisitions. Now let's turn to slide 8 for a look at our expenses. In the quarter, salary-related service costs were flat, with growth from our acquisition of Flywheel, offset by repositioning actions in the second quarter, and our ongoing efforts to nearshore, offshore, and increase productivity. Third-party service costs grew in connection with the growth in our revenue, especially in disciplines that have a higher level of these costs, such as media, experiential, and field marketing. Third-party incidental costs, which are out-of-pocket costs billed back to clients at our cost, were up slightly. Occupancy and other costs, which include office rent, other occupancy, technology, and general office expenses, increased primarily due to the flywheel acquisition. SG&A expenses decreased due to general cost management. Included in the fourth quarters of both years are approximately $14.5 million of acquisition-related costs for Flywheel in 2023 and the IPG transaction in 2024. Please turn to slide 9 and look at our income statement in more detail. Operating expenses in the fourth quarters of both 2024 and 2023 reflect these acquisition costs related to IPG and Flywheel, respectively. Removing them from both years, fourth quarter non-gap adjusted EBITDA grew 6.6%, and EBITDA margin was flat year over year at 16.7%. For the full year 2024, our adjusted EBITDA margin was 15.5% compared to 15.6% in 2023, in line with our guidance for 2024 by balancing ongoing cost savings initiatives with continued investments in technology platforms and tools for future growth, as well as costs related to the integration of Flywheel. For the full year 2025, on a standalone Omnicom basis, We expect adjusted EBITDA margins to improve by 10 basis points as we continue to balance cost savings initiatives with strategic investment opportunities that we believe will continue to drive strong future revenue and EBITDA growth. Moving down the income statement, net interest expense in the fourth quarter of 2024 increased by $11.3 million to $38.1 million. The change was driven by a $12.4 million increase in interest expense due to higher outstanding debt, primarily from the $600 million of euro bonds we issued in Q1 2024 in connection with the Flywheel acquisition, offset by a $1.1 million increase in interest income due to higher average cash balances. Our income tax rate of 26.4% in Q4 2024 was flat with the prior year. For the full year 2025, we expect the rate to be between 26.5% and 27%. Net income growth of 5.2%, coupled with fewer diluted shares outstanding from our share of purchase activity, drove a 6.1% lift in diluted earnings per share. On an adjusted basis, excluding after-tax amortization, Q4 2024 diluted earnings per share was up 6.6% to $2.41. Note that the negative impact of foreign exchange translation resulted in a reduction of $0.02 per share, also on an adjusted basis, for Q4 2021. and $0.05 per share for the full year. Now please turn to slide 10 for a look at free cash flow. For the year, our free cash flow grew 4.2%, driven primarily by improved operating income and net income. Our free cash flow definition, like other peers, excludes changes in working capital. For the full year 2024, our working capital improved once again by 50% to a use of $231 million, as you can see on slide 18. We expect our strong performance will continue and bring us back over time toward our historically neutral annual level. Regarding our primary uses of free cash flow for full year 2024, we used $553 million of cash to pay for dividends to common shareholders and another $85 million for dividends to non-controlling interest shareholders, both roughly the same level as 2023. Our capital expenditures were $141 million. Levels were higher in 2024, reflecting ongoing investments in Flywheel, our strategic technology platform initiatives, and investments in our facilities. Total acquisition payments, which include earn-out payments and the acquisition of additional non-controlling interests, were $998 million, which primarily reflects the acquisition at the beginning of the year of Flywheel for $845 million, net of cash acquired, and the late September acquisition of LeapPoint. Finally, our share of purchase activity was $371 million, excluding proceeds from stock plans of $102 million, which is in line with our expectation that repurchases would be lower than our recent historical average of approximately $600 million due to the flywheel acquisition. For the full year 2025, we expect to return to the $600 million repurchase level. Slide 11 is a summary of our credit, liquidity, and debt maturities. At the end of 2024, the book value of our outstanding debt was $6 billion, up from the end of 2023. Changes during the year included the issuance of 600 million 3.7% Euronotes related to the flywheel acquisition as well as the issuance of 600 million 5.3% U.S. dollar notes, which was used for most of the repayment of our 750 million 3.65% U.S. dollar notes in November. Looking forward, we have no maturities in 2025 and expect to address our April 2026 maturities after the expected closing of the IPG acquisition in the second half of 2025. We estimate net interest expense to increase in Q1 of 2025 by approximately $7 million, reflecting the full quarter impact of the Euronotes we issued in February of 2024 and an expected increase in pension-related interest expense. We also estimate that net interest expense will increase by $15 to $20 million for the full year, primarily related to lower estimates of interest income beyond Q1. Cash equivalents and short-term investments at September 30th were $4.3 billion, in line with levels at the end of 2023. We continue to maintain an undrawn $2.5 billion investment revolving credit facility, which backstops our $2 billion U.S. commercial paper program. We will assess our revolving capacity in connection with the closing of the proposed IPG acquisition. Slide 12 presents our historical returns on two important performance metrics with the 12 months ended December 31, 2024. Omnicom's return on invested capital was 25%, and return on equity was 38%, both of which consistently reflect our strong performance and strong balance sheet. Slide 13 is a summary of the potential IPG acquisition, which highlights what we believe are the very compelling merits of the transaction. As John discussed, we believe the combination will drive exceptional future growth opportunities. In closing, 2024 was a very solid year for Omnicom. We delivered organic revenue growth of 5.2%, adjusted EBITDA growth of 6.1%, and adjusted EPS growth of 5.5%. We made important investments in our platform's while maintaining our strong adjusted EBITDA margin level. Our free cash flow grew by over 4%, and we significantly reduced our use of operating capital. We executed two key financings, closed on strategic acquisitions, and announced the transformative acquisition of IPG. I will now ask the operator to please open up the lines for questions and answers. Thank you.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. And we'll take our first question from Adam Berlin at UBS.

Hi, good evening. Thanks for taking two questions, if I could. The first question is, 2024 organic growth ended up above the top end of your guidance range. Can you talk a little bit about what happened in Q4 that meant things ended up better than you expected? Was it just more ad spend, a couple of clients investing more, or was it around precision marketing? Just what beat your expectations in Q4? And the second question is, I'm a little bit surprised that you've guided for a slowdown in organic growth in 2025, given the strong account wins you've had both during 2024 and a couple of things announced at the beginning of 2025. Can you just explain your thinking about why you think growth is going to slow down or are you just being a bit conservative because it's the beginning of the year?

Thanks. Do you want to take the first one?

Yeah, I'll take the first one, Adam. Yeah, I think we certainly expected to finish at the top end of the range. 5-2 versus 5 isn't really that significant of a difference. in the scheme of things, but certainly the media business and precision marketing performed quite well in the fourth quarter, as well as the PR practice group as it related to the U.S. election. Some of that spend in the fourth quarter. Those are probably the key drivers of people or businesses coming in a little bit higher than we expected from a positive perspective in the fourth quarter. So I think those are the key drivers.

And Adam, with respect to the guidance, I think I, in my prepared remarks, when I talk about it, I indicate that we're cautious. 25 is going to prove to be a very interesting year. But with all the changes in the U.S. government, just the mere change, plus some of the policies that they're considering and the implications they possibly have on things like the auto sector and other sectors. We're not pessimistic. We still remain optimistic, but I think we're going to be conservative at this point in the year until we get a little bit further along and a bit more guidance from our clients.

Thanks. Very clear.

We'll move next to David Karnowski at JPMorgan.

Hey, thank you. John, just following up on the merger, can you discuss a bit what's been the reaction so far from clients? What are the points of excitement versus reservation, and how are you addressing any possible concerns? And then for Phil, on the margins, the guide through MOSA 24 was for more or less flat, so your result was in that target, but wanted to see if you could review What factors push that on balance to the slightly negative side, you know, including flywheel, new business or investments? And then as we look to 25, can you just walk through the puts and takes of that margin moving up 10 basic points in the guide? Thanks.

Sure. In terms of clients, every client that I've been in contact with and most of my principals who lead other businesses have been very constructive and see the possibilities coming out of the combination of both omnicom and public. I haven't heard any concerns that we weren't able to address. As I said in my statement, we still do have to operate as two independent companies, so we're still operating as two independent companies until we get through the regulatory period. But we're able to plan and start to identify products and services that One of us have that we can offer to a larger bench on behalf of the other and vice versa. We've also spent time. We'll spend a little bit more time later this month with consultants involved in advising clients in terms of reviewing their business, be the positively constructively or putting the business in pitch. And we've gotten a very favorable feedback from, from those folks. And we will continue to communicate. to everyone on a regular basis as we go through this process. We do feel that we've made very good progress, especially since we announced right before the holidays and we had to work through the holidays to get some of the regulatory filings done in the U.S. and some things done. We haven't heard any concerns and we don't anticipate concerns because of what's in each of our portfolios to date. And we want to keep the client consultants informed because oftentimes they're the first people that clients reach out to if they're considering making a change. So they have a pretty clear understanding of what to look forward to. So we're bullish and we remain bullish on the transaction and Some of the heavy lifting from a regulatory point of view is really behind us in the last 10 days or less. So we'll do more planning going forward.

Regarding margins, David, probably about a year ago we said we expected margins to be close to flat. And in our updates throughout the year, We indicated we were going through a process of integrating flywheel. Margers were down probably 10 basis points or so in the first quarter last year. And, you know, I think we're always trying to find the right balance of investing to support long-term sustainable growth. And, you know, at the same time, maximizing our EBIT growth and the margin falls out. Certainly, we got the flat margin in Q4 as we anticipated and expected. And I think as we look out at 2025, certainly our goal is to show some margin improvement while at the same time balancing those investments that we talk about in the prepared remarks and have talked about on all of our calls. You know, the marketplace continues to change pretty rapidly. And we continue to invest in the businesses that we think are going to drive our growth in a sustainable way into the future. And we do try to manage that balance all throughout our planning processes and our execution processes. So we expect to continue with our efficiency efforts, automation offshore, et cetera, to drive the cost structure down as best we can and be as efficient as we can. so that we can continue to invest and provide that base for sustainable long-term growth. So I think we're comfortable with the expectations right now for 2025, and we're going to continue to drive the business forward.

Next, we'll go to Tim Nolan at Macquarie.

Thanks a couple of integration questions. If I could, you've referenced flywheel a couple times already. Just wanted to check on where the status of the integration that is now basically a little more than a year in and likewise an IPG. My question is you've done quite a bit of work to consolidate office right word to use, but to concentrate your activities with Omnicom advertising group and the production platform and so forth. I'm just wondering how IPG fits into that sort of pre existing. concentrated Omnicom?

Sure. Let me do the last part of that question first. What I said in my prepared remarks is really the reality between the two groups. If you look at 85% of our revenue is both Omnicoms and IPGs are generated in the top 10 markets. When putting aside the integration for a second at Omnicom last year, what we did was we kept the brands alive in those top markets. And we took a hard look at the other 35 to 40 markets we operate in and said, what's the best way to efficiently run these offices, both to the satisfaction of the client. the people themselves working in those offices and create as many career opportunities as possible. And as a result, we came up with OAG. And OAG allowed us to take overheads and inefficiencies and set realistic expectations based upon the market as to what the growth in those markets should be. And we are planning to follow a similar process here with uh when when and if we're successful in completing the transaction within public the major markets where where everybody's constantly focused and should be because they're the places that generate the greatest growth will be left uh and supported effectively in the way that they are um when we get there's other 40 markets we're going to take a look and say, what is the best way to organize that individual market? For Omnicom so far, it's been to set up OAG. We think, although we haven't done the work yet, we think that when we sit down and speak to the people at Interpublic, which will be permitted as we get further and further through this regulatory period, we're going to find the same result when we do that planning. In my comments, I was pointing to our intention at this point based upon the knowledge that we have. And as long as that knowledge works out, we'll follow the same pattern. If we find something that will have to be treated differently because it contributes to our ongoing growth, we will treat that differently. So I don't know if that helps out, Tim, or if that answers your question or not.

Yeah, no, that's very helpful. Thanks, John.

John Potter, And on flywheel. John Potter, and fly flywheels integrate. John Potter, flywheels team is very much a part of the central team we pitch businesses my prepared remarks I probably took out a paragraph, because I thought I was carrying on a little long about the mutual wins that we had during the year, and there were numerous.

John Potter, Great thanks so much john.

We'll move next to Cameron McVey at Morgan Stanley.

Thanks. I was hoping you could talk a little bit about the campaign management tools coming out of the big tech platforms, notably Performance Max or Advantage Plus from Google and Meta. I'm curious if they're impacting client share or growth rates at all, or maybe these platforms are targeting SMBs and the end of the market, which aren't historically clients. Any color on how you're thinking about that would be helpful. Thank you.

I think most of the impact, if there is any impact going on present, it's really with the SMBs and not our normal client base. Having said that, we have a very robust program going on with several thousand of our creative and strategists who are testing all large language models. Because a different large language model may be more applicable for a certain task or a certain outcome, depending upon what the person's asked to do. So we have a very active program going on where we're seeing, we're doing it in a way that our people can utilize those tools the best way they see fit and the most appropriate way they see fit, and one that is compliant in our understanding of the regulations, both privacy plus copyright and all sorts of other concerns. If you're not a small business unit, you don't have to place as much concern about as you would if you were a large multinational corporation, which tends to be what our clients are. But we're very active with it and it's being actively used and tested every day. Prior to this call, I had Jeff Goodby in my office who has 40 people in his agency in San Francisco working on it. And he was asking if he could expand the number of people who have access to the system. And that was literally less than 45 minutes ago, which we gave him permission to do. So this is growing every day. And there's a new tool or capability that's appearing every day. We just saw it in this past week or so with the Chinese introduction of their large language model. So we're in a very, very early stage of development, but a very impactful stage of development as we move into the future.

Thanks, John. That's helpful. And then just secondly, I did notice a number of partnership announcements out of CES. I'm curious if you could dive a little further into those, particularly with Google, Amazon, TikTok, maybe what that means for Omni's capabilities going forward.

You know, I prepared for everything, and I was there at CES. I know that I read them all ahead of time. I didn't focus on anything for this call.

We can certainly pick it up, Cam, when we talk post-call, if you'd like.

That's a constant problem. One thing I will add, it's a wonderful relationship with all those major players, and we're constantly working with them and getting access to what we feel are the best, most appropriate tools. Phil and company will give you the more specifics.

The primary focus of some incremental benefits is access to some of the data that is very unique to their platforms that we'll be able to access and use for the benefit of our clients. Our media people and our media teams are certainly very excited about it, and it is kind of a unique thing. across each of those platforms in terms of the partnerships that are recently announced.

Got it. Thank you. Sure.

Next, we'll move to Jason Bazinet at Citigroup.

I just had a question on share buybacks. I think you guys talked about potentially not buying back a lot of stock in the fourth quarter. But I think that was sort of before the transaction closed, or transaction was announced on December 9th. Maybe you're in a blackout period or something. But do you mind just talking a bit about your sort of posture as it relates to buying back stock, given that your shares are down a fair amount since the IPG announcement was made? Thanks.

Sure. We certainly intend and have indicated in our prepared remarks that that we will be back in the market in terms of buying back shares in 2025. We did reduce the annual buyback amount in 24, primarily because in January, you know, right to start off the year, we did the flywheel acquisition. We did a financing associated with that. And we indicated on the February call that we were going to reduce the amount that we bought back in calendar 24 in terms of the use of our free cash flow at that time. And in fact, we said we'd probably buy back about half of the annual amount. We ended up buying back a little bit more than that before the end of 2024. We certainly expect to get back to the $600 million level in 2025. And we are going to have to navigate one or two blackout periods associated with the transaction. um but certainly um um you know we have a strategy in place to be able to buy back shares at least to that 600 million dollar level and expect to do so uh during the calendar year um 2025 so i i think you should expect a more normalized approach in 25 um it may be a little bit different in terms of the timing because of the um the transaction and the regulatory process but but certainly that's our our expectation.

The only thing I'd add is rest assured that I think I'm the largest single shareholder. So I'm as interested in these things maybe a little bit more than the average listener. So we totally agree with you. We haven't changed our approach.

OK. Thank you very much.

Sure.

And we'll go next to Craig Huber at Huber Research.

Yes. Hi. Good afternoon. John, can you talk a little bit further about revenue synergies with the IPG transaction once it closes here? I mean, having known you guys for a number of years, it seems like you would have done this just for the $750 million of cost savings, which you seem pretty constructive on that front. But talk a little bit more about the revenue synergies other than just Axiom Flywheel. Where else do you think you guys can drive some revenue synergies? And is there an idea in your head about where you're thinking what it could maybe add up to and maybe add a couple hundred basis points to growth in the first year, first or second year. Thank you.

I am confident that there's quite a bit of revenue upside. I have to start with media. We have a very elaborate and very mature principal media business to start off with. If you just reference prior conference calls that Philippe has been on, he's indicated that they were trailing behind the competition in the implementation of that and that they were in the process of perfecting their program. Us coming together will make that available to their suite of clients in addition to our growing suite of clients. That's number one. Number two, There really are two companies that stand out as having unique credibility as first party data companies. One is Epsilon, the other is Axiom. I think that my competitor has done a very good job of creating some products based upon the information and the data that Epsilon generates and creates. We've had conversations to the extent that our lawyers will permit it with the Axiom group. And we see a whole suite of incremental products that will be brought into the joint company and made available for the first time to Omnicom's clients. And so we see very reasonable revenue growth associated with that. On the back of that, what's going on and it'll go on during the regulatory period through 25 and take have more and more of an impact every month as we go forward. These investments we're making in AI and some of the large language models that are occurring will make us more efficient, will make the product and the efforts that we're engaged with on behalf of clients more efficient and And as we get more efficient, we're getting more measurable and any media, any dollar spent, um, that is more measurable and does get a definable ROI for a client. I've never seen a client where we've been able to present those facts, um, not double down and spend growing their business because that's what their, their aim is. So. So there's two things going on. This will allow us to pick up tools and activities that otherwise we didn't have in our portfolio and utilize them in a unique way, number one. And number two, it will allow us to advance and spend more resources generated from our free cash flow of the combined businesses on this technology, its development, and how we're going to deploy it to the benefit of our people and also for our clients.

Great. Thank you, John.

We'll take our final question from Stephen K. Hall at Wells Fargo.

Thank you. John, maybe first just a follow-up on these same themes. You've talked a lot about the revenue acceleration on the combination with IPG, and you said you're able to now do some planning together. When are you able to start to go into pitches together? I think one of the best ways to prove to the market that this merger is offensive and not defensive is showing that revenue acceleration. So I'm wondering at what point you'll be able to put that combined capability together in front of clients and start to convert that into business. And then, Phil, we've always looked at IPG on a net organic revenue growth basis, and you talked about some of the drivers and third-party costs in the quarter. Is there any way to think about Omnicom from a net organic revenue basis at the moment so we can put those kind of apples to apples? Thank you.

Hey, Steve, if you could see me, you'd see that I have a lawyer on my right shoulder, And he hasn't left me since December the 9th. And what he points out to me is the rules of engagement, and especially during the regulatory period. And there are pretty, well, not pretty, there are defined rules as to how the companies have to operate until we get the approvals that we need to combine. As a result, we cannot go and pitch somebody's Richard Schauffler, Jr.: : Opportunities together, which would be the natural thing to do. Richard Schauffler, Jr.: : I have examples of a couple of clients that we actually share. Richard Schauffler, Jr.: : And the only time that you'll find an omnicom into public person in the same room is if the incline insist on the meeting because we're not permitted to get there yet. Richard Schauffler, Jr.: : But that's the negative side of it, the positive side of it is we're able to test and identify these products. and identify the clients, either us identifying through our client portfolio or them identifying through theirs, the clients that would be open to and would be excited about understanding these products and how they would positively impact their businesses. So it is a bit of a temporary pause because we're required to, but we're not wasting that time. We're utilizing that time to plan how we're going to deploy these as quick as humanly possible when we get permission from the regulatory authority to do so. I'll leave the second question to Phil.

Yeah, regarding the concept of net versus revenue as we're required to report, I think the bottom line is no different for us. Those costs, the third-party service costs, are an integral part of the business. We manage them as such, and we don't exclude them from how we manage and measure our performance. So I wouldn't expect that to change, and certainly if people want to make their own estimates, they can feel free to do so, but we're going to be consistent with our reporting and we're going to include the costs that are part of the business, and we're going to manage them because they're costs that are part of the business. So I don't think the expectation is that we're going to change our approach in the near future.

Thank you. Sure.

And that concludes the question and answer session. Thank you for your participation in today's conference call. You may now disconnect.