Okay. Good morning, everybody. I'm Ben Swinburne, Morgan Stanley's U.S. Media Analyst, and we are here with Ellen Johnson, the CFO of Interpublic Group. IPG is one of the world's largest advertising and marketing services companies, and Ellen has been with IPG since 2000. Ellen, good to see you, and thanks for coming to Barcelona. Thank you for having us. Absolutely. So, as you know, there's a lot going on in the world, particularly from a macro point of view. Maybe before we attempt to unpack the global economic outlook, you know, what are your priorities for the company as you round into 2023, and how are you thinking about managing through all the, you know, sort of cross-currents right now in the macro environment? Sure. So, as you mentioned, I've been with IPG for a long period of time, and the strategic priorities, for a large part, remain the same. You know, what we've been trying to do is really embed, use technology and embed data into everything we've done. And, you know, we had that belief many years ago not to silo things, but to really take the digital and to embed it into all of our offerings so we can make our offerings continuously smarter and move up the value chain and help our clients solve business issues. We've also always believed in agency brands. We find that that's a great way to attract the best talent in the industry because people wanna work for a brand and a culture. We also have a unique way of pulling it together in what we call open architecture, where we make it very simple for our clients, but we bring together the best of IPG in a seamless way to offer our clients the most integrated offering, and then our balance sheet and financial flexibility have always been important, as has capital return, and those things remain strong and remain the same. As far as looking ahead at 2023 and the macro uncertainties, we're coming in from a place of strength, but look at the last nine months, we've grown at 9%. I look at our three-year stack, we've grown at almost 16%. Starting from a very strong place of momentum and strength, the data shows that for companies who continue to spend through a downturn, they wind up being stronger and better, and that you really need to keep your share of voice amongst your market share. Clients seem to understand that. But you know, as we mentioned on our last earnings call, there is a lot of uncertainty out there, and we are having certain contingency planning conversations with our clients where they're really looking to us as their trusted advisor to say, "If we need to shift spending, where should we shift it?" or "If we need to trade out of capabilities, which ones do you recommend?" but we know that the limited visibility is a short-term phenomenon. Mm-hmm. And that we really believe our clients understand the importance of what we do. So we're extremely bullish, you know, once we get past this, Mm-hmm. Short term. And when clients, like Morgan Stanley, ask for contingency planning advice, I'm sure it does vary by client sort of what the answer to that question is, or are there areas of spending that usually we will address first versus others? We have 5,000 clients. The conversations are quite varied. Yeah. It really depends upon what your goals are and what you're trying to accomplish. Yeah. But the role of a trusted advisor is we can help them navigate those types of decisions. Are you guys seeing different trends in different regions around the world, or are there different categories of advertisers that you're seeing, you know, either more or less, concerned right now? So if you look at our growth between the U.S. and international, it's been pretty well balanced. Mm-hmm. We're U.S.-heavy, which we think is a strength, but if you look regionally, we've done very well in LATAM and what we call other, which is Canada, the Middle East, and Africa. We've also done extremely well in Europe. We are watching that given the macroeconomic and the proximity Europe is, but it's been a strong point for us as well. We've grown solidly in Asia and the U.K. Both of them have been a little bit more mixed. China, which is small for us, but it has been a bit of a drag on Asia, and the U.K., while we've had certain agencies which have done phenomenally, we've had others, whether it was spending for COVID, but it's now reduced. Mm-hmm. But overall, very strong growth. Okay. One of the questions I get a lot, and I would love to hear from you on, is around the difference between the strong growth we're seeing from the Interpublics of the world and the less robust growth from the big digital media players that obviously investors who invest in the public markets focus on, like Meta, Google, etc. What's your answer to sort of your, you know, 9% year to date versus, numbers lower than that from, you know, really the dominant digital platforms? So that's a business that's adjacent to ours, but not ours. And I think there's more things going on there beyond just macroeconomic factors. I would say that there's a bit of share shift. There's more fragmentation coming on with more players and more choices, whether it's the advent of, you know, retail media coming, connected TV. And so I think there's share shift, there's further fragmentation. And then also their clients tend to be more small and mid-sized enterprises where we skew to larger multinational clients. Yeah. Some are concerned that it's a timing issue that those businesses, you know, you can pull back from spending on those platforms relatively easily if you're an advertiser, whereas an agency business or even like a linear television business has longer duration contracts. Are you guys worried that we're gonna see sort of a rolling slowdown that you're 6-12 months behind those platforms, or do you really see the points you just made sort of fully explaining the variance? I'd say a couple things. I mean, one where I don't think we're necessarily the most leading indicator. Yeah. Our business is so much more diverse. Right. I mean, if you look at, you know, what some of our businesses are, we have Acxiom, which is a data management business, which is two-thirds made up of very long-term client contracts. Our largest sector is healthcare. That business, you know, should be more resilient. Yeah. When you think about the sophistication that's required and the products that they're marketing are so critical and they have such big R&D dollars at stake. We do everything from digital transformation to help our clients develop e-commerce strategies. So we have a much more diverse business, and the business is continuing to evolve. Yeah. That makes sense. It's sort of sticking with the digital media theme. There's been massive changes around privacy, and we haven't even seen yet the impact of the deprecation of cookies from Google yet. They've sort of delayed that, but it's obviously coming. What does that mean for your clients? And I'm sure you're having conversation your media team is having conversations with them all the time about navigating that, you know, what are your what's the advice you give, and how is it impacting your business, if at all? It's a huge opportunity for our business, and what it's gonna make even more important than ever before is having your own first-party data and being able to develop your own ID graph so you know who your clients are, you know, everything you need to know about them, where they are in the customer journey, and what are the best places to find them. The marketplace is gonna get more and more fragmented, and it's gonna be harder to go across different platforms and agencies. People are gonna need trusted advisors who can help them with all of those types of services, and that's where we come in. Are there specific areas of product development or investments that you've made to try to really take advantage of this opportunity? I'm thinking of some of the initiatives like KINESSO and Matterkind. Do those fit into this narrative? Absolutely. I mean, first of all, it was one of the things we foresaw when we did the Acxiom acquisition. Right. I mean, we knew Acxiom very well. They were a long-term partner of ours. We were building our own data stack. But what we really loved about them was their experience in managing first-party data and the credibility that they had in that space. So that was an investment we made with this foresight. And then we created KINESSO, which, as we mentioned, is our technology layer. And we use it not only to democratize the data across all of IPG and make all of our offerings that much smarter, but we've developed technology that we can license to our products. And then Matterkind is our addressable media solution, and it is the next generation of what programmatic was. And we use it to access and to optimize media across all addressable channels. And then we have products like Cascade, where if you're gonna find clients in a digital world, it's a much more efficient way to do it and to get higher match rates. So we are definitely using our data and our technology to enhance our product development. That makes sense. How about on the M&A front? Are there acquisitions that you're looking for in this space? Is that an area you expect to be active? We have lots of financial flexibility and a strong balance sheet, which is great. While we don't see any large gaps in our portfolio, which would cause us to do another Acxiom-like transaction, we have the ability to be opportunistic if we think it can accelerate our growth. We just closed an acquisition on October 1st, RafterOne. Yeah. That's fantastic. We've acquired 500 people with expertise in integration into Salesforce and MarTech integration. We were very strong in Adobe and some of the other platforms, but that's a critical component of an e-commerce offering. So we thought that that was gonna be extremely important. Yeah. Yeah. It was interesting when you guys announced that. I don't think the market investor community appreciates how much you guys and sort of the industry have gotten into really sort of software integration. Is there any way you can help us think about sort of the size of that business at IPG or how much of a driver of growth it might be? So, we think it's an extremely part of the commerce offering. Yeah. And commerce is very complicated, which we love because it allows us to sell many of our different services and bring forth many of the different products and services that IPG can offer. But when you think about a commerce offering, you need so many different types of skill sets. You need the data to really understand who that customer is. You need that identity graph. You need to help your clients make sure that they have the MarTech capabilities to accumulate that data and to develop loyalty programs. So having integration capabilities in the different MarTech stacks is important. Then you need to help them build out their site, the right content to put on the site, and how do you manage that content depending upon who's coming in. You wanna recognize your customer when they come into the site and modify the images and the messages they see. But then you also have to understand things like payment and inventory management 'cause you don't wanna drive people to your site if you can't handle the purchase. And then lastly, there's the algorithms. How do you get to be in the top of the search funnel? So what that means for IPG is that we have all those different capabilities, and we can bring them together as IPG Commerce. And if you look at e-commerce as a percentage of overall commerce, it's still a relatively small percentage. Yeah. We see that as a growing opportunity. How do you think about IPG Commerce's competitive position? I think investors have been grappling with sort of the competitive threats of all the consultants consultancies to the agencies for years. And now, in many ways, it feels like your guys are going on offense a little bit, maybe a lot, in areas that they've more been known for. Is this a, you know would you describe yourself as sort of, you know, one of the main competitors in e-commerce services to your clients and feel like you're going after a lot of the wallet that these consulting firms have been earning? So we don't run into the consultants that often. When we run into them, it's purely in the systems integration vertical. But what I described is so much broader, and that's what's really required for e-commerce. And that's one of the things that the pandemic actually sped up is the acceleration of direct-to-consumer strategies and, and the desire for people to have e-commerce. Got it. Let's tie that tie in media to this. Omar, who's chatting with the Publicis team earlier yesterday, I guess it was. We talked a lot about retail media. What are the exciting things happening in media that you guys are working on and you see driving that business as you look ahead, and how is IPG positioned around the media business? We have a media business that's done extremely well. It's growing. It has been growing. It is accretive, and we're very excited. We think that the fragmentation that's going on in the media is a good thing. We think retail media is a huge opportunity, and so is connected TV and all the other changes that are happening, like we mentioned, privacy. For us, who's a trusted agnostic advisor to our client, we think that there's a bigger opportunity than ever before to help our clients navigate that space. How does creative fit in, 'cause that seems like one area that's maybe been a little bit of a drag on growth, at least for the industry over the last couple of years? Creative is important. Yeah. You know, it's what creates that connection, that engagement, and whether you're working on brand purpose or values. It's the magic. It's the secret sauce. What you can do, which is exciting, is embed that with data now and make it even smarter, so you can do things with behavioral science so you really know what's the best imagery to reach your target audience and how do I change the messaging. So we think creative is still extremely important. Got it. Okay. Rounding into some other disciplines, you mentioned healthcare, which I think was probably an area that really helped during the pandemic from a business point of view. What's the position for IPG Health at this point? How are you feeling about that business from a growth point of view? So we view it as a capability. It's about 27%-28% of our revenue, so we're extremely strong. Yeah. We put together IPG Health about a year ago, which takes two very, very strong brands, both FCB and McCann, who had complementary offerings and complementary geographies. It is also a capability that we think we're good at and we're large at because it's sophisticated. It requires science. It requires data. It requires technology. The products that they're marketing are much more complicated than many others. And we think that skews to our strength. And we think as other categories become more sophisticated, there will be growth opportunities as well for us. Does that business tend to be less cyclical as we think about all the macro stuff that's on everyone's mind? We believe it should be. Yeah. I mean, there is those products still need to be marketed. There's still a huge need for them. And, you know, we span across pharmaceuticals. You know, there's payers in the industry. There's consumers. And there's a technology component that's, you know, changing there too where. Yeah. The way people are consuming media and advice. So we're very happy about our overweight there. Okay. Maybe going from a massive business like healthcare to a couple other disciplines that I wanted to ask you about. One is on the experiential side. You guys have a very strong agency there. I think Momentum was the experiential agency of the year in 2022. You just made a management change at that, on, on that side as well. Is that a growing part of advertiser budget? 'Cause it seems from the outside, like, experiential advertising and marketing is becoming a bigger, bigger part of what consumer marketers are spending money on. So it's a part of our business that is very exciting, and it's more than just Momentum. Maybe explain a little bit about what you guys are doing there. Sure. So we have Momentum, which does a lot of B2C experiential. We have Jack Morton, which leans more to B2B. And we also have Octagon, which does sports marketing and sponsorship. And there's a huge opportunity there to connect it more to data and to technology because when you're at an event, you're very, in a privacy-compliant way, apt to give a lot of information, and that information is valuable. And then with technology, you can extend an event beyond the seats in the stadium. You can pre-market it. You can post-market it. You can connect it with e-commerce and close the loop. So we see that while at the moment a relatively small part of our business. Mm-hmm. A very big opportunity. And there's pent-up demand for all those types of services. Yeah, so even though it may seem fairly unsophisticated to be sponsoring a football stadium or something, you actually think there's a lot of data connectivity there for advertisers to drive spend. There's a lot of data connectivity, and there's the opportunity to make it a lot longer than one football game and to create unique experiences. So if you know who your customer is. Yeah. You can make the experience very unique for them, and then they can connect it to a brand that they're inclined to buy and connect it to the commerce aspect. Got it. Let me ask you one more, and then I will give the audience an opportunity if they wanna ask some questions as well before we get into some more boring stuff like cost and margins and balance sheet. So PR is another area that has obviously had some volatility during the pandemic. What's your perspective on IPG's PR offering and the growth outlook for that business? So we have great brands in that business as well. And communication is still very important. It could be very C-suite-level communication. It could be crisis communication. It could be corporate communication. But there's probably a need for communication more than ever before. So it's a business that we're very happy we have. Okay. Any questions for Ellen for the audience? You could also wait for a microphone. Go ahead. You can go ahead, and we'll repeat it on the mic. The vast majority of this business is driven by Amazon. So do you work for Amazon? And what do you see in the next three, five years, on your own figures regarding retail media? I can repeat it for the webcast. This question is about retail media, the outlook. It's a business, I think you said, is dominated by Amazon. So what's sort of your offering there and how big do you think that business can be for IPG or for your clients? So for us, we're agnostic to media, so it's another place to help clients either market their products or to help them develop their e-commerce solutions, and we think it's a big opportunity because retail media is actually closer to the point of purchase, and there is gonna be a lot more attribution there and ways to close the loop, so we think it's an exciting alternative, and for clients, it's you can be using your own versus paid media as well, so we think we're very bullish on it and think that there's a lot of opportunity, and it will be a growing opportunity. Do you think that the retail media business is gonna be largely, you know, sort of the Amazon Walmarts of the world, or are there opportunities for this to be a much more fragmented space where you can leverage real estate across or virtual real estate across lots of e-commerce and retailers? I think it's gonna be larger than just the two. Yeah. I think that there's net new money coming into it because you think about all the money that's spent within bricks and mortar, and a lot of that money can go into the retail, you know, e-commerce space, so I think that net new and good opportunity. Okay. Did you raise your hand? Oh, okay. Tricked me. Okay. We'll just keep going then. If they have questions, go ahead and raise your hand. Normally, we don't ask about currency at conferences. It's sort of a pretty nuanced story, but this has been an unprecedented rise in the dollar. From a CFO point of view, does this change at all how you guys manage the business, and are there margin implications we should be thinking about for the company as a result? So for IPG, it's mostly translation versus transaction. Our revenue and expenses are very evenly matched. Yeah. and even in the most, as you point out, volatile times, I mean, it can be like a 10 basis point margin swing, but it's small. Okay. Got it, and COVID has been probably the ultimate in cost management experience. You probably never wanna go through again. No. For a variety of reasons. But, you guys, I think, are guiding to 16.6% margins this year. Walk us through sort of the structural changes to the cost base, Ellen, from the pre-COVID IPG to today as we round into 2023 and we increasingly leave the pandemic behind? So, during the pandemic in 2020, we did a restructuring where we looked at a few different, you know, and we really were very clear that there were structural changes. So whether it was layers of management becoming more agile, whether it was global, regional, and local, we looked very heavily at that. We looked at nearshoring and offshoring, which we continue to look at 'cause we think that there's opportunities there. And we looked at our real estate footprint and took out about 15% of our real estate footprint, which, again, we continue to look at. So when I think about those things, we're definitely seeing the cost benefits from them, but we're also not complacent. I mean, we have big efforts going on business transformation where we're looking at how do we use technology and data to make what we do more efficient? How do we take joyless tasks out of what we do? And, you know, as I mentioned, I think there's opportunity still on he real estate side. Okay. So as we go into next year, obviously, the macro is out of your control, but we used to think about, or we typically think about incremental margins in the agency world of 20%-30%. And so if you're growing your revenues, margins should expand. Is that still the right way to think about the model over the longer term? So we definitely have the algorithm down of converting growth to profitability, but there's other things that should help our margin going forward, and that's the ability to diversify our revenue stream. Mm-hmm. The more things become measurable, the more we can get paid for performance, the more we can productize our services as opposed to just selling them on FTE and overhead. We have technology that we can license. And then there's, you know, as I mentioned, I think further efficiencies, that we can have on the cost side. Okay. How's the return to work going for you guys? You mentioned real estate savings. I know a lot of companies have been working on the right balance. Are you sort of in an optimal place from a back-to-the-office point of view, and does that impact your real estate plans in any way? So we are a company of many companies. And what makes us unique is that we really let our agency brands take the lead on these types of decisions. So there's a divergence across IPG. We have some people that are back almost all the time at full capacity. We have others which are in more hybrid models, but it's working. I do think that the office, there's an important place for it. We're a mentorship society. We have collaboration and ideation, and to really drive innovation, I think you need to spend some time in the office with other people. Mm-hmm. So it is, you know, I think it's an evolution. I don't know that we're optimal. I think learnings will continue, and we'll find that right balance. But do you think there's additional real estate opportunities even with that return to work for IPG? I do, and we're very efficient at IPG with real estate. It's centrally managed. Where we can, we tend to stack multiple agencies in one building, which gives the ability to flex up. Mm-hmm. And flex down based on requirements. And I think that we will structure the space in such a way that it really lends to collaboration as opposed to someone coming into the office to sit on their computer every day. Mm-hmm. Those things, I think, allow you to look at how do you use your square footage and how much do you need. Ellen, I wanna come back. You mentioned two things on the margin in your answer to my question on margins. I wanted to see if you could unpack a little more. You mentioned productizing and data licensing. From a revenue model point of view, maybe explain to us what that means and why that could be a structural tailwind to margins. A large part of our business is traditionally sold on FTE and overhead rates. What we really should be doing, especially now since what we do is so much more measurable and we can demonstrate return on investment, we should be talking about value proposition. We are, where possible, migrating our services and being charged a fee for what we do versus a rate card. Mm-hmm. If you can demonstrate value to your clients, which we can, you're a lot better off to get paid that way. Yeah. And so we have, you know, an effort and a focus on trying to migrate more of our business from that perspective. There's also the ability to get paid on performance, which we love, and it's great for our clients because, again, if we can demonstrate that we can help our clients deliver return on investment and move their business results, the more apt it's a win-win for each of us. And we try to do that wherever possible. Got it. So does that mean sort of migrating from mostly a cost-plus model to something that's more either recurring or, yeah, I guess, recurring and performance-based? Recurring, performance-based, and when you buy one product, it'll lead you to the next. I mean, consultants are very good in that space. Mm-hmm. And so I think it's an opportunity for us, which we're focused on, to get better. What's going on with, you know, sort of the costs we typically associate with pitch activity, whether it's, you know, T&E or some of the temp labor? Is that stuff starting to pick up now that we're hopefully and we're back in Barcelona for the first time in three years that? It's great to be back. that, you know, that's starting to impact the cost base a little bit more than it used to? I think those are good costs to have, to be honest. I think T&E, to a certain extent, shows business activity. It shows we're in front of clients, which we love to be. Mm-hmm. It shows we're pitching. We're getting together. We're training our people. We're creating that culture that keeps us. I don't think we're ever gonna get back to the 2019 levels fully where, I know I personally would go to London for the day or even Hong Kong on occasion for a very short period of trip. Yeah. So I think we'll be smarter. I think we also have sustainability goals we're all trying to drive towards. So all those things are considerations. Okay. What about there's a lot of news around hiring freezes, and even certainly in the technology and media space layoffs. Where is IPG right now on the hiring front? Are you guys still adding? I know you've had a great year this year, but you've also mentioned the contingency planning. What's the feeling from your point of view about headcount? So we're always extremely disciplined in how we manage our costs. You know, we give our agencies. We have a large base of our incentive comp is all performance-based, and that becomes a lever both up and down depending upon performance. But what that does is it spreads the targets and creates alignment throughout our organization. So all of our agencies are incentivized not only to manage growth but to manage the margin. And that creates a cost discipline throughout our culture. And so while we're always doing that, we hire behind revenue growth. Mm-hmm. It usually lags a few percentage points and we manage accordingly. Okay. So no top-down orders from the boss. No top-down orders. Got it. Okay. Let's check and see if we have any more questions from the audience. And we've got two. Sorry. I should have given the mic runners a heads-up. You go ahead. Yeah. Yeah. This is the labor market specifically, which has been very tight labor markets on that, that's inflationary pressure. Also, it's reduced churn in the industry. Where's the churn? If you're happy to talk about that, the company specifically relatively is in line with the industry. Sure. So the. So just repeat the question so the. Thank you. Those who listen to the webcast will hear it. Question was about churn of the employee base, kinda competition for talent, where you are on that. Hopefully, I got that roughly right. I'll start with churn, and then I'll turn to competition for talent. Our industry in general has a high degree of attrition or a higher degree. We saw that go up even more post the pandemic when I think a lot of people were rethinking their life. We're seeing that trend, for sure. And from a labor market perspective, we really are able to attract and retain, you know, really, really amazing talent, and that has not been a challenge for us. And as far as, you know, inflationary pressures, which are a natural follow-on cost question from that, we've seen a bit, but it's been manageable and nothing that would allow us to take away from the margin trajectory that we're on. I would say those are industry averages, and it was higher than that during post-pandemic, and now it's coming back down to more normalized levels. So the Great Resignation is behind us or it's fading behind us? Is that what you're saying? I think it's fading behind us. Yeah. It's interesting 'cause we usually think about the agencies competing for talent with the big tech companies, and we've obviously seen what's happened to those tech employee bases lately, so. Yeah. I'd say the direct competition with the tech companies for talent is overstated. Okay. You know, we offer a very different type of environment. And, I think that's the draw. Yeah. You know, why we have very sophisticated people and the things that we do that require a high degree of data and science. We also offer a very different type of environment. Yeah. Yeah. You had referenced some contingency planning conversations happening with clients. I'm curious, you know, do you think there's gonna be any delayed kind of budgeting as advertisers think about 2023 spend? You know, obviously, it's still early, and I'm sure those conversations are ongoing, but just any thoughts on 2023 budgets? And then the second question, you guys had vocally, I think, told some of your clients to pause spend on Twitter. Kinda curious if you could elaborate on that. And do you think there are other digital platforms that are gonna see those dollars, you know, maybe move over, whether it's a TikTok or, you know, is it kinda just going into different funnels? How do you think about those two items? Sure. So as far as 2020, you wanna repeat the question? No, you got a microphone. Oh, okay. Fine. As far as 2023, we have a very detailed budgeting process at IPG where we meet with each one of our agencies and really go through client pipelines and one by one. That process has not begun yet. It will begin in the next few weeks and go until mid-January. So I'm not gonna touch on 2023 at this point. As far as the pause on Twitter, I mean, at IPG, we have a chief brand safety officer, and we also have media responsibilities principles and index that we publish. So we really believe it's a value add for our clients to comment on safe places to put your media or not. And with Twitter, we did advise our clients to pause for now. Okay. Maybe just lastly for me then on capital allocation. You guys have been back in the market buying your stock. You have a dividend, which I believe has attracted a lot of dividend investors over the years to the business. And looking at your balance sheet, I mean, you have really very little maturities for quite a while. I know it's a nice environment to have a conservative capital structure right now, but what's your, you know, sort of willingness or interest to sort of ramp up the return of capital just given how well the business is performing and how much your leverage has come down since the Acxiom deal? To go back to your first question, you know, on consistent strategies, we've believed in a balanced return of capital for many, many years. We do have a very strong balance sheet. We do have a really nice maturity profile. We have no debt coming due, really. We have $250,000 in 2024 and nothing thereafter till 2028. So lots of financial flexibility. And we believe in balance as far as capital returns. We've grown our dividend every year since 2011. And we believe in share repurchases. We've been very disciplined about it. We paused it briefly as we were paying down the Acxiom debt, but just as we said we were gonna do, we got back into the market thereafter. So, you know, we see a lot of value in our shares. Okay. All right. Well, if there's no other questions, going once, going twice to Ellen, thank you so much for coming. Thank you. Thanks, everybody.