Good afternoon. My name is Adrien de Saint Hilaire. I've got the great pleasure of working at Bank of America, covering the agencies out of London, but we're here in New York today, and it is indeed an immense pleasure to be welcoming again, Philippe Krakowsky - Hey, Adrien. ... CEO of Interpublic. You don't need any introduction, but of course, you've been now running IPG for a few years, and it is indeed a great honor to have you today. Thank you. We've got about forty minutes, and I've got a pretty long list of questions to go through, so why don't we I'll talk fast. Why don't we crack on? Perhaps starting off on a maybe slightly disappointing note, perhaps, but there was some news today- There was ... about a big account review that concluded a big pitch. Is there anything you can tell us about potentially some of the financial impact for IPG, but also what you think the drivers of that account's review were and why it concluded this way? I mean, there's a limited amount I can say because Amazon continues to be an important client of ours, notwithstanding the news today, which, to your point, not welcome news. So given what I can and can't say, there's nothing that we learned as a function of their decision that we hadn't already shared with the market. And so if you look at our media business, which has been a very strong, you know, driver of our consistent outperformance for a number of years, we have called out that in the last twelve months there seems to have been a shift in the level of marketer interest in what is referred to as sort of principal media buying capabilities. Industry had sort of. The marketer side of the industry had been clear some time ago that transparency was very important to them, and it seems to be the case that, you know, that has changed. And so I think it reinforces for us the decision that we've made to push further into and continue to build a principal buying capability. I think that that was a part of the decision. And then in terms of impact, I'm not sure, you know, it's not a 24 i mpact. And we remain active with them in a number of lines of business. This was the consumer part of the business, so, as they announced, we remain their media agency partner for AWS and Ads and Amazon Business. and we'll finish the year, look at some of the opportunities that are out there, and then sort of net them out and dimensionalize it as we set a target for 2025. Understood. While we're on that topic of like, principal media buying- Yep ... you said there was a bit of a change in the market there over the past twelve months. A few years ago, it seems to be an area where there was a lot of controversy and seemingly a lot of pushback from advertisers around that practice. So why do you think that is, that advertisers are now in greater demand for principal media buying solutions from their partners? I mean, I think it's for some clients, you know, there's still a sense that that's not a way that they want to trade. I think that the macroeconomic uncertainty and the interest rate environment, I think, play a part in that, and then, you know, the inventory that's available, there was a period of time when some of the larger digital platform players would not engage, wouldn't trade in that way, so I think that those are probably the two key determinants. You know, do you have qualitatively inventory that is available to purchase in this volume-based, volume-driven way. And do you have a macro that has meant that many organizations and many, you know, many businesses, and therefore the marketing side, given the scale of the media budgets, have decided to sort of prioritize or reprioritize, efficiency and define value on a real cost basis to a degree that it's greater than what used to be the case. And does that then kind of overcome some of the concern people had around: Is there risk inherent in that? Am I getting the best inventory? Does it concern me that somebody else has taken a principal position, and that that inventory is being passed through to me. So how big is that activity for you today, and perhaps where do you see it going? For us, it is de minimis. I mean, we created a media model that was basically predicated on both transparency and essentially a consultative model. If you think about financial services, it was, you know, best advice on how to make those investments. And you saw some of the bets we made around that when it came to, you know, having the best data asset to connect to it and a tech component to the offering as well. So for us, right now, it's all opportunity. I mean, I think it has hurt us in the market in terms of seeing some new business opportunities not go our way or some growth we could have realized, 'cause media has been such a strong driver of growth for us. So you look at it sort of both ways. It's clearly something where we're addressing a shift in the market and a place where we feel that there's now a gap in our offer. But you know, there's only so much of your clients' budgets that you can buy in that way, and so not for me to say what some of our-- whether some of our competitors are. How much fulfillment, you know, is there room for them to continue to grow in that regard without bringing in net new billings? Whereas for us, there's meaningful upside- Mm-hmm. -over a, I'd say, eighteen to twenty-four-month period, because ramping it up will, you know, require... You know, we've got the infrastructure, and we're in market, but now you've got to get clients to opt in, and then you've got to be transacting with the, with the media owners, in a way that is really much more volume-based. Yeah. I was gonna ask, actually, on this. Yeah. What, what's the biggest challenge in scaling that business up? Is it about finding the right people, having the right relationship, having the right technological solutions maybe, or...? I mean, I think with any model. You know, I mean, it sort of says it's principal. You all know, given what your audience does, principal comes with principal risk. So we've definitely built the systems and all of the guardrails internally now to be transacting in that way. So we think we feel like we've mitigated that, and so now it's about, you know, engaging with media owners. You probably make fewer, bigger bets in terms of your media partners, and as I said, you prioritize value-driven by volume, which is definitely cost, as opposed to optimal piece of inventory to achieve a specific marketing outcome or to reach a very specific audience that you've defined as a high-value audience for one of your clients based on, you know, what they're trying to accomplish with their business. Okay. Moving to another topic, I'm sure we'll come back to that story around principal media buying. But if we talk about macro, - Mm-hmm ... during the last quarter, you very modestly trimmed your full-year guidance to approximately 1% organic growth. I think back then you talked about maybe some uncertainty making its way back into your conversation with clients. A few weeks on, like, where do we stand on that? I mean, it's interesting 'cause it's a month on, and it's a fairly. You know, August, it's a month that, relatively speaking, is not a big month in a seasonal business and, you know, certain parts of the world clearly kind of. So we don't have any incremental information that I could sort of move the conversation along. I guess what I'd say is, you know, the 1% shift on the guide in Q2 was really sort of a catch-up to something that we'd said in Q1, which is a very, very big account shift that took place late last year, which was significant for the industry and significant for us and one competitor. That client remains a very big client for us in a lot of the specialty healthcare marketing and medical affairs, medical publishing area, and in PR. But that client had looked to sort of come into the market less as a healthcare company and more as a consumer brand, and I think that they simplified or shifted their model, and that's the thing that led us to say, "Our original guide might we might not be able to do the top end of that." So we were just really confirming that. And then the delta on macro, you know, I think it's a function of how much uncertainty there is in the world right now. It's not indicative it, you know, to our mind, of something as, You know, the level of concern is not what it was in, say, middle of 2023, but we definitely thought that we needed to call out that conversations with clients were moving at a slightly different pace. So whether it was certain things were being delayed, whether it was that there was just a measure of caution that had not been there. I think September will be very telling, 'cause, you know, you have a lot of activity, seasonal, and then we'll be sharing, you know, quarter results not long after that, and then we'll have a much better read on whether, you know, the macro has changed. There's a lot of just really, you know, the data that's out there on sort of economic numbers, consumer confidence. You get a lot of conflicting data points at the moment. Mm-hmm. And on the backdrop, especially in the U.S., I mean, it's my impression that in general, U.S. elections don't really have a meaningful impact on how advertisers think about their budgets and therefore the impact for agencies. Would you say 2024 is any different, perhaps because the environment is, or the two candidates maybe are, it's a different race than it normally is? No, I mean, I think you're right in that I don't think it traditionally does, and I think if you've got a set of things you've got to get accomplished as a business, you're gonna need to be out in market interacting with consumers. You know, we may see a shift from a channel perspective. We may see now that you've got. So, you know, on the the touch points along the consumer journey, there are just so many options that, you know, people, you know, marketers may choose to modestly skirt. And first of all, you know, cost for, some of the more traditional, you know, pieces of media inventory will clearly be driven up. So it'd be a smart thing to do just to try to figure out can we reach the people we need to reach, you know, not necessarily by using the you know the more standard channels. But I also think that you know folks will, among our clients, choose to do that to sort of dissociate themselves from you know disinformation and from the polarization that you clearly see around that discourse right now. If we double-click on that, on that 1%, there was one category for you, which has been a little tricky. Mm-hmm ... in 2023 and early parts of 2024, which is tech and telecom. How's that category now doing? Are we seeing clearer signs of budgets firming up in that vertical? I mean, I think, I mean, from among our direct competitive set, I think most all of us called out that you know tech/tech telco was challenged, right? And so I would say it's definitely improved, or at least we have found a floor. We haven't seen it bounce. We haven't seen it sort of turn on or really, you know, start to take off again. And clearly, there were times when three, four years ago, it was, you know, one of, if not, the best grower among industries you know kind of client sectors, industry-wide. Mm-hmm. Now, for us, I think maybe a bit more challenging because we over-indexed to it relative to, I think, most of our competitors before the slowdown. And then it's, you know, it's had an impact on some of our businesses. You know, some of our digital specialty agencies, you know, had a lot of their client concentration there. Mm-hmm. Okay. And any other categories that you would call out? I mean, there seems to be a bit of weakness, potentially on the automotive side of things, not on advertising, but just as an industry. Do you see that as having a bearing on, like, how these, that category thinks about marketing and advertising? I mean, that's a tough one, right? Because I think we all expected to see that category suffer, you know, as you saw supply chain issues during pandemic- Mm ... and it was pretty resilient. Obviously, you know, 2021, 2022, pretty robust across the board. Then in 2023, when there were some really significant concerns that were economic in nature, it held up pretty well, and now we're seeing, you know, some noise in the system. So it may be something that is just sort of cycle because, you know, you can't. You know, they all do move through it, and to your point, you've seen some of the European automotive, you know, brands very recently say that they're looking hard at costs. You've seen some of the domestics, but we're not seeing anything dramatic at this point. Mm-hmm. Mm-hmm. And then maybe sticking on that conversation with clients. I mean, there was a time when, you know, marketing was looked by CFOs as, like, one of the first thing they cut whenever things turned negative. I was lucky enough to be in Cannes this year, among many marketing people. And one of the things that struck me is that there is generally a sense of optimism or a willingness from brands to advertise. I think McDonald's, for example, was talking about, you know, marketing being an investment, not, not, not a cost. Would you say that in that cycle, marketing is definitely now looked differently by those companies, or are we still in a sort of procurement-driven phase of the market? Well, look, I mean, I dial back to where you started, which is I think that if principal is something that, you know, many clients who had previously said they weren't interested in having us as an industry trade that way, it is because, you know, there's a meaningful benefit to be driven by the scale of your media investment, you know, at a moment in time when there's uncertainty and interest rates are where they are. But if you look at marketing activity, kind of outside of that, it's become much more diversified. You've got much more sophistication around the mix, whether it's sort of... There's it's a much more integrated story. So it used to be that you had sort of brand activity, and then you had sort of performance channels, and the pendulum swung pretty hard, to your point. And it's not that marketers turn their outreach to consumers off, it's that they discontinued certain things and put a lot of the spend and the focus on kind of direct channels and CRM and the like. And now, I think that marketers are much more thoughtful and sophisticated about understanding that if you do that, you're dropping a lot of consumers in the middle, and you're losing a lot of signal that comes back to you. And so they really want there to be much more integration between the two. So I still think that there are channel shifts and budget shifts, but it's seen as something bigger, and we're even now thinking about: How do we move outside of just the marketing channels, but also into sales channels? And so I think it is understood as an investment by more marketers. Okay. That doesn't mean that, again, you know, in more extreme circumstances, whether it's macro or a company-specific circumstance, people won't say, "Okay, we've got to look at these costs." But it's definitely the conversation has moved up a couple of clicks. Mm-hmm. And as you said, you see that any place you get a lot of marketing all together. Yeah. Yeah. Okay, we're gonna come back to that topic on, you know, the mood of advertisers towards marketing and agencies. Switching gears a bit, talking about the IPG asset mix. So during the last call, you- Mm-hmm ... announced formally that you were looking at, you know, strategic options regarding R/GA. Huge. Can you tell us, number one, like, why you decided to effectively look at now disposing of those businesses, not necessarily restructure them? And perhaps talk or give us an update on, like, where we stand on the disposal process. Sure. I mean, I think you've got two assets that have been very strong performers for us, two terrific brands. And their differentiator was always that. And I'm. It's awkward, 'cause I don't want to be rude to folks in the room, but then I don't want to be rude to the person I'm talking to. So this is weird. And it's also a very wide room. So you had these two agencies that had been places where marketers went to when they wanted to understand kind of what was on the leading edge of how technology was impacting marketing. And as cycles had played out and new tech had come into play, we'd seen them pivot and be very successful in essence, reinventing. In this instance, whether it's because more of the rest of the ecosystem has become fairly sophisticated, meaning a PR firm is more sophisticated than it used to be, a media agency, definitively ad agencies. Whether it's some of what we were talking about earlier, where, you know, there is a bit more of a focus, at least during 2023, definitely efficiency was very kind of top of mind. The complexity is very high, so for some clients, going to a place and getting the breadth of the offering and not having to integrate it themselves by going to three best-in-class. So we saw them go through a cycle that we'd been successful in and not kind of find the gearing or the traction that we needed to see. We did meaningfully restructure the businesses, so we looked pretty hard at the capability sets, the cost base. And then most recently, you know, and as I said, they also had a lot of concentration in the tech space, which was hurting in terms of client spend reductions. And a lot of it hit with three or four very large tech companies that were taking costs out of their system in every way. So you had, you know, major players in the valley cutting a lot of jobs, and therefore, also looking really hard at marketing budgets. We then co-located them and had them focus on just a couple of areas that were real centers of excellence, and now we've said, "You know what? There's probably a better fit for them somewhere outside of our ecosystem." There was a rumor in the press about that maybe being a large, you know, with a large consultant systems integrator. And so we are, you know, kind of in a solid place in terms of that. That process kicked off. That process has led us to have a series of conversations with interested parties. We have a number of interested parties in the case of both of the agencies, and so we, you know, would like to conclude that process sort of sometime over the course of the remainder of this year. Okay. Super clear and in contrast, are there any areas of your business that you're trying to, like, scale up, potentially inorganically? You talked about, okay, trying to ramp up in principal media buying, but is there anything that you're thinking of in terms of inorganic, Yeah ... contribution, whether it's in data or media or anything else? No, no. Look, I mean, that's a great question. In principle, I think we do that in conjunction with our media business. Mm. So that is De Facto Organic. We've invested in the tools and the systems. So in terms of inorganic, I would say sort of most of the things that congregate around kind of retail activity, so that's retail media. Mm. And that could be, kind of a capability, but not... It's not just an agency, because you obviously would want practitioners, but I think they would have to come with some differentiating tech. It could be specialized, kind of data asset. A nd it could be where you have kind of retail, meaning advising clients on their commerce activity, right? So that's retail, but not retail media only. So, you know, those are the places where we've looked at a number of things, and I think we'll continue to, and we see, you know, the opportunity to take things that we've built inside of the group, a retail media solution inside of Media brands, powered by Acxiom data. But, you know, if we could get to growth faster in an area where kind of more sail to wind because there's a lot of activity there and there is a lot of growth available, we're clearly looking at what's possible there. Mm-hmm. That's probably the biggest area and the one area where you would see us do something thoughtful on the M&A side. Okay. On your model, the IPG model, like, how would you compare it to the rest of the marketplace? Like, we see some agency-holding companies operate like a country model. Some have done a lot of, like, integration of their various assets. I think IPG really spearheaded the open architecture model. Yeah, integration of services- Exactly ... in the service of a client. Exactly. So where are we on your journey in terms of, like, integration? And by the way, how do you think or how important is that in your view, in terms of succeeding with clients? I mean, I think it's become more important just because, you know, as we were discussing a little while ago, you wanna take friction out of it for clients. Where I think the speed at which this needs to happen and the complexity is such that whereas they might have previously said, "We'll be the integrator ourselves," or "We'll take five best in class," you know, there is an understanding that there's a benefit, too. If I look at our portfolio, you kind of see media, a very strong performer, in a place where we created, you know, De Facto, a center of excellence and something very, you know, integrated. The client-facing brands and those teams, and yet behind that, kind of a platform approach to the tech, to all of the ways of working, to the data asset. And you even saw us, sort of put KINESSO, which is where we do the tech development and the activation of the data, and Acxiom; we put those together. Healthcare, another area where we've been very strong, and again, putting together like assets, one management team, one set of investment priorities, one sort of, you know, set of ways of working, and then you sort of, you plug into the platform parts of Interpublic in a way that's consistent. I think production is a place where we're on the journey. You know, we're two-thirds of the way there, say. We've got, you know, 1,500 to 2,000 people who are production professionals across the group. That's out of maybe 56,000, 57,000. And the connectivity to the data piece, the ability to activate through tech, so a platform approach. So I'd say we're two-thirds of the way down the track in terms of all of that. We've got one sizable asset, and we'll be pushing more of the rest of our capability together there, so there'll be more integration there. And then I think, you know, you saw us early in the year, late last year, early this year, do a couple of modest dispositions of traditional, creative, kind of consumer creative agencies. So I think we will. You know, you said kind of asset mix. You do have disparity of performance because all the HoldCos have a measure of history and legacy that we've brought forward, and so I think we're gonna be thoughtful about, you know, kind of making sure that it's simpler for clients to engage with us, that when they engage with us across any area of expertise, experiential, public relations, consumer advertising, what they're getting is really best in class. So I think we'll keep looking at that. One of our competitors just a week ago, you know, Omnicom, did something on the creative services side that seems to be a reflection of that. Good. Like, we're... You know, I don't think it ever ends. Mm ... that process. Yeah. So we're 30 minutes in that conversation, and I don't think I've brought up the topic of GenAI, but it has been- Sure you have. It has been a big topic. Yes ... at Cannes or in a lot of press articles. So, there's a school of thought out there that goes saying, look, Gen AI could allow advertisers to bring a lot of creative capabilities in-house. There is a fintech company that talked about reducing marketing expenses and making some savings, thanks to Generative AI. So, what's your stance around that? Is that, for you, an opportunity to potentially expand your margin or, in fact, even a revenue opportunity? Is that a risk? How do you frame it? It's a long question and- It is. Okay. I think a lot of people focus on the fact that, you know, to the extent that you'll be able to automate certain things, there clearly should be a margin opportunity. What does it mean for the top line? If you kind of dial back really quickly, for us as an industry, 15-20 years ago, when the platforms first came along, you had the same set of questions around, you know, will marketing services providers get disintermediated? If you really think about it, you know, the platforms are AI companies, right, and GenAI brings algorithms to a set of activity that we didn't necessarily know or think it was gonna be impacted, but you know, the platforms clearly brought, you know, machine learning and very, very large data sets to sort of people's attention. And everybody said they're gonna go direct, you know, marketers will go direct to them. And yet, as an industry, we've done pretty well since whatever you pick as your sort of high or low water mark fifteen, seventeen years ago, when you know, those became big destinations for clients. So what we're seeing is a lot of use cases and a lot of opportunity and a lot of curiosity on the part of marketers. And it's not just to the point, you know, that you said. You had the fintech company that said, "You can do it, you can do it cheaper." You can do more. You can do more, better. You can do things you ought to have been doing, but you never had the budgets or the times to do. You can, again, if you connected to a smart production platform and start thinking about the content side of our business as much more addressable and precise, and a thing you can optimize increasingly in real time and see how it performs. So I think it's early to call it, but so far we're definitely seeing. We use it to identify reputational risk at the PR firms and to work with clients on, you know, disinformation. That wouldn't have even been possible two or three years ago. So, at the moment, we're definitely engaged with clients on opportunities it unlocks, and then that will ultimately lead to conversations around, you know, compensation models. So it's essentially use the savings to do more that we should be doing. It may be do more of what you do in your CRM and performance and media business, where you align with a client and you get sort of performance upside, and it may be that we can also productize what we do and sell more comprehensive solutions to clients, but at the moment, we're seeing interest and opportunity. We're engaged with literally a couple of hundred providers, which as a marketer, that's a lot, so if that fintech company has relatively few use cases and a very specific sense of what it's trying to accomplish, maybe the brute force, "Hey, it's cheaper and we're getting what we need," but for big, sophisticated global marketers, I think that's a ways off. I was gonna ask, and you touched on that, Do you think that that also leads the industry on the creative side to be more remunerated based on, you know, outcome, as opposed to being based, so far as I understand it, around, you know, FTEs and headcounts? That seems fair and something that, you know, would align the interests of marketers and agencies, and something that collectively we, you know, look to figure out. Yeah. Okay, good. We've got about five, six minutes left. I'd like to offer the audience to ask questions. Maybe if I can just add one topic- Yeah ... which is around your margin performance- Mm-hmm ... which has come a long way to the point that now, you know, some might ask, you know, if there is further upside to go, given that you've now, you know, exceeded the average of the industry heads. So how do you think about your margin trajectory from here, and what would be the drivers of that? I mean, I don't think we can articulate a point at which we would say to you, we've kind of collectively found a ceiling, right, so I mean, in the day, you know, WPP used to say, you know, "There is no ceiling." Our model works for a couple of reasons, so clearly, where we see growth, when we generate growth, there are a series of things. It's a flexible cost model. We're very, very disciplined in terms of how we deploy it. We have everything from kind of the freelance lever to the fact that, you know, our incentive compensation plans are super clear and very simple. And for our people, it's essentially organic growth and margin, and modestly overweight to margin so that we can, you know, hold that in a business that's dynamic and moving very fast. And now more of the kinds of things that you mentioned a minute ago, which are these performance and outcome-based levers that again, I look at our media business and it's been very accretive to our. You know, it's been the most sophisticated in that regard. It's been very accretive to our margin performance. So we believe that there's still upside. And I guess if there's ever a point at which, for whatever reason, we would sort of say, "Hey, hold on a minute," you know, we're thoughtful. We continue to invest in the areas that whether it's talent, whether it's training around AI, whether it's. And then we do look to use a lot of the same tools, and we are sort of assessing whether or not, as you said, nearshore, offshore, country models, you know, the kinds of things where we can still drive incremental upside in what used to be a very, very decentralized and is still a very complex business, so there's still opportunity there. Okay. So as promised, if there is any question from the room, now is the time. It is also the end of the day. Kind of like... Seems to be one here. Yeah, there's a mic coming, maybe. Hi. Can you talk a little bit about cyclicality? One question I have is: As more advertising becomes digital, is digital easier and faster to cancel? And possibly, clients could cancel digital spend faster than you could change your staffing. And so do you see your business becoming more cyclical? Well, look, I mean, I think. As soon as you asked the question, what jumped to mind for me was, you know, if you look at what happened in 2020, right? So pandemic hits, none of us have a clue that we're not gonna be home for four weeks, but we're gonna be home for a long damn time. Excuse my language. And the first place that marketers could go, and we could go on behalf of marketers, was to digital, and that's what got turned off first, and pretty hard, right? So there was a learning there. And again, as I said to you, I think that, you know, programmatic has meant that some of that buying has already been automated. You know, we're pretty thoughtful again about how we get kind of a platform, a tech platform approach to some of those businesses. So I can't speak to whether it will become kind of more cyclical, but we do think about places where, you know, are we staffed in such a way that it gives us the necessary flexibility? I mean, if there's a big enough shock, nobody can stop fast enough, right? You know, but the way that our business is structured gives us a lot of confidence that, you know, we get asked a lot in a zero-growth environment, "Can you hold margin?" Right? And we, we've demonstrated that that's a thing we can do. So I don't know that I can give you a better answer than the thing that is easier to cut. The easiest to cut off is the thing that in many ways has largely been automated in terms of how we... You know, we don't have 10 years ago, you had a lot of people with a lot of spreadsheets, and it was also a much more fragmented digital media ecosystem. It's much more sophisticated now, right? Cool. Well, on that note, we're unfortunately- One last question. ... out of time, but that's great. Thanks, everyone, for your interest, and thanks very much, Philippe- No, thank you. Good to see you. And the IPG team for coming over. You're the guy who's over here from far away, so- No, not too far away, but... Not too far. Thank you so much, everyone. All right. Thank you.