Everyone here, and it is my pleasure, to welcome to the stage Chief Executive Officer of Interpublic Group, Philippe Krakowsky. Brian. I'm Brian Fenske, TMT sector specialist at Bank of America, subbing in for my esteemed colleague, Adrien. Welcome. Thank you for- Thank you. Thanks for having me. Doing this again. We really appreciate it. So exciting time for your company and for you. So I have some questions here I want to run through, but I would love for you to, you know, expand in a little bit as I'm deeply interested in AI, the intersection of tech and AI and- Look at that! AI, or AI and agencies later. All right, so we've got minute one, and the word AI has been used. Yeah, you know I had to get it in. But, so starting from the top, at the first half results, you reiterated your guidance for down 1-2% organic sales growth, despite being down 3.5% in the first half. So some stakeholders in the ecosystem have talked about reduced client spending in either the auto or CPG categories. Are you observing that? Is that factored into some of your thinking for the second half? Because I guess we've got some questions on that first half or second-half dynamic. Sure. That's a lot to unpack. So I guess before I go to a client sector analysis, I'd just unpack, and obviously, you know, for folks who have been tuned into our story or who, you know, heard what we had to share when we took folks through the first half results. You know, that first half result reflects a number of large client losses that took place last year. And interestingly enough, you know, we think that the big news around us, obviously, which is the acquisition and the combination, acquisition by a combination into Omnicom, is a function of or strategically really kind of addresses a number of those things. So the three and a half is the weight of those client losses, greater in the first half, still evident in the third quarter, and netted out by performance that was ahead of what we would have forecasted, particularly in a couple of areas of the business that are strong for us, which are the media business or the media and data business, and then the healthcare business. Then, you know, at a macro level, we're not seeing something that says that kind of clients, writ large, are not very committed to marketing or not continuing to invest, and are not, in essence, performing as we anticipated that they would. And then if I get into the kind of client sector areas, CPG, I think for us, you're gonna have some strength based on some wins we had in food and beverage. One not insignificant loss on kind of consumer goods. Automotive, not seeing the concern that you mentioned, and I think from across our competitors, this is pretty consistent. You know, we have one competitor who's probably an outlier, who seems to see more reticence on the part of clients, and then other segments, you know, quite strong. Tech and telco, which a couple of years ago was challenged, really you know, bouncing back, and I think a lot of the innovation we're seeing in that space has to go out and be introduced to consumers, and financial services, a couple of other segments, so you know, to the way that, you know, from where we sit, the client climate is pretty solid. It's sound. That's good to hear, and how about healthcare? It's been a dramatic story in the last two years with GLP-1s and the Trump administration and RFK. I would just love to hear a little color. So a big one of our strongest capability areas, I guess I'd call it. You know, we would say that we feel very good about what we're able to do with clients in that space. We also bring some scale in that space. And again, other than one-offs that are really specific projects tied to very specific policy or news, we have scale with global clients in the health and pharmaceutical sector, still quite a bit of activity in terms of new business and very strong performance in our portfolio as we look at, you know, 2025. That's great. Good to hear. So, getting to this, the next magical topic of AI, but investors are obviously preoccupied with AI and the potential of how it could shape or impact advertising and marketing industry, creative industries. One of the concerns is that it could deflate the revenue pool, particularly on creative and the creative services that advertising agencies have long provided. How far advanced are you in terms of changing either the compensation model away from cost- plus into outcomes, output OR outcomes-based? That's one question. But do you think additional acquisitions might be required to complete the skill set in that area? We've seen AI tuck-in acquisitions in other parts of tech starting to really manifest and just, you know, how are you preventing from the potential that some of your customers just in-source or in-house some of these AI-related creative capabilities and others? Look, I mean, I don't think that we're immune as an industry, right? Everybody is answering the question around, you know, to what extent is this technology something that you're prepared for, something that could potentially be disruptive, something that could potentially be additive or, or represent opportunity? Like, the first place that I would refer to is the parts of the business where we're already five, six-plus years in to incorporating AI, data at scale, and the ability to use those to drive better decisioning and more accountability, more clarity around the impact of the activity that we engage in with clients. So in the media and the data parts of the business, that has been a net positive because it's allowed us to actually move upstream with clients. To then get to the question that you're asking, I think that it requires that we connect those capability sets into the platform part of the business and into the data stack, and when we do, so when you take more, quote-unquote, "traditional capabilities" like production or like consumer advertising, and they're part of these integrated end-to-end solutions, I think what we'll see is we'll see a shift in. You know, some of our talent will upskill, which is what we've seen, you know, like I said, in some of the more tech- enabled parts of the business. I think that what we'll be able to do is to evolve the compensation models, and I think initially it'll be kind of a hybrid of where we are now in cost- plus with incremental, say, you know, asset-based compensation, where we are seeing that with a number of our clients in that space. Outcome-based compensation, where we have done that, as I said, in the more precision and data-informed parts of the business. So we're fairly far along in thinking through what the impacts are. We've got a tech platform inside of our business that allows folks in these, quote, "more traditional areas of the business" to access data and to use AI, whether it's to drive insights, whether it's to ideate faster. You know, there's a huge need on the part of clients for just the amount of content that's required, the fact that you need to version, the fact that you need to iterate, so there's demand coming at us, which I think we're gonna be well positioned to meet, so I think it's awfully early to sort of suggest that it's de facto gonna be deflationary to revenue in that part of the business. I think what it'll actually likely be is some of that client investment will shift to new, more tech-informed activity, and then there'll be the opportunity to work with clients on these new compensation models that align, you know, what we need to achieve together and their business results to the services that we provide. But, you know, it makes for a better headline to just say, "You know, the world is- No, I think you bring- The sky is falling. I think you bring up a great defense or point, which is to say that, one, the agencies have been sophisticated and more sophisticated than people appreciate, and two, you're also looking out for the brand and for the client, which, as we know, the world of LLMs can be a bit of the Wild West. As we have found in, what? The last week and a half or two, that there's definitely meaningful social risk inherent in some of what's going on there, and I think having, you know, a partner that has expertise in the areas that we do and can help you, you know, bring your brand into that world, but do so in a way that doesn't necessarily, you know, that doesn't expose you to some of that risk is. Yeah Is important. Exactly. At Cannes, you showcased the launch of a new Kinesso offering, which blends creative production and media all in one place for customers. Have you been able to roll it out yet with some core clients, and does that drive a potential revenue uplift or better retention? Yeah, all of the above. So, it's interesting 'cause it then also kind of dovetails with direction of travel for us, again, as part of, you know, kind of the new family that we are, that we'll be joining. But, that platform offering, which was originally incubated and built, as I said, in kind of our media and precision business, now has breadth so that it's got sort of modules that you can implement when you're engaged in any kind of marketing activity. So accessing the data to generate insights if you're in a creative agency or a public relations agency working on a client's, you know, kind of earned and owned assignments. Connecting that through to how we produce the asset, whereas before it was how we activated the asset in, you know, in the media ecosystem. So we're using that with a number of our sort of larger clients. We bring it to bear on a pretty consistent basis in any net new you know business opportunities. And then, to your point, it both creates a pathway for these new compensation models, but then also does make us you know kind of more core or fundamental to the way in which clients go to market and from a retention. You know, in some of our businesses, whether it's in media, where there's a sizable performance or outcome-based piece to how we're remunerated, to data where they're long-term clients, I mean, long-term contracts. They're multi-year contracts. So I think it, you know, that offering, which you referenced, which we showcased then but have been building for a while, you know, does all of the things you're talking about. It opens the door to different kinds of relationships, and it gives us the ability to plug more of what we do into this more attributable model, where we can prove the value of what we do. Excellent. So I think in your roster of clients, you now have some of these AI companies like Perplexity and, I believe, Anthropic. Can you see these companies, obviously, we know their valuations, we know the heat and the sizzle around them, but do you expect them to be significant clients over time, users of marketing and advertising services? Do they behave differently so far than other categories of customers? Yeah, I mean, I think we've seen it in past cycles when you saw a lot of innovation happening in the tech space, right? And so, I've been doing this for a long time, and so anyone tended to want a certain kind of client, and in the early days of innovation in tech, when that meant Microsoft and Apple, there was a sense of, are those clients who are going to behave like these other clients? Is there a long-term future with those clients? That worked out pretty well. Second wave of that, you know, would have been when, you know, Google and Meta were becoming meaningful users of the kinds of services that we provide. Similarly, Amazon, important client and a value client, and then now you have these organizations. And so I think what'll happen is that they do need to take their stories out into culture and kind of broad public consciousness. They need to mean something to consumers. I think, like with any business where there's a lot of innovation, you know, there'll probably be a bunch that make it and some that don't necessarily come through, but we're not seeing them behave in a way that's... You know, they're sophisticated about the things you'd expect them to be sophisticated about, which is good from where we sit because they understand tech, and they understand data, and they're interested in almost jumping to the newest model of how we engage with clients right out of the gate. But other than that, no, nothing too different. Right. So last quarter, you surprised market to the upside in margins. So margins were better, raised your margin target for the year. Now, what are the drivers of this margin upside? How are you able to do this, and is it any of this pulling forward potential margin upside or synergies that you might have realized post-Omnicom merger, or totally unrelated? Just thinking about that. No, I think they're unrelated. They're parallel paths, right? And so, you've heard, you know, John and the Omnicom management team speak to what the merger synergies are and what all the buckets that will add up to that number are. And, you know, broadly speaking, I think you can characterize those as you take two scaled public entities, and you make them into one. You look for a lot of redundancy in what, you know, you could refer to as sort of the supporting infrastructure or the back office of this entity is. What accounts for what, you know, we called out in the second quarter there and what we've been doing is our transformation program, which we announced as we went into this year, which, if you think about us as a standalone, with the challenges that we were facing on the top line due to these, you know, losses last year, that had to do with, you know, I think some structural things in the business 'cause we'd come off of a number of years of outgrowing the sector, but what we've done is really think about ways of working, embedding technology, centralizing a lot of functional areas, standardizing a lot of ways of working, and then in some of the delivery areas, also thinking about the benefits of kind of a platform approach across the enterprise. So that makes us, I think, a healthier company as we come into the new company. But it's largely, you know, whatever the word that we're gonna use to say that what you have are these two parallel activities where the overlap is minimal. Right, and while we're on the merger, can you provide any update on either the timeline or any major hurdles there? We don't see major hurdles, which then means that we're still on the timeline we called out at the very beginning, which is it's a very sizable combination. It's got a lot. You know, they're two companies that are global in nature, and so we've said all along that we'd have, you know, 18 jurisdictions to clear. We're 15 of the 18 in, but nothing in the conversations has led us to change the conviction we've got that it's back half of the year closed, and we're now in September. Right. So, you know, that would indicate that we're relatively close at this point to- Absolutely A success. So in the midst of this, as we approach the merger, how is IPG preventing staff attrition of some of the most critical talent at the firm? I mean, it goes back to what I called out earlier, which is, I mean, I think that we're clear that if you've got these two large entities, they're both public, these fairly federated companies, and you're gonna find meaningful synergies, and some will be the purchasing power that the entity brings into market. Some will be, you know, how you consolidate, you know, some sizable spend areas like real estate, but some will clearly be around the people. And so, on corporate functional areas, that's definitely not as straightforward. In terms of the talent question, which, you know, has been interesting because you've seen it called out a lot in industry press. You've definitely, you know, seen it whispered, hopefully, by some of our clients who are like, "Hey, it's gotta be bad for them in some way." But 'cause there are a lot of benefits to our coming together. But the people who serve clients and the people who generate revenue see the strategic upside to this and are excited that they get more to bring to bear to solve client problems. They get more to go to clients with in the way of solutions or tools. And so, like, nine-plus months into this thing, all of those headlines around talent flight, talent flight really haven't materialized, and I think it's because there's a lot of enthusiasm for what it's gonna mean to be a part of a company that has, you know, really strong commerce capabilities, a really remarkable data asset, sort of resources at a global level in terms of where we're complementary to each other in terms of our geographic strength, so that just feels like it was overblown from the beginning, and, you know, we spend a lot of time in the field with our clients. We spend time with our people, so it's not that we're not making sure that people are okay and that they're on board, but what we're finding is that they're very leaned in, and they're eager for it, so. Yeah. Yeah, an opportunity- Yeah For the talent, if you will. So on this topic a second, because there may be some listeners who are not super up to date on the ad agencies and your company, but if you rewind the clock 15, 20 years ago, there were holdcos, and that owned a bunch of boutique agencies that were little fiefdoms and had their own CEOs, their own CFOs- And probably not as much back office synergy as they could have had. But then over the years, a lot of that's been changed. Can you sort of like fast-forward to how IPG, as it stands now, is really a more seamless organization and not a bunch of disparate agencies as they once were? 'Cause I feel like that is probably underappreciated by some investors who aren't up to date. Sure. I mean, you know, to your point, I think that across all of the large holdcos, you know, how they were built and the degree to which they were still somewhat federated, is more a thing of the past than not, right? Now, that isn't to say that you couldn't do better. I mean, I think we're demonstrating just with the progress that, you know, kind of we're making around thinking about, like, just ways of working. The pace of change is significant, so you're kind of going, there's got to be ways in which you can embed tech, and you can embed platforms so that you can standardize ways of working, which isn't the silos piece that you were talking about and isn't some of the kind of messy rearview mirror stuff, right? But... And then the more you connect all the pieces, the better the product is, because from a client point of view, they get seamless delivery of a set of services, and it's connected to something that gives you accountability and clarity around kind of the value that's being generated. Or, like I said, whether it's, you know, outcomes, precision around audience definitions, you know, some of the benefits you get from how you show up in the market, when it comes to, you know, media owners or other players in a now pretty complex ecosystem, 'cause there's MarTech and AdTech, and so on and so forth. So I think that, you know, we left that very decentralized cottage industry phase behind a while ago, but there's still a lot of opportunity and need now. And one of the things that you know you've heard from both John and I is the investments we make in tech and you know the word that you mentioned two seconds into the conversation the need to kind of invest in AI and ensure that you're provisioning people with the best tools and resources. You know all of that we can make now in a much more centralized way at a level of investment that means that we are a really credible player and then everybody gets the benefit of that right? And so you're right that the perception of the industry and the reality are probably you know there's a little bit of a gap. I agree with you. The opportunity is immense to not just on the synergy side, but the scale and the efficiency you can provide to clients is just gonna be different and just gonna resonate in this market. Can you – one data point was Dentsu was said to be looking at potentially disposing of their international business. Would that change the industry in any way, or any thoughts? Not dramatically. I mean, I think it's a modest-sized asset at this point, and I don't know that it has anything that sits inside of it that is particularly differentiated. So there's obviously some noise around it, 'cause they seem to have confirmed that, you know, it's a process that's begun on their side. But I'm sure we'll hear any number you know, we'll hear a lot of speculation about where it might end up, but my sense is that it's not in and of itself something that changes the math a lot. Right. Okay. Now, one topic that's come up lately in the world of marketing, search, and AI is the idea that AI-related searches, whether you do it on ChatGPT or Google, are giving you the answer and not giving you ten blue links and not sending you around the internet. So it's making customer acquisition potentially harder and making traffic harder to come by. We had a few tech companies, maybe it was HubSpot, Monday.com, brought this up- And, you know, it - we can make too much of it or too little of it, but I would love to just hear your... If you have observed that, if there's any thoughts on is business discovery changing and traffic direction changing? Is that an opportunity for you, or? Well, look, I think, I think consumer behavior changes based on what technology gives you, is a way, you know, in the way of tools to navigate this incredibly overwhelming amount of information that we all deal with on any given day, right? I think consumers are smart, though, and so there's a point at which they go, "Okay, am I outsourcing this? Am I missing something by outsourcing this in a certain way? Right? "So am I missing choice? Am I missing, do I try it this way, and do I like the results and the recommendations that come back to me? Is it as interesting?" So I think it's sort of TBD, whether or not it will be. It'll de facto become, quote, "the new avenue for discovery." So that's one piece of it. The next piece is that when things change and when things get a bit more complicated, and when marketers need somebody to help them figure out, how are we gonna solve for this? And how are we gonna then find ways to intersect with the consumer, identify the audiences that we should be talking to in order to unlock growth? That is an opportunity for us. And then I guess the last piece I'd call out is, I'm not, I'm not sure that there's ever been a medium that hasn't hit a wall and discovered that it likely needs to be ad-supported. I was just gonna bring that up, yeah. Right. Yeah. and so the fact that in- Uber, DoorDash Right. You name it, Netflix, Spotify. Yeah, the streamers, like- Yeah And so in like, you know, top of the first inning, four pitches into the first batter, everybody's like, assuming they can now tell the rest of the like, the story of how this game's gonna play out, and I'm not, I'm not sure that I would draw that conclusion as yet. Right. Yeah, my observation would be when you find a big tech growth industry that's deeply subsidizing some user experience- Eventually And giving away content or, like Something has to happen. Giving away a free ride, advertising is usually far, not far around the corner. Again, that then becomes an opportunity- Opportunity From where we sit. Yeah. Yeah, I absolutely agree, so just again, like high level ad agencies are trading, ad agency stocks are trading at pretty depressed valuations, not quite financial crisis levels, but pretty cheap, I mean, eight, nine times earnings. You know the business better than any of us, what do you think is most misunderstood about the businesses? I was looking and I was actually saying the earnings revisions have been way more durable than a lot of stocks that have, you know, that I cover. Even though, as we've talked about, revenues slowed, but what do you think the market might be misunderstanding about your industry, in general? I mean, I think it's been, it's been the case for a couple of years. Because, look, I mean, that, that's not a multiple. You know, if, if you, if you dialed back thirty-six months, that would have been a meaningfully different multiple, right? And even at that multiple, I think that what was missed is, that there's a great deal of tech in the model, that, you know, whether it's what Omnicom has with Flywheel in the commerce space, what we've got with, with Acxiom, that we have pretty powerful data assets. And so I think both of those are, are misunderstood and then likely not reflected. And then I think the, you know, fact that the AI sky is falling part of the story seems to have, you know, landed in some areas to a greater extent than in others, and that I think we're gonna do well, notwithstanding some of those concerns. Those are probably the three, you know, thematic elements that, you know, if people understood them better, you know, this idea of it's a tech-enabled service. It has the capacity to build out both outcome-based and SaaS compensation models, and it sort of sits on top of a powerful combination of data assets and the capacity to innovate and incorporate these changes in a way that are gonna actually not just benefit us, quote-unquote, in terms of that we're more efficient, but that it'll help us unlock growth. I think those are the ones. You know, in this industry, this merger, transformative merger for any of us who've followed the industry for a long time, and congratulations on the merger. I think it's very exciting. Yeah, it's great. Is this gonna be like a rallying cry for your company, for this merged company, to help with recruitment, to help with, you know, changing the perception that this is, you know, kind of legacy media industry, and that it's not to bring forward some of those, you know, elements? Well, I mean, I think, I think that it, it's exciting and interesting to our folks who work with clients, and as I said, the people who are delivering value to clients and who are generating revenue. It's been something that we've gotten very, very positive feedback on from clients, so I think marketers see that there's a meaningful benefit to them. So I think in those ways, it will definitely be very, very... It'll be powerful and well-received. Whether it's a rallying cry that helps us get people to understand the evolution of the industry, the complexity, and I don't know that in and of itself it leads to re-rating other than over a period of, say, twenty-four months. I don't think. Like, I don't think on day one, it gets us that. Yeah. But I think it does give us a platform from which we can prove that case. Yeah. No, I think there's a lot to like about it. So, well, we're about out of time. Thank you. So I just wanted to- I appreciate it. Yeah, I wanted to thank you, and again, congratulations on the merger- Thank you. and wish you well. And, thanks, everyone. Thanks a lot.