The wall's almost crushing. Anyways. All right. We'll get. Um, well- Thanks for the anecdote. I know. Um- I know about stuff I think. All right, we'll get started. Happy to have back at the conference, from Omnicom, John Wren, Chairman and CEO, and Philip Angelastro, Executive VP and CFO. Thanks so much for being here, guys. John, maybe I'll start it off at a high level. We're still in a pretty dynamic period for advertising and marketing services. How are you thinking about setting key priorities for Omnicom and balancing the short and long term? Sure. The short term, I think a couple things. We've rebalanced the portfolio over the last... you've been listening, over the last 10 years. I think we have a portfolio of companies that the market needs help from. We're in the process, even with the prospect of lower growth in recession or mild recession at some point, we are still continuing to grow and invest in the areas where we're seeing the greatest growth, and that's in the precision marketing, ethical healthcare, the consultancy projects that we have, and then some tuck-ins for products that we've made the decision that it's cheaper to buy than to... Yeah. That continues. That's the short-term method. Long term, longer term, there's a lot of complexity that's in the marketplace. A lot more complexity has been introduced now with AI. We're in the unique position in that we're one of two companies that Disney selected, Microsoft selected Disney and us to beta and test AI. We have a similar agreement with Firefly and Sensei, with Adobe. We'll be doing something with Google and Bard that I'm not allowed to, you know, talk about. Currently, today, we have over 71 projects, both client-facing and to improve our operations internally or transform our operations internally, which will make it better, cheaper, faster, more effective for our knowledge workers to face complex situations that our clients will face. Yeah. From a macro perspective, kinda seems like we've been moving from one headwind to the next. Now it's the debt ceiling talks. I'm interested to know kinda what you're hearing from clients in terms of their ad budgets, planned outlays. Have you seen wholesale adjustments at all, or is it kinda more a push for flexibility more than anything else? I would say it's the latter. Clients have not pulled back or said that they wanna cut their budgets. I think it depends on the vertical that you're talking about or the area that you're talking about. They're preserving as much flexibility as they possibly can. You get to some of the consultative projects you have with the introduction of AI and the impact. Even though AI has been around for a long time, we use it at Omni to a certain extent, not to the extent that we're going to be able to use it. People are just pausing, looking at the architecture of some of this digital transformation that they wanna go through, but they haven't reduced those budgets. As a matter of fact, they see the need to excel those, you know, to double down on those budgets. The bottom line is the larger advertisers that we deal with have learned from those... I've seen a lot of recessions. No one can claim that because they were around for the last recession, they know what to do in this recession, because every recession is different. But having said that, clients learned, and history proves, that clients have pulled back on their marketing and promoting their products in prior recessions, take an enormous amount of time to gain back that market share, and have to spend a lot more money emerging from it. Clients are not doing that, but they're preserving as much flexibility as they possibly can. You'll see that reflected, I think, in the upfronts. You mentioned, you know, verticals, it could differ. Any additional color you can provide there? Sure. I mean, you know, you take a look at automotive, right? You have two different client bases. You have the dealers, you have the manufacturers. We deal with both. The manufacturers have to position their products, especially their electric or hybrid type of products. They can't back away from the marketplace. They just can't. They absolutely cannot. The other implication that we're seeing from the OEM's point of view is if you asked them three years ago where the biggest growth market was gonna be, they would've said China, then they would've said the U.S. Of all the nonsense that's going on between China and the U.S. or Western companies, they're now doubling down and saying that they have to get more out of the U.S. That's why you're seeing budgets being dedicated and spent. If you go to the dealers that didn't have supply for three years, if you went in looking to buy a new car, they'd charge you over list. Some of them are still in denial that they can't do that anymore. There's a little bit of confusion as a result of that. Sometimes you get lucky, sometimes you don't. That's one vertical. If you take a look at healthcare. Healthcare, science, and probably the computing power of things that they've been able to solve, there are more and more oncology drugs being developed every day. The outcomes are being proven to be much better. Those are coming to market. Those need to be marketed. They need to be marketed in a proper way. We need to get to the payers and convince them that they should include those drugs on their formularies and pay for them. The ethical pharmaceutical vertical is going through the roof and will continue to grow through the roof. Entertainment, I guess Western governments gave a lot of money away to a lot of people during COVID, and they couldn't go anywhere. They're still spending a lot of money. You wouldn't think the doom and gloom that you might look at or I might look at in The Wall Street Journal or listen on, you know, Squawk Box or Bloomberg hasn't hit the public yet. Yeah. You know? The ridiculous part of it is because they can't get enough people to service every room in the hotel and to get you everything they want, they've raised the prices. Right. The demand there is going up, and people are taking advantage of it. I could go on and on. Anything notable from the tech vertical? That's one that everyone has called out as or it seems like that's called out a lot as a headwind, but maybe there's a thought as you kind of cycle past Europe efficiency and, you know, that might see a rebound at some point. well, depends on who you're talking about. If you're talking about Facebook. Yeah. Google. The big- Yeah. -tech marketers of the world. Yeah. I mean, my son is chief of staff of one of the four major divisions, and I think the text I got this morning is this was the last known layoff that he had to do last night for Facebook. I don't care because they were competition for the best and brightest people. Right. As now- Talent event. Now they can't be trusted as employers, so people are coming to me. That's what's best about it. What I think the next battleground that you're gonna see in those tech companies is AI. Right. We have a, as I said, a relationship with Microsoft in beta-ing their products and integrating them into what we do. If you compared or you listen to a YouTube comparison of OpenAI and Bard yesterday, you'd get the impression OpenAI is way ahead of Bard. Bard, Google yesterday made quiet private claims that it's advanced quite a bit in solving copyright concerns of ethics that are associated with this. If that's the case and the other limitations that they had, they'll overcome it. I think the next war that you're gonna see, it's gonna lead to- It sounds like they need brand marketing. Yeah. Well, a lot of growth too. Yeah. Is gonna be between all the big players. Yeah. because they all have to get their stake in the ground. Okay. We are partnering with them in terms of determining how to do that, and we'll service them in other ways too. Got it. You recently reported Q1 earnings. You maintained your guidance for organic growth for the year at 3%-5%. I think, John, you described the upper end as a stretch target. You did post over 5% in the first quarter. How are you thinking about factors that could get Omnicom to those stretch levels? Is this entirely a macro conversation, or are there factors that are more in your control? Well, the macro environment is don't fight the Fed, right? I could put a lot of examples and spend 10 minutes talking about what that means, but don't fight the Fed. That's 1 macro factor. Individually, when you get to our individual companies, we don't have 100% market share in anything. We're always pushing company by company, operating unit by operating unit to do better. We put out stretch goals for them, and ones that we think that are practical. The other dynamic which is going on within the company is I'm pretty aggressive in terms of what I think the implications of AI will be in a relatively short number of years. We are pushing quite a number of jobs into... that I believe will get automated or eliminated at some point into offshore locations. There's a lot of change going on, internal investment going on. Yeah. at the same time. I'd be interested how, you know, you just talked about we're not 100% market share in everything. Maybe you can update us on new business. We've seen a lot of pitch activity recently, media and creative side. Do you see a lot more RFPs potentially coming down the pipe? There's a fair amount that's coming down the pipe. Thankfully, we're in an offensive position in most of them. We're not. Yeah. A defensive position. That's not to say the odd thing doesn't happen. You take the most recent ethical one. What was really changed hands was the media. We didn't win it. I'm pissed off about it. We didn't win it. We'll win the next one. Got it. we didn't really... The ethical business wasn't really in review. It'll be a less than $10 million kind of impact to us as a negative, but other opportunities are presenting themselves. There are a number of pitches that are going on for all sorts of different reasons. Got it. People, the more prominent players in the market are getting more aggressive. Yeah. I used to look, go to market through only my brands. Now I'm going to market as Omnicom, showing the power of Omnicom. Yeah. You'll see more and more of that. That's a good segue to the next question. One comment I found interesting in your Q1 commentary was that your top 100 clients are now engaging 50 different services from Omnicom on average. How much has that figure changed over maybe the last 10 years or so? I don't know. I think it's pretty constant. It's pretty constant. Okay. What we meant by that was disciplines and geographies. Now the services have changed as they've matured, but that's been the beauty of the diversity of our bait, you know, of the services that we provide. Yeah. It's certainly part of the strategy. You know, John mentioned the Pfizer review just before. We do business with Pfizer out of, you know, dozens and dozens of agencies in the U.S. and outside the U.S. You read about a pitch oftentimes in the press and it seems as if there's a big loss. The reality is the more agencies and the more services you provide to those clients, the stickier those relationships are and the harder it is to kind of unseat, you know, our agencies in one fell swoop. You know, Pfizer ended up being a relatively small piece of business that we've lost and we've maintained, you know, the vast majority of the business. John, I think. Having said that, I get pissed off because we didn't win. Right what was on the table. Right. What was on- I'm sorry. No, that's okay. You mentioned before, digital transformation. I think we've seen that growth come through, in your precision marketing segment. What I'm wondering is kind of as we come out of the pandemic, you know, is there any risk that, you know, we've cycled past some period where marketers were sort of moving with urgency on that topic? Or do you see digital transformation as, you know, some, a truly secular change that you're going to get paid a long time for? Oh, I see it as a secular change that we're gonna get paid more and more for. Again, I don't want to go back to it and make it seem like I'm only talking about AI, but you look at the implications of AI and digital transformation, the architecture of what companies have to do, the ethics associated with how you use it will be unlimited in what it's capable of doing if you organize and architect your organization the proper way to utilize it. Also associated with that is you have privacy rights and other things. You can't open it up to our 70,000 employees and let them run wild with it, because you'll be sued until you go out of business. There's an awful lot of questions that have to be answered. There's very careful architecture has to be put in place, and all that complexity requires people that are expert in each one of those aspects, in each one of those fields. I see this as a practice that will continue to grow as it has grown. You know, when we get past the current what can I hold back moment that we're, you know, people are facing the uncertainty in their own organizations, it's something people will have to address, will have to invest a lot of money in or they won't be relevant 10 years from now. Yeah. John, why don't we just lean into the AI conversation there? Sure. Where it sounds like you're saying, you know, two things, right? There's a client-facing side of this, but then there's an internal. Absolutely ...way you can do more efficiently. Maybe we could unpack each of those a bit. Sure. I'll do the internal one. I said I wouldn't do this. I'm not going to. We have 71 active projects going on, right? Yeah. Most of which are client facing, some are internal facing. Let me first talk about internal facing ones. Right now, if I wanted to know my real estate landscape, so I know I have 318 buildings under lease globally to house 70,000 people. I know when those leases expire. I know all the terms and conditions of those leases. It's in a database. In a separate database, I have a payroll system that's connected to a human resource system, which among other things, identifies what building you're assigned to, in order to be paid. Alongside that, there's another database which lists all the assets that I've invested in a particular building, which I may re-lease, I may not re-lease. Right now if I ask people for that information, it'll probably take them at least, if they worked hard at it, seven days to compile it into a database, to hand it to me, for me to hand it back to them and say, "You forgot this." Right? If I type it into OpenAI, I can get the answer by myself in five minutes. The control factor is the especially the HR part of it, has all sorts of personal information associated with it. I can't give that to a low-level person and let them have access to it. In addition to defining and cleaning up databases and making them available to utilize to make better decisions, there has to be a whole governance structure associated with the digital transformation or input of that. Because you can't just have anybody walking around saying, "Gee, how much does Phil make? where does Phil live? Who does Phil bank with?" You know? You go to Europe and you try to do that. Go to Germany and try to do that, and you'll be sued before- Yeah. Before you wake up the next morning. That's an internal example of how I can cut out hundreds of man-hours. Yeah. Right? That's an internal one. I'll give you an external one. An external one, and we've told people, we are beta-ing, you know, commercials and work that we're doing and doing it similarly in an AI fashion with Art Bot and all the rest. Because clarity hasn't been defined as well as it needs to be in terms of privacy rules and in terms of copyright rules, I've informed my people, and they're doing it internally so we can see how well it works and how fast and what it eliminates and what it doesn't eliminate. We're not deploying it to clients because you get too far away from the people who worry about everything, and you give it to people who have specific assignments. They may think it's the coolest thing in the world, let's run with it, and they're gonna wind up in a lot of trouble. Right. Its power, from what I've seen of it, and I've seen Chat and been able to play with it personally, it's not released yet, is enormous. The implications and the ethics and how to utilize it are also enormous. There's gonna have to be a reconciliation of that. Once you get past But- Yeah. I mean, I'll give you a perfect example. If you were to do the research sitting in Belgium, Brussels, the EU has come up with a pyramid of defining risk and opportunity for AI and try to fashion some proposed legislation for this. You could drive 10 trucks side by side right through the middle of this legislation, you know, beating it, because it's gonna be hard to legislate. It's gonna be based upon ethics. I was just saying to somebody else, but I say it all the time, everything you ever learned, you learned by the time you were six years old, whether you're gonna be honest, transparent- Yeah. Whatever. All those building blocks are in Omnicom in terms of respect for privacy, the due diligence we go through, respect for, you know, copyright and laws. All the foundational blocks are there. We just have to apply it in such a way that it's gonna benefit the client, gain greater ROI. We also have to realize that we have to change the way we contract with clients, right? Some of them won't... If you just pure hours and materials... Yeah. You depend upon that way of getting paid ad infinitum, you're gonna wind up on the losing end of this. Is that just because the AI will reduce the hours? Right. The cost plus model. Yeah. What it'll do is it'll drive your margins to a point where your client comes in and say, "You can't make that much money. Right. You have to figure out, can you turn some of these efforts into platforms, charge a price for the platforms? The platforms are gonna enable the people that I call knowledge workers internally at Omnicom. It's gonna make them do their job better, faster, smarter. Another practical example. If you had $10 million and you had certain KPIs and you want to spend it in the New York metropolitan area, AI could give you a plan. What it can't give you is information that we have about every individual that lives in the New York metropolitan area, their habits and where that should direct you. That's a private database. That's not gonna be available to the public. They don't know what kind of deals we have with the various medias, which might redirect you to spend the money a different way than a general AI project would help. There is a place for us, and we have to figure out how to be paid properly for it. Not-Necessarily historically for it. We've gone through these changes before. I was already an executive when we were on the commission system. I mean, I've seen these changes over a long period of time. We're starting to adjust, and we will start to test different ways of getting paid as we gain these efficiencies. What we also have seen in most clients, and we can do this on every client now, prove the ROI of a marketing dollar. As we can make it more efficient for the client, they don't cut budgets, or if they cut them, they cut them. Yeah in a very small way. They reinvest them if we can handle the complexity and help them through it. Yeah. The other question, which is just a natural question which comes is, "Gee, if it gets so good, you can in-house things. Right. Yes, you can. You've been able to in-house things for a long time. Yeah. We've turned that into a practice where we assist clients in housing things, and we stay partners with them because we're doing it at scale. They're just doing it for their limited company. We get paid for helping them improve what they've already in-housed because we're not frightened by it. You know, in the case of AI this time around, as we transform our own company internally, we're gonna create or further our consulting practice with the mistakes and the intelligent things that we do, so we can codify those and go sell it to companies that don't have those skills and will need help in order to do it. We'll change the portfolio again by creating other new businesses. I'm excited by it. Yeah. I'm not afraid of it, and we're embracing it. Got it. We have about seven minutes left. If there's questions in the room, you can raise your hand. If not, I can go on babbling about AI. Maybe I can get you to babble a little on the upfronts. You mentioned them before. Sure. Can't help but ask about it. The process always looks a little less like the upfronts when I first started looking into the advertising space. Sure. Maybe the strike had a role in that this year. You know, how's the changing nature of that process, more streaming, less linear, play out for Omnicom Media Group? It's a complex question. I'm not expert in it, but I'll give you what I know. Video is the king. Right. Everybody can see and agree with that. There is a battle which will continue to go on between linear and streaming. Streaming will ultimately be advertising supported 'cause the public can't pay for it any other way. I think if you looked at the total amount of money spent, linear still has the greatest share. I think that will erode over time, probably over the next three to four years, where we'll see the waterfall go more towards the streaming side of the equation. What does all that mean? That means it's complex, and what's good for me is complexity. Right. Right? That's what's good. Yeah. The only place, though, that you see commitments with those clients, it's not an election year, so they're gonna maintain as much flexibility as they possibly can in the upfronts because they think they'll have more certainty as the year goes on. That'll impact it as much as anything we've just discussed, except for in the case of sports. Okay. Sports will. Maintain its place. Yeah, it'll maintain its place, and we're probably the leader because of the client base we have in securing those commitments. Phil, I wanted to ask you on costs. You recently announced plans to exit about 1 million, sorry, 1.5 million sq ft of real estate. That comes on other significant reductions. Maybe you could talk about what's changed that you can pursue this level of consolidation. I know that there's a lot of puts and takes to the margin on that, some offsets in year one with return to office. Maybe you could speak to that. Sure. you know, Coming out of COVID, certainly, the way we work, the way our agencies work, has changed. I think you see that reflected in the actions we've taken during COVID and coming out of COVID, in trying to shrink our real estate footprint. We've done quite a bit of that over the last, you know, really the last five or six years, but certainly accelerated that during COVID and coming out of COVID. you know, we've set out a policy of people need to be in the office at least three days a week globally. It's really 3- 5, 'cause many of the markets around the world, especially outside the US, people are back to being in the office five days a week. In the U.S., it's a little different, especially in the major cities we operate in. Having people back in our business, you know, we're better together, especially the creative aspects of the business. When those people come back, you know, they're gonna come back to a more open environment. We've made some investments in the portfolio in terms of making some of our facilities easier to use, more collaborative space, et cetera. That's added a little bit of cost and offset some of the savings. We're gonna continue to use those savings to reinvest in the business in many of the things John was talking about. We do expect it to put us in position to be, you know, near the higher end of our margin guidance, which was operating margin of 15%-15.4%. One other aspect that I'll add to that is we're changing our approach in other ways. Mm-hmm. If you take the New York metropolitan area, where people are afraid to get on subways and trains, what we've done and where people got used to going to their kids' softball game or swim meet or walking their kids to school, we've opened up satellite offices in Westchester, in Greenwich, on the Nassau-Suffolk County line, and in Jersey City. Trying to reduce the commute and the cost of the commute for our employees, and give them more flexibility. Not insisting that they come to the office because they need to be in an office environment. Right. Not trying to mitigate wherever we can that disruption that you had total flexibility before. Now you have to go back into a structured environment. We're not making you commute two hours and pay a zillion dollars to park. It's gonna go up. Yeah. Congestion. Yeah. Phil, I'm curious. You updated your financial disclosures on the cost side. You broke out third-party incidental costs, like travel from third-party costs where you act as a principal. I'm just curious. For the latter, can you say in what business lines you are acting as a principal? How much of that is sort of your media operations? Sure. We have a few different businesses that have those types of costs, including in our principal media operations, our events business, certainly in our field marketing business. Those are the three principal pieces of the business that operate in that way. There are some, you know, some of those costs that come through virtually all of our disciplines, but at a much smaller level. Media business probably is about half of that. Got it. John, maybe just one last one from me going back to the real estate. I think you're gonna be you know, kinda co-locating agencies at single offices. You've always been really careful to maintain separate identities, cultures for your agencies, right? Any risk of now kind of bringing everyone under one roof, or is that? The risks are minor. Yeah. The difference in Omnicom of the past, I've been around, as I said, for many decades now. People used to buy just brands and just activities. Increasingly, people are buying Omnicom. Right. Our people have learned how to collaborate a lot better. The major cultures and differences and approaches are. There's a lot more similarities than differences. I allow those, you know, pods of people to live in with other pods of people. They've always known what the differences are in approach. You can see it in how we prepare, which we never have done before until recently. When an RFP comes in, it comes into Omnicom more often than not now than to a particular agency, especially when you're talking about larger opportunities. That's where you'll really see the impact, and that's primarily in the U.S. To give you a perfect example, the next biggest market after the U.S. is London. In London, there's over 5,000 people. They're located in one location. It's two buildings with an adjoining bridge between the two. They're on different floors. If you went into any one of them and asked them who they work for, they'd say, "Omnicom." If you ask them if they have a different culture than the agency on the other floor, they'd say, "Yes." Right? We're getting the best of both worlds. Yeah. We're not trying to do it at the exclusion of losing that culture, losing that ability to attract people. We also know that clients aren't interested in hearing about us. We're there to solve a client's problems and solve it as Omnicom. All right. I think that's a good way to wrap. Thanks, John. Thank you. Thanks, Phil. Thanks, everybody, for coming.