The Interpublic Group of Companies, Inc. Price & Performance (IPG)

Good morning. Thank you for joining us. This morning, we are joined by our CEO, Philippe Krakowski and by Owen Johnson, our CFO. We have posted our earnings release and our slide presentation on our website interpublic.com. We will begin with prepared remarks to be followed by Q and A. We plan to conclude before market open at 09:30 Eastern Time. During this call, we will refer to forward looking statements about our company. These are subject to the uncertainties and the cautionary statement that are included in our earnings release and the slide presentation. These are further detailed in our 10 ks and other filings with the SEC The. We will also refer to certain non GAAP measures, We believe that these measures provide useful supplemental data that while not a substitute for GAAP measures allow for greater transparency in the review of our financial and operational performance. At this point, it is my pleasure to turn things over to Philippe Prakowski's Thank you, Jerry, and thank you for joining us this morning. As usual, I'll start with a high level view of our results in the quarter and for the full year, as well as our operating outlook for the year ahead.

Ellen will then add additional detail and I'll conclude with thoughts on the compelling strategic benefits of our proposed acquisition by Omnicom. Turning to performance and beginning with revenue. Our organic revenue decrease in Q4 was 1.8 bringing us to full year organic growth of 20 basis points. Our revenue change in the fourth quarter was largely due to the impact of the account activity over the previous twelve month period which we had discussed with you on prior calls. Those headwinds intensified during the quarter which was expected but at a somewhat greater rate than we'd anticipated. As a result, the full year fell shy of our forecast. While we saw the impact of those headwinds across a number of disciplines and geographic regions, That was partially offset by notably strong growth in the food and beverage sector as well as the return to solid growth in technology and telecom. As discussed on our last two calls, the underlying tone of business in the quarter did pick up from earlier in the year. It's also worth noting that we had several headline wins including Amgen, Little Caesars and Volvo on the media front as well as Pizza Hut and The Clark Creative consolidation, which took place in mid January.

This represents solid new business momentum but those wins are too recent to have benefited our fourth quarter and won't fully be online until a bit later in the year. Turning to operating expenses and The in the quarter, our adjusted EBITDA margin was 24.3% And with that performance, we delivered against the full year margin target of 16.6% that we'd set at the beginning of twenty twenty four. That sustained level of profitability reflects strong operating discipline by our teams, notwithstanding a challenging year while continuing our significant investment in talent and our technology and platform capabilities. Fourth quarter diluted earnings per share was $0.92 as reported and was $1.11 as adjusted for acquired intangibles amortization some initial deal expenses related to our planned combination with Omnicom and the non operating impact of non strategic businesses sold or held for sale. Full year diluted earnings per share was $1.83 as reported and $2.77 as adjusted. That compares to $2.99 in 2023. As a reminder, our EPS in full year 2023 included The benefit of a $0.17 per share related to the resolution of routine federal income tax audits of previous years. Over the course of the year, total capital returned to shareholders between dividends and share repurchased was $727,000,000 We suspended repurchases in the fourth quarter due to the tendency of the merger and given regulatory limitations We expect to be back in the market after our shareholder meeting.

It's also worth noting that while historically we've raised our dividend per share at this time of year, as we work towards the acquisition by Omnicom, both parties contractually agreed to no increases through the pre merger period. As you heard last week in John's remarks, the expectation is that the free cash flow of the combined companies And as such, we expect to increase Omnicom's historical capital allocation for dividends and share repurchases while also being able to invest meaningfully in The the combined business to further enhance its strength in key areas such as technology and talent. As we look ahead to 2025, of course, one very significant focus is our commitment to bringing the merger to full effectiveness. A number of our competitors are clearly concerned enough about the combination that they've spent a lot of airtime talking about are being distracted. But our frontline talent is fully focused on clients which is obviously as it should be. And we have a small and clearly defined group here at corporate that we'll be working on the day to day activities required for a successful integration. In the meantime, IPG will of course continue to operate independently. So it's appropriate that we continue to share our standalone outlook with you as part of these calls.

Entering the The Year, we've seen The clients remain focused on the need to drive growth. And that means investing in the ongoing evolution of their businesses especially around solutions at the intersection of media, creativity technology, and data. Yet global macroeconomic and geopolitical uncertainty which we had seen abate in the latter part of 2024, remains and that is showing up in a somewhat more cautious and deliberative approach to budgeting on clients in certain industry sectors. During this year, we'll also continue to navigate the weight of trailing wins and losses on our top line. As we've discussed previously, we The on the wrong side of the outcome in defending a number of very significant media [indiscernible] It's worth reminding everyone that the decisive factor on those largest decisions was Principal Media, and specifically the commercial terms enabled by Principal Media at scale. In one other important account shift in the healthcare vertical, where our capabilities have led the market for many years, a competitor was able to leverage its much greater size to win a significant portion of a large creative account we've been awarded not long prior. Looking at just the three largest of those decisions, [indiscernible] they will weigh on our growth for this year by 4.5 to five percentage points.

Factoring in that headwind, and with an offset of otherwise sound underlying performance. We are therefore targeting an organic decrease for 2025 of 1% to 2%. We estimate The quarterly revenue phasing will be with a net impact of wins and losses [indiscernible] in the year's second half.

It's important to highlight that our proposed combination with Omnicom will position us with greatly strengthened solutions for more competitive and better client outcomes. Turning to our outlook on expenses and margin for the year. As most of you know, With respect to our opportunities to evolve the architecture of our company, [indiscernible] for client service as well as operating efficiency. You've heard me speak before The a structural changes that we need to make to improve our growth profile. Namely investing in higher growth capabilities increasing the integration of our offerings and constantly simplifying what it means to work with us This also applies to our ways of working and our organizational structure. With an eye on the rapid evolution of our industry, and its impact on our business, over the course of the back half of last year, we undertook a wide ranging strategic analysis that included multiple avenues to rethinking our operating structure. This strategic review has been focused on maximizing as an independent IPG but these efforts will also clearly benefit us when it comes The The combination of our company into Omnicom. Our outlook for 2025 therefore includes a programming of restructuring, over the course of the year designed to transform our business, enhance our offerings and drive significant structural expense savings.

This is a blueprint for accelerating change that includes speeding our progress on strategic centralization of many corporate functions greater offshoring and near shoring in both corporate services and certain areas of client service delivery. With The latter centers of excellence focused on platform benefits in key areas such as production, and analytics. We will also continue to improve efficiency, the operational structure at a number of our agencies, as well as further improve real estate efficiencies. Specifically, we expect that our program will generate in year savings of approximately $250,000,000 in 2025. The associated charge should be of an equivalent amount with a significant portion being non cash.

We will recognize most of those expenses in the first and second quarters and we'll call those out for you in our P and L. And we plan to provide additional details on this plan with our first quarter report in April. To be clear though, believe these actions have very limited overlap with a $750,000,000 of cost synergies anticipated, as part of our proposed combination with Omnicom. As you heard in some detail from John last week, those savings are enabled largely by the combination of our two companies and the areas of focus he called out are not those that I just identified. Additionally, as John mentioned on his call, the $750,000,000 of synergies excludes revenue synergies, synergies from automation, and incremental onshoring and offshoring. The restructuring is required The and will allow us to become a part of the new Omnicom in the strongest possible to The In terms of 2025, with The strategic actions on costs along with our usual strong operating We're targeting adjusted EBITDA margin of 16.6% under our expected organic revenue decrease of 1% to 2%. As we look ahead, we remain confident in the many fundamental areas of strength within our company, and the enormous potential of our planned combination with Omnicom.

I'll come back with thoughts on the acquisition. But at this point, I'd like to turn things over to Ellen for a more in-depth view of our results.

Thank you. I hope that everyone is well. As a reminder, my remarks will track to the presentation slides that accompany our webcast. Beginning on Slide two of the presentation, our organic decrease of net revenue in the quarter was 1.8%. That brings our organic revenue growth for the year to 20 basis points. Adjusted EBITDA in the quarter was $591,200,000 and margin on net revenue was 24.3%. Adjustments exclude the amortization of acquired intangibles, ended 9,300,000.0 of deal expenses in SG and A related to our acquisition by Omnicom. For the full year, our adjusted margin was 16.6%.

Our diluted earnings per share in the quarter was $0.92 as reported and $1.11 as adjusted. Below the line, we have adjusted for non operating losses from both the disposition of non strategic businesses and assets held for sale. Our adjusted diluted EPS was $2.77 for the full year. We concluded the year in a strong financial position. With $2,200,000,000 of cash on the balance sheet and with only 1.7 times gross financial debt to EBITDA as defined in our credit facility. Our share repurchases during the year totaled 7,300,000.0 shares. Which returned $230,000,000 to our shareholders in 2024, As Philippe noted earlier, we suspended our activity in the fourth quarter due to the planned acquisition by Omnicom. Turning to Slide three, you'll see our P and L for the The. I'll cover revenue and operating expenses in detail in the slides that follow. [indiscernible] Turning to fourth quarter and full year revenue on Slide four.

Our net revenue in the quarter was $2,430,000,000 a decrease of 5.9% from a year ago. Compared to Q4 'twenty three, the impact of the change in exchange rates was negative 50 basis points The impact of dispositions and assets held for sale was negative 3.6 Our organic net revenue decreased was 1.8% which brings us to organic growth of 20 basis points for the full year.

Further down The slide, we break out segment net revenue performance. Our Media, Data and Engagement Solutions decreased 60 basis points organically Very strong growth at Acxiom was offset by continued decreases at MRM. Media Brands decreased slightly in the quarter less than 1%. Due to the significant impact of trailing account losses. Organic growth for the full year of this segment was 20 basis points. The organic decrease at our integrated advertising and creativity Lead Solutions segment was negative 4.7%. In large measure, performance reflects the decision The Singapore single sizable client in the healthcare sector early in the year We continue to have strong growth at Deutsche and we had solid performance in the quarter notably in the international market, For the year, the segment decreased organically by 20 basis points. At our specialized communication and experiential solutions segment, organic growth was 1.3%. We have growth at Golan, In public relations and at Momentum and Octagon, in experiential offerings. Which were more than offset by softness elsewhere in the segment For the year, the S and E segment grew 1.3% organically. Moving on to Slide five, our revenue growth by region in the quarter. The U. S. Which was 60% of our fourth quarter net revenue, decreased 3.2% organically.

Reflecting the impact of certain accounts lost in late 'twenty three and during 2024. We weighed on our growth broadly across our domestic operations. Were 40% of our net revenue in the The, and increased 30 basis points organically. In The U. K, 9% of our which was 9% of our revenue in the quarter the organic decrease was 3.3%. Growth at Acxiom and Dolan was more than offset by decreases elsewhere in the portfolio. Continental Europe was 10% of our net revenue in the The. And decreased 3% organically which was against 11.7% growth a year ago. Declines in regional spending by global clients weighed on performance. With the results notably soft in Germany and France.

In Asia Pac, which was 8% of net revenue in the quarter, Our organic decrease was 7.9%.

The loss of certain global accounts weighed on results across the region. In LatAm, which was 6% of net revenue in the quarter, we grew 10.4% organically on top of 15% a year ago. Our strong growth was led by five gs Media Brands, and by market, was led by Mexico, Argentina and Colombia. Our The international markets group which consists of Canada, The Middle East and The Africa, was 7% of net revenue in Q4.

And grew 12.1% organically. Performance was due to strong growth The Middle East, where business rebounded from the impact of the events the year before. Moving on to Slide six, and operating expenses in the quarter. Our fully adjusted EBITDA margin in the quarter was 24.3%. Which is the same level we attained in the fourth quarter of twenty twenty three. Our ratio of total salaries and related expenses improved 70 basis points to 58.7% compared with 59.4% in last year's fourth quarter.

We had leverage on base payroll and temporary labor partially offset by higher expense for performance based incentive programs due to the timing of accruals over the course of the year. And it's severance expense. We ended the year with headcount of 53,300. Which reflects an organic decrease of approximately 5% from a year ago. And a total decrease of 7% including our net business dispositions.

Our office and other direct expense increased as a percent of net revenue by 20 basis points to 13.8% Occupancy expense was flat as a percentage of net revenue. While all other office and other direct expense increased by 20 basis points. Mainly due to higher levels of investment in technology.

Our SG and A expense was 1.8% of net revenue, an increase of 90 basis points from a year ago.

Due to $9,300,000 of expenses related to the planned acquisition by Omnicom and strategic investments in senior enterprise talent and platform development. These expense ratios for the full year are available in the presentation appendix and reflect the same drivers that were at work in the fourth Strong leverage on salaries, offset by greater technology investments increased strategic hiring in SG and A. Turning to Slide seven, we present detail on adjustments to our reported fourth quarter results in order to give you better transparency and a picture of comparable performance, This begins on the left hand side with our reported results and steps through to adjusted EBITDA and our adjusted diluted EPS. [indiscernible] in the second column was $20,400,000 The small restructuring reversal was $6,400,000 Deal costs pertaining to the planned acquisition by Omnicom were $9,300,000 Below operating expenses, are net loss due to assets held for sale and the sales of non strategic businesses, was $57,800,000 At the foot of this slide, you can see the after tax impact per diluted share of each of these adjustments. Which bridges fourth quarter diluted EPS as reported at $0.92 to adjusted earnings of $1.11 per diluted share. Slide eight, similarly depicts adjustments for the full year again for continuity and comparability.

Bridging diluted earnings per share as reported of 1.83 to our adjusted $2.77 per share.

It's also worth noting that shown on The schedule, our adjusted effective tax rate for the full year was 25.2% which is in line with our expectations. On Slide six, turn to cash flow for the full year. Cash from operations was $1,060,000,000 and was $1,220,000,000 before changes in working capital. Our investing activities used 151,100,000.0 mainly for CapEx of $141,800,000 Our financing activities used $1,000,000,000 mainly as shown here for dividends on common stock, The repayment of debt in April. And repurchases of our shares. Our net decrease in cash for the year was $198,700,000 Slide 10 is the current portion of our balance sheet. We ended the year with $2,200,000,000 of cash and equivalents. Slide 11 depicts the maturities of our outstanding debt and our diversified maturity schedule.

Total debt at year end was 3,000,000,000 and our next scheduled maturity is not until 2028. In summary, our strong financial discipline continues. And the strength of our balance and liquidity means that we remain well positioned both financially and commercially. And with that, I'll turn it back to Philippe.

Thanks, Ellen. As you've heard from us previously, until we have regulatory approvals, and the proposed combination with Omnicom is complete, We continue to be in market So I'll review the particulars of our performance as I would on any other quarterly call. An important announcement during Q4 related to the continued enhancement of Interact, the suite of integrated end to end technologies across our portfolio and that's The latest evolution of our core technology infrastructure and marketing engine. This operating system integrates data flows across the consumer journey from research and insights to creative ideation, production and commerce, as well as powering media activation. Built and developed by our in house product team, Interact represents many years of investing, refining and unifying core capabilities to ensure we can drive sustainable growth for our clients. Whether in marketing or sales channels, It's being used by a growing number of interpublic companies on behalf of their clients.

In the quarter, we also announced the planned acquisition of Intelligence Nodes, a leading e commerce intelligence platform known for its data accuracy and global reach. Specific to retail data. Intelligence nodes technology leverages AI to aggregate and analyze 1,000,000,000 of data points across thousands of retail categories over 30 global markets. Delivering dynamic insights into consumer sentiment, and a range of product attributes. Including pricing, product availability and inventory levels as well as retail media. [indiscernible] This move significantly enhances our existing commerce capabilities providing clients with real time intelligence to understand shopper trends optimize performance in digital retail marketplaces, In terms of operating unit level performance during 2020, IPG Media Brands posted solid growth and we saw a number of sizable new business wins to close the year. In the fourth quarter, Amgen and HelloFresh TAPS Media Brands is their AOR and Volvo chose Initiative as its global media agency. The network also retained Unilever and LatAm, and grew the business in Canada and MENA The, as part of that client's global media review. MediaHub was named AOR for Little Caesars and earlier this month Alaska Air tapped as its U. S. Media partner. Acxiom also posted good growth for the full year and in the quarter.

Which featured four large new business wins across industry sectors. Including technology, financial services healthcare and the public sector. These new engagements reflect Acxiom's expertise in leveraging first and third party data to solve complex business challenges and helping clients maximize their own tech We also consolidated all of IPG's Salesforce cloud services under AXA which now offers clients consulting implementation and operational services across the full suite of Salesforce clouds as part of IPG's centralized platform services. IPG Health continued to be the best in class creative network in its space winning top honors at the M and M Awards and the London International Awards. The network also expanded partnerships with clients certain key clients in the quarter, including AstraZeneca, Merck, Regeneron and Edwards Life Sciences. Our earned media solutions continue to evolve with leading offerings. Weber Shandwick launched a differentiated influencer offering that marries Acxiom data with cultural and commercial impact. And the company has added nearly a dozen new clients' assignments in the area using this tool and also won the FE award for the year's most effective influencer campaign for its work on behalf of Kellanova.

During the quarter, Goen committed to being the first fully AI integrated PR agency by the end of this year. And over 80% of Golan staff are now using AI as part of their daily work with more than 100 brands and clients benefiting from Golan's AI assisted workforce. Our creative agencies continue to deliver powerful ideas that are winning in the marketplace for their clients. We've increasingly seen significant wins when we bring together creative, data and production, with audience led thinking and identity resolution powered by Interact. This includes Kimberly Clark, which recently as part of their global consolidation review process. With FCB as a lead agency and support from both MullenLowe and McCann And this was the second sizable win for us with this after the Klinova consolidation last year. Notably, work from FCB for another such client Budweiser secured the number one spot in The USA The ad meter ranking for best commercial in this weekend's Super Bowl. Of course, given the requirements of sophisticated modern marketers, we have to not only maintain our commitment to great talent, and tech enabled capabilities, that give thoughtful consideration The new structures and ways of working. As mentioned in my opening comments, Q4 saw us finalized plans for the organizational restructuring This program will include streamlining efficiencies with in our agencies centralization of a number of corporate functions, focus on greater offshoring and near shoring, accelerating our progress on strategic centers of excellence in areas where platform services can benefit delivery and cost such as production and analytics, as well as further improving our real estate footprint.

These actions are necessary to ensure that a standalone IPG is in the strongest possible position despite our top line challenges. While some of the cost savings we generate will be invested in talent and technology capabilities, in areas such as AI, identity resolution, content management platforms commerce and data the strategic restructuring and transformation will deliver savings in 2025 that position us to maintain margins this year and expand them going forward. These actions are independent of and to our proposed combination with Omnicom. Which will create the industry's most dynamic and well resourced company.

As I called out earlier, we believe there is limited overlap between the impact of these efforts and the synergies identified as a result of the proposed acquisition. By Omnicom. Turning now to Slide 12, we outline the full range of benefits that a combined The and Interpublic, will deliver to our various stakeholders. For our clients and our people, expanded and enhanced products and services will mean significant value. Our combined operations will be positioned to offer clients multiple advantages that are unduplicated and superior to anything currently in market. They include media offerings that leverage unparalleled scope and quality of investment data and technology. The proposed transaction will also enhance our collective commerce offerings and technology investments bringing together specialized capabilities on both sides. In addition, our companies have highly complementary geographic footprints and a shared foundation of common values and culture. With respect to technology, the combined company will have exceptional identity resolution and commerce offerings based on a deeper understanding of consumers than any other provider. In terms of Gen AI technologies, like some of our competitors at Interpublic, we've moved well beyond testing and are applying LLMs and proprietary tools across media, creative, experiential agencies and other areas of our business.

Together with Omnicom, we would be able to bring to market the combined resources of both companies. Focusing our investment and then amplifying it against The larger For clients, this means a foundation of compelling benefits. Creating a seamless ecosystem where data, technology and creativity come together to drive innovation, and deliver measurable business growth and outcomes against clearly defined KPIs. That's why we believe the differentiated offerings will result from the combination will drive exceptional future revenue growth opportunities.

I think it needs to be said because there's been so much that has been said by others who are not part of the proposed transaction. That our partners have been enthusiastic about our combination with Omnicom. Our client facing colleagues within Interpublic from those who create ideas to those who advise clients on their investment decisions to those who innovate with tech and data, They are all looking forward to the wider array of capabilities that we would be able to bring to marketers.

Our teams appreciate that nobody in the industry has as comprehensive a solution as we will together with Omnicom The. As you'd expect, we've also spoken with our top clients. They see the benefits and understand that our partnerships and the value we can deliver for them will be meaningfully enhanced.

So while we understand that our competitors are trying to disrupt what we are looking to build, it bears repeating that the integration will remain very focused and not get in the way of the services we deliver to clients every day. You've heard about the financial benefits both when we announced the deal and on Omnicom's call last week. From the revenue and cost synergies, to the powerful balance sheet that will support capital return and accelerate innovation to the accretive nature of the deal, it is very compelling proposition. In terms of timing, the regulatory process is moving forward. We are progressing in the HSR review on February 10, We refiled our HSR filing to continue that process which is commonplace for transactions of this type. Foreign filing processes are also well underway and the special shareholder meetings to approve the transaction are scheduled for March 18. We continue to expect to close in the back half of this year. In the interim, as we've outlined for you today, we are taking steps to keep Interpublic competitively positioned for Our strategic actions will bring us into The combination as the strongest possible company and we'll continue to build on our ability to deliver integrated client focused [indiscernible] and solutions and further align and extend key data and technology capabilities.

As well as remain true to our long standing commitment to operational discipline and a strong underlying financial foundation. Thanks for your time today. And at this point, let's open the floor to your questions.

Thank you. Our first question is from David Karnovsky with JPMorgan. You may go ahead. Hey, thank you. Maybe just first with Palynziq, On The underlying conditions, I think you noted improvement through last year, but maybe some incremental caution now due to the macro, especially in certain sectors. Wanted to see if you could expand on this a bit and also touch on tech.

Where I think you said you returned to growth And then second for Ellen, on the accelerated business transformation, the $250,000,000 of net cost savings you help us understand that figure against the flat margin guide? What is actually realized this year versus items like severance that will show up in adjusted EBITDA And then is it reasonable to be extrapolating those savings out to say '26 with the implication that you would see a notable step up in margin assuming steady revenue.

On the revenue question, I mean, I think what I would just do is, we've tried to give you clear line of sight to the ups and downs of '25 and the degree to which just a number of those very large losses are weighing on the performance. So if you're looking at 4.5% to five of drag Clearly, the underlying business is is getting us back to the guide, not that we're happy that that has The be the guide. In terms of the fourth quarter, the run off of certain of the accounts we mentioned was probably greater than expected. So cumulative way in Q4 of again just a few trailing losses was about 4% in the quarter. So all of that says to us that there's no new news. It's really timing. And then at a macro level, I think you heard us say towards the back half of the year that it looked as if people were lean past and beginning to really get what was the reality that they needed to just start to make plans and invest in growth, There's one or two client categories or there's just you look at the degree to which there's some [indiscernible] kind of it's just a slight downshift.

It's nothing dramatic.

Okay.

Good morning, David. Thank you for your question.

Regarding the business transformation and how it relates to the restructuring, would say it's a continuation. All through 2024, we talked about how we were implementing common systems. And standardizing our processes. Which enables you to create centers of excellence. A lot of what the restructuring is doing is doing just that. Which is allowing us to be more efficient in the ways that we operate and more effective in the ways we service our clients.

And those are the types of things that we called out in the prepared remarks. As far as expenses and savings, we said we think the charges in 2025 will equate approximately to the savings in a year, with more to come in future years, which lead to expanded margins go Thank you. Our next question is from Michael Nathanson with MoffettNathanson. You may go ahead. Hi. Good morning, Philippe. Thanks. Hi, Michael.

Good morning. It was notable that you called out Principal Media as a factor for some of the client losses. Can you talk a bit about [indiscernible] abilities if this deal is done, how quickly do you think you could integrate their Printful Media business with Media Brand. So there seems like a big opportunity on the top line.

Maybe fix some of the losses. So can you talk about like your thesis on why it was better to merge than to build at that point for Principal Media?

Look, I mean, I don't think that you would I wouldn't introduce The are so many parts of and so many strategic benefits to the merger. Sort of yes, for us in 2024, our media business which had been a very strong performer for a long time ran into challenges and that was an area that we felt was of concern.

So to the extent that you've got in our perspective, soon to be partner of great deal of expertise in that regard. And then presence because you heard from us that we felt good about the rate at which we were able to bring build a principal ourselves domestically kind of in The U. S. The opt ins we were getting from clients the degree to which we were able to put together a very sophisticated contemporary service offering and products there I think that marrying that up to connecting it given The Fact that Omnicom is sophisticated in that regard that they do this well and that they do this [indiscernible] benefit. But I think that there's just so much more about what and how the company's fit together There's so much that's complementary. The opportunity is much greater than which is not to say that this is not one of the opportunity areas.

Okay.

Thanks, Luke. Sure.

Thank you. Our next question is from Julian Rock with Barclays. You may go ahead.

Yes. Good morning, Philippe. Good morning, Ellen. My first question is in the proxy statement, you presented forecasts where you have 110 basis point of margin improvement in 2026 and one hundred basis point in 2027. Which is well above consensus. So can you confirm The forecast And do you need more than the €250,000,000 of savings you announced today to get The, I. E. We'll get another round of cost cutting next year? Or with today's announcement that's how you get to those those margin improvement.

That's my first question. The second one The, as you said that those savings you've announced today are largely independent from the seven fifty. Kind of philosophically, if I take the to get the EBITDA for the combined group, do I take what you have in The proxy statement forecast and just add $750,000,000 to get combined EBITDA because some clients are telling me that you'll have some cost creep and I shouldn't do it like that. And then The last one Bruce, John and yourself, I said that client facing would be absolutely fine, would be better because they have better tools, one should combine. And that the merger benefit were mostly merging the back office But if you do that and you do not consolidate any brands, you will end up as a combined company with eight global media agencies and eight global creative agencies. Is that the right number?

Thank you.

That's an awful lot to wrap one's head around in The time that we've got. So I guess I will start with The modeling that you would have seen in the filings was billing for standalone. And clearly, it reflects the work that we shared with you that we are doing now. You've seen us in the past enact programs like this and you seen that they lead to tangible success. Degree to which having gone through the exercise that led to the cost synergies around the acquisition, the merger [indiscernible] John and his management team we do understand these to be there's very limited overlap there. And then you start asking questions about running a very sizable enterprise. And so [indiscernible] benefits of all of the things that John called out around these two large companies together, the corporate compensation, the corporate G and A, clearly our presence in market and vendor cost savings shared services, things of that nature. They're very, very significant. Our people and our clients are responding very, very well because as I've said and I laid it out, I think in fair amount of detail, as our businesses continue to evolve, and the investment that needs to happen in technology fit that we've got from a geographic point of view what Flywheel and Acxiom can do together [indiscernible] strength that Omnicom has through Credera The the pack, there are just many, many things that fit together to the point of the answer to to Michael's question.

I think that the sitting here now and kind of going to [indiscernible] kind of G, how many brands, what's the optimal organizational structure. I think what I would just point out to you is, Direction of Travel and you use the word philosophically, we're very aligned with Omnicom in terms of the fact that we have a commitment to strong agency brand. We win with talent by giving them the opportunity to come into the company within the cultures of those brands and then that talent wins for us with clients. Clearly, at the holding company level, we pick the strongest agency providers and put them into the teams that solve the client. And increasing you've heard us talk about how we combine like for like to create centers of excellence. And how then that ties into the platform services. So I don't know that answering the question about, gee, how many bands is the optimal number at this point. Is super productive, but I think that we will have we'll be able to go to clients and give them options and very strong options in every one of the capability areas that matter and we've got very complementary capability.

So again, the revenue synergy, the revenue opportunity is meaningful. And we'll sort out the flying formation, but I don't think we'll do it next three minutes on this call. But hopefully The gives you line of sight. The was a lot of questions in a finite period of time. So I think I covered most of what you asked.

No, you did that. Sorry for being too ambitious, but thank you for an excellent summary.

All right. Thank you.

Thank you. Our next question is from Jason Bazinet with Citi. You may go ahead.

I just had one quick follow-up on the $250 of savings. Can you talk a little bit more about the cost to achieve those? I was just a little bit confused when you called out the non cash component of those costs.

To achieve being significant?

I think it's equivalent as we said in there will be some real estate and there will be some degree to which we might also as we rationalize and standardize Ellen to Ellen's point, some of our tech investments we might be writing off an asset or two there. But nothing dramatic.

There's nothing on the stock based compensation side or anything?

No?

No. Okay. Thank you. Please.

Thank you. Our next question is from Cameron McVeigh with Morgan Stanley. You may go ahead.

Thanks, hey. Just curious how the health care is trending when you exclude the impact of the recent account losses. And then then secondly, when you think of a given CMO and a pitch curious how their priorities have shifted at all recently. And is Principal Based Media buying is that the most important capability now to win or retain new business? Or how are you thinking about that?

Sure. Healthcare independent of that one sizable swing We see ish Healthcare as growing this year. And as you know, it's one of our large operating units I mean, I think everybody whatever it's been four, five, six months, So I was asking questions around that and we were clearly giving you line of sight into we've got every channel covered. We've got very, very deep subject matter expertise. And so if the playing field changes, all of those clients are still going to need to be in market. They're still going to need to be reaching not just consumers, but all of the other participants in the healthcare The. Whether that's caregivers, whether that's doctors, whether that's so on and so forth. And so there'll be some share shift in terms of how you reach them and that might have an impact on the media owner side. The were clear that we didn't see that as a meaningful concern. Sitting where we are. And then on the CMO question, I think that we've called that principle because we've built a media business that was very much about kind of consultative highly database sort of helping clients make the smartest possible investment decisions that piece has come into the equation.

And for us is something we call out. I think it's important clearly, but I think that you see the largest opportunities around media because that's where you have the fusion of technology a lot of data, Clearly, now commerce is a very important part of this and there's conspicuous strength in commerce.

On the Omnicom side and we see a big opportunity connecting Flywheel and you see some sizable integration opportunities like a Kellenova or Kinklari The in the last six months, So no, I think it's more sophisticated [indiscernible] a part of the decision matrix.

Got it.

Thank you. Thank you.

Thank you. And our last question comes from Craig Huber with Huber Research Partners. You may go ahead.

Thank you.

Philippe, I'd like to hear a little bit more if I could about how three sectors are doing. [indiscernible] the healthcare technology and retaile commerce maybe you can give us how that organic growth for each or lack thereof did in the fourth quarter The maybe touched on your outlook for the new year for each of those?

I mean, it's you're touching upon two in which we these sizable losses, right? So obviously, we've talked a bit about a big healthcare win that turned into a much smaller healthcare win for us and is impacting our results The biggest media decision of the year last year was in the retail space. As I said, I think independent of that one big swing item in health, we have healthcare growing this year and it touches other parts of our world. You see healthcare clients in the media business, We've got a sizable healthcare practice on the PR side. Retail is just going to be muddied for us just because it's going to be the one very sizable loss there. And The, tech and telco, as mentioned, has come back and is now growing for us. So I think that that probably covers it as best as I can. You're happening to pick two where we've got one very item that's going to distort the result.

Fair enough. Obviously, they're important sectors for you guys and elsewhere. Ellen, if I could just ask you a nitpick question The $250,000,000 of in year 2025 cost savings, what is that on an annual basis as we exit 2025? Is that more like $350,000,000 How should we think about that, please?

It's clearly going to be high. We don't have a full year of the benefit in 2025.

And I would just reemphasize The it's incremental to the the synergies that we've called out in relationship to Omnicom. I mean, what we're really talking about here, as I mentioned, was creating centers of excellence, which also allows offering in the air shoring. And just creating a lot more efficient operating structure. Streamlining some of the operations of our agencies. So that should continue to benefit our margins. But again, very separate and apart from the deal synergies that we called out.

And then Philippe, if I could just squeeze in one more here before the market opens.

Sure.

I'd love to hear from you the tone of business out there putting aside the various losses that you've talked about here. How do you feel The tone of business right now, the macro environment versus say a year ago right What are your feedback from clients on that front? Thank you.

Well, I mean, as we said to you, a year if you go all the way back to a year ago, there was a measure of caution. The as we move through 24 things meaningfully better and we felt that people were leaning in towards the latter part of the year. And broadly speaking, I'd say that that's still the case, but there are one or two big items that are pending in terms of the macro But I think as we tried to call out in the remarks, we're seeing clients engaged, we're seeing fair bit of opportunity in terms of new business flow there's some bigger than not opportunities. So it feels it feels pretty solid, I'd say. Great. Thanks. But you're sort of you're asking me, last year kind of had enough swing in it quarter to quarter And when you say compared to last year, I'd want to say compared to what point in the year last year.

Yes. I'm just trying to get a sense from you what you're hearing from your clients versus how they were feeling a year ago about their spending levels for the upcoming year?

Like I said, I mean, it does sector to sector, you don't necessarily get the same read [indiscernible] feels like, again, pending one or two kind of open macro items, that are geopolitical. Things are progressing.

Very good. Thank you.

Thank you. Thank you.

Appreciate the time today and look forward to speaking to you all again in April.

Thank you. This concludes today's conference. You may disconnect at this time.