Omnicom Group Inc. Price & Performance (OMC)

Thank you for joining our first quarter earnings call. With me today are John Wren, Chairman and Chief Executive Officer and Phil Angelastro, Executive Vice President and Chief Financial Officer. Our website, omnicomgroup.com, will find a press release and a presentation covering the information that we'll review today. An archived webcast will be available when today's call concludes. Before we start, I'd like to remind everyone to read the forward looking statements and non GAAP financial and other information that we've included at the end of our investor Certain of the statements made today may constitute forward looking statements. These represent our present expectations and relevant factors that could cause actual results to differ materially are listed in our earnings materials and in our SEC filings including our 2024 Form 10 ks. During the course of today's call, we will also discuss certain non GAAP measures. You can find the reconciliation of these to the nearest comparable GAAP measures in the presentation materials. We will begin the call with an overview of our business from John. Then Phil will review our financial results. And after our prepared remarks, we'll open the lines up for your questions. I'll now hand the call over to John.

Thank you, Greg.

Good afternoon and thank you for joining us today for our first quarter twenty twenty five results. I'll begin by covering our results and then provide an update on the progress we are making towards closing our proposed acquisition of Interpublic. I'm pleased to report that we've had a good start to the year. Organic revenue growth in the first quarter was in line with our expectations of 3.4%. With strong growth in our media and advertising and precision marketing disciplines. Adjusted EBITDA margin, which excludes amortization of acquired and strategic platform intangibles, as well as IPG acquisition related costs was 13.8% for the quarter. Non GAAP adjusted earnings per share which excludes the after tax amortization of acquired and platform intangibles as well as IPG acquisition related costs was $1.70, up 1.8% versus the comparable number in q one two thousand and twenty four. Our cash flow and balance sheet remain very strong and support our primary uses of cash. Dividends, acquisitions, and share repurchases. For most of the first quarter, we were restricted from purchasing shares until after our shareholder vote on the acquisition of Interpublic on March 18. We expect to continue our share repurchases consistent with our approach in prior years for the remainder of 02/2025.

Since our last call, as you're all keenly aware, there's been increased volatility in the economy and the markets. We're assessing the implication of these events to determine how they will affect our clients, and our business. As in past periods of uncertainty, our clients must continue to compete for share in a dynamic marketplace by investing and leveraging the strength of their brands and increasing and actively expanding their connection with customers. Internally, our management teams are continuing to drive operational excellence manage costs in line with revenue, and monitor changes in the macro environment. Given the uncertainty of the current environment, we're expanding the range of full year 02/2025 organic growth to between 2.54.5%. And maintaining our adjusted EBITDA margin guidance to 10 basis points higher than the 15.5% we achieved in 02/2024. Nothing about the current environment impacts our confidence in our business and strategy or our ability to create new services and win new business. On the technology front, AI is touching every aspect of how our people work. It augments our insights and creativity, increases the speed and volume of personalized content, raises the level of effectiveness in targeting customers, expands the knowledge of our talent, and makes our operations more efficient.

All of this is driving transformative outcomes for our clients. Much of this is enabled by OmniAI. Our open source platform that leverages the industry's leading generative AI models for text, graphics, video, and audio trained for our agency specific use cases in areas such as strategy, content, and creative. Thousands of our people use OmniAI, and we expect to add more users with the goal of having it on the desktop of every client facing Omnicom employee by the end of the year. At this point, most advances are to provide state of the art tools to our employees We expect that as AI tools become more reliable, and are deployed to more clients, they will result in measurable efficiencies for our business. This work directly contributed to recent recognition In March, we were named a leader in the Forrester Wave for marketing creative and content services. Omnicom Precision Marketing Group and Omnicom Advertising Group were recognized for their strong strategic and current offering respectively. This evaluation followed Omnicom being named a leader across two other recent Forrester evaluations. Media and commerce. Omnicom is the only company named a leader in Forrester's wave reports for content, commerce, and media 02/2024 and 02/2025.

Several of our agency networks are also recognized for the outstanding performance during the quarter. On AdAge's a list, OMD was named media agency of the year. And GSD and M was recognized as an agency standout. TBWA was named to Fast Company's most innovative company list for the sixth time. PhD one, Adweek's Global Media Agency of the Year, for the second consecutive year after successfully defending 4,000,000,000 in business while reengineering its strategy for an AI powered future. I wanna congratulate everybody on these achievements. Turning now to our proposed acquisition of Interpublic. We made progress throughout the quarter. In March, along with Interpublic, we received overwhelming support from our respective stockholders when they voted to approve the proposed transaction. This strong support confirms the immense opportunity of having a complementary assets come together to create an unmatched portfolio of talent, services, products, and platforms. We also made progress on the regulatory approval front. In the last five weeks, we've received approval from five of the 18 jurisdictions under review. In the months ahead, we will continue to work on obtaining all the necessary regulatory approvals. We remain on track to close in the February. We continue to develop plans for integrating our businesses with Interpublic, We have successfully organized our portfolio at Omnicom, by aligning our agencies into marketing disciplines.

Or practice areas. To strengthen our depth of expertise and capabilities and to enhance collaboration across the group. This structure provides a seamless path for bringing together our operations with Intrepublic. Adding deeper expertise and capabilities to each practice area following the closing of the acquisition. Moreover, across the board, our practice areas will be underpinned by the best in class tech and data platforms including Acxiom, Omni, and Flywheel Commerce Cloud. A combination that will position us to thrive in an AI driven future. Finally, we've made progress on our integration planning work. Which will help us meet our targeted $750,000,000 in run rate cost synergies following the closing of the proposed transaction. As I've discussed in February, we have clearly identified areas of synergy opportunity and our integration planning is well underway to ensure we achieve our targets. We believe our multiyear plan and the successful acquisition of Interpublic will create significant shareholder value. In closing, had a good start to the year and are focusing on servicing our clients in these unsettled times and are on track to close the acquisition of Interpublic in the second half of the year. I'll now turn the call over to Phil for a closer look at our financial results.

Phil?

Thanks, John. Delivered solid results this quarter, including organic revenue growth, growth in adjusted EBITDA, and growth in non GAAP adjusted diluted EPS.

We believe that the diversification of our portfolio of agencies across geographies, industries, and service offerings will help us in the uncertain environment ahead. Let's begin with a brief overview of our earnings for the quarter. On slide three. Reported revenue grew 2%, Note, our total reported operating expenses include $33,800,000 of IPG acquisition related costs in the first quarter of twenty twenty five. At the bottom of this slide, the non GAAP measures remove these IPG acquisition related costs from adjusted EBITDA which was also up 2% and the related margin was flat with last year. At 13.8%. Now let's go into a more detailed review of our performance. Beginning with changes in revenue on slide four. Organic growth in the quarter was 3.4%. The impact on revenue from foreign currency translation decreased reported revenue by 1.6%. A bit less than our original expectation for the quarter of 2% to two point five In the current environment, it's difficult to forecast the impact of FX rates on our future revenue for the rest of 2025. If rates stay where they were at quarter end, we estimate the impact of foreign currency translation on revenue will be negative 0.5% for Q2 twenty twenty five.

Negative 1% for Q3, and flat in Q4. Which would result in a negative 1% reduction for the full year 2025. The net impact of acquisitions and dispositions on reported revenue was negative 0.1%. At this time, expect the impact of acquisitions and dispositions completed to date will be minimal for Q2 and for the full year 2025. Let's turn to slide five and review the quarterly organic revenue growth trends by discipline.

First, however, I'd like to point out a change we made for 2025. In connection with the rollout of Omnicom production, Omnicom advertising group, we've made some minor reclassifications of certain revenue related to changes in the agency groupings across our service discipline categories. You can find the revised revenue by discipline presentation with the reclassifications of the historical 2024 and 2023 numbers. In the appendix on slides twenty one and twenty two.

Turning to the quarter, media and advertising was up 7% driven by strong growth in our Media businesses across our geographies. And mixed performance across our advertising agencies which were down a bit.

Precision marketing grew 6%, driven primarily by strong performance in The US, partially offset by mixed performance in other geographies. Growth reflects strength from the benefits of new business wins in our CRM agencies that began late last year, as well as continued good performance at Flywheel. Public relations declined 5% due to certain client delays and reductions from certain government clients. As the year progresses, we expect benefits from public affairs activity in our specialty agencies and we expect a difficult comp for the rest of 2025 related to the benefit in 2024 from US election related spend. Execution and support grew 2%, driven by growth at our custom communications businesses, offset by declines at our merchandising business. Experiential declined 1% driven by The Middle East, and Asia Pacific, partially offset by strong growth in The US, Europe, and The UK. We also expect a difficult comp in Q2 and Q3 related to the benefit in 2024 from Olympics related spend. Healthcare revenues were down 3%. As expected. Slightly better than a decline in Q4. As our health group manages through some delays in client product launches and as they complete cycling on a client loss. We expect improved growth in the second half as the year progresses.

Branding and Retail Commerce was down 10%, with most of the decline in our branding business. Which is due to uncertain market conditions impacting both new brand launches and rebranding projects. As well as the continued slowdown from M and A activity. Turning to organic revenue growth by geography on slide six. Our largest market The U. S. Had organic growth of 5%. And Latin America grew a strong 15%. Europe experienced growth but it was mixed by market. And Asia Pacific also posted growth, offset by declines in The UK The Middle East and Africa. As we look at the global trade uncertainty, we expect our geographic diversification to provide balance to our results. The U. S. Remains approximately half of our revenue and it's worth noting that in fiscal year twenty twenty four, China was only 2% of our total revenue. Slide seven is our revenue by industry sector for the quarter. There were no notable changes to discuss. Now let's move down the income statement and look at our expenses on slide eight. In the quarter, salary related service costs were down on both a reported and constant dollar basis. Driven by our continued efficiency initiatives and ongoing changes in our global employee mix.

Our Q1 twenty twenty five employee base is down from Q1 of twenty twenty four. Third party service costs grew in connection with the growth in our revenue. Primarily in the media and advertising. Discipline. Third party incidental costs, are out of pocket costs, build back to clients at our cost, also grew in connection with revenue growth. Occupancy and other costs were flat. These include office rent, other occupancy, technology, and general office expenses. SG and A expenses increased due to the $33,800,000 of acquisition related costs in the first quarter of twenty twenty five. Excluding these costs, reported SG and A expenses declined by about 1%. Please turn to slide nine to look at our income statement in more detail. Excluding the acquisition related costs from the first quarter of twenty twenty five, non GAAP adjusted EBITDA grew 1.6% and the related margin was flat at 13.8% compared to last year. Foreign exchange translation reduced EBITDA by 1.5%. Moving down the income statement, net interest expense in the first quarter of twenty twenty five increased $2,600,000 to 29,400,000.0 This increase is the result of having a full quarter of interest expense in Q1 twenty twenty five, from the debt we issued in early March twenty twenty four in connection with the Flywheel acquisition.

The increase in expense was partially offset by an increase in interest income due to higher average cash balances. Our income tax rate was 28.5% in Q1 of twenty twenty five, compared to 25.7% in the prior year. The increase is primarily due to the non deductibility of certain acquisition related costs in 2025. Excluding a tax impact on these costs, our Q1 twenty twenty five rate was up a bit from Q1 twenty twenty four. At 26.7%. For full year 2025, we expect the rate to be between twenty six point five and twenty seven. Average diluted shares outstanding were down 1% from January. Due primarily to repurchase activity last year. Reported diluted earnings per share was down 8.8% due to the after tax acquisition related costs. On an adjusted basis, diluted earnings per share increased 2% to 1.7 Effects of foreign currency translation reduced diluted EPS by point $2 Now please turn to slide 10 for a look at free cash flow for the first quarter. The year over year decline in the quarter was driven primarily by a reduction in net income which includes the impact of the acquisition related costs. However, for the twelve months ending 03/31/2025, our free cash flow increased 3.5%.

Driven primarily by improved operating income and net income. Our free cash flow definition excludes changes in working capital. Our working capital followed its normal seasonal pattern in the first quarter and over time we expect to trend back towards our historical annual level that's close to neutral. Regarding our primary uses of free cash flow for the three months ended March 31, We used a hundred and 38,000,000 of cash to pay for dividends to common shareholders. And another 13,000,000 for dividends to non controlling interest shareholders. Our capital expenditures were $30,000,000 As expected, the spend was a bit higher this period reflecting ongoing investments on our strategic technology platform initiatives. Total acquisition payments, which include earn out payments the acquisition of additional non controlling interests, were $4,000,000. As a reminder, in the first quarter of last year, we closed on the acquisition of Flywheel, for $845,000,000 net of cash acquired. Finally, our share repurchase activity was $81,000,000. Excluding proceeds from stock plans, of $12,000,000 For full year 2025, we still expect to return to an annual purchase level of approximately 600,000,000 And we resumed our activities subsequent to the successful March 18 stockholder vote. On the IPG acquisition.

Slide 11 is a summary of our credit, liquidity, and debt maturities. At the end of q one twenty twenty five, the book value of our outstanding debt was 6,100,000,000.0. Flat with the same prior year period. We have no maturities in 2025, and expect to address our April 2026 maturities after the expected closing of the IPG acquisition. In the second half of twenty twenty five. We estimate that net interest expense will increase by 2,000,000 to $5,000,000 Q2 compared to Q2 of twenty twenty four. And by 15 to 20,000,000 for the full year, related to lower estimates of interest income in the second half. Our cash equivalents and short term investments at the end of the quarter were $3,400,000,000 We continue to maintain an undrawn $2,500,000,000 revolving credit facility. Which backstops our $2,000,000,000 US commercial paper program. We will assess our revolver capacity in connection with the closing of the proposed IPG acquisition. Slide 12 presents our historical returns on two important performance metrics. For the twelve months ended 03/31/2025. Omnicom's return on invested capital was 20%, Our return on equity was 37%. Both of which reflect our strong performance and strong balance sheet. The year over year change is driven by the IPG acquisition related costs incurred in the twelve months ended 03/31/2025.

I will now ask the operator to please open the lines up for questions and answers. Thank you.

Thank you. Thank you. Your first question comes from Adam Berlin of UBS. Your line is open.

Hi, good evening and thank you for taking the question. Can you just say a little bit more about your decision to lower the bottom end of the guidance range for twenty twenty five to 2.5%. Is that because you've actually seen some advertisers start to talk to you about cutting their spend or is that just something you'll just could happen based on what you're hearing about the broader macro? That would that would be quite helpful. And any trends about how Q2 has started in the first couple of weeks would be very helpful as Thanks. Sure.

Adam, it's the latter. We're being conservative. In in what in lowering the the bottom end. And you have to look at our business when it gets in this type of an environment. Our advertising media and CRM businesses remain strong. We didn't change the forecast on those. [indiscernible] where if we had doubts it was really more in the events business as companies probably get a little bit more conservative. And we're up against one because of, as Phil mentioned, the Olympics, There might be fewer projects And also in the latter part of the year, because this is annual guidance, we had the elections last year, which we don't have again this year. So it's the it's that's the segments of the business in terms of how we looked at it to be conservative. We're striving to get to the top end always. And we're still there's still some confusion or there's still confusion in the marketplace. As we look at the especially in the next ninety days, and how some of these tariffs and other moves get negotiated [indiscernible] or do they stay in place? So it's that uncertainty where we didn't wanna surprise anybody later in the year.

That we chose to be conservative.

Yeah. It does and it doesn't as John said, reflect any specific client actions taken to date.

Okay.

You very much.

The next question comes from David Karnovsky with JPMorgan. Your line is open.

Just kind of going back to something Phil had said, it sounded like for PR, were some delays in government spend. I don't know if you could dig into that a bit. Is that for The U. S?

Or other regions? And then for branding and commerce, this is an area that was already lagging last year. Curious how much of the delays you're seeing there is new.

And then, specifically for Phil, just as you consider the and possibility of clients adjusting their spend how are you thinking about your own cost base? And what's your confidence in holding margin in some of the more adverse scenarios you might say?

I'll leave the first part of your question to Phil. Hold on. I can cover We're we are constantly and I think we have a very solid track record in this. In in looking at our business and adjusting because we have a very flexible cost basis adjusting our cost basis so as to stay in line with whatever the revenue trends are. And God knows, never tested the same twice, but we've been tested quite a bit. Over the years. And if you look back across that, we have a very, very competent management way below the corporate management looking and concerning themselves with that all the time. So that would be one answer. You know, the the one PR event was something in The US It was was it FDA related? [indiscernible] there's a yeah. There was, I would say, not a large trend that that we're concerned about going forward, but there's just a minor year over year comparison difference in terms of some project spend that didn't happen in Q1 that was there. The year before in the PR business. I think not going to see the impact of the year over year comps related to election spend until probably a little bit in Q2 and then PR was especially strong in that area in Q3 and Q4.

So we do have a difficult comp in Q3 and Q4. To your specific question on the cost base and margins, John just referred to this, but certainly we are always very focused on making sure we take the appropriate actions to rationalize adjust the flexible cost base that we have to our current expected revenues. And to the extent that there is a pause, we're clients decide to delay project spend or delay spend in some way depending on how some of this tariff uncertainty gets resolved. We're going to be very active in making sure we take the appropriate actions as opposed to kind of keep our fingers crossed and hope that the best scenarios are the ones that come forward. So certainly going to be planning you know, very carefully and aggressively if need be to make sure that we're not out ahead of it from a cost base perspective.

We're comfortable [indiscernible] based on everything we know today [indiscernible] our expectations as far as operating earnings and our margin targets. But there is still quite a bit of uncertainty out there as far as tariffs and what's going to happen to the top line But we haven't seen any specific actions by clients that that have happened yet. We're just being cautious as we mentioned earlier in answer to Adam's question.

Sure. One of the little tidbit because this is early in the cycle. A lot of our larger clients don't come out with quarterly reports until later in the month. Which we'll all learn a little bit more. But with the sensible delay of ninety days in the tires, I think it gives many of our clients the opportunity to acquire more inventory at reasonable prices and tend to front load or look to front load sales in the first half of the year, it's in the the uncertainty really comes in later on in the third, fourth quarter. And hopefully, that will get we'll get more clarity as we as we continue.

Sorry. To be clear, I think you said you haven't seen clients you know, take action on anything yet. But I I thought with branding, for instance, you had mentioned the months Branding edition. Yeah. No.

Yeah.

Brand branding's a category, but it's such a small category within the overall Omnicom. There's it's really it's it's really three very, very well known boutiques who are the leaders in branding. And when they tend to prosper in years where there's a lot of m and a going on. And a lot of changes you know, that people corporations who are considering maybe changing rebranding their corporations or or getting swept up in a merger. And in periods like this where there's been a pause in a lot of that activity, naturally, fully expect that revenue is gonna be off a bit. But it's Yeah. In total, it's it's probably yeah. 2% or less than 2% of our total revenues. And it's had challenges all throughout 2024. For pretty much similar reasons to what I indicated in my prepared remarks. We unfortunately see that continuing through the first two, if not three quarters of of this year. As it kind of rights itself and continues to pursue new opportunities. But that's a unique a unique business that's managing through some unique challenges in its industry right now. Specifically.

And not to beat this to death, but I started off by saying, advertising media and CRM remains strong. Also in those categories specifically, there's some very positive potential new business that we're not really defending, but we're on the offense. And we continue to win our fair share, that'll contribute us getting to the closer closer to the top end of our of our forecast.

Helpful. Thank you.

The next question comes from Jason Bazinet with Citi. Your line is open.

I know everyone is so focused on the the macro in '25, but I would just like to ask a question about 2026, actually.

Sure.

It let's let's assume that the IPG transaction closes. When when do you think the street will have evidence or you will have evidence that the market has embraced your notion that the pro form a firm will be in a better position?

To win business as opposed to the bearish argument which is you might lose some accounts, because of the transaction. Is that is that something that will become evident, do you think, in '26, or do you think it really we won't really see it in the organic numbers until '27? Or beyond?

My personal opinion, specific to that question, we have not had any any client of any significance that we're in fear of losing because of the transaction. And especially in environments like this, I doubt that many there's always gonna be some because there is some every single year. But if you're running a company right now, unless you're gonna get some great efficiency by putting advertising and marketing into review, you're not going to proactively disrupt your own organization.

So I think and I'm not sure. I know you, Jason, but I think what what you're what you're asking the question about is certainly a valid question. But that's just nonsense fed by my competitors to the trade regs. Alright? That I'm gonna lose people and I'm gonna lose accounts and I'm gonna lose this, that, and the other thing. Not true.

Okay. Yes. It's just to just to add, it's it's very disruptive for the client to make a change and especially in this environment, there will have had to be some some underlying strategic reasons why they would go ahead and do that. Beyond the ones that had started that process already.

And think I think this is also part of your question, Jason. We can go back. Well, we have much clearer sight on the synergies we promised. Today, and we continue to have many work streams where we're actively planning to achieve those synergies.

Understood. Thank you both.

Thank you.

The next question comes from Cameron McVeigh of Morgan Stanley. Your line is open. [indiscernible] [indiscernible] Wanted to to ask if you're able to provide, you know, the precision marketing growth ex flywheel? And then secondly, curious of any update to the regulatory review of the deal timing of integration, potential client conflicts that may have arisen. Thanks.

I'll take the the Precision question. In the first quarter, I would say Flywheel grew Its smallest quarter is always the first quarter. Growth was fine. But it was lower than the average in the overall category and the rest of the CRM Precision Group probably grew faster than the average, in the category.

And and today, out of 18, requests from governments, regulators, [indiscernible] we've received five Actually, the most recent one, which we got just a couple of days ago, was China. And you no one on the call will remember this, but ten or eleven years ago when we were trying to do publicis, the place that we had trouble getting approval was China. And we've already received that in this process already. So we are very confident advisers and attorneys who are guiding us through their process as we speak. Great. Thanks.

The next question comes from Steven Cahall with Wells Fargo. Your line is open.

Thank you. John, I was wondering if you could spend a little time talking specifically about trends in pharma and health. I think that's your biggest industry vertical, and health care is its own discipline within the revenues. So just wondering if you see this area as having less risk on some of these concerns in the rest of the portfolio or a little more risk now that we're dealing some of this extra uncertainty in 2025. And then, also, I just wanted to dig a little more into media and advertising. You've had a number of quarters where your third party expense growth remains healthily in the teens. So I'm guessing media continues to grow really well.

Is creative also growing really healthily within that? I've sensed from some peers that it might be under a little bit of pressure So just wanted to know if you're seeing any pressure on creative.

Or it's still really solid just not as good as as media given a lot of the account wins?

Thank you.

So first, health care. First, health care.

Health care health care is is I I think the decline of what you saw in in the first quarter was us just working through the loss of Pfizer and one or two other minor accounts. And we're phasing through that as we get into the beginning of 02/2025. It's still a very strong business. I mean, our businesses in healthcare go all the way are dedicated to different aspects of creating a drug, bringing a drug to market, getting the appropriate approvals from the the stronger [indiscernible] regulatory bodies around the world, which principally you know, The US, [indiscernible] Germany is very strong too in terms of its procedures. What what is not a big part of our business is the stuff you'll see on the 06:00 news like BioSempic and you know, you know, here's a a mom, a dad, and a cat, and somebody needs to lose weight because they have diabetes. That's not a very large part of of that segment for us. It's more specific, very high science. The employees that we have in that those categories are extremely well educated and very specifically educated in terms of medicine. So I see it as you know, over as I look forward, I see health care as being a very important segment in what we do.

And and I apologize you asked other part of the question, and you want if you might Sure. The second part was just within media and advertising.

Sort of comparing and contrasting the strong growth, I think, that's implied in media with how you're seeing the trends in creative.

Sure. Well, media by far is very strong. Continues to be very strong. And last year, I think we topped the leagues in terms of new business wins and retention. As a matter of fact, if you netted some of IPG's losses against our wins, we'd still be number one. From last year, and that continues. Advertising, [indiscernible] really needs to be separated into two different areas Both are being very highly affected by technology. But creative is our IP.

That's always gonna be at the center of what Omnicom does.

And it's terribly important to our clients and to the creation of differentiation especially as these tools become more democratic. Right? The if everybody had the same generative AI tools on their desk, what would make a difference? Well, what would make a difference would be a brilliant creative idea. So now is that business going through some adjustments because technology has has created efficiencies within that business, which allow us to have less effort in in some instances? Yes. No question. But but it remains a a very key part of our organization. If I look back at twenty four, it probably makes up something closer to 17% or 18% of our total business. That that balance may increase a bit as we complete the transaction with IPG. But it's still the core of what we do. The I as I said, the IP. I don't know if Phil or anybody wants to Yeah. In in terms of the other component, production is certainly a fast growing component of the solutions we provide to clients. And there's more and more activity in that area and opportunity in that area, especially as you look at Artbot, our content automation platform, which has been quite successful.

Recently. So overall, Creative has grown low single digits last year. First the first part of this year, we expect it to be close to flat.

A little bit down in the first quarter. And we expect it to pick up in the second half And as John said, Media has been quite strong. We expect that they continue to be very strong. And together, those are two key components of the overall the overall product mix. [indiscernible] That is very key and very strategic to the business going forward.

Great. Thank you. Sure.

The next question comes from Michael Nathanson of MoffettNathanson. Your line is open.

Thanks. One for John, one for Phil.

Hey, John, you touched on it earlier that you guys are feeling pretty good about the new business potential. Can you talk a bit about the volume of new business pitches? Is it normal, or or do you think people are kinda holding back in terms of the scale of of volume until maybe the uncertainty is lifted? And then on that point, how do people deal with the fact that you'll you'll be merging with into public? Right? So is that part of the conversation when people are asking you about the future prospects of Omnicom Media? So anything you talk about there would be helpful.

Then for Phil, party service costs, third party and central costs were up double digits this year. You think about your guidance on organic revenue for the year, is it normal to expect this type of growth in third party costs or is there anything unusual about the first quarter of this year in third party? Thanks.

In the first part of your question, the new business reviews, I have to admit, I haven't tried to track them year over year. I do expect do expect that unless a client has some proactive reason to put their account in review, I'm expecting it to not be as robust as it was, say, last year. But having said that in the first quarter, you know, there are clients who, thankfully, were on the offense, not the defense, where their accounts are currently being reviewed. And I won't use their names. Those do not insult them. And, you know, you had the move at which benefited public seas of the Coke business earlier in the quarter. So there are things going on. There's a lot of conversations going on. I I can't tell you that we're 10% up or 10% down from this exact moment last year. In terms of what goes on in terms of IPG and the acquisition, we are extremely cautious because there are very strict rules. In terms of what we can do. We can collectively each plan for when the transaction's approved, but we're not able to go to market in any way. And so we don't.

We don't. And and you know, that's just us behaving accordance with expected of us in this kind of a process.

On the on the specific question, Michael, that third party service cost growth, certainly, we're happy to get the growth wherever we can get it. The reason The reason we have that business and the reason it's growing is because clients want it and it provides valuable benefits to the clients. Ultimately, if it didn't provide benefits and it wasn't a key part of what clients' expectations were, you wouldn't see the results that we've seen in it. We don't think our numbers frankly are any different than our competitors That business is growing throughout the industry. Again, because clients like the benefits of that particular service offering. You just can't see it. Outside of our reported results.

Alright.

Okay. Thanks, Phil.

Sure.

The next question is from Craig Huber of Huber Research Partners. Your line is open.

Thank you. My first set of questions has to do with the potential closing of the acquisition. I think you mentioned five of the 18 jurisdictions.

Have approved the transaction, including China. Can you share with us if it's possible, what the other four are? And then also wanted to ask John, I think when you originally brought forth and talked publicly about this, acquisition of Interpublic. You talked about if you run into any issues with any of the regulators out there that you would be open to potentially selling divesting any related assets in various jurisdictions. Is that still your case here? [indiscernible] I'd probably answer the question a little differently in that we are 100, unless you do go higher in percentages, committed to the completion of this transaction. I think that various regulators have requested information from us because they [indiscernible] are trying to understand our business before some of them are approved. Sitting here today, based on very competent advice from our attorneys. And I would I would go as far as to say I haven't heard anything. From the very competent attorneys that IPG has either. That we expect that we're in violation of any antitrust rules and you know, you being us all being here in America, all you gotta do is look at Google's results, Meta's results, and, you know, in in terms of who we're really competing against and where consumers spending their money.

We're we're a very strong player, but they are extremely strong. So I think I'm not knowledgeable enough with the rules. As the lawyers will continue to point out to me every day when I ask a question. And I think I know the answer. I don't. I don't think we're I don't think we're I don't think this merger drives us into a position in almost any market around the world where where we would have difficulty after we go through whatever their required processes. But if there was the odd thing or two, it would be small. If if it even existed. Would we it wouldn't change our view that we'll we will close this transaction. And we are dedicated to closing this transaction. But there's nothing material Other otherwise, there's there's certainly enough legal firms working on this globally, locally, to have highlighted anything that would be in that category, which would rise to the level of being a concern. And we haven't had that.

And then can you maybe touch on just what the other four jurisdictions are that have approved it so far?

Are you allowed Yeah.

I can I can list them for you?

Jason. [indiscernible] [indiscernible] Sorry, Craig.

Sorry, Craig. Sorry about that. Yeah. Did you just change your name?

So so in in addition to China, it's Colombia, Brazil, Saudi Arabia, and Egypt. They're all relatively small for our combined businesses. But certainly, it's progress. And we've tried not to issue a press release every time we get an approval. But certainly, it's good progress so far. But process has been quite thorough. In all the markets that have done the work to review the transaction, and we wouldn't expect anything else.

Then my last question, guys, is can you just talk a little bit further about the tone of business, what you're hearing from executives out there in two areas, the specific here, autos and consumer packaged good areas. Just given that the this issue with tariffs and certainty out there and so forth, what is the tone that you're hearing from, your companies that you work with in those areas, please? Has it materially changed for the negative? I guess, is what I'm trying to get to.

Well, with respect to tariffs, I think that's still an open question. Because I think the tariffs or the potential for tariffs that the administration has spoken to they've except for in very specific markets, They made it clear that they're in conversations with many of those governments to resolve any issues that the tariffs may bring to the to the fore. And I I I'm not any more knowledgeable than you. But it it's kinda confirming that the pause that we're in you know, is probably driven because of people approaching administration with things that are of interest to them. But, again, I don't have any firsthand knowledge of that. But it's all it it all bodes better than had they just simply gone into effect. So we were planning for a glass that could be half empty, but we're personally striving for what we really believe and have believed for a long time that we're optimistic and that it will wind up half full.

But certainly, those those yeah. I'm sorry. Go ahead.

I'm just gonna John, are you trying to suggest that you're not quite sure what the spending levels are of the auto companies out there in CPG, for example? How they may or may not adjust that? It's just too early to tell?

Yeah. We believe I don't think we know what certainty. Alright? We haven't heard any disasters or had any disasters reports specifically from clients. We've taken advice from very knowledgeable people and and specifically in the auto industry, related the advertising business. In terms of what they believe car companies globally are expecting And again, that leaves us in a position where these are terribly important long term clients where we have multiyear contracts with in almost every single case of a car company. Gives us some comfort And as a good partner, they have difficulty, we'll work with them as best we can to to help us all get through whatever the process is. So the good news is there's none of those accounts are under threat because of the multiyear contracts. And, yes, as good partners, we will work with our partners to get to a good outcome. Terms of CPG, I haven't really had as I haven't dug in as deeply into CPG as I have, say, into the auto sector.

And and I kind of go wait some of their quarterly reports as they come out through the rest of this month. To find out if there's more specific information would require us to adjust ourselves. Finally, on that point, unlike our competitors, CPG is not a huge percentage of our business. So whatever adjustments need to be made will, in fact, get made. I'd even go as far as to say companies CPG companies are probably taking the lead on in housing things. And they're gonna find themselves in a very uncomfortable position if they have to adjust how they they deal with those in housing efforts as opposed to if they had a third party vendor, which would be easier to get concessions from.

But that's all speculation, so it doesn't count for anything. I think we're going to all learn a lot more in the next two, three weeks Yes. Certainly clients across industries are you know, they're for more clarity. They they want flexibility at this point in time. But they're looking for clarity. And ultimately, they need to defend and grow their brands So the type of marketing spend may change but we've got a diverse portfolio. We can help them in many different ways. And I think this is going to this is gonna evolve, and we're gonna know more in the near future. And we'll adjust accordingly. And I think we have a track record that shows that we can and will adjust depending on what the market brings Great. Thank you both.

Thank you. Thank you.

There are no further questions at this time. This concludes today's conference call. Thank you for joining. You may now disconnect.