IPG
#Thank you, <UNK>.
Yes, it is a fair question.
Yes, we have been on a good streak, particularly on the event side of the business over there, as well as our networks.
<UNK>ly what you're seeing in the UK this quarter, is we are cycling through some losses.
We had both on the media side of the business as well as the creative side of the business.
We are seeing an impact of that.
Absent that, we think our offerings in the UK are very strong.
Notably, R/GA, McCann, you know, all of our networks, MullenLowe.
We believe that we will continue to be strong in terms of our performance in the UK absent something weird happening as a result of Brexit.
That is a mouthful.
Look, obviously MRM is a very strong component of the world group and IPG and we are always looking to add talent and strength in our offerings.
We see there is a big opportunity at MRM at the world group, in terms of cross disciplines, as well as potentially using that in the open architecture environment.
Yes, we are beefing up our expertise in that particular segment and we believe that those opportunities will come as we strengthen their offerings.
R/GA and HUGE are very interesting examples of competency.
They started out as pure play digital agencies.
Obviously, with the growth of digital they have expanded dramatically.
R/GA is a great textbook story of growing globally with success in the markets that they have opened in.
R/GA you can put up a shingle and all of a sudden you have strong businesses.
Their reputation is second to none, in terms of their space.
R/GA has done a great job of expanding their offerings focusing on the connected environment.
They are doing design.
They are doing business transformation.
They have expanded their offering well beyond the typical digital play, if you will.
That is why we are seeing the great growth out of R/GA.
Similarly, HUGE has expanded.
Remember when we acquired HUGE we had 80 people in Brooklyn, New York.
Now we have some 1,100, 1,200 people on a worldwide basis.
They have expanded their offerings as well in terms of different offerings and their go to market strategy in terms of business transformation.
<UNK>ly, expanding upon just the pure play digital offering.
If you plug those two agencies in our open architecture model, frankly, there is hardly many companies that compete with the strength of our global networks plugging in our digital place to supplement their own expertise.
That is frankly the whole concept of open architecture.
It is a challenge for us, obviously, because those individuals are focused on growing their wonderful businesses.
But again they also see opportunities partnering with some of our agencies.
Some of the wins that we have seen, we've seen partnering of those digital ---+ whether it be HUGE or R/GA with whether it be McCann, FCB or MullenLowe, although MullenLowe has Profero, which is another digital agency that is performing extremely well on a global basis.
It is not by accident that we see our digital agency grow in double digits.
Of course the embedded digital expertise we have at Weber Shandwick and experiential marketing and all of our networks themselves have very strong digital offerings.
That is why we do not break out digital.
<UNK>ly, digital is really throughout our offerings.
The concept of our open architecture is to provide the best talent we have, within the expertise and bring the best to our clients.
<UNK>ly, it is working quite well.
Hopefully, we will see another win that reflects that in the next couple weeks.
First on the overtime, we have been doing work on it and we are obviously looking at ways to mitigate it.
But to the extent, it does effect us, it is not a significant number.
Obviously, we are working towards reducing it.
We will in fact implement whatever we need to do to minimize the effect of it.
On a pass throughs, yes, the answer is basically all of our pass throughs have to do with our events.
It has nothing to do with media ownership, which obviously is one of the confusing parts of pass throughs from our competitors and us.
Throughout the years what we have been trying to do is change the contracts on these event engagements.
Because whether we act as an agent or not affects the accounting.
What would happen is we will go out and outsource a lot of the people that are used in that engagement and it is treated as a straight pass through but the accounting has it in our revenue and in our expenses, so we back out the pass through.
So it's not something that is a surprise to us.
In fact ---+ and those pass through numbers are actually coming down because when we enter into contracts, we know that it is confusing from an accounting point of view.
So we try to structure the contracts to reflect it properly, so that we don't find this.
So if you look at it on a global basis, we had 30 basis points of pass throughs, which is why if you looked at our overall organic, we would increase that organic by 30 basis points.
<UNK>, we started this about three years ago ---+ four years ago, to move away from being a principal and become an agent in the events business.
Every quarter for the past three years you've seen her pass throughs coming down.
On your working capital question, you know how volatile it is around quarter end, with respect ---+ primarily it is cash flows around media.
Nothing stood out.
We had a couple clients who were in some inefficiencies in our payment streams so it tripped over into third quarter.
For us, it was normal course and there was nothing that was a surprise.
You are welcome.
Yes, <UNK>, everyone started the year thinking it was.
If you remember, I did not think so.
The reason for it is we did not know of any big media reviews or existing clients.
That is basically why I answered the question the way I did.
I still do not see as big ---+ there are two big reviews out there.
Obviously AT& T and of course McDonald's on the creative side.
But yes, I suspect as always we will see ---+ probably around September, we will see some media reviews.
But certainly it will be pretty hard to compete with what we had last year, <UNK>.
What is happening ---+ some of our clients are just asking to look, as far as the A&A report.
Of course, we have dialogues with our clients, going over contracts and making sure our language is as tight as it has been.
We had all these provisions in our contracts before whether it be the ability to audit, transparency.
Clients will ask questions like that but I do not see any big upheaval in terms of reviews as a result of the A&A.
I know there is one particular company out there.
Not a client of ours, that has brought in their outside auditors to look at this kind of stuff.
I am knocking on wood, we have not seen any of that.
Thank you, <UNK>.
The reason you do not see us talking about it is because we do not see it.
We are in the camp of that one versus the other one.
Interesting question on ---+ look 62% of our business in the quarter came from the United States.
There is no question that is a strength of IPG.
We have very competitive offerings across all of our networks.
Plus let's not forget our independent agencies in the US.
We have Deutsch.
We have Hill Holliday.
These are very strong ---+ the Martin Agency.
We have strong independent agencies in the US.
And frankly, if there are UK or European companies looking to break into the US market, we have more than enough competitive offerings to pick up that business.
And obviously, the digital components in the US is exceptionally strong.
We can really field a great team to get that business.
The other side of it, the US side of the business is very competitive, particularly on the CPG side.
We did see some of our clients shift some business to us in the US and as they do acquisitions in the US, they want to beef up the offerings.
There is some of that and our growth in the US.
I view that as an opportunity.
I think the fact that we have 62% of our business in the US is a strong positive for us.
I know this goes through waves, if you will, in terms of being better off in other countries but we have been consistently very strong in the US and frankly, we like the position.
Thank you, <UNK>.
How much time do we have left in this call.
First let me talk about the accounts in review.
The most significant item, it's not in review, but, well it is in review, it will be, is the Army.
There is a mandatory review every five years.
We've been extended through September of 2017 on that one but there will be a review of the Army coming and obviously we have done this before and hopefully we'll be able to retain.
[C-OT], a client of MullenLowe is in the midst of a review and we hope to hear from that in the next couple months.
And TD Bank is in review.
Those are the significant items of review from existing clients.
And our existing wins, ---+ I think it goes to the offering and a comment that we have always said that we want to treat our existing clients as if we are pitching them all the time.
The retention of BMW is significant.
Obviously, it is a good client for Mediabrands, but it is also an indication of verification of the work that we have been doing and the fact that as the market changes, we are able to field it with talented people, tools, and data, analytics that are necessary and we are very competitive in the media space.
What was the other question.
A good portion of the tailwinds phased in within first quarter and second quarter.
Some of it spilled over to the second half of the year, which is what I talked about.
Obviously, with new wins and so on we will have some additional business issues.
Wins hopefully and tailwinds in the second half.
But it is too soon ---+ we are not going to give out a number on that yet because frankly, some of our wins have not been announced yet.
The answer is yes, we have tailwinds, not as big as the first half of the year and it certainly tails off in the second half of the year.
Although, the timing of these things ---+ again, I have to reiterate, the timing of these tailwinds and when they impact, we really don't have much control over that.
It happens to be in the hands of our clients.
We are very conservative when it comes to whether we answer the question of when is the timing of our tailwinds and for good reason.
They are all baked into the revenue forecast right here.
It was a little bit less, because obviously we had some in the second half of the year.
Canne, as I said before in my comments, on a revenue basis, we outperformed ---+ we are not as big as some of our competitors so if you throw a lot of money in Canne, you can win more awards than anyone else.
We think a good way of looking at it, is comparing awards per revenue and when you do that, our agencies performed better.
That is the way we look at it.
Of course we are gong to look at it that way.
McCann was very strong this year in Canne.
And that is not by accident.
McCann had a very strong emphasis on creativity.
Rob Riley and his team working with Harrison and part of the McCann World Group had a very strong effort in Canne.
The results are reflective of that.
McCann New York in particular.
It was great to see the awards they were winning and of course McCann helped ---+ won the healthcare agency.
It is an important factor.
Every year we look at the question of risk/reward in terms of spending the kind money that we do in Canne.
No one asks for the person who performed the poorest in Canne.
(Inaudible) I believe you will continue to see a strong effort in terms of awards and to reflect the creative power.
Creativity and effectiveness is a critical component of what we do, which is why FCB, MullenLowe, all of our agencies participate in it but we pick and choose the work we want to put in.
We are very proud of all agencies and the awards that we one.
You're welcome.
Yes.
I think that was a big talk in Canne.
A lot of it was coming from the media owners, the TV owners and a lot had to do with the upfronts.
Remember last year's scatter ---+ a lot of companies were caught flat in the scatter and had to pay higher pricing.
We saw an uptick in TV in the upfront.
And a lot of people read into that therefore the money going into digital is slowing and it's going back to TV.
You know in the US in terms of spend, we see 2016 sort of equal between digital and TV.
<UNK>ly in 2017, we believe digital will pass TV.
The growth of digital is slowing a bit, because look, it keeps getting bigger and bigger but TV is not going away.
So our expertise is to help our clients decide where to put it and some clients are happy with digital and they spend more in digital.
Other clients are concerned about the ad fraud and visibility and are they getting the right ROIs in terms of box and all of the ad blockers and so on and they are more comfortable with TV.
It is a question of what gives the clients the best ROI.
<UNK>ly, that is what we get paid to do in terms of helping our client understand it.
We continue to see that as the opportunity for our business.
Thank you very much for the participation and I look forward to talking to you again in our third quarter results.
Bye now.
