Good morning, ladies and gentlemen, and welcome to the Omnicom Second Quarter 2015 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I’d like to introduce you to the host for today’s conference call, Vice President of Investor Relations, Shub Mukherjee. Please go ahead.

Good morning. Thank you for taking the time to listen to our second quarter 2015 earnings call. On the call with me today is John Wren, President and Chief Executive Officer; and Phil Angelastro, Chief Financial Officer. We hope everyone has had a chance to review our earnings release. We have posted on our recently relaunched website at www.omnicomgroup.com, this morning’s press release along with the presentation covering the information that we will review this morning. This call is also being simulcast and will be archived on our website. Before we start, I have been asked to remind everyone to read the forward-looking statements and other information that we have included at the end of our Investor Presentation. And to point out, that certain of the statements made today may constitute forward-looking statements and that these statements are our present expectations and that actual events or results may differ materially. I would also like to remind you that during the course of the call, we will discuss some non-GAAP measures in talking about Omnicom’s performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in the presentation material. We’re going to begin this morning’s call with an overview of our business from John Wren. Then, Phil Angelastro will review our financial results. And then we will open up the line for your questions.

Thank you, Shub. Good morning everyone and thank you for joining our call. I am pleased to speak to you this morning about our second quarter 2015 business results. As I’m sure you have seen, Omnicom had a strong quarter with organic growth up 5.3% and EBITDA margins increasing 10 basis points. Based on our year to date results, we’re on track to meet revenue and margin targets for the full year. As we mentioned on our year end 2014 and first quarter 2015 earnings calls, we expected the continued strengthening of the US dollar versus other currencies would create headwinds to our 2015 reported revenue and net income. At the same time, it’s important to point out that the majority of our non-US operations are naturally hedged with both revenue and expenses in the same currency. In the second quarter, the significant change in exchange rates versus the prior period resulted in a 7.1% or $275 million decline in reported revenue. Year to date, FX has reduced our revenue by $500 million. On a constant currency basis, EPS would have increased an additional 7% for both the quarter and the year. Phil will provide more details about the impact of foreign exchange by market later in the call. However, at this stage, if rates remain where they are today, the impact will moderate during the remainder of the year. Turning now to organic revenue growth, North America increased 5.9%. The main drivers were brand advertising which includes our media operations, specialty healthcare and our CRM businesses. The UK generated 5.4% growth. The performance in the UK was broad based across all disciplines with the exception of our PR operations which had difficult comps versus the second quarter of 2014. Organic revenue growth in our European region was 3.9%. In…

Thank you, John, and good morning. As John said, our businesses continued to deliver against their financial and strategic objectives and meeting the needs of their clients. For the second quarter, organic revenue growth of 5.3% was once again above our expectations as the US maintained its solid performance and we experienced strong performance in the UK, Germany and Canada. Our underlying businesses continued to perform well and we had good balance to our organic growth performance across our disciplines. Exchange rates continued to create a considerable headwind on our revenue. This quarter, the negative impact of FX reduced revenue by 7.1% or $275 million. And as has been the case since the fourth quarter of last year, FX in the quarter was negative in all of our significant foreign markets. Including the small net positive impact from our acquisitions, net of dispositions, revenue for the quarter was about $3.8 billion, down 1.7% versus Q2 last year. I’ll discuss our revenue growth in greater detail in a few minutes. Turning to EBITDA and operating income, EBITDA for the second quarter of 2015 decreased by $8 million to $566 million versus $574 million in Q2 of last year. Exchange rates also had a significant negative impact on our EBITDA for the quarter. But since the vast majority of our expenses are denominated in the same local currencies as our revenues, the negative impact of FX on margins was negative, but not significant. And operationally, our efforts to increase efficiencies throughout the organization continued to make positive progress. As a result, the EBITDA margin for the quarter of 14.9% was up a bit versus Q2 2014. Operating income decreased $9 million to $539 million for the quarter. And although FX also negatively impacted operating income for the quarter and the amortization of…

[Operator Instructions] And we’ll first go to the line of Peter Stabler with Wells Fargo Securities.

Good morning. Thanks for taking the question. So I guess I wanted to start with capital allocation, your acquisition activity seems to be fairly moderate at this point. John, wondering if you could update us on what you are seeing in the M&A pipeline, relative prices across the globe, what your appetite is and whether that’s changed? And then a quick question on buybacks and dividends and the ratio and spread between those, wondering if you have any updated thoughts on shareholder capital returns. Thanks very much.

There are quite a few acquisitions that are in the pipeline and August and September, I think, many of the things that we’ve been working on will come to a final decision both on our part and that of the sellers. We’re muted in the first half because as we were doing acquisitions we’ve also taken a couple of small companies that no longer fit the portfolio and we’ve divested ourselves, that’s why you see the net number affecting our overall revenues. The prices, I would say, the prices [are pretty dear], no one is giving anything away and certainly nothing we’re interested in purchasing. But they’re not – we are still very disciplined in the way that we approach it and we have to make sure ourselves that we can extract the proper value before we’ll actually finish and close the deal. So I’m hopeful, there is a couple that we’ve been talking to which expand our presence in markets outside the United States and also a couple in media that I’m hoping that will get accomplished in the back half of this year. But I’m not in control – without getting requisite about the price, I’m not in control about how the process finishes out. With respect to our capital program, that really remains the same, Peter. First, we plan to utilize our free cash flow really in three manners. First, to pay dividends; the second, to pay for and hopefully increase the number of acquisitions we do and then share buybacks, turn out to be the fall out the difference between the amount of cash we generate and taking care of those first two items. There is no foreseeable change in terms of our attitude of what we’re planning to do.

Just one thing to add, I think on the buyback front, we certainly have come off the last 12 months of some increased activity probably higher than we’ve historically bought back, mainly since we were out of the market for an extended period of time. I think we don’t foresee going back to those levels, the levels we were at in Q3 and Q4 of last year as well as Q2 of last year. But depending on the timing of the acquisitions and what we close and what we don’t get closed, that will have an impact on the buyback activity for the balance of the year.

Quick follow-up for Phil, can you tell us what the contribution of digital media pass through was to the organic growth number for the quarter?

Yeah, so the growth in our Accuen business for the quarter was about $30 million.

Our next question comes from the line of Alexia Quadrani with JPMorgan.

Just two quick questions. First one on the outlook for organic growth, you’ve come in well ahead of our full year guide of 3.5% for the year in the first half of the year. What should we expect in the back half, any color there? And just following up to the earlier question about the programmatic contribution, maybe if you could talk a little bit about how the impact is on profitability in the quarter?

Certainly the over-achievement in organic growth that we’ve had in the first half versus what our original guess was for the year, those will continue to pass through for the balance of the year. We don’t expect to go into that. And at this point, until we have a little bit more clarity on a few things, I’d say looking to the third quarter and the fourth quarter, we’d still stay conservative and stay with the 3.5% back half growth of revenue.

And then in terms of the margins on the [indiscernible] pass through?

I think we’re fine and are finding that the margins are, as we described previously, we expect that overtime as we get more scale that the margins in programmatic space are going to approximate our media margins overall and we’re going to end up with a normal margin contribution relative to the rest of our media businesses. And I think we’re still on track to do that.

And then John if I could just follow-up on some of the commentary you had in your opening remarks about unprecedented set of media count reviews right now, I think you highlighted that maybe one of the drivers might be the technology changes we’re seeing and the allocation decisions of media might be causing advertisers take a closer look at their media relationships, would you say that’s sort of the main reason that you’re saying that lot of these reviews are coming into play? And if you would, any commentary on possible pressure on margins, just in maintaining a relationship, do you have to [indiscernible] keep that relationship in review?

Sure. As you can imagine, Alexia, I’m not in the room when the picture is being made, but I’m following them very closely with Daryl Simm and the other leadership people in OMG. And despite all of the other noise and everything else that’s out there in the marketplace, I really do think it’s been very consistent that clients are really reevaluating how they’ve done things in the past and they’re reevaluating their teams that they are doing with. And we’ve been, as I said, I think we’re about halfway through the reviews that have been called, it’s a guess, but we think that will all be decided by October and it will be very interesting to see who the net winners are in this round. So I’m very confident that with the amount of revenue we’ve already won and the few losses that we’ve suffered, we’re well ahead of the game and looking out there should only be upside opportunity for us. The second part of your question? I’m sorry.

Do you feel the industry, not just Omnicom, but the industry has to give better – some concessions or some better rates and fees in order to keep these media count when they’re up for review?

Except for one client that we consciously elected to not pitch because of terms that they wanted, we haven’t seen people raising forward and discounting things. The clients are fairly sophisticated and they know that at the end of the day, they’ll get what they pay for. I think it has more to do with the complexity of the marketplace and it turns out to be a process that ultimately should be beneficial to us, on my side of the table, but it’s totally also very beneficial to the client because they challenge their own media folk to say, listen, we’ve been doing this this way up until now, should we be changing the way that we’re planning or executing. And we’re seeing clients rethinking their whole behavior. So I don’t see – and in terms of the cost advantages, it turns out that it’s an unprecedented time, but the people who are using naturally are senior people and probably be just working a little bit harder than they were before all these pitches commenced.

Our next question comes from the line of Craig Huber with Huber Research.

A couple housekeeping questions, if I could. How many shares did you buyback in the quarter, please?

Just give me one second, Craig, and I'll get that for you. I think it's about 1.6 million, a little over 1.6 million shares.

And then in terms of expectations for the full year, should investors expect you guys not to outspend your free cash this year on dividends with small acquisitions and share buybacks, but not to outspend free cash like you've done in some other recent years?

I don't think we'd expect not to outspend, but depending on the timing of some acquisitions that we're working on, we'll probably come close in terms of an expectation of spending our free cash flow may be a little bit more and some things could change in the next six months between now and then. But I don't think you should expect that we'll outspend it to any significant degree, but we certainly will look to spend all the free cash flow by the end of the year and maybe a little bit more.

And then, John, question for you on all these media reviews going on right now, is it your expectation everything is all said and done that yourself and the other three major players in the marketplace that these revenues just move back and forth between the four of you or do you think on a net basis a decent amount of that could actually get moved over to some smaller third-party perhaps programmatic players out there?

No. I fully expect that the four or five players that are out there will be the beneficiaries and suffer the changes that happen. I don't see money being diverted to these small ad tech players at this point and certainly not from the reviews that are going on.

Our next question comes from the line of John Janedis with Jefferies.

Phil, just one question. With some of the changes you discussed, I guess maybe you and John discussed from a client perspective and technology, there's a narrative in the industry that there will be longer-term margin pressure and so if that's going to be the case, can you talk about some flexibility you may have on the cost side of your business either on the salary or the OMG line?

Sure. I think you know from John's comments, in the last question, I think we're going into these pitches in particular looking to provide value to clients and for clients look at that value and realize that to get what they need and to get the best services that they're going to need competitively priced it. We've approached the business and we'll continue to in approach the business looking for efficiencies internally and we've been down that path, we're going to continue down that path. We think we're pretty efficient, but we think there's certainly room for improvement and we're pushing pretty hard on several fronts as it relates to that. So we manage the business for the long-term. We're going to continue to make the investments that we think need to be made and find the right balance of growth and profitability and returns, and we're going to take whatever actions we think we need to get there. Some of them are certainly longer term in nature; some of them are shorter term in nature. But we expect to continue to manage the portfolio and maintain or improve over time our margin profile. So we don't think this is really any new or dramatically different. We've always realized we need to continue to push on the efficiency front. We’re going to continue to do that so that we can continue to generate the returns that our shareholders are looking for and generate the margins that we think will allow us to continue to invest in the business and have sustainable growth and sustainable profits.

And just as examples that ongoing process which occurs, we are in the area of real estate and payroll that's probably our largest next expense, we have probably changed the living conditions of close to 12,000 people who work for us just in the first six months of this year in terms of moving from existing space which were legacy leases into more modern open plan spaces. The net effect is you do become more productive when you're working like that and we’ve been able to on a net basis lower our future rentals by doing that. There's items in areas like that going throughout the whole cost system within the company to try to become more efficient.

Maybe one quick one just on Accuen, to what extent are there more markets to expand outside the US? And of the $30 million you referenced, is there a meaningful piece of that international or is it mostly US in terms of the growth?

I think you got to give me a minute on the split, but I’m not sure I have it here, I may have to get back to you. But we've expanded over the last I'd say at this point 15 to 18 months to most of the significant markets outside the US where Accuen operates and where we see it operating. There might be some opportunity for some of the smaller markets outside the US that we're going to continue to pursue, but we're pretty much in any and all of the significant markets we expect to be in. So I think we see opportunity for Accuen to grow both in the US and outside the US, but there's a decent amount of the growth that's coming from the rest of the world. And I can get back to you with a more specific number, but it's probably this quarter say roughly around 50/50, US and outside the US.

Our next question comes from the line of Dan Salmon with BMO Capital Markets.

Two questions: one for Phil and one for John. Phil, obviously in the areas of analytics, programmatic, you’ve seen a big ramp up in your offering there over the past four or five years, do you see a point where that starts to even off a little bit, ease off a little bit rather, simply as you move past the stage of getting that new business established, or does really the increased demand keep that headcount growing at the same rate? And then for John, you made a good point in discussing the media reviews earlier as how much everyone's somewhat conflicted out of certain pitches because of current client relationships. Would you expect that because of that maybe the hold rate actually ends up little bit higher just because we've got so many of them going on at once?

I have an opinion, I just hesitate to speculate. I think there will be some – even if there is a hold, I do think there is a reevaluation of approach, so on some of the very, very large pieces of business that still aren't decided, you might see adjustments to what – even if the same supplier holds onto it, the activities that we're doing in the past and the activities that will be doing in the future. But I would say that there will be some net change, but in terms of, I think the revenue of each of the larger holding companies, there's not much. When you look at it as percentage point, there's probably only, in the worst case, a couple of percentage points which could possibly move. And if they don't retain them, it's only a couple of percentage points that the winner would gain. It's just the state of the play at the moment. They're all significant, significant psychologically. I don't know if that answers your question or not?

Helpful. A little color. Thanks.

So on the analytics and programmatic front, I think our perspective is its still early days. Although we've been making investments for the last five years or so in our data and analytics platform, Annalect, and Accuen has been around now for, in a sizable way for the last year and a half or so to two years. We think it's still somewhat early days. We expect the growth opportunities to continue in the future, but as the businesses get bigger and the base gets bigger, we're not going to be surprised if the rate of growth slows a bit just because of the math of the numbers. But when you talk about the data and analytics side, and Accuen, we see some big opportunities there for using that platform to drive growth and drive insights through the rest of our lines of businesses, not just through the media business and the programmatic space. So we see some opportunities certainly in our CRM businesses and frankly the rest of our portfolio to utilize the data and analytics to actually drive some and find some meaningful insights that we can use and provide big ideas for our clients that are going to help us grow in areas other than just programmatic media. So we're optimistic for the opportunities in the future. A lot can change and will change as it has over the last few years here, but we think we've got a great set of assets that we're going to be able to build on.

Our next question comes from the line of Tim Nollen with Macquarie.

John, I just wanted to come back to your question, to your comment on, you referenced potential rate rises by the Fed. Could you give us your thoughts on what does a rising rate environment mean for the ad market? And my understanding is that is often a response to rising inflation, which means pricing power increases a little bit, which is generally good for marketers and hence, for agencies. Maybe that's a little simplistic. If you wouldn't mind just please explaining what a rising rate environment means.

Sure. From your lips to God's ears, I would like a little inflation back in this business. It's a long, long time since we've had it. The problem is and I'm no economic expert, the problem is it's been what, six years since the Fed has been in these markets. And there's been a lot of growth not so much in the industry, but across the spectrum which has been effectively free for large companies that could access capital freely. It's hard to gauge the disruption it might have in some of the emerging markets. As we reinforce the strength of the dollar versus – through the interest rate mechanisms and actions versus other places in the world. So does it have a direct impact on the capital structures or the ability for advertising industry to function? No. And I think it will be a good long time because I think the Fed hikes when they come will be very gradual and take quite a period of time before they become impactful. So it's just yet another unknown. It's nothing that we fear is something that we watch and we try to gauge with our existing client base around the world.

Operator, I think we have for time for one more quick question.

Thank you. And that will be from the line of David Bank with RBC Capital Markets.

I'll try and make it quick. It's actually a follow-up, I think, to an earlier question on the call about wins and losses. I think we've always viewed win some, lose some, right. You win some, you lose some. You guys have a really strong platform. Occasionally, you lose and you usually make up for it over time. I think the question is less about the structural issues of procurement getting more involved in programmatic and more about as a general rule, do legacy clients tend to be more profitable than newly acquired clients, given the infrastructure you've already invested in and historical pricing? Does a shift from legacy clients to newer clients impact margin in the same way it always might have or is it not an issue?

It's not significant. And you might, if enough new business was won in a particular quarter, you might see a minor blip because the least profitable time for someone in the agency business in dealing with the client is when we first acquire it because we have to gear up and put a team together and start to work. And oddly enough, some of the most profitable moments in the history of a client are after you’ve been put on notice. But to answer your question, I don't think it significantly moves the needle for anyone in the larger holding company type of environment.

Thank you all for joining the call. We appreciate you taking the time.

Thank you. And ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation and for using AT&T executive teleconference service. You may now disconnect.