Good morning, ladies and gentlemen, and welcome to the Omnicom First Quarter 2016 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. 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 your host for today's conference, Vice President of Investor Relations, Shub Mukherjee. Please go ahead.

Good morning. Thank you for taking the time to listen to our first quarter 2016 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've posted on our website at www.omnicomgroup.com this morning's press release along with the presentation which covers the information that we will review. This call is also being simulcast and will be archived on our website. Before we start, I've 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 a reconciliation of those measures to the nearest comparable GAAP measures in the presentation materials. 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. 2016 marks Omnicom's 30th anniversary and I am pleased to report that we are off to a good start. First quarter organic growth was 3.8%. We also improved our margins by 30 basis points in the quarter and are on track to deliver a 30 basis point margin improvement for the full year 2016, or 13.7% EBITDA versus 13.4% for this past year. The effect of large currency swings in 2015 continued to negatively impact us in the first quarter leading to a reduction in revenue of $97 million or just under 3%. At this point, we expect the impact of foreign exchange rates to moderate to more neutral levels in the second half of 2016. Phil will cover the impact of currencies on our business in more detail later in the call. As I look at the broader economy and geopolitical environment there is still quite a bit of hesitation in the marketplace. The capital market swings we saw in the first quarter, the unchartered actions of central banks around the world and the tragic events in Brussels, Paris and other cities is creating uncertainty for consumers and corporations and a cautious approach to spending. Given this environment our operational results were very good for the quarter. Looking at organic growth by region, North America was up by 4.5%, driven by performance in media and advertising. UK growth was up 2.2%. Media as well as specialty healthcare performed well in the quarter. However, the UK faced difficult comps versus the first quarter of 2015. Like you we are tracking the potential outcome of the EU referendum in June. But it is too early for us to speculate on what the direct or indirect impact of Brexit would be on our operations in the UK…

Thank you, John, and good morning. As John said during the first quarter of 2016, our businesses continued to meet the financial and strategic objectives we have set for them, as well as adapt for the ever evolving needs of their clients. As a result of these efforts, our businesses have continued their strong operating performance. Our organic revenue growth of 3.8% in Q1 was a little bit better than our expectation. As has been the case for over a year, FX continues to create a negative headwind on our revenue although this past quarter, it was at a lower level than it has been in quite a while. In Q1, the impact of FX reduced revenue by 2.8% or $97 million. Except for Japan, reported FX was negative again across every one of our significant foreign markets. As a result, total revenue for the quarter was about $3.5 billion, an increase of just shy of 1% versus Q1 last year. I will discuss our revenue growth in detail in a few minutes. Moving down the P&L, [low revenue], our EBITDA increased 3.8% to $420 million. The resulting EBITDA margin was 12%, which was up 30 basis points over Q1 of last year. The margin improvement which was in line with our expectations for the full year of 2016 is the result of our continuing efforts to leverage our scale, to increase operating efficiencies throughout the organization as we continue to pursue several initiatives in the areas of real estate, information technology, back-office services and strategic purchasing. Operating income or EBIT for the quarter increased 3.8% to $392 million, with operating margin improving 11.2% in line with the increase in our EBITDA margin. Now turning to items below operating income. Net interest expense for the quarter was $40.1 million, up…

Thank you. [Operator Instructions] Our first question today comes from the line of Tim Nollen representing Macquarie. Please go ahead.

Good morning. Thanks for taking the question. Couple of things, please. First, I was wondering if you could comment on the mix of spending amongst clients. There has been a lot of discussion about the strong TV ad market in the US and some comments about the ability concerns in that blocking and so forth in digital media. I wonder if there is anything in general or even specifically regarding P&G. I don't know if you want to address particular client but I have read about them being involved in that sort of a mix. So, just discussion about the mixed shift on advertising. And then I just wanted to ask you as well about your cost saving initiatives. Is it possible to say maybe how much you invested, how much of time you spent on things like the real-estate and the IT insured services or perhaps how much of this 30 basis points margin guidance upside for this year is derived from these efforts. Thanks.

On the mix of business this is an all gross statement. I'd say that this trend continues towards digital. And the areas I'm concerned are visibility. But we've seen a solid TV demand pick up over the past few months. We are expecting spending those on only a few points going in to the up front. You have to keep in mind that many clients hold back money in order to create flexibility in this. So many different channels that they can get their messages in through in these days. With respect to P&G, we don't have any revenue in the first quarter from P&A even though we are on it. We haven't really start to stepping up for it now, I think it really starts in earnest in the third quarter.

[Indiscernible] the cost savings.

In terms of how much time spent, I'm not sure I got that part of the question clearly but as far as our expectations for the year and the timing, certainly we probably spent more time pursuing initiatives in the area real-estate here. It's an initiative that's taken quite some time major market by major market and there is still more to come because we had the plan and line up a number of leases in each of our major markets as opposed to moving out of less efficient real-estate into hub buildings and take a big charge for vacating real-estate. We haven't taken that approach, we've been little more patient but certainly some of the actions we put in place a number of years ago we are starting to see the benefits of that in late '15 and then really on here into '16. As far as our other initiatives in the areas of IT back office spending strategic purchasing etcetera, I think they are the ones we are continuing to pursue, this isn’t a nine months or a 12 months thing. We are going to see benefits from those I think throughout over the next year and we are going to continue pursue them long after just 2016. We are after efficiency broadly but saying that not -- we don’t look at it as just kind of a one-time effort.

The another thing I would add to that would be the real-estate because we feel certain we are waiting for our leases expired, we will also continue in the future not only '16 but '17 and '18 -- will draw our benefits worth.

Okay. Thank you.

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

Yes, good morning. I have a couple of housekeeping questions to start with. Your guidance you've given in your last quarterly call of organic revenue up to 3% to 3.5%, I assume that you're still sticking with that and do you think it will be fairly level over the course of the year? And the other question I want to ask you is that new wins in the first quarter, what was that in place, typically talked about a billion?

I will take the first question. Yes, we're still between a 3% and a 3.5% for the year in terms of what we expect our overall revenue growth to be. That's principally because there is a lot of unknowns out there. And we are planning our business and our cost and our expenses to be consistent with that growth because for the most part that growth is fairly known to us. You fill the second.

Yes. As far as wins and losses in the quarter, the number net is just above the billion 250.

And your comments Phil, on the cost front that you could keep up looking at the cost hard here going forth back office, IT, etcetera. Do you think long term as you think about your business that there is some margin up side assuming that can't be hold together on a long term basis or are you advising your investors to maintain in their models flattish type margins?

I think we are looking at '16 to deliver what we said we're going to deliver for the year. From our perspective we've always said we are pursuing EBIT dollar growth, not we are not obsessed with the margin percentage because you can't touch and feel the margin percentage we can deliver EBIT dollars that's going to continue vehicle. So, when we get to '17, and thinking about '17, when we evaluate where we expect to be but there is an awful lot of uncertainties and awful lot of things that can happen between now and then. So, we're not making any commitments beyond '16 other than we expect the margin improvement that was achieved in '16 will be sustainable. On beyond '16, we're not making any commitments beyond that other than we're committed to pursue the initiatives we begun to pursue. On into the future we're going to continue to try and be as efficient as we possibly can, but we're not obsessed with margin percentages we're focused on delivering EBIT dollars.

Lastly, Phil, I want to ask you, what was the gross amount of shares that you bought back in the quarter? Thank you.

Can you -- in a second. That number is I think the share's number is 2.7 million shares. Growth.

All right. Thank you.

Sure.

Our next question is from the line of Alexia Quadrani with JP Morgan. Please go ahead.

Hi, thank you. Just a couple of questions. First, when you think about the timing of the new business ramp and how that impact the organic revenue throughout the year. Is it more sort of business as usual or you get a little bit every quarter or given the timing of P&G which is sort of an outsized win, hitting later on the year, maybe I think Q3. Shall we see maybe a bit more of a tailwind in the back half of the year to organic revenue growth [indiscernible]?

Well, let me just [indiscernible]. Right now for the year was we are staying with our guidance but on the media wins great trend. To have at least this six months, in some cases even longer, [indiscernible] to when somebody loses an account and when the new person comes and picks it up. On the agency business [indiscernible] and 90 day changeover period and projects which are part of our business as Phil was mentioning when talking about CRM, those are [indiscernible]. We learn about quite a number of those 60 days into that. So, it varies across the business, I would say when you take a look at something like P&G, starting in the second quarter, where we've been hiring, we've been getting -- we'll get some partial reimbursement as we incur those costs but there really won't be what I call revenue growth. That really starts to kick in as I said July 1.

And then just a follow on and you gave some good color on the weakness in Brazil on the quarter. Any reason why that shouldn't continue to be a big headwind in Q2, I mean it sounds like their economic conditions that are mostly driving that, not any change in clients and necessarily. So, I assume that that's sort of a headwind for a little while now at least in the foreseeable future. And then just last question if I can squeeze it in, if you could let us know what the impact of programmatic was in organic growth in the quarter?

Sure. Brazil right now and we don't know necessarily anymore depending on IMF or anyone else, so we are planning for these headwinds throughout the rest of the year. We might get mitigated a little bit in the second half from the Olympics but we are not certain unless they come up with a cure to that virus that have God knows what the attendance is going to be. So, Brazil is going to be challenging I think for '16 but it's not it's important for us it's less than 1%. And so that -- between 1.5% to 2% of our revenue annually. So, that's with Grupo ABC included in our revenue numbers. So, well, it's a dry, we are very healthy, the most creative businesses in Brazil and what our folks is doing there now is they are trying to optimize revenue and they are working very hard on their expense basis. So, you want to?

Yes. As far as Accuen in the first quarter, growth in Accuen was $25 million.

Thank you, very much.

Our next question comes from the line of Julien Roch representing Barclays. Please go ahead.

Yes, good morning John, Phil and Shub. My first question is could you give us some impact of the new account winds on 2016 organic? And I know you win account every year but P&G is quite big this time, so having an impact in terms of [indiscernible] would be great? That's the first question. The second one is what did you sell in Q1 leading M&A to be negative and whether we could get this split of minus the open one between the positive acquisition and negative disposal. And third question is would it be possible to have an idea of your percentage of total revenue coming from project based activities as opposed to annual contract? Thank you.

Okay, sure. I'll take the middle question which I think, I forgot, what was it?

The --.

Oh M&A. I think what you'll see is, M&A is result of Accuen that we took last year. I don't even recall, Phil may. And that, yes, there is no real outline in terms of one big disposal. It's a number of small businesses actually across a few different geographies. And we expect that the number in the second quarter given where we are with acquisitions completed as of now. We will be positive through the rest of the year probably in the neighborhood of all new for the year about $80 million to $90 million of acquisition contribution net. In terms of project businesses I don't have that number for you I am sorry.

Yes, we don't really track it that way, Julien, because in each of our disciplines there is some component of the business even traditional advertising agencies, our media business, as well as PR, healthcare, CRM etcetera, that there is a component of both project based business and retainer business. We prefer the retainer business but certainly there are some businesses we now that are primarily project based. And on an overall basis, more of those businesses are probably in our CRM discipline than the others but each of the businesses does have a project based component. And we don't really segregate the revenues that way within those businesses.

And on net new business?

Yes. If you could just repeat that one, Julien.

I mean, you have net new business every year but this year you have P&G which is quite a big one. So, I was wondering whether you could give us like maybe an annual number of the benefits of the larger than usual net new businesses.

We really can't. That's -- it goes into a much larger calculation and what makes up our organic growth are the contribution from wins to organic growth, growth of existing clients. We fully expect --, during the year – for clients cut back on projects. So, we don’t really sit down.

Yes, I think the -- I think one maybe one way of answering as directly as we can is we don't place very much of an emphasis on what the billing number is when new business gains and losses or you know net new business billing on gains and losses in that calculation. So, a lot of the businesses we have, the billings number really isn't relevant to the revenue that's being driven from gaining that business from a client. It's not about an approach and a methodology that the industry follows everybody wants us to provide a number we do our best to come up with a number that's somewhat consistent in terms of the way we reported. We don't place any emphasis on it in terms of how we actually run the businesses themselves. We are focused on a revenue contribution of those businesses and when we say our expectation is 3% and 3.5% growth, yes, that includes an expectation where that includes both new business wins and losses that we know of and new business some aspects of new business that we expect businesses to obtain. But in terms of this year even with P&G which from Omnicom perspective is a fantastic win from a revenue perspective. It's nothing out of the ordinary when you combine it with the rest of say what we expect to be in excess of $4 billion of wins net for 2016. That's kind of a normal year we expect our growth, that's going to be a relatively normal year in that context.

One thing I would add to that is it was a wonderful win from multiple reasons. One, it validated all the work we've been doing in the digital space and what we can and the services we can provide our clients. And two, I'm not expecting much of it in the second half of this year, we've stated we're primarily focused on P&G but it allows us to open up a third media network which once we get the 17 and 18 and now, it's going to provide us opportunities to pitch our business that we might otherwise been pretty close from pitching.

Okay. Thank you very much, very useful.

Our next question comes from the line of Ben Swinburne with Morgan Stanley. Please go ahead.

Thanks, good morning. Phil, any impact from currency on margin in the quarter?

Very little. But the margin impact in this quarter was less than five basis points. So, three or four basis points. So, for us that's kind of the normal and which is what we'd expect in an environment plus or minus 1% to 2% FX.

And John, if you look back, your revenue by discipline you don't want to look at any one quarter but I think it's been a couple of years now where advertising has been growing high single digits organically and that's about half your business and the other half has been growing low single, in fact, I think it was down organically this quarter. That's a two year plus phenomenon. Secularly in your business, what's driving that variation in performance if you sort of cut your revenues in half that way?

Well, we probably focus more in some ways on improving the service offerings because the path is changing both in ways that greater is done, media is executed within all the channels. One of the reasons that we announced the formation of two of the groups that are included in DAS both the public relations and the healthcare, was getting more folks. Even though they are growing, PR it has a little trouble in the last quarter or two. Healthcare has always been strong is to get more line managing people who are operators in charges of those groups or companies to continue to drive growth and to make recommendations for incremental acquisitions with supplement and compliment the products that we have. You'll as we go through the rest of DAS, which is a very large part of our crew, we are taking a look at other areas where a similar approach might add to that growth and as we go out. But we don't rush and we have as I said in my prepared remarks we have great respect for the brands and so we want to make sure that we can strengthen individual brands in whatever process we take on board. And if the market is open, so I think we can have one more question. Todd?

All right. Our final question today will come from the line of Dan Salmon with BMO Capital. Please go ahead.

Hey guys, good morning. I'll ask maybe one on the PR agencies specifically with the new organization and leadership in place there. John, could you maybe tell us a little bit more detail on what type of strategies you may see implemented there to pick up the growth where it has been lagging to area where social media is very impactful. I am wondering if there are specific initiatives around there to help get the PR agencies back up consistently growing again.

Sure. Dan, well, basically you're absolutely right. Great investments that happen in the changing social media environment. When you focus only on brands and you don't have any in the central leadership, you tend to make those investments multiple times. I think by having central leadership, we'll basically be able to do it better, faster job in creating platforms that which we'll be able to white label and therefore use across the grids. The other thing that we've been seeing is an increasing number not complete number of briefs coming from multinational clients looking for different types of services to be included in our responses. While we have a lot of similarity in our largest groups, there are a lot of specialties in some that are not included in others. By having a single individual or team that becomes intimately familiar with the 6000 people we have there, well we will do a better job I think of and increase our opportunities of winning new business simply from the knowledge and the control of somebody that's focused a 100% of the time on managing our PR assets. I hope that answered your question?

Yes, that's great. Thank you.

Okay.

Thank you everyone for joining the call, have a great day.

Ladies and gentlemen that concludes our conference for today. We thank you for your participation and using the AT&T executive teleconference. You may now disconnect.