Good morning, ladies and gentlemen and welcome to the Omnicom Third Quarter 2018 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 would like to introduce you to your host of today’s call, Vice President of Investor Relations, Shub Mukherjee. Please go ahead.

Good morning. Thank you for taking the time to listen to our third quarter 2018 earnings call. On the call with me today is John Wren, Chairman 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 to 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 materials. We are going to begin this morning’s call with an overview of our business from John Wren. Then, Phil Angelastro will review our financial results for the quarter. And then we will open up the line for your questions.

Thank you, Shub. Good morning. Thank you for joining our call this morning. I am pleased to speak to you this morning about our third quarter 2018 results. It’s been a very busy quarter as we successfully executed many of the repositioning plans and dispositions that we discussed on our last call on July 17. On August 31, we completed the previously announced disposal of Sellbytel. In addition, during the third quarter, we disposed of 18 other companies, which were primarily in our CRM execution and support discipline and to a lesser extent in our CRM consumer experience discipline. These businesses were no longer aligned with our long-term strategy. The disposition activity resulted in a net gain to our P&L in the quarter which Phil will cover during his remarks. With respect to the company’s results, we reduced headcount by approximately 7,000 people. We also accelerated certain planned cost reduction and real estate consolidation activities in the quarter. During the quarter, we took actions to reduce our staff in our ongoing operations by over 1,400 people with annual payroll of approximately 135 million. These staff actions fell into three general categories. Approximately 500 positions will be replaced as we refresh and upgrade our talent to meet our agency’s current needs. The retirement of a number of senior executives in our networks, practice areas and at Omnicom corporate, these retirements ensure that our succession plans are up-to-date and that we are creating opportunities for upcoming leaders and the savings from the remaining reductions in the headcount will contribute to our goal of offsetting the EBIT loss from the dispositions we completed in the quarter. During the quarter, we also accelerated our real estate consolidation plans by creating more large open and modern campus style hubs, encouraging greater cross-agency collaboration. This move…

Thank you, John and good morning. From John’s remarks, you can tell we had a very active third quarter. As our businesses always do, this quarter they continue to focus on responding to our clients’ needs while ensuring that they proactively manage their own cost structures. And as we mentioned and as we expected back in July, during the quarter, we closed on the disposition of Sellbytel, our European-based sale support business. That transaction, along with 18 other smaller dispositions we completed during the third quarter, resulted in a net pre-tax gain of $178 million. In addition, during the quarter, we recorded charges of $149 million for repositioning actions primarily resulting from severance and lease terminations in connection with ongoing efforts to enhance the strategic position and operating effectiveness of our businesses. Lastly, we recorded additional tax expense of approximately $29 million resulting from adjustments of the provisional amounts originally recorded in connection with the 2017 Tax Act. We will discuss our 2018 results both with and without the impact of the net gain from dispositions, repositioning charges and the tax adjustments in connection with the Tax Act. The non-GAAP adjusted results on Slides 5 through 8 presents our results excluding these items and show how our underlying businesses performed year-on-year on a comparable basis. For the third quarter, our organic revenue growth was 2.9%. Organic growth was 3.3% for Q3 of 2018 after adjusting to reflect the pro forma impact of third quarter dispositions, which reduced organic growth in the quarter as if they occurred on July 1. FX negatively impacted revenue for the first time since Q2 of 2017. The decrease to our reported revenue for the third quarter was $62 million or 1.7%. Regarding the impact of our acquisition and disposition activity that John spoke about during…

[Operator Instructions] Our first question comes from the line of Alexia Quadrani with JPMorgan. Please go ahead.

Thank you very much. Nice to see some improvement in U.S. organic growth in the quarter. I know you spent a lot of time talking about the dispositions and the repositioning, but I am curious if there were other drivers for the better growth that you saw in the U.S. in terms of are you seeing a pickup in some client spending, is the new business maybe more of a tailwind in the quarter than it’s been the headwind, I mean I guess anymore color you can give us on the changes sort of gives the confidence that the type of repositioning we are seeing the underlying business getting a little bit better?

Yes. Alexia, we have cycled through number of count losses from over a year ago. A lot of clients are in fact spending, not huge sums more, but they are spending money and I think that’s the trend that will continue as we go forward. And new business I mean we have been very successful just at the end of this quarter which is going to benefit 2019 greatly. We are still waiting a few more pitches which will be big contributors if successful with regard to those and those are supposed to get announced in November sometime. Though I am feeling good about the business, we have a lot of work to do. We are feeling good about it.

And then on the – I think the press report said that the Ford business may come online as soon as November that seems a little early for me, I know transition usually take longer, do you think you will see any – you don’t address Ford directly, but do you think you will see any of the benefits of the recent wins in general benefit Q4 or they are really 2019 like you mentioned and then I have a quick follow-up for Phil?

Yes. I don’t know what information the reporter had been reporting what the reported did, but I am expecting the contribution to revenue in 2019 from those particular wins.

Okay. Thank you. And then just Phil, just a question on the restructuring charges or severance expense, I know you said you continue to evaluate your business and you are constantly repositioning and looking at it, should we assume further charges in the fourth quarter or do you think this is sort of a particularly big quarter in terms of these expenses flowing through and you won’t necessarily foresee them coming in the next quarter?

We would this quarter I think we view as have a lot more activity for sure than we typically do. The numbers, severance number that is essentially carved out in the non-GAAP column is the incremental severance number. So we typically expect to have and do have severance every quarter. Essentially that numbers in excess of our average severance, average quarterly severance that we have had in the last couple years, that’s in the $20 million or $20 million to $25 million range every quarter, so that numbers in excess of the average, it’s just the incremental amount. I think going forward as a business it’s always been continued to part of our business, it’s turn over, it’s changing our talent, etcetera. But certainly this quarter was much more extensive than our second quarter.

Thank you very much.

Sure.

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

Yes. Hi, thank you very much. Let me start with in Europe if I could please, you mentioned that Germany was down, I was wondering if that was client specific or more economics from your balance sheet point. And then also can just touch on the UK slightly down than second quarter, was that more economics driven uncertainty on Brexit and I have couple of follow-ons? Thank you.

I think you know I will take Germany first. So no we don’t see there is a broad economic issue in Germany in terms of what’s happened in the last couple of quarters actually. But I think Germany was on – our businesses in Germany were on a good run for quite a long time with quite a good growth rate. And I think that was just kind of natural slowdown there have been a couple of client losses, couple of businesses that have struggled that we have been working with through our networks and local management teams. So I think Germany itself in terms of our performance hasn’t been I wouldn’t chalk it up to the German economy slowing as opposed to the businesses that we have got and the client portfolios to be regenerated a bit and we are working with them to do that.

Similarly, with the UK, the clients that we have had there were pretty specific to businesses that we have and they are no longer real mainstream businesses. We have a standalone research business that declined and we have pretty expensive field marketing operations still up in Northern England [ph]. And there was a slight decline in those that’s what contributed to that, didn’t have anything to do with the baseline economy.

And then also John in the U.S., I guess making the adjustments you had the two dispositions done at the beginning of the quarter, you will be up 1.2% in the quarter we just finished here, when you think about that versus the U.S. economy, it seems like you probably grew 4% again third quarter I guess we will find out in a couple of weeks for sure and you add maybe a couple of percent for inflation to get to 6%, can you just walk us through in your mind right now why that’s the large gap of 1.2% organic number just based in the U.S. versus what it looks like maybe nominal GDP of about 6% and normally you would be how much closer to align with that is it, I would just like to hear your thoughts around that please? Thanks.

Yes. Normally when I start – in years passed when we compare to GDP we always did that on an annual basis not a quarterly basis. But I think there is a number of reasons that that’s happening. One, there are some structural changes which have occurred in the business which were especially in 2018 been adjusting to. What do I mean, programmatic business that was done by us outside in the past and had a fairly high revenue associated with it. Clients have decided to take that in house. They are doing it. Now we have gone in house with them, in most cases in the case of programmatic. We are still making roughly the same amount of money when you look at profit or EBIT, but the revenue number is different. There were a couple of client losses in the past and recycling through them, what else, some of our non-advertising businesses have individually suffered. Those are the ones that we have been looking at and selecting 18 this quarter that which we sold and there are still one or two more that we weren’t able to complete during the quarter because the buyers didn’t have proper financing. So when that occurs, they will occur, but there is nothing to concern yourself with because there will be some more properties associated with both, that’s about as much of a reconciliations I had in my head.

John, in your mind do you feel your organic growth that you put up this quarter sort of versus behind you here in the last couple of years or it’s too hard to tell?

No. I remain cautiously optimistic, especially again especially as we go into 2019 and my optimism is based primarily on two things – three things, one is we haven’t lost any large clients, so we are not – we don’t have any automatic headwinds going into the year. We have had some pretty handsome wins which should start to kick in, in the first quarter of next year. And our clients are – certainly most of them are not still looking to cut back, but they are looking to invest in their own businesses, so that’s what makes me optimistic.

Great. Thank you.

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

Yes, good morning. Thank you very much for taking the question. Look, first one quickly for Phil, could we get the impact of Acuren [ph] on Q3 organic. My second question is do you expect more disposition to be announced next year, John in you introductory remark you said you were still identifying non-strategic underperforming businesses for disposition, but any initial idea on what the impact could be next year on top of the 3% in the first half, are we talking an extra 2, an extra 4? And then the last one is the impact on margin from disposition to the business sold are lower in line or higher margin than the group? Thank you very much.

Sure. So, the impact of acqu in this quarter was – it was down $7 million in the quarter, most of that was international and the U.S. was basically flat. As far as – I’ll take the margins and then maybe John want to touch on the disposition. So, we can – we continue to focus on EBIT dollars not the margin percentage. And I would say that the – overall, the expectation given dispositions that the revenue base is going to be down in our goal and target is to replace that EBIT through the actions we've taken in the third quarter, you can expect that the percentage will increase. And as a basket I think the smaller – the smaller dispositions beyond Sellbytel will probably a lower margin than our average and the bigger business was probably equal to or a little bit higher right around our average. So overall, even though we’re focused on the dollars, I think the net result is going to be the percentage would go up.

And finally, with respect to dispositions, as I mentioned a minute ago or two that we’d originally identified that didn’t get completed in the third quarter because the buyers didn't have financing in charge, but those conversations continue, they’re not very large, there won’t be much – they won’t impact the past numbers that Phil gave you. And as we look at the portfolio, there is nothing in the portfolio that I have a burning desire to dispose off. Most of our companies have been streamlined and we’re very happy with their performance or the future performance, but there will always be exceptions that pop up from time-to-time, and when we can get a fair price for companies that we no longer feel are strategic, we’ll act on it.

Yes, I think similar to acquisitions, we don't have a disposition target or bogey that we then have our folks chase around to meet that target. So we’re going to continue to be opportunistic in the future.

Okay. Thank you very much.

Sure.

Thank you. Our next question comes from the line of Peter Stabler with Wells Fargo Securities. Please go ahead.

Good morning. A couple for Philip I could. Just going back to the severance numbers he gave us, just want to make sure I got this right. About 1,400 heads, 500 to be replaced, he mentioned $135 million salary run rate. Could you give us a sense of what the total impact after the replacements come in, what the total impact to savings might be for 2019? And then I have one follow-up after that. Thanks, Phil.

So, the savings I would say is going to be impacted by an awful lot of things. Certainly, we expect the net result of this take out some costs because ultimately we’re going to continue to pursue all the efficiency initiatives we've been pursuing, but we’re going to continue to look at what we need to invest to grow the business and some of the new business wins which we’ve recently – which have recently come in the door are also going to impact what the net savings are going to be. So, we don't have a specific number that we've carved out, there’s still quite a few moving parts to get to the ultimate savings number, but certainly, we've done this because the intention is to lock in those savings and pursue them in the future, we just don't have a quantified number to give you.

Okay, great. And then quickly moving on to the commentary around dispositions in the 40 bps of organic growth impact. We understand the distraction issue as you go into negotiations and divestiture. Can you give us a sense though how those divested businesses had been tracking let’s say over the full course of the year, have they been a significant weight on prior quarters as well or was this really an issue where performance really fell off quite abruptly in this quarter and then we didn’t see a similar impact leading up to this? Thank you.

Sure. So, if you took a similar approach to say what are the businesses that we disposed off during 2018, what was their growth while they were part of the portfolio. So for the – somewhere between six to nine-month period that they were part of the portfolio, they declined as a group probably in a similar fashion to what they did in the third quarter, somewhere I think not quite 40 basis points, but probably closer to 30 basis points. And probably three quarters of that where the vast majority of it impact our U.S. business, probably three quarters of that impacted the U.S. business or came from the U.S. businesses that were disposed in the third quarter.

Great. Thank you. That’s helpful.

Sure.

Thank you. Our next question comes from the line of Michael Nathanson with MoffettNathanson. Please go ahead.

Thanks. So, I have one for John and one for Phil. John, I hear you talk about the acquisitions you’re doing, they’re all a lot more technology-focused, lot more data-driven. Can you talk a bit over time whether these deals come more expensive and less accretive to you in the beginning versus what you may have done prior – previously? And then for Phil, could you just give us a sense of your philosophy on working capital, I know it’s pretty volatile by quarter, but when the year is all set and done, is working capital still a benefit for you guys or a modest headwind. So, how are you thinking about working capital for a fall of ‘18?

Yes. I have to say that we – to-date we’ve only done accretive acquisitions, and if I’m comparing the price that prices of multiples we pay in 2018 than say 10 years ago, they’ve gone up a little bit, because you’re competing amongst not so much your typical competitors, but there’s a lot of PE money that has been out there. Now as the Fed starts to tighten up some of that money will start to dry up. So, should be at least stable as we move forward.

On the working capital front, I think certainly expect it to continue to benefit to the business. I think there’s no question as we’ve indicated in prior calls, it’s certainly as challenging as it’s ever been or more challenging than it’s ever been. Through the nine months we’re about flat in terms of working capital performance and that’s a hiccup in the most recent quarter, most recent two quarters from some negative performance earlier in the year. But I think neutral to benefit is where we see it going forward, but it does require quite a bit of work.

Okay, thanks, guys.

Sure.

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

Thank you. Good morning, guys. Just going to be focusing more on acquisitions or continue with the conversation on acquisitions. John, can you put this Credera deal in context for us, is IT consulting, marTtech, strategic focus for the company? How do we think about that shift for you guys either in terms of the competitive set that you are going to battle with every day or the opportunities sort of transform Omnicom from a technology perspective?

At this point what we’re doing in that regard is not trying to reform say a sapient that’s not our intention. Our intention is to make sure that we have embedded as employees within the company in the right areas, the skills of any one of the major consulting firms that we can deploy to the benefit of our clients and future clients. That’s really it. And people that are skilled in the transformation of businesses as things will come only more digital as we move forward and people that we are looking to acquire are established people with their own reputations in the marketplace.

Certainly complementary as opposed to – we don’t think we have a skills gap at all. We are looking to supplement and complement the businesses and disciplines and services that we currently provide our clients.

Is there a pipeline for more deals like this and does this – if you were to execute more of these kind of acquisitions, does it expand the kind of pitches that you guys are kind of business you can go after?

Well. Yes, we do have a list, no I am not giving it to you over the phone. And it certainly is complimentary to other skills that we have within the company as we talk to our various clients, close to 5,000 and their challenges in transforming their businesses.

We don’t see ourselves being excluded from currently or in the future key pitches at our largest clients and largest prospects because we don’t have the capabilities and we are looking to fill them. I don’t think we view it that way and are looking at the acquisition pipeline to kind of fill that gap.

Okay. And then let me just one last one this has been a pretty active year – 2 years for you guys on the disposition front, you mentioned management or talent distraction, do you feel like you have had a broader impact from all of the reshuffling of that I think over the last 2 years we are looking at almost $1 billion of dispositions for the organization, has that something that you think you have been able to manage through more broadly or has that created uncertainty that may have weighed on performance outside of the stuff that you have actually disposed?

I am pretty certain that it hasn’t disrupted in any way our mainline business that we are keeping. As I go through all the things we have disposed they weren’t part of our main skill sets that really are at the core of what Omnicom is and each one of them has been a standalone type of operation. So you are not impacting the managements at our subsidiary level.

And certainly our senior most managers that run our networks and groups have been part of this process with us and part of determination of where we need to invest and where we need to move on.

Thank you.

I think we have run out of time operator since the markets now open. So thank you all for joining the call and we will talk to you again soon.

Thank you. Ladies and gentlemen, that does conclude your conference for today. We thank you for your participation and for using AT&T teleconference service. You may now disconnect.