Good morning, ladies and gentlemen. And welcome to the Omnicom First Quarter 2019 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 your host of today's conference, Senior Vice President of Investor Relations, Shub Mukherjee. Please go ahead.

Good morning. Thank you for taking the time to listen to our first quarter 2019 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 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 Web site. 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. I am pleased to speak to you this morning about our first quarter 2019 results. It's been two months since our last call and a lot has happened in that time, including kicking off a few strategic initiatives, promotions in our agency network leadership and some notable industry awards. Importantly, we got off to a good start with our financial results. In the first quarter, organic growth was 2.5% and was in line with our internal targets. Our operating profits and EBITDA margins of 13% for the quarter exceeded our expectations. The improved performance is attributable to a number for factors, including the continuing benefits from Omnicom wide cost initiatives, the impact of dispositions completed in 2018 and a small gain from a few additional dispositions completed in the first quarter of 2019. The upsides were offset in part by the negative effect of foreign exchange on our operating results. Phil will provide you more detail when he gets to his remarks. And EPS of the quarter was up 8.3% to $1.17 per share, excluding the impact of one-time tax benefit from the successful resolution of foreign tax claims recorded in the first quarter of 2018. The results continue to demonstrate the consistency and diversity of Omnicom's operations, our ability to deliver consumer centric strategic business solutions to our clients and our best in industry creative talent combined with market-leading digital, data and analytical expertise. In the quarter, we grew organically in every geographic region of the world with the exception of Latin America. This growth was achieved through broad participation across all of our agencies, disciplines and clients sector. Looking first across disciplines, advertising and media was up 5.1%, CRM consumer experience was down less than 1%, strong performance in our precision marketing group…

Thank you, John and good morning. As John said, our results for the first quarter of 2019 were better than our expectations. While organic revenue growth was within our expected range, our operating profit and margins were stronger than we expected. Our results were driven by several items, including the strong performance of our agencies, the continuing impact of our cost efficiency initiatives, costs and benefits from the repositioning actions we took in the third quarter of 2018, including a favorable change in business mix in the quarter from the disposition of certain non-strategic underperforming agencies in the second half of 2018. In addition, we recorded a net gain on few smaller dispositions in Q1, which after considering the effect the negative impact FX translation had on our operating profit also had a slightly positive impact on our margins. Turning on Slide 3. For the first quarter, organic revenue growth totaled 2.5% or $91 million. Additionally, due to the continued strengthening of U.S. dollar since the second half of last year, changes in currency rates negatively impacted our reported revenue by $122 million or 3.4%. And finally, dispositions in connection with our repositioning actions, primarily in our CRM execution and support discipline, exceeded revenue from acquisitions in the quarter as we continue to cycle through the disposals we made in the second half of 2018. The net impact from acquisitions and dispositions reduced our first quarter revenue by $130 million or about 3.6%. In total, our reported revenue decreased 4.4% to $3.5 billion in the quarter. In a few minutes, I will discuss the drivers of the changes in revenue in more detail. Turning to Slide 1 and the income statement items below revenue. Our Q1 EBITDA was $451 million, up $1 million from Q1 of '18 or three-tenths of…

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

Just a couple of questions, if I may. John, maybe if you can provide a bit more color on what you are seeing behind the healthy underlying business, especially in U.S., which has seen some improvement the last couple of quarters after lagging for a couple of years. You gave some broader color. But I'm wondering if there is anything specific that's driving improvement in the U.S.? And then maybe for Phil, I think you have highlighted a couple of divestures that you've identified over the last 12 months or so, which has helped improve the profitability of the business. I guess I'm wondering if you could tell us if that's going to help improve the profitability going forward. Should we see some margin benefit the next couple of quarters? And maybe how many more of these underperforming businesses you think you still have that we could see the opportunity of further divestitures?

Alexia, in terms of the color or our outperformance this quarter versus same quarters prior years is the marketplace is changing all the time, it's changing in a number of ways. The competition set is pretty much what competition set was. Last year -- at the end of last year, we were able to -- we had a very good run in the third quarter in terms of new business. So we're seeing some of that reflected in the performance of the first quarter, and you will see it throughout the rest of the balance of this year, that's probably the biggest single component. The other thing as you know is organic growth for the net of what to win, how your clients grow or decline and what you lose. And we've been fortunate of late not to have the leaky bucket syndrome. So I'm pretty optimistic.

And then just follow up in terms of divestitures, Alexia. I think for future expectations for the balance of the year and the rest of the quarters, I think our expectation is for the businesses to continue perform well. And I think we would expect to achieve probably 20 to 30 basis points of improvement over the last year. First quarter relatively speaking is traditionally small relative to the rest of quarters. So the first quarter doesn't always necessarily make a definitive trend for us. But we're going to continue to focus on EBITDA as we always do and we would expect 20 to 30 basis points for the balance of the year. But we're also going to continue to invest in the business and invest for growth as we always do and try to find the right balance, so that we can find and fund sustainable growth. In terms of future divestitures and the process we go through, I think you've seen over the last three or four years that it is a part of the process we follow. I think we're through an awful lot of what we plan to do strategically, but we're going to continue that process. We look at it every quarter and annually every year late in the year as we look at the new year and reevaluate where the businesses still fits strategically and what might be some opportunistic things that come up, which is essentially what you saw with the Sellbytel disposition in the third quarter of last year and then the market saw a disposition in the first quarter of this quarter, both of those were similar businesses, different geographies. But there were opportunities for us to take advantage of situations where we weren't prepared to continue to invest in what was needed for the future of those businesses yet we're able to find buyers that made much more sense than us for those businesses.

I think, that's was very helpful. Can I just ask you one quick follow up? Could you quantify the gain of MarketStar that you captured in the quarter?

I don't think from our perspective it's significant enough to quantify. I think between MarketStar as we said as far as the gain and the translation loss we had on FX, those two together were essentially less than 10 basis points.

Thank you. Our next question in queue will come from Dan Salmon with BMO Capital Markets. Please go ahead.

John, maybe with your comments earlier about the competitive set not changing that much ultimately, the answer to this question maybe, no. But nevertheless, I'd be just interested in your thoughts a bit more high level. But when you look at some of the moves in recent weeks where non-traditional competitors like Accenture has been buying maybe what we viewed as a bit more traditional competitors like Droga or transaction like we saw over the weekend with Publicis and Epsilon. If I put aside everything to talk about disciplines and capabilities and where the future of the business heads, if I put that aside. If I put aside your normal discipline on M&A and valuation in the past and just what deals maybe available. And just try to isolate the variables in your head that line up to say. Does M&A in a mid to larger scale make more sense or less sense based on what's going to on around you? Do you sense any notable change in how you might look at the landscape in that sense?

Speaking surely from an Omnicom point of view, we take these apart - as examples in two parts, Accenture buying Droga, which is a very good agency. I already have a lot of really good agencies. So that is not something that we're buying another agency, it wouldn't be of appeal to me. Hiring which we're requiring larger end consultive type of IT practices, not Sapiens of the world, because we think there was big builds of the past, but like Credera, which we did last year and a few others. We will continue to do those but I don't see them to be terribly expensive. And what Epsilon and I don't know what -- I haven't looked at Epsilon in a long time. But from what I've observed of Epsilon, they're a good company. They have some good clients. They don't have anything from what I can observe as unique or self proprietary in terms of what it does that it's if necessary is not replicated. Jonathan Nelson who is head of our -- whole of Omnicom, our Digital Practice is sitting here with us today. Jonathan, do you want to add anything on that?

At Omnicom, we have been working on this idea of mass personalization and scale for well over a decade. Our investments in Annalect, our platform Omni and the Precision Marketing Group, along with Hearts and Science, are just latest examples of how we're focused on this. As we proceed on this, we are really focused on three key areas. One is to keep the platforms open. As I've previously talked about, we would rather rent and partner on data and technology rather than own. That's not to say that in a few strategic instances, we won't develop our own data assets. We do develop our own data assets like our inventory graph, but we generally believe a modular open approach is best for ourselves and our customers. Two, we have been doing this on a global basis for over a decade. Our data platform and our technology platforms have been rolled out in every major region of the world as of right now. And three, the hardest part about this is doing integration with your traditional assets at scale. Anybody who does this can tell you that mass personalization at scale is extremely hard and we have been dedicated to training thousands of our employees across all of the world in every major discipline across Omnicom for the entire time that we've been doing this. So those three things open versus close, global and integration at scale are how we're approaching this problem.

And the final answer to your question, if I or my team felt threatened in any way, we would look for the appropriate acquisitions to complete our offerings to our clients. I simply don't feel that way right now.

Thank you. And the next question in queue will come from Adrien De Saint Hilaire with Bank of America. Please go ahead.

Actually a very easy one, I don't think you really repeated your 2019 outlook for 2% to 3% organic sales growth. So could you just say whether you are still happy with this? Thank you very much.

I don't think there's anything in our view that would change the outlook for the year at this point up 2% to 3% growth for the year.

And also would you mind sharing how much did Accuen grow year-on-year dollar wise Q1 versus Q1?

So actually Accuen grew in the U.S. by about $2 million, so it's basically flat. And on a worldwide basis, Accuen was down $4 million, which also is roughly flat. Going forward, or overall just to comment on the programmatic business. So programmatic business certainly in our view continues to be strong but we continue to see the transition of some clients from our performance based bundled solution to the traditional agency approach and going forward, as John had said earlier, programmatic offerings being integrated into our agencies and into the agency offerings. So we think that's the right answer for the business ultimately, because it is something that is just part of what our agencies do on a day-to-day basis. But ultimately, the business is strong and continues to perform well.

Thank you. Our next question in queue will come from Julien Roch with Barclays. Please go ahead.

My strategy question I admit has been asked, so I will do a more simple number question. For Phil, if FX is minus 100 basis point across the board, i. e. not a big impact from one country to another. What's the rough impact on margin, that's my first question? The second one is for a while you said that you've done the bulk of dispositions but you're looking at the portfolio on a continuing basis and you've increased the guidance from 2.5 to 3. Going forward in 2021, what's the best way of thinking about acquisition less disposition, put a flat number or put like a minus one number, because you will continue to trim the portfolio? And then, last question is interest guidance for the full year, because of the benefit of the projects until August? Thank you.

So on FX, I think your question is a hypothetical one. If FX was down a 100 basis point what would the impact on margin be, I think the answer is it depends on where the FX positive or in this case a negative would be. But I think it's pretty direct to say if FX is up or down 100 basis points to 200 basis points, typically the impact on our margins is minimal. And in this quarter the impact that negative FX had on margins, the margin percentage was less than 10 basis points, which sometimes when FX is up or down in the neighborhood of was this quarter. We do tend to see a larger impact on our margins, on the margin percentage but that didn't happened this quarter, the FX decline was not across the board, didn't have a big impact on margin percentage when you looked at the totality of Omnicom. As far as dispositions go, we don't forecast certainly into 2020 and 2021. I think the bulk of the dispositions we have done to date, we will cycle through by the end of Q3 of this year. The size of the dispositions we did this quarter just are not that large that they're going to have a significant impact on the number going forward. And as far as strategically, we'll continue to pursue the same strategy as far as acquisitions are concerned. We'd rather do more than less. Our capital allocation strategies are going to change to the extent that we can find accretive acquisitions that fit our strategy fit the culture, and meet the needs of what we think we work well and integrate with the business. We're going to try and find more of those deals and do more of those deals.…

Thank you. Our next question in queue will come from Michael Nathanson with Moffett Nathanson. Please go ahead.

Can I just ask one on the numbers and then one if I could to Jonathan? So just on the numbers, when I look at salary and service change, I know there is a lot of moving pieces from dispositions and currency. Is there any way you can give me a sense of what was -- what do you think your organic growth is for Omnicom on salary and services? How do we think about it for the year? Just try to strip away all these moving pieces.

I don't know if Phil can but I know I can. We don't really look at it that way or attempt to look at it that way unfortunately in terms of having a specific answer for your question.

Okay, and then I guess question B is, so also you guys within that number, you can't take out what currency would be. Do you think currency is representative of -- the change in currencies represent the change in salary and service, is there anything unusual about maybe the weighting of salary and service by geographies?

No, I don't think there is anything unusual. We actually -- I don’t have it with me for the call. But we do have a constant currency calculation that we do. So we can give you a follow up what those ratios were on a constant currency basis so that you get a sense for what those numbers are without currency. We typically have that I forget to bring it with me into the room where we're having the call.

And do you guys mind if I ask Jonathan a question. Jonathan, a question for you is last year we spent a lot of time in beginning year thinking about GDPR and the impact on the market and on agencies. I wonder when you look back on what happened last year in GDPR. What did you learned? And looking forward, what's happened within the U.S. what do think is likely turns a privacy outcomes here for the U.S.?

Well, I think that there will be more regulation around privacy in U.S. that’s nearly inevitable with the comments made by a number of people in the industry legislation is going to happen in the U.S. At Omnicom, we did a deep audit of all of our assets looking at all of our different data providers and partners and came up with policies and procedures to protect ourselves and our clients. And what we're trying to do is find that fuzzy line of privacy and take a few steps back from it. And I think that policy has worked so far and it will likely work going forward.

And you didn’t see any material change in how you guys run your business because of it?

Not a material change. I mean when it comes down to actually on a day-to-day basis, of course it's evolving everyday but in the macro it keeps moving forward.

I think we have time -- given the markets are about to open, I think we have time for one more question.

[Operator Instructions]

Okay, if not, we're right on time. So thank you everybody for joining the call. I appreciate it.

Thank you. Ladies and gentlemen, that does conclude you conference call for today. We do thank you for your participation and for using AT&T's executive teleconference. You may now disconnect.