Okay, we'll get started. Very happy to have back from Omnicom, Phil Angelastro, Executive Vice President and CFO. Phil, thanks for being here.
Good to be here. Thank you for coming.
Okay, so I thought we'd start with IPG. You and John have had around six months to further plan for the upcoming acquisition. How has your level of conviction shifted around the deal, and what are you most focused on going into the second half close?
Certainly, you know, our conviction is as strong, if not stronger, than when we announced the deal. You know, as we have spent more time with the folks at IPG, you know, I think we have kind of reinforced our belief that the cultures are very similar and complementary, and the businesses were quite complementary as well. I think our people certainly have had the same impression. You know, as we go through this regulatory process, there is certainly a bunch of restrictions in place from our legal folks that things we cannot do. You know, the integration planning has really started to take shape, especially over the last, I would say, month, at least with kind of the corporate functions. I think, you know, that cultural similarity has been reinforced for sure.
You know, I think we're very, very optimistic about the opportunities that it's going to present to the new Omnicom and to our clients. You know, we're even more excited than we were back in December.
Phil, you know, holding companies are obviously, you know, people-heavy organizations. You know, what's kind of your level of confidence that how you've been, you know, running agencies at Omnicom, the corporate culture you've built, that that's going to translate over to Interpublic and what they're bringing?
I think we're open to, you know, on the last point, I think we're open to the best, you know, solution, whether that's the best people or the best platforms. You know, this isn't a situation where we're just going to, you know, conclude that everything Omnicom has is the best possible one, you know, resolution for the combined company. We certainly think there's a lot of benefits that's going to come from what we can bring to, you know, the IPG table as far as, you know, the Omni platform and some of the other assets we have and certainly our practice area structure. I think, you know, certainly we're excited about that. Our people are excited about that. We're both focused primarily on, you know, servicing our clients in the exceptional way that we've been able to do that in the past.
That's where, you know, the primary focus of the client-facing people is. You know, as John and Philippe have both said, you know, they want the client-facing people to focus on servicing their clients. We need more of them, not less of them. You know, I think that's resonated well with those particular groups. There's certainly a key focus in terms of, you know, retention and input that we've gotten from those people, IPG has gotten from their people. You know, our senior management and their senior management are certainly focused on, you know, the best performers in those areas. That's where the primary focus has been. You know, from a retention perspective, we've both been focused on it in that aspect. I think, you know, there are going to be some synergies.
Some of those synergies certainly are going to come from, you know, the overlapping corporate organization and practice area and regional management organization. You know, there's going to be some inevitable disruption that comes from that when the deal closes. I think, you know, from a client-facing perspective, it is certainly an area that we're both focused on from a retention perspective. You know, I think so far, so good in terms of being successful with maintaining the key players in that space.
Phil, to follow up on that point, you know, the broad kind of practice area structures you've built around Omnicom Advertising Group for Creativity Media Group, I think that'll stay intact, it sounds like, on a go-forward basis, and you'll sort of build around that structure.
Yeah, the practice area structure we have in place is certainly a big part of how we're going to approach the business and our clients going forward. I think the IPG teams will benefit from that. You know, their organization and the way they've run the business, while culturally similar, you know, organizationally probably different, and that McCann has been kind of a group of companies that operate in different disciplines over the years, some of that has evolved over time, but, you know, it's still kind of organized in a different way. As their similar businesses come into Omnicom, they're going to come into the current existing structure that we have as far as practice areas go. Their media business will become part of our media business. The healthcare business will become part of the healthcare practice area that we have.
The PR business will become part of Omnicom Public Relations Group. Their precision marketing assets will come into Omnicom Precision Marketing Group. Those structures, you know, will provide some benefits in terms of definition of, you know, management layers, as well as, you know, the necessary investments in those verticals and how to evaluate those investments, how to evaluate new product needs, how to evaluate people, et c., in those particular practice areas. I think we're going to bring the IPG businesses into that structure. We're going to be open to, you know, the best people are going to be the ones that ultimately are awarded in that structure. I think there's going to be some benefits, certainly from a client service perspective. There's going to be some synergistic benefits that come from that in terms of the management layers and the regional organization within those practice areas.
Our intention is to, you know, help to efficiently, you know, integrate our businesses and IPG's businesses through those practice area structures.
Even prior to IPG, I think you've largely completed your practice area kind of restructuring. OAG was maybe the last one. Can you say anything on, I think you had moved from some of the smaller agencies kind of to more of a regional reporting structure, how that's going?
Yeah, you know, I think that's certainly been successful so far. I think it hasn't been extremely disruptive, but, you know, it's still an evolution, I would say. OAG has come together quite well, especially outside the U.S. There's a number of markets that were already standalone markets where we only had one OAG agency in that market. Those markets are now, you know, OAG markets officially. There were a number of markets over the last, frankly, two years where we've combined agencies and merged them to have a more efficient structure in place in that marketplace. Rather than having multiple brands and multiple agencies, we've gotten the benefits of the efficiency of having one organization in that particular market. I think, you know, that's going to continue to evolve and the efficiencies are going to continue to come from that. It's not fully completed.
There's still more benefits that we see to come from that structure. I think it's really resonated well with the people in those businesses, you know, to have a common leadership team that can help roll out the appropriate tools, especially in the advent of AI and generative AI. You know, there will be an awful lot of benefit that comes from that for the people across what used to be some disparately run agency groups that are now going to be much more effective and efficient in that, you know, the way they're organized.
Speaking about the IPG acquisition, I think you and John have alluded, you know, several times to kind of the advantages of running a media operation that will now be informed by Acxiom in addition to Flywheel and Omni. I know there's a lot of detail within that to unpack, but maybe at a high level, you know, for clients, how is this going to result in a better commercial offering?
I think certainly we're going to have what we believe will be the premium, you know, identity and data solution that we can bring to clients going forward when we add the Acxiom Precision Identity, you know, data to our already robust data platform powered by Omni and the behavioral consumer data that we've developed over many, many years in the Omni platform, combined with, you know, the consumer transactional data that came from and was integrated into the Omni platform from Flywheel. You know, having those two legs of the stool, you know, and then adding Acxiom and the Acxiom Identity Graph is going to be quite compelling for clients. It's going to be an enhancement of our current platform. I think we're going to be able to drive, you know, new product offerings that will resonate with clients for sure.
You've seen most recently, I think probably yesterday, Philippe made comments about how, you know, they've finally started to develop some of those products themselves that are resonating with clients. We think that's just going to add to, you know, the compelling. We think the acquisition and integration is going to add to the compelling set of products that we can deliver more broadly, especially using the Omni platform. Clients are going to find that, you know, a lot of opportunities that they're going to want to take advantage of when we bring those two together.
On the cost synergy side, the guidance is for $750 million. You've bucketed that out. We have seen IPG begin their own internal restructuring program ahead of their sale. Based on what they've said, do you have confidence that there's limited overlap there?
We definitely do. I think, you know, whatever benefits come from the actions that IPG announced recently and is taking, they're going to come over to the combined company ultimately. That is a positive. We certainly, you know, continue to believe in everything we've seen and heard in our discussions with IPG relative to what our expectations were for synergies is that there isn't going to be much, if any, overlap at all in the areas that they've kind of focused on most recently. I think, you know, overall, we think it's positive. You know, the sooner the better. You know, we're in the process of continuing, you know, our own evaluation of efficiency opportunities, whether that's AI-driven, organizational structure-driven, et c., and
You know, we're going to continue down that path and to the extent that we can achieve some of these opportunities sooner rather than later, you know, we're going to drive to do that ourselves. Certainly when it comes to the $750 million, we're very focused and confident that we're going to deliver the $750 million, and the goal is certainly to deliver more. Most of that is going to come from the overlapping, you know, corporate organizations and G&A, as well as, as we've said in the past, you know, vendor consolidation, shared services and IT infrastructure and those areas. You know, those are not areas that really have been addressed in this most recent set of announcements from IPG.
Got it. Maybe touching on capital allocation as the combined entity, I think it's going to generate over $3 billion in free cash flow. You've commented you'll continue with dividends and share repurchase, but, you know, with a bigger base of clients, bigger base of revenue, there is a change in the calculation on ROI. So kind of interested how you think now about maybe the pace of deals that you've executed on, possibly adjusting.
You know, I think our principal focus, you know, certainly is on integrating IPG. There's quite a lot to do, you know, and from the Omnicom corporate organization and the IPG corporate organization, you know, the pace of integration planning has certainly picked up in the last few weeks and months. I think as it relates to acquisition opportunities, you know, we're still in the market. We're still open to ideas. We still meet with potential acquisition candidates. I think you can expect that we are going to continue to focus on tuck-in acquisitions going forward, you know, but we're not going to get distracted by that when it comes to successfully integrating the IPG business. Once the deal's closed, you know, there will definitely be some opportunities given, you know, the combined cash flow of the two companies.
We expect to continue with our consistent capital, you know, approach to capital allocation. We're going to continue to pay a healthy dividend. We're going to continue to, you know, look for accretive tuck-in acquisitions, and we're going to continue to look to use, you know, the remaining parts of our free cash flow to buy back shares. You know, if anything, we're going to have the financial flexibility to reevaluate each of those areas going forward because the combined businesses will be, you know, result in a delevering of where we are from an Omnicom perspective today. We've always been conservative about the capital structure. The goal of maintaining our credit rating is kind of the boundaries that, you know, we and the board have operated in for many years.
We expect that to continue, but we will have some flexibility to kind of reevaluate, you know, enhancing some of those areas of our capital allocation approach post-deal. But, you know, right now we're continuing to focus on, you know, a successful integration and then, you know, a successful strategy to grow the business going forward. But I, you know, I think we'll have some flexibility to kind of, you know, continue to do what we're doing and maybe do it at a bigger scale.
Got it. Maybe the last one on IPG. Can you update us on the regulatory process, including in the U.S. where you're in a second review with the FTC? Is there any framework you've applied to kind of looking at the relevant ad markets that kind of gives you comfort with the process?
Yeah. So, you know, we continue to progress. I think we're optimistic, more optimistic than ever that, you know, we will complete, you know, the antitrust process certainly in the second half of the year. Most recently, we've heard from Japan, and we've completed the process in Japan. We got approval in Japan just in the last few days here. That's the most recent announcement. We don't see, and certainly we've got a lot of antitrust attorneys globally involved in the various markets that we're still working on. You know, we don't see any data points that would cause any issues or create any true antitrust concerns from a numbers perspective in any of the markets that we operate in, in any of the markets that we've filed in.
You know, most of those markets do n't have fixed deadlines in terms of, you know, any guarantee around, you know, you will either get approval or you wo n't by a certain date. That is n't the case. Certainly, you know, we are working very, very attentively on being responsive to any data requests and certainly being timely in our responses to any Q&A that we receive. We continue to push that process forward as rapidly as we can. As far as the U.S. process, that continues. You know, the second review process is quite a bit of data that we have been gathering that we have to provide to the FTC. I think we do n't have any reason other than, you know, to be optimistic about the process and reaching a successful conclusion.
Again, you know, from a numbers perspective, we don't believe there's any issues in any of these markets that we're going to, that we should be concerned with. In fact, you know, on your last point, if you look at the marketplace, you know, it's quite a competitive marketplace, and it goes beyond just, you know, the traditional large holding companies and/or medium-sized holding companies. You know, we compete on a day-to-day basis in broader aspects with, you know, the big tech companies, Accenture, you know, and many others that, you know, I think if you look at the market from a broader perspective, I think, you know, competition concerns, we just don't believe they're going to get in the way of the approval of the deal.
Got it. Let's shift gears a bit. You recently updated your full-year organic growth guidance, reducing the low end of the range to 2.5% and maintaining the high end at 4.5%. This stands in contrast to other holding companies that did hold their outlooks. Wanted to see if you could expand a bit on what you're seeing in the market and maybe what informed the more conservative view.
You know, certainly, you know, when we released back in, you know, early to mid-April, there was a lot of uncertainty, and there continues to be, you know, a lot of uncertainty. I think we didn't think it was prudent at that point in time, you know, to continue with, you know, a forecast for the full year that didn't reflect, you know, a conservative review with respect to that uncertainty that's out there. You know, quite a bit of it has dissipated, but there's still a lot of uncertainty around when tariffs are going to get resolved and how they're going to get resolved and what industries they're going to impact, how they're going to impact our clients and our business.
I don't think anything has changed in terms of, you know, us believing that that was the prudent and conservative certainly approach to take as we looked out at the year. You know, we don't have a great deal of, you know, sight into what's going to come in the fourth quarter. You know, we haven't seen anything in the business in the first month of the second quarter that would lead us to conclude that, you know, it's been an overly bad month or it'll be an overly bad quarter or it's going to be, you know, a great quarter if you look at just the specifics of, you know, the current second quarter outlook. I think things have settled down a bit in terms of some of the more recent tariff announcements and the discussions with China and the U.K.
I don't think any of our clients believe there's certainty on what the impact of tariffs are going to be. Certainly, we've got, you know, a lot of auto clients that, you know, are still trying to figure out how tariffs are going to impact them and what changes they need to make to their business. We believe that, you know, and in discussions we've had with them, this has kind of proved out. You know, we believe there have been some lessons learned coming out of COVID and even with , you know, the zero-based budgeters in some of the consumer industries. Clients need to continue to invest in their brands. Clients need to continue to communicate with their best customers. They need to be top of mind in those interactions with consumers.
They've got a lot more options on how to do that than they ever did before. They need us to help them do that. You know, we're happy to help them through that period of uncertainty. I think, you know, we haven't seen any drastic changes, you know, in either direction just yet. We think, you know, the level of uncertainty is certainly not an overall favorable in terms of, you know, full growth mode. You know, time will tell. I think we're pretty optimistic, but we're still, you know, conservative and prudent about the guidance.
Those comments on the zero-based budgeters, I think you were referring to CPG and some of the companies that had kind of taken that approach maybe pre-pandemic and kind of more recently, it sounds like there's a greater commitment, I think, to marketing investment.
Yeah. I mean, you know, I think it depends on how things play out, but yes, that was what I was referring to. I think, you know, they've spoken about it publicly and , you know, have for some time. I think that's instructive of, you know, what you may see playing out here, at least in the short term.
Okay. So healthcare, this is a vertical or discipline, I should say, that has dragged Omnicom a little bit over the prior year. There's a specific account loss associated with that that I think you'll cycle soon. Maybe can you speak to the outlook to the vertical on an underlying basis? We've heard some television advertisers at least speak to an accelerated pipeline. Anything good you're seeing there? And ask the way too early question about what Trump announced this week. And if you have any early feedback there.
You know, certainly to start with that, you know, it is way too early to understand and to evaluate what the most recent executive order is really going to mean for the industry. I think, you know, you saw the market over the last couple of days, I think, kind of calm down about what it may mean and how it's going to impact, you know, the pharma clients. You know, the idea that drug prices are going to come down dramatically, you know, based on an executive order is probably, you know, not exactly the case. There is an awful lot of things that have to happen before that comes to fruition. That's certainly, you know, something that the new administration is focused on. How it plays out is certainly way too early.
Certainly, it'll add some complexity to our clients and the industry in terms of, you know, how they evaluate what it means for their business and, you know, what it means to their investment in, you know, marketing and the impact on our businesses. I think both IPG and Omnicom have strong healthcare businesses. Those are, you know, businesses that are highly technical and, you know, high science-based in many instances. The people are not, you know, they're different. They have a different level of expertise than people in our broader brand marketing type businesses. We help clients deal with that complexity in a variety of different ways.
We think those clients are certainly going to need us and our agencies to help them through, you know, uncertain times like this and complex decisions as they go through, you know, trying to understand how this is really going to impact their business. We think to a certain extent it'll be favorable. Are we going to be immune if, you know, in the extreme case, you know, that there's a significant amount of revenue that's just, you know, ripped out of the pharma supply, you know, the pharma industry because drug prices are going to be driven down dramatically? You know, we wouldn't be immune to that. You know, that reality is a long way from happening, I would expect. It's going to be a much more complicated equation as it relates to that.
Y ou know, we think the business is going to be a strong one for us prospectively. We think, you know, combining with IPG, certainly in the healthcare, our healthcare businesses is going to be an even more compelling option for our clients to evaluate what we can do to help them in these uncertain times.
Got it. Precision marketing is your second largest discipline. Maybe can you unpack a bit what you're seeing there at the moment and separating out Flywheel maybe from some of the more traditional operations like Credera?
Sure. So, you know, that's a business and a space that we've been quite successful in over the last few years. We made some investments and changed the service offering over the last probably five years. And, you know, it's been quite a good, you know, growth business. We invested in Credera, which is a more, you know, it's a different business than what we had traditionally been in when it comes to CRM and precision marketing. It's a consulting business. It has a focus on, in particular, clients' marketing stacks. It's open to and has skills in a variety of those different spaces, whether it's, you know, Adobe or Salesforce and Pega and some other platforms that our clients use in their marketing stack. That business has done quite well.
More recently, you know, there's been a little bit of disruption and dislocation in that space, but they are back in growth mode. Probably not as robust as several years ago, but that business is doing quite well. The other businesses that we have in that space, Critical Mass and RAPP, which are focused on consumer experience and a more technical CRM, have been extremely successful. We expect that to continue. You know, RAPP in particular has grown recently in winning some new business on both GM and BMW. You know, it's a very technical business and, you know, it helps clients, you know, interact with their best customers in a very precise, targeted, measured way. Generally in our business, you know, more and more, you know, client marketing investment is measurable, especially in the precision marketing space.
The more measurable that spending is, the better it's going to be for us longer term. I think, you know, if you read one of the recent Forrester reports, probably the most recent Forrester report, it reflects quite positively on our business in that space and, you know, what we can do to help clients in that space. We expect that to continue to be a growth area for us going forward. The addition of Flywheel certainly has been quite positive. We expect that business to continue to grow. We expect the benefits that we've gotten by combining their Commerce Cloud data with the Omni platform are going to continue to resonate and, you know, help us grow in other ways prospectively. We're pretty positive and bullish about our precision marketing group and, you know, how it's going to continue to perform going forward.
You recently spoke to creative at less than 20% of your revenue now, though, as always noted, the business is your core IP and highly strategic. Can you talk about how creative continues to adapt to changes in tech and what are you assuming on your creative lines and organic for the rest of the year?
You know, the creative businesses certainly continues to be a key component of our IP. It really is core to what we do. And it's not limited to, you know, what we think of as creative advertising agencies. You know, all of our businesses have creative components and they've got people that add creativity to the solutions, whether that's, you know, our PR group, whether that's our healthcare group, whether that's our media company specifically. You know, we've got creativity as kind of a core part of the business in each and everything we do. The creative agencies themselves have evolved quite a bit over, you know, our history, frankly, but especially in the last three, five years. They continue, you know, to enhance and change out the skills of the people we have in those businesses. They continue to approach the market in different ways.
They are at the forefront along with our media business and our precision marketing business when it comes to AI and generative AI and developing new product solutions and ways of working certainly that are going to continue to change those businesses. You know, I think they are a core part of what we do and it is evolving quite rapidly, no question, you know, and it'll always be a core part of what we do. As far as the business themselves, you know, I think their performance as far as organic growth, you know, has been okay. They've been flat up a bit over the last, you know, year, year and a half. You know, we don't expect that to change too much in the very near future in terms of the rest of 2025.
You know, I think creativity is certainly going to continue to be a core part of what we're about because, you know, you can use all the technology to create new ways to find the consumer in a very personal way and a very precise way that our clients, you know, the consumer that our clients are trying to reach. You need a compelling reason, a compelling creative hook to get them to buy something or to get them to interact with a brand. Creativity is always going to be a key component of our business.
Okay. We're about out of time. I think that's a good note to end on. Thank you, Phil.
Okay. Thank you all for coming.