Shub Mukherjee - Vice President, Investor Relations John Wren - President and Chief Executive Officer Philip Angelastro - Executive Vice President and Chief Financial Officer

Peter Stabler - Wells Fargo Securities Alexia Quadrani - JPMorgan Craig Huber - Huber Research Partners John Janedis - Jeffries Daniel Salmon - BMO Capital Markets Tim Nollen - Macquarie Research David Bank - RBC Capital Markets

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

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

Thank you, Shub. Good morning everyone and thank you for joining our call. I am pleased to speak to you this morning about our second quarter 2015 business results. As I’m sure you have seen, Omnicom had a strong quarter with organic growth up 5.3% and EBITDA margins increasing 10 basis points. Based on our year to date results, we’re on track to meet revenue and margin targets for the full year. As we mentioned on our year end 2014 and first quarter 2015 earnings calls, we expected the continued strengthening of the US dollar versus other currencies would create headwinds to our 2015 reported revenue and net income. At the same time, it’s important to point out that the majority of our non-US operations are naturally hedged with both revenue and expenses in the same currency. In the second quarter, the significant change in exchange rates versus the prior period resulted in a 7.1% or $275 million decline in reported revenue. Year to date, FX has reduced our revenue by $500 million. On a constant currency basis, EPS would have increased an additional 7% for both the quarter and the year. Phil will provide more details about the impact of foreign exchange by market later in the call. However, at this stage, if rates remain where they are today, the impact will moderate during the remainder of the year. Turning now to organic revenue growth, North America increased 5.9%. The main drivers were brand advertising which includes our media operations, specialty healthcare and our CRM businesses. The UK generated 5.4% growth. The performance in the UK was broad based across all disciplines with the exception of our PR operations which had difficult comps versus the second quarter of 2014. Organic revenue growth in our European region was 3.9%. In the Euro Markets, Germany continued to outperform with over 5% growth. France was flat and the Netherlands was negative. Overall though, the euro-currency markets were up almost 4%. Outside Euro Markets, Turkey, Poland and Sweden had above-average results. Russia moderated to low single digit growth in the quarter. Looking at Asia Pacific, overall growth was 7.6%. Among our large markets, growth was strong in Australia, China and Singapore. Latin America was down 9.6% for the quarter. A positive performance in Mexico was offset by weaknesses in Brazil and Chile. The decline in Brazil is attributable to tough comps when compared to Q2 2014 World Cup spending and in 2015 from sluggish economic conditions. Overall, I’m pleased with our performance and where we stand halfway through this year. I’d now like to make a few remarks on the macroeconomic picture in terms of things we’re watching in the back half of 2015. First, in the last few weeks, we’ve seen another economic crisis play out in Greece. Our Greek businesses are small and are expected to decline. In 2014, annual revenue was about $12 million. So the impact will not be material. Second, as I mentioned earlier, China is still performing well for us and we remain bullish on China, despite recent setbacks in property and stock markets. Two other large markets, Brazil and Russia, are projected to have negative GDP growth in 2015 and face inflationary pressures that will take some time to reverse. Brazil should, however, benefit next year as we start to focus on the 2016 Summer Olympic Games in Rio. Lastly, the US continues to improve with moderate GDP growth. Hopefully, anticipated actions by the Fed later this year will not cause any harm to the US recovery or emerging markets. Turning to our balance sheet and cash flow generation, they remain very strong, enabling us to navigate and be opportunistic in these alpha markets. Our consistent practice for the use of cash, dividends, acquisitions and share repurchases remains unchanged as does our commitment to a strong balance sheet and maintaining our credit ratings. I’d now like to spend a few minutes discussing the unprecedented number of media buying and planning assignments that are currently up for a review. There is more media business up for review from large marketers at the present time than I personally have ever seen before. We estimate we’re about halfway through the agency pitches for these large assignments and I’m pleased to report we’re doing quite well. We recently added new media assignments from SC Johnson, which is a global win from one of our top competitors as well as Wells Fargo in the United States and Bacardi globally. These and a number of other wins brought in annual billings of over $1.4 billion in the first six months of 2015. And just last week, we were awarded Unilever’s Australia media business following the win of their global search businesses a few months ago. Throughout this unprecedented period, it’s been important to note our current clients are our first priority. Therefore, we’ve been very selective in choosing which media assignments to pursue and have elected not to participate in many reviews, 21st Century Fox, Citibank, Coke, Cody and L'Oreal. Looking at [things] still in progress, I’ll classify them in two buckets. First, accounts we are defending. On these assignments, we have about $1.2 billion in media billings. However, in most cases, we share these accounts with competitors and we estimate there is about $1 billion in upside potential if we’re successful in winning all of them. Next, we’re pursuing a few select new assignments where we have either no relationship or a very small one and where the upside is much greater. However, rather than trying to predict the outcome of these reviews, we can confirm that we are in a good position to benefit from any changes these large marketers make. With the abnormally high number of large media assignments, it is an opportune time to look at what is behind many of them. We know the media landscape has become more complex and many of the reviews are strategic reevaluations of agency suppliers. Technology has radically changed media planning and buying. The rise of digital data and analytics has given marketers the ability to more precisely understand how consumers are using media. In areas such as programmatic buying and micro targeting, clients want to make sure that they have the right partner with the right resources in this space. We’ve also seen a number of available media channels increase exponentially in the past several years. Over the past 12 months in particular, we’ve seen a rapid growth in transition to online video really take hold. With many more media channels and online video available to consumers on so many devices, advertisers want to make sure they have the right strategies in place. Given these areas of focus by our clients, Omnicom is especially well positioned as a result of our investments in analytic and our data management platform. Using this platform, our people today are analyzing campaigns on a granular level for hundreds of Omnicom clients around the globe. These are differentiating efforts for us and are proving to be a competitive advantage. While these data and analytic platforms are more important than ever, it is of course the talent of our people in putting them to work across all of our disciplines that really make the difference. At this year's Cannes, we proved once again we have the best people in the business producing award-winning campaigns for our clients. Here are a few highlights demonstrating the depth and breadth of our talent. Over hundred Omnicom agencies won nearly 250 Lions from approximately 50 different countries across 21 communication categories. CDM, one of the world’s leading healthcare agencies won the inaugural Healthcare Network of the Year award. BBDO was the runner-up for Network of the Year and had a record Cannes with 29 agencies winning almost 120 Lions. Omnicom Media Group and its flagship agencies, OMD and PHD, won over 60 Lions, including three grand prixes for clients such as McDonald's, Apple, Under Armour and Harvey Nichols. I want to congratulate all of our people and our agencies for their outstanding work. Our investment in talent, technology and partnerships are making a difference for Omnicom and our agencies. They are critical to our success. We will continue to strategically invest in these growth areas as the marketing environment becomes increasingly complex. I will now turn the call over to Phil for a closer look at the second quarter results. Phil?

Thank you, John, and good morning. As John said, our businesses continued to deliver against their financial and strategic objectives and meeting the needs of their clients. For the second quarter, organic revenue growth of 5.3% was once again above our expectations as the US maintained its solid performance and we experienced strong performance in the UK, Germany and Canada. Our underlying businesses continued to perform well and we had good balance to our organic growth performance across our disciplines. Exchange rates continued to create a considerable headwind on our revenue. This quarter, the negative impact of FX reduced revenue by 7.1% or $275 million. And as has been the case since the fourth quarter of last year, FX in the quarter was negative in all of our significant foreign markets. Including the small net positive impact from our acquisitions, net of dispositions, revenue for the quarter was about $3.8 billion, down 1.7% versus Q2 last year. I’ll discuss our revenue growth in greater detail in a few minutes. Turning to EBITDA and operating income, EBITDA for the second quarter of 2015 decreased by $8 million to $566 million versus $574 million in Q2 of last year. Exchange rates also had a significant negative impact on our EBITDA for the quarter. But since the vast majority of our expenses are denominated in the same local currencies as our revenues, the negative impact of FX on margins was negative, but not significant. And operationally, our efforts to increase efficiencies throughout the organization continued to make positive progress. As a result, the EBITDA margin for the quarter of 14.9% was up a bit versus Q2 2014. Operating income decreased $9 million to $539 million for the quarter. And although FX also negatively impacted operating income for the quarter and the amortization of our intangible assets resulting from our recent acquisitions increased on a year over year basis, our total operating margin of 14.2% was flat versus Q2 of 2014. Net interest expense for the quarter was $34.6 million, up $900,000 versus Q2 of 2014 and up $400,000 from the first quarter. Versus the first quarter, the increase in net interest expense of $400,000 was the result of increased borrowing on our commercial paper facilities, partially offset by additional interest income earned overseas. Versus Q2 of last year, the positive impact of the floating interest rate swaps we entered into during Q2 and Q3 of 2014 effectively offset the additional interest expense related to the issuance last October of $750 million of 10-year senior notes. However, net interest expense was up $900,000 due to a decrease in interest earned on our cash balances held by our international treasury centers, primarily driven by negative FX translation as well as additional interest expense from increased US LIBOR rates on our CT borrowing. Our quarterly tax rate of 32.8% continues to be in line with our current tax rate expectations for 2015. As a reminder, in Q2 of last year, our quarterly reported tax rate of 31.1% reflected the impact of an $11 million tax benefit we recognized related to merger expenses incurred in 2013, which were required to be capitalized for tax purposes at the time. Upon terminating the merger in May of 2014, we recognized the tax benefit related to those expenses. So to better understand the year over year change on the tax line and in our tax rate, in addition to the reported 2014 figures, we’re also presenting our 2014 quarter and year to date numbers excluding the impact of this tax benefit. Earnings from our affiliates of $4 million was flat year over year. The allocation of earnings to the minority shareholders in our less than fully owned subsidiaries decreased $4.4 million to $28.8 million, largely due to the impact of FX because a significant portion of our less than fully owned subsidiaries are located outside the US. As a result, net income for the quarter was just below $314 million. That’s flat versus last year after excluding the impact of the tax benefit discussed above from Q2 2014’s results and it’s down 3.5% or $11.3 million versus our reported Q2 results last year. Turning to slide 3, the remaining net income available for common shareholders for the quarter after the allocation of $3.9 million of net income to participating securities which for us are the dividend-paying unvested restricted shares held by our employees was $310 million. You can also see that our diluted share count for the quarter was 245.7 million. That’s down 4.8% versus last year and was driven by our share buyback program which we resumed during the second quarter of 2014. As a result, diluted EPS of the quarter was $1.26 per share, up 2.4%, an increase of $0.03 versus Q2 2014 reported EPS or up 5.9%, an increase of $0.07 versus last year after excluding the impact of the tax benefit discussed above from Q2 2014’s result. On slides 4 through 6, we provided the summary P&L, EPS and other information for the year to date period. To save some time, I’ll just give you few highlights. Our organic revenue growth was 5.2% during the first six months of the year. The significant FX headwind caused revenue to decrease by 6.8% and after factoring in the impact of acquisitions net of dispositions, of 0.3%. Revenue declined on a year-to-date basis by 1.3% to just under $7.3 billion. While FX also negatively impacted EBITDA, which decreased 1.1% to $971 million, both our EBITDA and operating margins were unchanged when compared to last year. Turning to taxes on page 5, our effective tax rate for 2015 of 32.8% is in line with our expectations, while the reported 2014 tax expense and tax rate reflect the impact of the $11 million tax benefit we recognized in Q2 2014 related to merger expenses incurred in 2013, which became deductable after the termination of the merger. As you can see, similar to way we presented our Q2 results, the comparative results for the six-month period are presented both including and excluding the tax benefit. Excluding the impact of this tax benefit, the tax rate for the six-month period in 2014 was 33.5%. And our six-month diluted EPS was $2.09 per share, which is up $0.09 or 4.5% versus 2014’s reported figure of $2 per share and up $0.13 or 6.6% versus EPS after excluding the impact of the tax benefit recorded in Q2 2014. Turning to slide 7, we shift the discussion to our revenue performance. First, as I mentioned, this quarter we balanced organic growth across all disciplines. However, the effects of FX more than offset their performance. On a year over year basis, in the second quarter, the US dollar continued to strengthen against almost all of our major currencies. This decreased our revenue for the quarter by $275 million or 7.1%. The FX impact was greatest in our European markets. The decline in the value of the euro and the pound represented nearly 60% of the FX decrease during the second quarter. Looking ahead, considering a steep decline in the value of all major currencies against the US dollar, if rates continue to stay where they are, FX could negatively impact our revenues by approximately 7% during the third quarter and approximately 6% for the full year. Revenue from acquisitions, net of dispositions, increased revenue by $5 million. While we’ve added businesses both in the US and in Latin America and Europe over the last 12 months, we’ve also made some strategic dispositions during that period as well in EMEA and the US. And finally, organic growth was positive $204 million or 5.3% this quarter. Again, we had another quarter with solid organic growth across most of our major markets except for France, the Netherlands and Brazil and we had good growth across our disciplines except PR which was up slightly in the quarter. The primary drivers of our growth this quarter included continued excellent performance across our media businesses and solid growth in CRM. Our full-service healthcare businesses driven by new business wins over the last few quarters posted double-digit organic growth in the quarter. Our UK businesses continued to perform well across most disciplines and we also had excellent performances in the emerging markets this quarter, including Mexico, Turkey and our Middle Eastern agencies. In the Euro Markets, driven by strong performance in Germany and Spain, overall organic growth remained positive. And across the Asia Pacific region, our performance was once again strong. Slide 8 covers our year to date revenue performance. The impact of FX reduced revenue by $0.5 billion over the first six months of 2015 or 6.8%, while organic growth over that same period was 5.2%. On slide 9, we present our regional mix of business. During the quarter, split of revenue was 60% from North America, 10% UK, 16% for the rest of Europe, and 10% for Asia-Pacific, with the remaining 4% being split between Latin America and Africa and the Middle East. Turning to slide 10, in North America, both the US and Canada turned in solid performances and we had organic revenue growth of 5.9%. While the media businesses continued to perform well, this quarter also saw a strong growth from our full-service healthcare businesses and CRM businesses in the region. Turning to international markets, the UK continued its strong performance this quarter, except for our PR discipline which faced difficult comps versus Q2 last year. The rest of Europe was up 3.9%, led by Germany and Spain, while France was flat and the Netherlands continues to lag negatively. Our performance in the non-Euro Markets in Europe continued to be solid. Before leaving Europe, in Greece, where the economic and political situation is uncertain, we have a very small presence with revenues of less than 0.1% of our consolidated revenues. So we do not expect much exposure. But given the uncertainty, would expect a continued decline in our businesses going forward. The Asia Pacific region was up 7.6%, with most markets performing well, including China, Australia and Singapore. One market that lagged was Latin America which was down 9.6% organically. The positive performance in Mexico was offset by weakness in Chile and Brazil. In Chile, the decline resulted from a significant local client loss in 2014 that we are now finished cycling through. In Brazil, the decline resulted from both the difficult comp when compared to Q2 of 2014 due to the World Cup and from general softness in that market. And finally, the Africa and Middle East region, our relatively small in total, was up 11.9%, led by our businesses in the UAE and South Africa. Slide 11 shows our mix of business for the quarter split equally between advertising services and marketing services. As per their respective organic growth rates, advertising services were up 6.4% or $125 million and marketing services were up 4.1% or $79 million. Within marketing services, CRM was up 4.3%. Most of our categories within the CRM discipline were up a bit year over year, with only sales promotion businesses down and our field marketing businesses close to flat. Public relations was up slightly at 0.3% and specialty communications was up about 8% on the strength of the performance of our full-service healthcare businesses. On slide 12 we present our mix of business by industry sector. Comparing our year to date revenue in 2015 to last year's figures, you can see there were no meaningful changes in this mix. Turning to our cash flow performance on slide 13, in the first half of the year, we generated $757 million of free cash flow, excluding changes in working capital. As for our primary uses of cash on slide 14, dividends paid to our common shareholders increased to $251 million, reflecting the 25% increase in our quarterly dividend during Q2 of 2014. Dividends paid to our non-controlling interest shareholders totaled $61 million. Capital expenditures were $107 million, up from last year due to an increase in leasehold improvements related to some recent real estate consolidations and acquisitions including earn out payments net of the proceeds received from the sale of investments totaled $65 million. And finally, stock repurchases net of the proceeds received from stock issuances under our employee share plan totaled $386 million. Since we restarted our share repurchase program just over a year ago, post the termination of the merger, we gave spent about $1.38 billion and purchased about 19 million shares. All in, we out-spent our free cash flow by about $113 million during the first six months of 2015. Turning to slide 15, focusing first on our capital structure, our total debt of $4.57 billion is down about $37 million from the first quarter, mainly due to a decrease in the fair value adjustment to our debt carrying value as required by US GAAP related to the in-the-money amount of our interest rate swaps. Our net debt position at the end of the quarter was $3.2 billion. The increase in our net debt of about $690 million over the past 12 months was driven primarily by the use of cash in excess of our free cash flow of $254 million as well as the negative impact of FX translation on our cash balance over the last 12 months of approximately $402 million using period end spot rates. Although our net debt has increased over the past year, our ratios remain very strong. Our total debt to EBITDA was 2.1 times and our net debt to EBITDA ratio was 1.4 times. And due to both the decrease in our interest expense and an increase in EBITDA, our interest coverage ratio improved to 12.9 times. Turning to slide 16, we continue to successfully manage and build the company through a combination of strategic acquisitions as well as focused internal development initiatives. Over the last 12 months, our return on invested capital increased to 17.6% and return on equity increased to 35.9%. And finally on slide 17, we track our cumulative return of cash to shareholders since 2004. The line on the top of the chart shows our cumulative net income from 2004 through the second quarter, which totaled $10.5 billion. And the bar show the cumulative return of cash to shareholders, including both dividends and net share repurchases, the sum of which during the same period totaled $11.4 billion for a cumulative payout ratio of 109%. And that concludes our prepared remarks. Please note that we have included a number of other supplemental slides on the presentation materials for your review. But at this point, we are going to ask the operator to open the call for questions. Thank you.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Helpful. A little color. Thanks.

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

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

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

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

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

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

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

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

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

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