Shub Mukherjee - Vice President of Investor Relations John Wren - President, Chief Executive Officer and Director Phil Angelastro - Chief Financial Officer and Executive Vice President Daryl Simm - Chairman and Chief Executive Officer, Omnicom Media Group

Alexia Quadrani - JPMorgan Dan Salmon - BMO Capital Markets Tim Nollen - Macquarie Peter Stabler - Wells Fargo Tom Eagan - Telsey Advisory Group James Dix - Wedbush Tracy Young - Evercore Richard Tullo - Albert Fried

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

Good morning. Thank you for taking the time to listen to our second quarter 2016 earnings call. On the call with me today is John Wren, President and Chief Executive Officer, and Phil Angelastro, Chief Financial Officer. We hope everyone has had a chance to review our earnings release. We have posted on our website, 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've been asked to remind everyone to read the forward-looking statements and other information that we have included at the end of our investor presentation. And to point out that certain of the statements made today may constitute forward-looking statements and that these statements are our present expectations, and that actual events or results may differ materially. I would also like to remind you that during the course of the call, we will discuss some non-GAAP measures in talking about Omnicom's performance. You’ll find a reconciliation of those measures to the nearest comparable GAAP measures in the presentation materials. We're going to begin this morning's call with an overview of our business from John Wren. Then Phil Angelastro will provide our financial results for the quarter. And then we will open up the line for your questions.

Thank you, Shub. Good morning. Thank you for joining our call. Second quarter organic revenue growth was 3.4%, continuing the pace we set last quarter and in line with our expectations. We also met our margin targets for the quarter and remain on track to deliver a 30-basis-point margin improvement for the full year 2016 or 13.7% EBITDA versus 13.4% in 2015. For the second quarter, EBITDA margin was 15.2% versus 14.9% last year. Our results were solid during the quarter even in the face of continued currency headwinds. In the second quarter, 44% of our total revenue was derived from markets outside the United States. As a result, foreign currency in the second quarter reduced our revenue by $63 million or 1.6%. It's too early to fully assess the impact resulting from the ongoing Brexit discussions and upcoming U.S. elections. So far the most significant effect is the continuing weakness of the British pound on our reported revenues. Additionally, when combined with backdrop of recent terrorist related events, clients have become more cautious with the most immediate effect being the cancellation of some customer events, which has had an impact on some of our share and businesses. Phil will provide more details during his remarks. Looking at our organic growth, it was broad-based across geographies. Our strong consistent performance over many years is a testament to the strength of our services and the diversity of our offerings across the portfolio. By region, North America was up 3.2% with our media, advertising, and specialty health businesses performing quite well during the quarter. Our growth in North America reflects in part the new business we captured in the United States in 2015 as well as the continued strength of our digital and data driven platforms. Revenue from some of our 2015 new business wins start in the second half of this year and recent new business wins like Volkswagen media start in 2017. In terms of client trends, we continue to see growth in digital media despite increasing concerns around digital measurement, viewability, and fraud. We also see modest growth in TV budgets, which is fueling the stronger upfront U.S. TV market with pricing up double digits in many cases. Please note these increases while good for the TV business do not directly correlate to an increase in revenue to us. Our UK growth was 3.3% with specialty healthcare and public relations having very strong performances in the market this quarter. In the euro markets, Spain and Germany were positive; France and Netherlands were slightly negative for the quarter as those countries continue to experience tepid economic growth. Outside the euro markets, we had very strong growth with the Czech Republic, Poland, Russia, Turkey, generating solid results. Looking ahead, it is still too early to know what the impact of Brexit will be for the advertising market in Europe. What is clear is that the UK decision to leave the EU creates uncertainty and may slow down decision-making in many markets. Our agencies continue to operate without disruption in the UK and Europe. Over time, we expect the volatility and the uncertainty surrounding the Brexit vote to subside and for our agencies to adapt to the post- Brexit marketplace. Omnicom remains committed to serve the needs of our clients in the UK and European markets and to our people who provide great value to them. Turning to Asia, second quarter organic growth was 4.5% with almost all of our markets showing positive results. India, Indonesia, Thailand, and Vietnam were exceptionally strong in the quarter. And Latin America grew 1.7% with Mexico well into double digits, which more than offset the negative performance in Brazil. While Brazil continues to be a challenge, we saw better performance compared to the first quarter of this year. We are hopeful that this trend will continue and that the recent changes in leadership and economic policies as well as the Olympics later this summer will have a lasting positive effect. Looking at our bottom line, EPS increased 7.9% to $1.36 per share for the quarter versus $1.26 per share for the same quarter a year ago. Excluding the impact of currencies, EPS would have been higher for the quarter. Phil will provide the details during his remarks. Our results follow a 10% increase in our quarterly dividend from $0.50 to $0.55 earlier in this quarter. Finally, our balance sheet and liquidity remained very strong. Overall, I'm pleased with our performance for the quarter and the first half of the year. Turning now to media and the ANA report, which was released earlier in June, as we said from the offset, our U.S. media agencies do not seek or retain rebates and return to clients all value negotiated in the form it is received. In the case of one global digital media provider, there is an incentive provision in our agreement that includes the U.S. This incentive continues to be returned to all clients in the U.S. on a pro rata basis according to their spending with this provider. We have contacted our clients to review our agency buying protocols, reassure them of the practices we follow, and address any questions they have. At Omnicom, we maintain strong compliance controls in both meeting the spirit of our client relationships and the terms of our client contracts. Our outside counsel formerly asked ANA, K2, and Ebiquity to share any specific findings relating to Omnicom, so we can ensure continuing contracting plans, no findings have been provided. It is our hope that after the Ebiquity report is released, the ANA and 4A's restore the joint task force that was suspended earlier this year so that a meaningful and clear agreement on joint practices and principles can be reached between advertisers and agencies. With respect to our media operations, we continue to outperform the industry. Volkswagen recently selected Omnicom Media Group's PHD as its global media agency following a lengthy review. It was a huge win for PHD covering all VW Group brands including Volkswagen, Audi, Porsche, Fiat, , Skoda and commercial vehicles. Volkswagen indicated that our team stood out versus the competition by offering new digital data and analytical techniques for improved media targeting. In addition to VW, PHD also won media assignments from Delta Air Lines and Carnival Cruise Lines and our OMD media agency won Ancestry.com business. These results follow the win of P&G's North America media business and the creation of our third media network Hearts & Science, which launched with integrated data analytics and marketing science capabilities into its core media service. What we’ve been seeing in media, we are now experiencing more broadly across our advertising businesses as more clients are focused on leveraging data to inform creative messaging decisions. In several new business opportunities clients are asking us to increase the collaboration of our media and creative services in order to maximize these benefits. The changes we are seeing underscore the importance of talent and capabilities we’ve assembled in Annalect, our data and analytics platform, which is integrated through sources across many of our agencies allowing our creative talent to bring new insight and value to clients. Across Omnicom we continue to expand our capabilities and simplify our service offerings through internal investments in our agencies and through acquisitions. We recently announced the formation of two groups: one that aggregates our diverse offerings in the global healthcare industry into Omnicom Health Group and one that combines the strength of all Omnicom's public relation firms Omnicom PR Group. Both groups made their first acquisitions in the second quarter. Omnicom PR Group acquired, Rabin Marti, a healthcare consulting firm that focuses on global public health issues including chronic disease, enhancing women's health, and preventing the spread of infectious disease. Rabin Martin’s deep expertise in global public health is an important in growing specialty area as an increasing number of our clients see the need to address critical health issues in the world. Omnicom Health Group’s first acquisition was BioPharm, an agency that specializes in multichannel marketing programs for pharmaceutical and biotechnology clients. Founded in 2005, BioPharm has an impressive client roster, which includes 17 of the 25 largest pharmaceutical companies in the world. Omnicom's Health Group is organized by service offerings into four primary categories based on clients needs: professional, patient, payer, and regulatory, evidence and medical. To further our capabilities in professional services, we recently launched DDB Health. DDB Health includes five professional healthcare agencies spanning the U.S. and Europe. Omnicom Health Group now has creatively inspired dedicated partnerships with each of our global creative networks: TBWA\WorldHealth, BBDO Health Work, and DDB Health. I'm happy to report that we are seeing good results strategically and operationally from both Omnicom Health Group and Omnicom Public Relations Group. We're also in the process of forming another group comprised of our independent national agencies including Goodby, Silverstein, GSD&M, Martin Williams, and Zimmerman among others. While these agencies will continue to go to market as independent brands, we believe placing them in a singular group will provide benefits through the sharing of best practices across their management and operations. Finally, I recently returned from the Cannes Lions Festival. I am always impressed when I meet our creative talent from around the world. I am proud to report the caliber of our creative continues to be outstanding. We proved once again we have the best people in the business producing award-winning campaigns for our clients. Here are a few of the highlights demonstrating the depth and breadth of our challenges. Nearly 90 Omnicom agencies won almost 300 Lions from 27 different countries across more than 20 categories. Omnicom Media Group including OMD and PHD earned the most media alliance of any media agency holding company scoring a grand total of 15 awards. BBDO placed second and DDB was fourth in the network of the year category. And finally, [indiscernible] BBDO won the title of Agency of the Year. I want to congratulate all of our people and our agencies for their outstanding work. Our investments 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 areas as the marketing environment increases in complexity. In closing, we achieve our goals for organic growth, margins and profitability in the second quarter. While it is impossible to predict the effects of Brexit as well as the impact of the U.S. presidential elections, we remain cautiously optimistic for the second half of the year and on target to achieve our 2016 plan. 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, during the second quarter of 2016, our business has once again delivered on their financial and strategic objective while continuing to deliver best-in-class services to their clients. Our organic revenue growth of 3.4% for the second quarter was in line with our expectations and keeps us on track to meet our organic growth target of 3% to 3.5% for the full-year. As has been the case for the last several quarters, the strength of the dollar continues to create a negative FX headwind on our revenue. For the second quarter, the reduction was 1.6% overall or about $63 million. Net acquisitions added 0.3% to revenue this quarter in addition to the Grupo ABC acquisition in Brazil that we closed during the first quarter. In the second quarter, we added Rabin Martin, a healthcare public relations agency and BioPharm, a specialty healthcare agency late in the second quarter. As a result, total revenue for the quarter was just under $3.9 billion, an increase of 2.1% versus Q2 of last year. I will discuss our revenue growth in further detail in a few minutes. Moving down the P&L below revenue, our Q2 EBITDA increased 4.3% to $590 million and the resulting EBITDA margin 15.2% represented a 30 basis point increase over Q2 of last year. The margin improvement, which is also in line with our expectations for the full year of 2016 as a result of our continuing efforts to leverage scale as we continue to pursue efficiency initiatives in the areas of real estate, back office services, information technology, and strategic purchasing across the entire organization. Operating income or EBIT for the quarter increased 4.3% to $562 million with operating margin improving to 14.5% in line with the increase in our EBITDA margin. Now turning to the items below operating income, net interest expense for the quarter was $44.8 million, up $4.7 million versus the first quarter of 2016 and up $10.2 million versus Q2 of 2015. The increase in net interest expense versus the first quarter was primarily due to the termination of the fixed to floating rate swaps on our 2016 and 2022 notes. As you know, in April, we issued $1.4 billion of tenure senior notes and redeemed $1 billion of notes that reach maturity on April 15. Although we incrementally added 400 million in debt, it had little effect on interest expense as rates have declined compared to when the 2016 notes were issued. Interest income earned in Q2 was lower compared to Q1 of 2016 as a result of lower interest earned on our cash balances, which were lower on average during Q2. Similarly, as compared to Q2 of last year the increase in net interest expense of $10.2 million was primarily related to the termination of the fixed to floating rate swaps on our 2016 and 2022 notes. Additionally, our interest income on our cash balances held by our international treasury centers decreased year-over-year, primarily driven by negative FX translation. Our effective tax rate for the quarter was 32.5%, which is down slightly versus Q1 of 2016 and the prior-year as well, as result of some small tax planning items. Earnings from our affiliates total $2.8 million for the quarter down a bit versus Q2 of last year. The allocation of earnings to minority shareholders in our less than fully on subsidiaries decreased by $3 million to $25.8 million. The decrease is primarily a result of two factors; first, the impact of FX because a large portion of our less than fully-owned subsidiaries are located outside the U.S. and second, the purchase of minority interest in certain subsidiaries over the past year. As a result, net income was $326 million that's an increase of $12 million or 3.9% versus Q2 of last year. Turning to Slide 3, the remaining net income available for common shareholders for the quarter after allocation of $2 million of net income to participating securities was $324 million, an increase of 4.5% versus last year. You can also see that our diluted share count for the quarter was 239 million shares, which is down 2.7% versus last year, as a result of repurchases of shares over the past year. As a result, diluted EPS for the quarter was $1.36, up $0.10 or 7.9%, versus Q2 of 2015. On Slides 4 through 6, we provide the summary P&L, EPS, and other information for the year-to-date period, and for the year to date results are essentially in line with the results for the quarter, I will just give you a few highlights . Our organic revenue growth of 3.6% during the first six months of the year, the FX headwind reduced revenue by 2.2%. Factoring in the increase from acquisitions net of dispositions of 0.1%, our revenue increased on a year-to-date basis by 1.5% to just under $7.4 billion. EBITDA increased 4.1% to just over $1 billion. As a result of the initiatives we mentioned over the last several calls, both our EBITDA and operating margins on a year-to-date basis have increased consistent with the increase from Q2. And on Slide 6, you can see our six month diluted EPS with $2.25 per share, which is up $0.16 or 7.7% versus 2015. Turning to Slide 7, we shift the discussion to our revenue performance. Starting with FX for the quarter, the net impact decreased our revenue by $63 million or 1.6%. The dollar remains relatively strong overall and when compared to Q2 of 2015 strengthened on a reported basis against most of our major currencies, including the pound, the reis, the Chinese Yuan and the Australian and Canadian dollars. However, the U.S. dollar weakened on a reported basis against the euro and the yen. Looking ahead, if rates stay where they are, the negative impact of FX may reduce revenue by about 1.5% during the third quarter and for the full-year. That being said, given the result of the Brexit though and the current volatility in the pound, as well as other global currencies, this estimate is certainly subject to further change as we move through the second half of the year. Revenue from acquisitions net of dispositions increase revenues $13.2 million in the quarter or 0.3%. Along with the acquisition of Grupo ABC in Brazil during the first quarter, this figure includes the impact of the acquisitions we’ve made in the U.S. and Europe over the past 12 months. The net figure also includes the impact of some strategic dispositions that we’ve completed as well. Going forward, we expect the net impact of acquisitions and dispositions will continue to be positive by about approximately 50 basis points per quarter. Finally, organic growth was positive $129 million with 3.4% this quarter. It was a solid quarter of growth across all of our major markets with the exception of Brazil, France, and the Netherlands. The primary drivers of our growth this quarter included the continued strong performance across our media businesses, as well as several of our advertising brands, our full-service healthcare businesses, which turned in solid performances and despite weaknesses in France and the Netherlands the euro markets overall had positive organic growth . The Asia-Pacific region also had solid performances across almost all of our markets. And in Latin America excellent performance by our agencies in Mexico, which offset the continued challenges experienced in Brazil. Further highlighting our regional mix of business on Slide 8, you can see during the quarter the split was 60% for North America, 9% for the UK, 16% for the rest of Europe, 10% for Asia-Pacific, 3% for Latin America, and 2% for Africa and the Middle East. Turning to the details of the performance by region on Slide 9, in North America we had organic revenue growth of 3.2%, driven by the continued strong performance of our media businesses, as well as several advertising brands and our full-service healthcare businesses. In Europe, the UK had organic growth of 3.3% on the strength of our specialty healthcare and PR businesses. The rest of Europe was up 4.3%, led by our agencies in Spain and the Czech Republic with a solid performance in Poland and Russia as well. Germany was also positive, while the Netherlands and France lagged with negative growth. The Asia-Pacific reason was up 4.5% most markets growing very well during the quarter including greater China and Japan. Although relatively small, we also saw double-digit organic growth from many of our emerging market countries in the region, including India, Indonesia, Thailand, and Vietnam. In Latin America, strong performance by our agencies in Mexico offset continued weakness in Brazil as the region was up organically 1.7% for the quarter. Brazil was down once again, but the negative impact this quarter was better compared to Q1 of 2016. However, it is still too early to tell when the political and economic situation will stabilize. In Africa and Middle East, which is our smallest region was slightly negative. Slide 10 shows our mix of business by discipline. For the quarter, the split was 53% for advertising services and 47% for marketing services. Our advertising discipline was up 7.7% in the quarter led by the performance of our global media businesses and several of our advertising brands. While CRM was down 2.7%, the results were mixed across businesses and geographies. The reduction in CRM was driven primarily by our events, field marketing, and point of sale businesses. PR was flat this quarter. As we mentioned the last quarter's call, we expect this performance to continue to improve as we move through the second half of the year. And specialty, medications was up 4.4% organically. The solid performance was driven by Omnicom Health Group with several new business wins by our full-service healthcare agencies. On Slide 11, we present our mix of business by industry sector. When comparing the year-to-date revenue for 2016 to 2015 you can see there was some minor shift in the distribution of our client revenue by industry, but nothing particularly significant. Turning to our cash flow performance on Slide 12, you can see that in the first six months of the year, we generated $722 million of free cash flow, excluding changes in working capital. As for our primary uses of the cash on Slide 13, dividends paid to our common shareholders were $243 million. Keep in mind though the 10% increase in our quarterly dividend that we announced back in April was effective with the payment we made in early July. The cash flow impact of the increase will be seen starting in Q3. Dividends paid to our non-controlling interest shareholders totaled $52 million. This is down versus last year, due to the purchase of additional shares from our local partners in prior periods. Capital expenditures were $78 million, acquisitions including earn-out payments totaled $360 million, and stock repurchases, net of the proceeds received from stock issuances under our employee share plans totaled $352 million. All in, we outspent our free cash flow by about $362 million in the first half of the year. Turning to Slide 14, regarding our capital structure at the end of the quarter, our total debt at June 30, 2016 of just over $5 billion is up about $490 million from this time last year, reflecting the incremental $400 million increase in our borrowings related to the debt issuance back in April, as well as an increase in the non-cash fair value of our debt of about $90 million, directly related to and offset by the positive fair value of the respective interest rate swaps on our debt, as required to be reported on the balance sheet under U.S. GAAP. Our net debt position at the end of the quarter was $3.5 billion, up $310 million versus the June 30, 2015 amount, primarily resulting from two non-cash items in the quarter. The increase in debt from the increase in the fair value of our interest rate swaps and the reduction in cash from the negative effects of FX translation at the balance sheet date from our foreign cash balances. Additionally, positive change in operating capital of approximately $250 million was more than offset by our overspend of free cash flow of $290 million. Net debt increased by $1.546 billion, compared to year-end, as a result of the use of cash in excess of our free cash flow of approximately $362 million and uses of working capital that typically occur on our first half of the year of approximately $1.1 billion. As for our ratios, they’ve increased slightly, reflecting the increase in our debt since this time last year. Our total debt to EBITDA was 2.2 times and our net debt to EBITDA ratio was 1.6 times. Due to the increase in our interest expense, our interest coverage ratio went down to 11.4 times, but it remains quite solid. Turning to Slide 15, we continue to manage and build the company through a combination of well focused internal development initiatives and prudently priced acquisitions. For the last 12 months, our return on invested capital increased to 18.4% and return on equity increased to 45.3%. And finally, on slide 16 we track our cumulative return of cash to shareholders over the past 10 plus years. The line on the top of the chart shows our cumulative net income from 2006 through Q2 of 2016, which totaled $10.1 million. And the bars, show the cumulative return of cash to shareholders, including both dividends and net share repurchases, the sum of which during the same period totaled $11.2 billion or cumulative payout ratio of 111%. And that concludes our prepared remarks. Please note that we’ve included a number of other supplemental slides in the presentation materials for your view, but at this point we are going to ask the operator to open the call for questions.

Excuse me operator, before we start the questions, we are happy to have Daryl Simm, the CEO of Omnicom Media Group with us here today for the Q&A session. We’ve had him with us before and we thought having him with us today would be helpful for those listening. So, if you could get started with the Q&A that would be great.

Okay. [Operator Instructions] Your first question comes in the line of Alexia Quadrani from JPMorgan. Please go ahead.

Thank you. Just two questions please, the first one is, just looking at your organic growth and your guidance, your performance in the first half, your guidance for the full-year, if you look at the midpoint of the guidance it does sort of imply a little bit of a deceleration in the back half, yet I think you’ve mentioned the kick in of accounts I think one on July 1 might be a bit of a benefit in the back half. You think that's just an element of conservatism just given the economy and all that or is there something else that we are not seeing? Then I have a follow-up.

I think as I said in the final paragraph in my prepared remarks is we remain cautiously optimistic. We have the Olympics coming up in just a couple of days, and if our CRM business - it's events start coming back that should benefit us quite a bit in terms of our organic revenue growth would be.

You are right. There is still quite a bit of uncertainty out there in terms of what the Brexit really means, how soon it may or may not have an impact in the US elections, the Brazilian economy etc. So, we are - while we are optimistic we're certainly cautious at the same time.

I would say the fundamentals of the businesses are sound though across…

I'm sorry just to be specific on the, maybe Phil or either John on the commentary you had on the ANA, I appreciate all the color you gave John around that in your opening remarks, but just more specifically on the, when you look at the contract negotiations going forward in light of these findings on this reported I should say, do you think that they there will be more cumbersome? Do think they will be more costly in any way? I mean, is there any sort of indirect maybe hit that we are not necessarily assuming out there?

I will throw that one to Daryl, who would have a more specific…

Yes. I think I will start the answer to that the question by saying that we certainly followed the - following the release of the study contacted all of our clients as we mentioned in the remarks to review the buying practices that we have within our agencies, and we received fairly supportive feedback from the majority of them. Some of them have asked for clarification specific to their business and naturally we’ve answered that, but all these clients ordered us on a regular basis and that continues to be the case as we move forward. So, specific to your question, naturally there is more scrutiny in the area, but the contracts that are written between ourselves and our clients are as you might expect very comprehensive in nature and we don't see any change in that.

If I could just squeeze one more in, since we’re lucky enough to have Daryl on the phone, Darrell on the upfront, the strength in the upfront that we’ve seen, how much of that do you think is, I think John you mentioned double-digit price increase in some cases, how much of that is just a shift out of scatter sort of the reallocation, how much of it is overall maybe a slight increase to our strength in the TV market?

You definitely hit one of the factors. A year ago, we did see, over the past year I should say we did see some significant scatter premiums so part of the move is undoubtedly some advertisers moving more to the upfront to avoid the experience they had a year ago paying those big premiums, but I do think there are couple other factors contributing to the price increase itself. You've got the pattern of diminished audiences, so there is less supply there. We’ve also seen some advertisers that while they are continuing to grow their digital budgets there is a tap at the brakes in that space as some react to concerns about the view ability or fraud matters. We see the demand is up some points. The prices are up higher than the increases in revenue because of the decreases in supply and we will have to see as the year unfolds whether those revenue increases hold and scatter.

Thank you very much.

Your next question comes they line of Dan Salmon from BMO Capital Markets. Please go ahead.

Hi good morning everyone. John, one of the comments you made in your prepared remarks, you mentioned that you are seeing some increased caution from clients and that it’s particularly being seen in the CRM division. Could you maybe just expand on that a little bit and then I’ll have maybe a follow-up for Daryl as well.

Sure. We’ve seen in a couple of areas and those tend to be gross businesses, so the revenue impact is actually larger than in some other cases. Earlier in the year, we saw -- when the oil prices fell, we saw some Middle East countries that we had done events for, canceled those events in an effort to not knowing their future. That oil seems to be stabilizing, those may come back next year. And then with Paris and San Bernardino in a bunch of other terrorist type of, either domestic or planned, clients really are taking a hard look at some of the events that they would typically throw and they pull back on them, they canceled them where they could. But not certainly every event, but it was enough to have an impact of a couple of percent on our growth in the quarter.

Great and then maybe just a follow-up for Daryl, you mentioned the capping of the brakes in digital around some of the issues on transparency, fraud otherwise, I'm going to assume that that is largely outside of the big two of Facebook and Google and that they are continuing to gain share within your budgets, is that a fair observation that it's some of the middle to longer tail sites and properties that feel that break tapping as a result of caution around the ecosystem a bit?

I think, what you are seeing is a general concern among some advertisers that's causing if you will the tapping of the brakes, while the issues may exist in some pockets more than others it does have a - it does soften the overall growth of the category. So, indeed there are areas that are more problematic than others, but it's an overall budget tapping of the brakes that we see among some advertisers at the moment.

The only thing that I would add is this a growing feeling on the part of big advertisers that you can't grade your homework when it comes to measurement and with more money being dedicated to digital new standards are going to have to get agreed to so they can measure the ROI or the efforts that they are putting in.

Great, thanks both.

You next question comes in the line of Tim Nollen from Macquarie. Please go ahead.

Hi, thanks. I would like to follow up on your comments on Brixit John, just wondering can you say if you saw any weakness in the UK heading into the vote. Can you give any further color or commentary on any client reactions to the vote? And do you think there would be any spillover effects beyond the UK and I'm actually wondering if we could spend this positively and wonder if any potential slowdown in the UK might mean clients would allocate spending to other regions like the US if the economy here remains fairly strong. And then a follow-on, but related question perhaps more for Phil. Talking about the FX impact, I hear what you said about the impact on revenues. I'm assuming the impact on earnings from pound dollar would be almost nothing, but I just want to clarify that. And then if there's anything to know about interest expense FX impacts from here on? Thanks.

Sure. Well, Brixit with recent and I think there will be uncertainty until we get greater color, they’ve just changed governments on some of the trade arrangements that the UK is able to enter into with the rest of Europe, its biggest trading partner. So, there could be shifts, there have been voices about banks making moves, but I think it's way too early to tell. The biggest impact is that we were in [indiscernible], and when you look at the demographics everybody from the UK that was there went to bed Thursday night thinking that the vote would fail and it passed. So, there is still a lot, a bit of uncertainty. We represented everywhere, so if there's a shift from one market to another, we can easily follow it and pick it up without any real destruction to our business.

Just picking up specifically on FX impact, the impact on margins this quarter was maybe 5 basis points negative, probably a little less. I think we are finding although, FX is not always intuitive at the connection between the impact it has on revenues and our margins because it depends on where the FX movements are, what market they are in and the relative margins of those markets, generally we find when FX is plus or minus 1%, maybe 2% typically doesn’t impact our margins that much, there could be exceptions, but we haven't found that this year yet. And as far as interest expense goes, and/or interest income, FX might have as we’ve experienced in the last year, year and a half here might have somewhat of an impact on our interest income on our cash balances overseas, but not on our interest expense.

But we weren't in pounds, too much prior to the vote is a matter of precaution.

My question on the FX impact was really pound/dollar and assuming your costs are there as well there probably is minimal impact on FX from the pound/dollar exchange rate just be clear, it's just those two currencies?

Yeah I think that's right. I think certainly the revenues we earned and our cost base whether it's people, rent, etc. is almost all in the same currency in the UK. So, we don't think it will have negative impact on us, as far as our margins go.

Okay, thanks.

Your next question comes from the line of Peter Stabler from Wells Fargo. Please go ahead.

Good morning thanks very much. I've got one for John, one for Phil and then a quick one for Daryl if I could. So, John, I wanted to go back to your comments on the CRM segment, you noted and called out some of the issues around events and I think those are all very understandable. However, when we look back over a longer timeframe, it does look like the segment has been underperforming, so I was just wondering if you could update us on kind of the larger assets within the CRM segment and if there any other trends that you could point out in terms of client desirability and services in there and whether adjustments would be made etc. So that's for John. Phil, wondering if you could quickly update us on the programmatic Accuen contribution from the digital media pass through and then finally for Daryl, fully understand that your response to ANA, I think we all appreciate the comments. Just wondering if you think the appetite for opaque models will change it all as a result of that report. Thanks very much.

CRM and some of the bigger assets are like Rapp Collins, Proximity of various brands that we have. We've recently made some management changes in those areas because we're unsatisfied with the pace of growth that we have. Looking at it longer term, as you get into addressable TV and you get into measure things more closely we believe CRM is going to become more and more important as you look forward. So, we are making investments, we are making changes and going through quite a bit of effort in the whole area.

On your specific question related to Accuen, the growth this quarter was $18 million, which I think is what you are looking for right Peter?

Yes. Thanks. And then Daryl any quick thoughts on the appetite for opaque models unaffected or…?

Yeah. When it comes to principle-based models it's too early I think to tell. It is, soon after the ANA study has been released. The clients still express a high level of comfort, but having said that we have been growing the programmatic business in the early days on a direct response ROI outcome-based models and we are seeing a shift that is towards more brand-based advertisers in looking for more effective targeting, they're looking for engagement and I think as this continues to evolve we will see a reduction in the share of programmatic that's on a performance basis or in a principle based model. Of course all of those clients that are participating on that basis are opting in to that model when it's principle based in programmatic.

Got it. Thanks so much.

What we said before Peter is even though Accuen has been around for two or three years now in full operations, we're happy to provide our clients with those services using whatever model they prefer. Ultimately, we want to go in and grow our EBITDA dollars first and foremost whatever model they are comfortable with, we're happy to provide it to them and were going to see how it continues to evolve as it gets more mature and, as Daryl had said, as more clients move more of their budgets into programmatic.

Thanks, Phil.

Sure.

Your next question comes from the line Tom Eagan from Telsey Advisory Group. Please go ahead.

Great, thanks. Daryl, I wonder if you could clarify a comment you made about the digital platform concerns. You mentioned client impacting their budget. So are budgets lowering? And/or are they migrating dollars to TV? And then I have a follow-up.

The budgets are not going down. The budgets are still growing in the digital space. I would say the pace of growth among some advertisers have slowed for the reasons that I mentioned, but they are still growing.

And so is the – any slowing of the growth in digital, is that being offset by growth in TV?

It’s certainly one of the – one of the factors that is helping lift the television marketplace in the U.S. that we are seeing at the moment.

Okay. And then just secondly, you may have said this already, John or Phil, but could you give us a sense of when we might expect to see the billings form P&G and VW and Carnival impact the revenue line? Thanks.

I think even though we’ve got a modest transition from P&G in the second quarter, we take over full responsibility starting July 1 and Volkswagen doesn't start until January 1 and I believe it's a multiyear contract.

Any of the other wins?

Generally on most of the other wins – until a week ago – but there is normally at least a 90-day lag before – between winning the business and seeing the first dollar of revenue.

We got a clock. There is quite a bit of activity every quarter in terms of both wins and losses. It's not all wins. There is quite a bit of turn especially when you consider depending on how you count them, we've got 1000 agencies or more.

Right.

So the model does tend to help us be a little bit less volatile and a little more consistent at Omnicom level at least.

I would also add that, sitting here today, I have more hunters than I do farmers, so we are doing pretty well in new business though.

In Q1 John, you mentioned that the net win was about $4 billion, you expected the net win would be $4 billion for the full year, is that numbers still good?

Phil? You – probably better.

In terms of the – I can tell you for the quarter – second quarter, the net number was about – just about $950 million that excludes Volkswagen and Volkswagen has been reported in the press at depending on whence report you read between $1 billion, $1.5 billion or $1.6 billion and $3 billion of billings. We don’t really put a lot of stock in this billings number but people certainly seem to want it, so we do our best to provide it. And frankly, we are happy to let people choose whichever number they want to put on the Volkswagen one as far as billings. We don't yet have a sense for what our revenue numbers going to be from Volkswagen, it's going to take some time to get a better handle on that and ultimately that's what our focus is.

Right. Did that answer your question? I am far more comfortable that it would exceed $4 billion now than I was when I first made the prediction.

Great, thank you.

Your next question comes from the line of James Dix from Wedbush. Please go ahead.

Good morning, gentlemen. I had three I think fairly short ones. I guess just geographically what was your growth in China, I'm not sure I heard that in the quarter and obviously people are interested in it because of the macro. Then secondly, what was the impact of all your pass-through revenues on organic growth in the quarter? I know Phil you gave the impact from Accuen, but just beyond that was there any impact that we should be thinking about? And then finally, I guess for Daryl, maybe anything in particular that surprised you about the growth of U.S. TV advertising over the past year? You mentioned a couple of factors, which you think have gone into it, but anything which given your expert perspective has struck you as surprising including anything that's come out of the upfront would be interesting. Thank you.

On the China question, growth in greater China was probably a little bit over 3%, 3% to 3.5% for greater China. As far as the pass-through impact on revenue, we just don't track it that way. We're focused on our revenue growth overall, we don't kind of pick and choose what we may consider to be good or bad. We report in accordance with GAAP. We don't have a hybrid revenue number. We expect our agencies and our managers to manage the full P&L and not pick and choose what can be excluded or included. So we just don't track it that way.

And I might add that there is -- under GAAP there is revenue associated with every dollar of recorded revenue. So unlike some other people who operate under different stock exchanges, we don't use headline numbers.

Okay. I just want to make because you did call out CRM declining, is it fair to say that there tends to be more pass-through revenue in that type of business – event business?

In the event of section – part of that business, there tends to be where you are taking responsibility for partying; you are contracting out to get services performed by third parties. That tends to be more of a principal transaction.

Okay. So we might have seen a little bit more impact on that this quarter just because of what you talked about already?

Absolutely.

Yeah, okay.

The other thing to keep in mind for us is those businesses certainly aren't new. We had all of them for quite some time.

Correct. And businesses like [indiscernible] so we like the proximity, which is also part of CRM, tend to be more like agency, they tend to be fees.

Okay, great. And just on the TV market?

Yeah, I can't say that there are major surprises there. I mean the advertisers [indiscernible] site, sound and motion and they will continue to be in terms of the most effective way to represent and engage with consumers their brands. So, as I said earlier, the strength that we see in the marketplace is the combination of, I would say, a modest increase in terms of budgets and a decrease in terms of supply and a concern about higher rates that were paid a year ago, our major contributors to the kind of strength that we see in the upfront. So, no, I don't see any, I would say significant surprises in that and nor am I surprised that again for the reasons I mentioned earlier that there is a tap of the brake among some clients that are concerned about their message getting through for reasons of [indiscernible].

Great. Thank you very much.

Your next question comes from the line of Tracy Young from Evercore. Please go ahead.

Yeah, hi. I will keep this quick. I guess just following up on your comments regarding CRM and your expectation that business should improve in the second half, do you think that’s related to seasonal or just your expectations that that's going to improve? And then in terms of the net income to controlling interest that line, do you think that based on your comments earlier, do think that will decline versus last year on a full-year basis? Thanks.

Well, we are about to go through our six plus six forecast meetings starting in about two weeks where I would have a lot more specific information about what our expectations are in terms of events, but we did see some impactful slowdown in the quarter from things that were canceled. So I remain optimistic, but I don't – Omnicom is not run quarterly, it's run over a longer period of time, so as long as the services we are providing are still a value to our clients, we will continue to make investments in them.

Yeah, I think we always say in any one particular quarter don't draw a trend, I think we have seen though in the event businesses here more than just one quarter of a bit of deceleration. Sometimes those things take a little time to cycle. So, again, we'll have a better sense after we spend more time going through the next six months of the year with the management teams as where we are going to shakeout for the year.

Okay.

And as far as minority interests, our concern on controlling interests declining for the rest of the year. I think we actually hope it doesn't because that means that the businesses with minority owners are performing better and we're getting – they're getting their share of a larger piece of pie.

Yeah.

But there is a bit of – we did acquire some additional interests within the last 12 months or within the last six months I'd say that might bring that number down a bit. And the rest of it, the bigger impact frankly on that number typically is FX, so it's possible that FX will reduce numbers, it’s possible FX will have positive impact on that number depends on what market it's in.

Okay, thank you very much.

Sure. I think we have time for one more question operator.

Okay. That question comes from the line of Richard Tullo from Albert Fried. Please go ahead.

Hi, guys. Thank you very much for taking my questions. I thought it was a pretty good performance in very challenging times. My first question is on the nature of the events in CRM, are these more like music festivals, large-scale events, or they regionally targeted in South America only to Zika or is it just business cycle related?

Well, the events go across great amount of activities. One which didn’t repeat this year was in one of [indiscernible] and that was based on education. In China, with the changes of what the Chinese government is doing a lot of luxury goods producers have cut back on the type of events that they are throwing in those markets and in places like Paris where there's been tragedies, we've seen a couple of events cut back or slowdown, so they are not music festivals.

Yeah, it could be events related, I mean it could be entertainment related, it could be sports related, it could be – and typically mostly is specific clients and product driven, it can be related to conventions, it could be related to auto shows, new car launches, really run the gamut of the type of events that those businesses will put on for its clients and it is a global business. Although – I think it could change relatively quickly both up or down.

Okay. And this next question is for Daryl, in regard to the upfront, was the 10% gain attributed on the linear TV feed? Is there bigger gains on the video-on-demand advertising that's being sold? And is digital being bundled into that 10% more and more?

There's not a lot of digital bundled into that 10% number when a agreement is reached with the kind of vendor you might be thinking, although, at an increasing amount. However, the clients are as, I mentioned just a few moments ago, are focused on site, sound and motion and on increasing their digital spend in the video space. So, there continues to be a swing in terms of the share of budget in digital to video fairly aggressively. So you can take from that what you will in terms of the price strength of the video in the digital space.

Excellent. Thank you very much for taking my questions.

Okay, thank you, everybody. Thanks for joining the call today.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.