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Text: We hope you are all well.
We will also refer to certain non-GAAP measures.
We believe that these measures provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance.
At this point, it is my pleasure to turn things over to Philippe Krakowsky.
I'll start with a high-level view of our performance in the quarter.
Ellen will then provide additional details.
Then I'll conclude with updates on the highlights at our agencies, to be followed by Q&A.
First and foremost, as Jerry said, I hope that you and your families are keeping well.
As we all know, around the world, the pandemic is still with us to a significant degree.
With all that entails, it bears mention that our people continue to navigate the many challenges, both personal and professional, presented by the health crisis.
Their extraordinary resilience and capacity for innovation, as well as their care for one another and their commitment to our clients, are inspiring.
Against business conditions that continue to be demanding, our people have driven the solid growth and the high level of first quarter profitability that we are reporting today.
Turning to those results, beginning with revenue, we are pleased with our start to the year.
First quarter organic net revenue growth was 1.9%.
That reflects solid performance in the U.S., an organic decrease of 20 basis points, and strong international growth of 6.3%, with increases in every world region.
In the U.S., you'll recall that we are comparing to very strong underlying performance in the first quarter of 2020 when we faced headwinds of nearly 4% due to certain 2019 client losses that we previously identified.
Domestically, during this year's first quarter, we saw increases in areas such as media, data services and technology and our healthcare specialist agencies.
Our international performance was paced by 12.4% growth in Continental Europe, where we had a strong start to the year by our media, data and tech offerings as well as McCann Worldgroup.
Worldwide, our healthcare and retail client sectors, which were consistent outperformers last year, were again our growth leaders in the first quarter.
From the standpoint of our operating segments, Our IAN segment grew 3.2% organically, led by media, data and technology and by the healthcare specialty agencies.
As expected, in comparison to last year's largely pre-pandemic first quarter, global conditions in Q1 continued to weigh most heavily on the events and sports marketing disciplines and on certain project-driven businesses in both IAN and DXTRA.
Nonetheless, while the environment understandably retained a strong note of caution across our offerings and client sectors, the lows were generally not as low.
Clients are finding their footing amid a global economy that's increasingly showing signs of recovery.
As better days ahead begin to come into focus, conversations with clients have generally become more positive and constructive.
Turning to operating expense and profitability.
Our teams once again demonstrated outstanding discipline.
Given the uncertainty that prevailed in 2020, we made decisions and took a series of actions during the year, necessary, but in many cases, no less difficult, to ensure the long-term health of the overall business.
Our expenses in the quarter reflect much of the benefits of the strategic restructuring executed over the course of last year, most notably, in our expenses for base payroll and occupancy.
We continue to be highly confident that, over time, we are well positioned to realize the full level of permanent operating expense savings that we've talked about previously, which, as a reminder, annualized at $160 million.
Along with a return to growth and the benefits of our restructuring actions, our Q1 results were further helped by variable expense categories that continue to run at very low level, given that many of our activities are still restricted by the pandemic.
These include significantly lower expenses for business travel and meetings as well as their associated costs.
Our first quarter net income as reported was $92 million, which includes the expense of certain nonoperating items.
Our adjusted EBITA was $266 million, a level which is approximately 2.5 times the first quarters of recent years.
Our adjusted EBITA margin was 13.1%.
Diluted earnings per share was $0.23 as reported and was $0.45 as adjusted mainly for our loss on the early extinguishment of debt, the disposition of certain small nonstrategic agencies, both of which are nonoperating expenses, and our expense for the amortization of acquired intangibles.
During the quarter, we refinanced a portion of our outstanding debt on very favorable terms, while extending our debt maturity profile.
This level of financial flexibility positions us well in the event there is volatility as the global economy moves through a recovery.
We're pleased to be able to share with you these strong set of results, which build on our company's long-term record of industry outperformance and consistent margin expansion.
It bears mention that we continue to invest in our people and our capabilities and, as a result, to further differentiate our offerings in the areas of strongest opportunity and growth.
This has been particularly relevant since we are seeing growing client demand for technology and data services and amid accelerating transformational change in marketing and media.
Our ability to create marketing and media solutions that bring together creativity, technology and data in order to solve for higher order client opportunities are what drove growth in the first quarter.
Given the complexity of the media and consumer landscape, marketers are looking for partners who can help them build their businesses through more precise, personalized and accountable engagements with individuals.
With the deprecation of third-party cookies, all businesses are increasingly focused on realizing value from their first-party data, who are finding partners with whom they can pool data assets.
As important, this needs to be done in a way that's respectful of people's privacy and anticipates likely regulatory development.
We remain well positioned to benefit from those opportunities.
Of course, our first quarter is seasonally our smallest, and most of the year still remains ahead of us.
We also appreciate the heightened degree of business uncertainty as part of the current reality facing all companies until a business like ours translates into more challenging visibility to the full year.
As a result, we're staying very close to our people and our clients, asking our teams for frequent financial updates and continuing to carefully manage expenses.
To date, we're seeing cautious optimism from clients, and the tone of business has firmed in the last few months.
Reopenings, fiscal stimulus and vaccination programs in a number of our largest markets are providing a tangible lift to economic activity and marketing demand.
As we mentioned to you on our last call, we remain confident in those areas we can control, namely the strength and competitiveness of our offerings and the people and talent within our group.
We are seeing that the most contemporary services we provide are growing in terms of the receptivity from clients and prospects.
Given our strong start to the year, and based on the assumption that there'll continue to be a reasonably steady course of public health and global economic recovery, we believe that we can deliver organic growth for the full year in the range of 5% to 6%.
With that level of growth, we would expect to achieve 2021 adjusted EBITA margin of approximately 15.5%.
As such, we see this as another year of strong value creation for all our stakeholders.
We will, of course, keep you apprised of our progress as the year develops.
On that note, I'll hand the call over to Ellen for a more in-depth view on our results.
I hope that everyone is safe and healthy.
I would like to join Philippe in recognition and, candidly, admiration of our people for their terrific accomplishments under very difficult circumstances.
First quarter adjusted EBITDA, before a small restructuring adjustment, was $265.9 million and margin was 13.1%.
These are levels that compare very favorably against any previous first quarter.
We returned to growth with variable expenses that are lagging the recovery in revenue, and we are additionally seeing the structural benefits of last year's restructuring program.
Diluted earnings per share was $0.23 as reported and $0.45 as adjusted.
The adjustments exclude the after-tax impacts of the amortization of acquired intangibles, a small restructuring refinement, nonoperating losses on sales of certain small nonstrategic businesses and the nonoperating loss on the early extinguishment of debt.
During the quarter, we refinanced $1 billion of senior notes that had been scheduled to mature over the next few years.
We placed the $1 billion in new notes maturing in 10- and 20-year tranches.
The timing of those transactions initiated in mid-February was favorable in light of the subsequent rise in market rates.
We appreciate and value the support and the reception that we received.
As you may have seen in late March, we also received upgrades to our outlook from both S&P and Fitch.
Turning to slide three, you'll see our P&L for the quarter.
I'll cover revenue and operating expenses in detail in the slides that follow.
Turning to Q1 revenue on slide four.
Our net revenue in the quarter was $2.03 billion, an increase of $55.6 million.
Compared to Q1 2020, the impact of the change in exchange rates was positive 1.5%, with the dollar weaker against currencies in most of our largest markets.
Net divestitures were negative 60 basis points.
Our organic net revenue increase was 1.9%.
At the bottom of this slide, we break out segment revenue in the quarter.
Our IAN segment was -- grew 3.2% organically, a terrific result against last year, largely non-COVID first quarter.
We saw solid growth by our offerings in media, data and tech at FCB and at McCann Worldgroup.
At IPG DXTRA, the organic change in the quarter was negative 4.8%, which reflects the weight of live events and sports marketing within the segment, the disciplines that have been most significantly impacted by the pandemic.
With that, DXTRA's performance was a sharp sequential improvement from the fourth quarter, especially in the public relations disciplines.
Moving on to slide five, which is a look at our organic revenue change by region.
In the U.S., which was 65% of net revenue in the quarter, our organic decrease was 20 basis points against the challenging comparisons underlying our headline number from a year ago.
Compared to Q1 2020, we did see continued pressure on events and sports as well as certain project work, as has been the case throughout the pandemic.
International markets were 35% of our net revenue in the quarter and increased 6.3% organically.
We grew in every international region, which is a notable improvement from Q4.
Continental Europe grew 12.4%, with increases in every major national markets, including Spain, Germany, Italy and France, driven by increased spend from existing clients.
With double-digit growth, there are a number of operating highlights in the region, including strong increases at media and tech and at McCann.
The U.K. increased 3.5% organically and, again, this is net of continuing headwinds in the events discipline We had solid growth at McCann at our media, data and tech offerings and at MullenLowe.
Asia Pac grew 3.4% organically.
Among our largest regional markets, we had strong gains in Australia and Singapore, while China and India's revenues declined.
Our organic growth in LatAm was 5%, with particularly strong results across Mexico, Colombia, Argentina and Chile.
Our Other Markets group grew 7.3%, with notably strong performance in the Middle East.
Moving on to slide six and operating expenses in the quarter.
Our net operating expenses, excluding billable expenses and the amortization of acquired intangibles, decreased 6% from a year ago and to 2.8% growth of our net revenue.
The result was first quarter margin expansion to 13.1% from 4.9% a year ago.
We have significant year-on-year expense savings in a number of different categories, most notably our restructuring savings in payroll and occupancy and a sharp decrease in certain variable operating expenses.
In the latter category, I would call out specifically the sharply lower travel and related expenses, for the obvious reasons, and significantly reduced bad debt expense, which was at an increased level in the first quarter of 2020.
As you can see on this slide, our ratio of total salaries and related expense as a percentage of net revenue improved by 340 basis points to 68.7% compared with 72.1% a year ago.
Underneath that, we drove very strong leverage on our expense for base payroll, benefits and tax, which improved by 360 basis points.
We had a lower severance expense ratio, which was only 30 basis points of net revenue compared to 120 basis points in Q1 2020.
At quarter end, total worldwide headcount was approximate 51,200, a decrease of 6.1% from a year ago as a result of our restructuring and regular severance actions taken over the course of last year as well as our business dispositions.
Also on this slide, our office and other direct expense decreased as a percentage of net revenue by 480 basis points to 14.4%.
We continue to have significant decreases in our expenses for occupancy, driving year-on-year leverage of 110 basis points.
We leveraged all other office and other direct expense by 370 basis points, which includes the decreased expense for travel and bad debt.
Our SG&A expense was 1.4% of net revenue, an increase of 30 basis points.
On slide seven, we present detail on adjustments to our reported first quarter results in order to provide better transparency and a picture of comparable performance.
This begins on the left-hand side with our reported results and steps through to adjusted EBITDA and our adjusted diluted EPS.
Our expense for the amortization of acquired intangibles in the second column was $21.6 million.
The restructuring charges were $1.3 million.
To be clear, these are small adjustments to estimates related to our 2020 restructuring program that we concluded at the end of last year.
Below operating expenses, in column 3, we had a pre-tax loss in the quarter of $12.5 million in other expenses due to the disposition of a few small nonstrategic businesses.
To the right of that, our pre-tax loss due to the early extinguishment of debt was $74 million, which relates to the refinancing and extending the maturities of $1 billion of our senior notes.
At the front of the slide, you can see the after-tax impact per diluted share of each of these adjustments, which bridges our diluted earnings per share as reported at $0.23 to adjusted earnings of $0.45 per diluted share.
On slide eight, we turn to cash flow in the quarter.
Cash used in operations was $249.8 million compared with the use of $277.1 million in Q1 2020.
As a reminder, our operating cash flow is highly seasonal.
We typically generate significant cash from working capital in the fourth quarter and use cash in the first quarter.
During this year's first quarter, cash used in working capital was $496.9 million and follows our fourth quarter of last year, where we generated over $1 billion from working capital.
In our investing activities, we used $28 million for capex in the quarter, which was essentially offset by the net proceeds from the sales of investments.
Our financing activities in the quarter is $212.7 million, which reflects the redemption and issuance of long-term debt and our common stock dividends.
Our net decrease in cash for the quarter was $492.7 million.
Slide nine shows the current portion of our balance sheet.
We ended the quarter with $2.02 billion of cash and equivalents compared with $1.55 billion a year ago.
Under current liabilities, the current portion of long-term debt refer to our $500 million, 3.75% senior notes, which matures in October of this year.
We plan on repaying these notes from cash on hand.
Slide 10 depicts the maturities of our outstanding debt and our diversified and extended maturity schedule following our activity in the first quarter.
Again, we have the maturity in October this year and then only $250 million due in April 2024.
Thereafter, our next maturity is not until 2028.
In summary, on slide 11, our teams continue to execute at a high level in an unprecedented environment.
And I would like to reiterate our pride in, and gratitude for, the efforts of our people.
The strength of our balance sheet and liquidity means that we remain well positioned, both financially and commercially.
It's worth repeating that Q1 is our smallest seasonal quarter, but nonetheless, we are pleased by our start to the year.
The return to organic revenue growth is a sign that our clients have begun to pivot to an investment mindset as they look to build their brands and grow their businesses in line with the broader economic recovery.
Our performance is also a reflection of the strength of our people, our offerings and our long-term strategies that have helped us drive consistently strong performance over time.
We all know that the pandemic has accelerated a range of underlying trends, whether in business or society at large.
As a result, many of our clients are undertaking meaningful transformation of their companies.
This means adopting new ways in which they go to market in order to keep pace with rapid digitization of consumer behavior and economic activity.
In a world that's more cluttered than ever with messages and channel all vying for our attention, the most critical challenge is to combine great ideas that come from the human storytelling side of our business with strategies and insights that can be generated by our technology and data capabilities.
We've increasingly seen the amounts of time people spend online, picking out content that's engaging, informative, entertaining, or some combination of all 3.
Content is undoubtedly more important than ever, and that's what makes the creative side of our business so vital.
Equally important is getting those messages to people in ways that are relevant, respectful of their privacy and ultimately connect with them in meaningful ways.
It's also key to take the information flow that results from all those digital interactions and apply it at every step along the process, from audience definition to creative ideation, in order to better understand the impact that our clients' communications are having on their businesses.
Our differentiated capabilities include a range of data-driven offerings that can do this both at scale and at speed.
As you know, we've been developing a data and tech infrastructure that underpins the full portfolio of our agencies and deliver solutions to a broad range of business problems through what we call the Open Architecture model.
All of our major clients are seeing the benefits of this integrated approach as our prospective clients.
During the quarter, it was gratifying to see that the Kinesso behavioral sciences teams are engaging with more of our advertising and marketing services agencies than at any time since we launched those offerings.
Despite the challenging external circumstances that we continue to deal with in the quarter, certain key elements of our business remain constant.
We will always succeed by adapting rapidly in our ways of working and how we are meeting the needs of clients.
Since the start of the year, we onboarded or promoted top talents across the organization, once again received high levels of industry recognition and saw solid new business performance, where we remain net positive for the past 12 months.
As you've seen in our results, growth in the quarter was driven by contemporary offerings in which we've consistently invested, including media, data and tech, healthcare and digital user experience.
Another area where IPG has invested significant resources is in our environmental, social and governance programs.
For some time, we focused on building a culture of high ethical standards by adhering to a set of values centered around respect for every individual.
As a company responsible for creating some of the world's most well-known marketing campaign, we have an obligation to ensure that the work we do as well as how we deliver it supports the long-term well-being of our communities.
This quarter, IPG released its sixth annual sustainability report using the Global Reporting Initiative Standards framework.
The report can be found on our website, and it represents another step forward for us in our commitment to ESG.
In terms of climate action, we track IPG's global energy usage and greenhouse gas emissions across our entire portfolio.
Next month, we plan to announce several strategic priorities focused on tackling climate change, including a science-based target for reducing our emissions globally.
The report also aligns with the UN Global Compact and focuses on human capital disclosures.
Further, we make clear that we operate with a core expectation that individuals deserve control over their data, and that we are responsible for promoting high ethical standards in terms of data privacy and security.
Equity and inclusion also remain areas of focus for us.
Our agencies are attuned to this priority, and they are held accountable because we have to show further progress when it comes to diversity in our ranks.
IPG's latest MSCI ESG Ratings report, which is a key ESG data provider for our various stakeholders, saw an increase in our company's score to an A rating.
Our improvement was the result of increased disclosure when it comes to human capital management, our position and capabilities related to data privacy and certain governance enhancements.
More recently, we joined Civic Alliance, as well as many of our clients, in calling for the protection of voting access here in the United States.
We continue to be committed to promoting democracy, and we'll work to support safe, accessible and fair elections, as well as to encourage our employees to participate in civic life.
As a business in which attracting top talent and advising clients is crucial to our success, a robust approach to ESG is a key part of our long-term strategy and important to all stakeholders.
Turning now to highlights from our portfolio.
During the quarter, we issued our second Media Responsibility Audit, addressing in a structured and consistent manner one of the most topical issues in the digital media ecosystem.
This framework and the principle it sets forth continue to be well received by clients as well as key industry groups.
Mediabrands' MAGNA unit also hosted a first-of-its-kind equity upfront, a week-long event intended to raise visibility and receptivity for black-owned media and media that serves black audiences.
In addition, the network announced that it would be joining forces with TikTok for a creator and content accelerator.
Two of our most dynamic units were in the media space, where we continue to leverage our deep data resources and capabilities.
We're seeing strong growth in Matterkind, which is customizing addressable media activation at scale for more of our clients.
At Reprise commerce, we have rapidly scaled operations on a global basis as we address growing needs in e-commerce, particularly for insight, content and analytics.
Following on a series of new business wins, Initiative elevated its U.S. leader to global CEO, where we believe she will have an even greater impact on the network's success.
At UM during the quarter, we added a global rental car client as well as an auto OEM in EMEA and HBO Max in LatAm.
UM was also named an outstanding company for working mothers, and three of its executives were named Adweek Media All-Stars, a distinction that was also earned by leaders of Reprise and Mediahub.
At our creative integrated global agencies, both McCann Worldgroup and FCB were named to the top five most awarded networks of 2020 in The Drum's World Creative Rankings.
Both also had work in the Super Bowl that was well received in a number of viewer polls and rankings.
Following the implementation of our succession plan, at the end of 2020, McCann Worldgroup posted a solid first quarter.
Along with most awarded networks of 2020 in the Drum rankings, McCann New York came in at number four on that list in terms of the top 100 agencies worldwide.
At MRM, the agency was again named a leader in Gartner's 2021 Magic Quadrant for global marketing agencies based on their ability to serve as key strategic business partners for clients and to execute on critical marketing priorities.
Huge and R/GA also featured on that list.
The health operations at McCann and FCB performed strongly in the quarter and continue to take share in the marketplace.
The notable program I'd like to call out was FCB Health's launch of the trial for number clinicalequality to shine a light on racial bias in clinical oncology trial.
In MullenLowe Group, Mediahub continued on its new business streak with the addition of global wins in Slack and Telly as well as New Balance in the U.K. Mediahub also introduced its inaugural Diversity-Owned Media Day and revamped its U.S. leadership team with a series of internal promotions.
The MullenLowe advertising network continues to be a leader in purpose-driven work.
Partnering with several independent casting agencies, the agency recently launched a campaign for Unilever's Dove to promote inclusivity in commercial casting.
In the U.K., the agency has continued to do important work on behalf of the government to inform and educate the British public concerning the pandemic.
In the campaign U.S. Agency of the Year awards, the Martin Agency was recognized with multiple honors.
And the agency also teamed with Mediahub for an integrated win of Terminix in Q1.
Huge posted strong results during the quarter and saw two big wins, adding Coppertone and Wakefern to its client roster.
The agency also announced the return of its Huge XD School, with a renewed equity-centered purpose that seeks to use education to increase the participation of underrepresented identities in the design industry.
And in R/GA, the agency's Venture Studio program announced the launch of a new Coalition Venture Studio with a mission to support Black start-up founders.
IPG DXTRA companies continue to deliver specialized capabilities and integrated solutions for clients in our evolving world.
Cone was once again a standout in new business arena.
Weber Shandwick was named PR Agency of the Year of the Campaign U.S. Awards.
And the agency also launched the Plan Vx open playbook, a communications program that draws on extensive vaccination and public health communications expertise to help companies play a role in getting America vaccinated.
At Octagon, leader in sports marketing, we recently promoted a longtime executive to the role of CEO.
Performance at Acxiom was consistent with our expectations and in line for a year of solid growth in 2021.
The company continues to carve out a position as an authority in the integration of marketing and advertising technology.
During the quarter, Acxiom expanded its partnership to better manage and measure campaign execution through the cloud in order to provide tangible improvements in campaign efficiency and speed.
Acxiom is also accelerating its development in client verticals where it sees opportunities.
Recently, Fortune named Acxiom one of 2021's Best Workplaces in Technology.
Working closely with the Acxiom data teams, Kinesso deployed its enhanced identity solution with half a dozen large clients.
This has already driven double-digit lifts in campaign efficiency.
Kinesso also expanded its range of direct data integrations with prominent platforms and ad tech companies.
As I mentioned earlier, we are pleased to see the Kinesso API connecting data and analytics capabilities across more of the IPG portfolio, since we see this as a growth driver for our business and a source of potential new revenue streams.
Acxiom, Kinesso and Matterkind, are working together to bring end-to-end data and identity solutions to clients, in collaboration with a number of IPG agencies.
We've seen the impact of this recently in new wins and expanded assignments in the telecom, auto, healthcare and financial services sectors.
Looking forward, we will stay focused on unlocking the enormous opportunities that exist due to the changes and disruptions that have accelerated during these past 12 months.
We worked over the years to embed digital capabilities throughout our organization and build a foundational layer of tech and data infrastructure that informs all our work.
As a result, we have a deep understanding of audiences at the individual level based on the strong legacy of ethical data practices.
Personalization, privacy and accountability are only going to grow in importance and value going forward.
Our vision is, therefore, for IPG to become a key partner in ensuring that clients businesses thrive in the digital economy.
As you'd expect, we are focused on supporting their physical and mental well-being and listening to them in planning a return to office.
That's likely is to begin to a meaningful degree in September, dependent on continued progress on matters related to resolving the public health crisis.
It will be a gradual and iterative process in which we obviously were going to have to test and learn as we go.
As such, on the cost drivers that go hand-in-hand with live collaboration with colleagues as well as calling on clients in person, which have, of course, been reduced as a result of lockdowns, we'll begin to work their way back into our ways of working as well as our operating results.
We've already shared with you our perspective on the balance of the year, which is based on the assumption that there will continue to be a reasonably steady course of macro recovery.
As is clear, we view our current performance and long-term strategy as significant factors that will continue to enhance shareholder value.
As always, we're committed to sound financial fundamentals, including debt reduction as well as continuing to grow our dividend.
We also remain focused on getting back to our share repurchase program, when appropriate.
We will, of course, keep you apprised on progress as the year develops.

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compname reports q1 earnings per share of $0.23.
q1 adjusted earnings per share $0.45.
q1 earnings per share $0.23.
compname says reported net revenue of $2.03 billion, an increase of 2.8% from a year ago.
interpublic group of companies - positioned to deliver fy 2021 organic growth of 5.0% to 6.0% and adjusted ebita margin of about 15.5%.

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