宏盟集團 (OMC) 2008 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Omnicom second quarter 2008 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 now introduce you to today's conference call host, Executive Vice President and Chief Financial Officer of Omnicom Group, Mr. Randall Weisenburger. Please go ahead.

Thank you and thank you all for taking the time to listen to our second quarter 2008 earnings call. We hope everyone's had a chance to review our earnings release. We've posted to our website both the press release and a presentation covering the information that we'll present 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's included on page one of our investor presentation and to point out that some of the statements made today may constitute forward-looking statements and that these statements are present expectations and actual events or results may differ materially.

We're going to begin the call with some brief remarks from John Wren. Following John's remarks we'll review our financial performance for the quarter in more detail and then both John and I will be happy to take questions at the end.

Good morning and thank you for all for joining our call. Let me start by saying that we were pleased with our second quarter performance. The results were in line with our expectations. As Randy has just mentioned we'll take you -- he'll take you through all the details in just a couple of minutes. There's just a couple of areas I'd like to highlight.

Our revenue growth in the second quarter continued to be strong in the US despite the difficult operating environment for many of our clients. In Europe growth was on plan except for the UK, Spain and Italy, which experienced some slower growth. Revenue growth, though, in the rest of the world was strong, with very solid perform in the emerging markets of Asia, the Middle East, Eastern Europe and Latin America. As for our mix of business revenue grew as we expected. Advertising grew at 9.8%. Organic growth in advertising continued to be strong. Despite the economic challenges in the US we were on plan. We did have some impact in the quarter from last year's third quarter loss of AT&Ts wireline business and Dell, but we'll cycle through those losses a little later in the year.

We were very encouraged by the growth in our marketing services businesses where growth was very strong. As Randy will explain, clients increased their spending in specialty and measurable marketing areas such as CRM, which grew 17% for the quarter. Looking forward we remain cautious about the economy but we believe we are well positioned to adjust to these changing market conditions. Despite the economic headwinds we continue to invest in our people and business units at record levels.

I'd like to just take a second and turn to acquisitions. As many of you know we've been very conservative. I'm still hopeful, though, that we'll start to see price income more in line with our historic expectations. Despite our discipline and our -- and I guess our acquisitions have been growing at about 1% or thereabouts, a little bit more over the past couple of periods -- one positive side of the economic slowdown is a reduction in the financial buyers interested in our industry. Additionally some of our competitors who have aggressively paid, in our opinion, uneconomic prices for some of their acquisitions have weakened their balance sheets and will be limited going forward in their ability to do acquisitions. As a result we're hopeful that pricing will become more sensible and we expect that we'll do more deals going forward.

With that I'll turn this back to Randy and then we'll both be available to answer questions.

Thanks, John. As John noted we're very pleased with the performance of our agencies this quarter. First, from a product perspective our agencies again distinguished themselves at the Cannes Advertising Festival this year, winning each of the three top spots for agency of the year, as well as the number one and number two spots for network of the year. From a financial perspective we feel we had a very strong quarter as the numbers will show, especially given the overall economic backdrop that we're all observing.

Revenue in the second quarter increased $351 million to almost $3.5 billion -- that was an increase of 11.2% -- and revenue for the six months increased $705 million to $6.67 billion, which was an increase of 11.8%. Operating profit for the quarter increased 12% to $517 million, with an operating margin of about 14.9%, which was up almost ten basis points from last year. For the six months operating profit increased 11.6% to $867.6 million and that was a margin of 13%.

Net interest expense for the quarter was $18.7 million. That was down $3.5 million from last year and up about $7.7 million from Q1. First, the year-over-year improvement is primarily the result of not needing to make a supplemental interest payment on our 2032 bonds last July as well as continued improvements in our cash management effort and higher interest income on our foreign cash balances. Those benefits were offset by higher interest expense on our Euro and Yen denominated swaps. The increase from Q1 is primarily the result of increased average debt balances, or I should more likely say lower cash balances as many of our larger cash payments, such as bonuses and earn-out payments are paid in the second quarter, as well as an increase in interest expense on our Euro and Yen swaps.

On the tax front our reported tax rate for the quarter was about 33.6%, bringing the full-year rate to 33.7%, which is pretty consistent with last year. Net income for the quarter increased 11% to $307 million, bringing net income year to date up to $515.6 million and that was an increase of 12.2%. Fully-diluted earnings per share reflected our performance for the quarter as well as the impact of our share repurchase activity, increasing 14.3% to $0.96 per share. For the six months, EPS increased 16.7% to $1.61.

Analyzing our revenue performance, FX in the quarter and for the six months was positive at 5.2%. Looking ahead, if rates stay where they are, FX should continue to be positive in the 4% range for Q3 and the 2.5% to 3% range for Q4. Growth from acquisitions net of divestitures added about $38 million to revenue in the quarter, or 1.2%, and organic growth was very solid, especially given the economic backdrop, coming in at 4.8%, adding approximately $150 million to our revenue. Year to date organic growth was $331 million, or about 5.6%. Should also note our new business performance in the quarter was again very strong, with net wins totaling just over $1.1 billion.

As for our mix of business traditional media advertising accounted for about 43% of revenue and marketing services 57%. As for their respective growth rates, advertising grew 9.8% in the quarter and marketing services increased 12.4%. Breaking down our marketing services revenue CRM continued to be very strong, growing 17.2%, public relations was up 3.7% and specialty communications was up 4.1%. This category, specialty communications, consists primarily of recruitment advertising, healthcare and our directory business. As we mentioned before, the directory business has not been performing well, and recruitment advertising is probably our most economically sensitive business and its been feeling the effects of the economy for a couple of quarters now.

This quarter two things that affected organic growth stand out. First, we felt the year-over-year impact of the AT&T wireline and Dell losses, which occurred in the second half of last year and we haven't yet felt the offsetting affect of some of the larger wins we had in Q4 and Q1. And second, we're beginning to clearly see a shift in the mix of client spending from traditional media advertising to CRM. As a result, organic growth in traditional slowed in the quarter and organic growth in marketing services and more specifically the CRM category accelerated quite significantly. Our geographic mix of business in the quarter was 50.4% US, 49.6% international. Within the US revenue increased $92 million, or 5.5%; acquisitions added about $20 million, or 1.2%; and organic growth was 4.3%, adding about $72 million to our revenue.

International revenue increased $259 million, or 17.7%. FX accounted for $163 million of that growth, or about 11.1%; acquisitions added $18 million; and organic growth came in at 5.3%, adding about $78 million to our growth. Internationally we had strong performances in the emerging markets of Asia, the Middle East and Eastern Europe, as well as in the established markets of Asia, like Australia, New Zealand and Hong Kong. Also we had strong growth in Latin America. We did experience slowing growth in the quarter in the UK, Spain and Italy, as well as Canada.

Cash flow for the first six months was strong and consistent with historical trends. Our primary source of cash, as always, was net income adjusted for basic non-cash charges, primarily stock-based compensation and the related tax benefits and then depreciation and amortization. Those items together totaled $669 million. Our primary uses of cash were dividends, which totaled $97.3 million; capital expenditures about $92.7 million; and acquisitions, including earn-out payments from prior acquisitions, total approximately $210 million. Share repurchases for the first six months totaled $408 million and we also received about $64 million of proceeds from option exercises and stocks sold under our employee stock purchase plans. That resulted in net repurchase activity for the six months of $344 million. As a result of our repurchase activity over the last 12 months our average diluted share count was reduced from last year by about 3% down to 321 million shares.

Current credit picture, we finished the quarter in a strong capital markets position. Year over year our net debt balance decreased about $124 million and our operating leverage ratios, specifically EBIT to net interest and net debt to EBIT continued to improve. From a liquidity perspective we also finished the quarter in a very strong position, with cash and undrawn committed credit facilities totaling almost $3.5 billion, and we had an additional uncommitted credit facilities available totaling $600 million. So again we believe Q2 was a strong quarter overall and we're cautiously optimistic about how we're positioned going into the second half of the year.

Now both John and I will be happy to take questions. Operator?

Thank you. (OPERATOR INSTRUCTIONS) Our first question this morning comes from the line of Alexia Quadrani with Bear,Stearns. Please go ahead.

Thank you. A couple of questions. First, did you see any significant trends as the quarter progressed, like a meaningful deceleration of growth or anything that may suggestion suggest we'd see a bigger fall-off in Q3 or the back half of the year?

No.

Okay. And how would you -- Randy, how would you characterize the operating environment in terms of expense control? Are you being a bit more cautious or taking more drastic steps in light of a potential slow down?

We started taking steps probably the end of last year and certainly in the first quarter. We asked all of our operating companies to manage their costs and staffing levels on a very tight basis, so hopefully we've been ahead of it. We'll obviously continue to adjust businesses and cost structures as the environment or if the environment changes.

And the directory business has been a bit of a drag for a while. Any reason to keep it or any thoughts of divesting it?

Yes, we're in the process of trying to divest it. I was hoping to get that deal done in the second quarter. It didn't happen. I'm hopeful that it's going to happen in the third quarter.

But at this point a little very small business, Alexia.

Okay. And, John, just one last thing. To clarify you'd mentioned that AT&T and the Dell that you think you're probably going to cycle through that loss in about the third quarter of this year. Is that right?

Yes, we lost it in the end of the third quarter last year. There's about an equal impact in the third quarter as to -- as what we face in the second and then it really tails down in the fourth quarter and then it's gone.

This quarter was also a little bit of an anomaly in that some of the larger wins we had in the second -- in the fourth quarter in Q1 didn't really -- we didn't really start seeing it in the revenues. There is a lag time with some of the losses and some of the wins.

Okay. I'll let someone else jump on. Thank you.

Thank you. And our next question then comes from the line of Craig Huber with Lehman Brothers. Please go ahead.

Yes, good morning. Just as you guys look out to the second half is there any areas or large customers or sectors that you see a meaningful pull back on in committed spending?

A meaningful cut back that they've communicated to us, no. Obviously the automotive sector is something that has been very challenged in the United States and the environment changes every day, I think, so we remain cautious.

Financial services is a sector that is probably mixed by client.

Right. So there are challenges out there for sure, but we've been facing these all year, I think, in those two sectors, so I haven't seen any significant cut backs with respect to us. We're not a proxy for broadcast media so there could be a shift as we've seen in the quarter between very measurable marketing services, which are the largest part of our Company versus what's spent in the -- in broadcast or some of the other media areas. So we have seen shifts. We haven't seen reductions to our revenue base. I don't know if I'm being clear.

Well, we've -- what we've pointed out a couple times as we see a shift or if there is a shift in spending from traditional to say CRM, generally we capture a bit more of the clients overall spend. Obviously there's work -- labor to go with it, but we can capture a bit higher percentage of their overall spend, which certainly mitigates the changes. We also -- it's worth pointing out, we have a much higher market share relative to our competitors in the marketing services field, so those shifts from a market share standpoint kind of moves to one of our strengths, as well.

Okay. Then just a nitpick question. On share buybacks what was the average price you spent on stock repurchase in the second quarter and how many shares did you buy, please?

That's going to take us a minute to look up. Why don't we go to another question and --

We'll come back to it.

-- as we look it up and I get the number I'll just say it.

If I could ask one other thing. You mentioned Canada, Spain, UK and Italy, was it all economic driven, the slower growth or negative growth in those four countries?

Spain and Italy have been more or less in an economic recession for the last couple of quarters. The UK, we saw flat performance in the second quarter, which was a slight reduction in performance. Canada, we're torn. We think it has -- there's an impact of the Dell loss in Canada.

I think you also had some -- with the currency I think there has been historically some near shoring to Canada with currency and I think that has basically gone away at this point.

That was specifically in digital and -- primarily in digital and some other areas so that's equalized.

So basically we don't really think it's the economy. At least with the data we have it doesn't appear to be economy driven in Canada.

Thank you.

Thank you.

Thanks. And our next question then comes from the line of Dan Salmon with BMO Capital Markets. Please go ahead.

Good morning, guys. Two quick questions, just maybe digging a little bit beyond some of your segments reporting and into your marketing services and CRM segment. Are there any particular marketing techniques that you're seeing your customers and your clients rather pick up a little bit more than others, particularly in that CRM segment? And then secondly, on the acquisition activity it sounds like you're still mostly staying on the sidelines right now. Beyond the traditional buys in digital and emerging markets are there any specific areas that you're looking at? I know in the past you've talked about analytics and targeting technology, any updates on what type of candidates you're looking at there would be great. Thank you.

Last question first, I think you have primarily our targets outlined pretty well for us. We think that -- we've been very disappointed about pricing for a long time. The financial buyers have really gone away and our competitors have really exhausted their balance sheets when you look past the fiction of net debt and you look at what the gross debt on balance sheets is. We' re in a great position going forward as opportunities come more in line to actually complete some transactions. We don't have anything teed up as you'll see in the third quarter per se, but we have a number of targets which we'll be able to pursue, I think, more aggressively than we have had in the past.

In terms of CRM, it's a broad array of techniques and products. It depends on the client base. It's different for financial services than it is for automotive than it is for consumer goods. We're very, very deep in the area and we've been enjoying it wherever there's -- wherever there's a clear measurement that a dollar spent brings back $2 on clients who've -- are very, very willing to continue or even increase their spending in those areas.

Basically anything that is driving, I'll say, next-day sales or near-term sales is probably a more accurate term, driving traffic to stores, et cetera.

Going back to the question about stock reimburse in the second quarter we bought 1.53 million, or just over that one million shares, with an average price of about $48 a share. Second quarter repurchase activity is generally our lowest quarter. That's our highest cash outflows from -- I mentioned in my comments -- bonus payments and earn--out payments, so we tend to say use our free cash to buy in shares. Given those other payments the second quarter's generally a lower quarter. I suspect we'll return to more normal buy back activity in Q3 and Q4. Dan, did you have other questions?

No, that's great. Thank you.

Thank you.

Thank you. And we do have a question then from the line of Troy Mastin with William Blair & Company. Please go ahead.

Hi. My first question's about margins. I believe that the ongoing growth driven by currencies has a negative mix shift affect on your margins. If I'm correct any idea, any approximation on how much of a drag that is on margins so we can get a context on an apples-to-apples basis on what your margin improvement looks like?

It does have a negative drag; yes. I haven't calculated it. My guess is its in the ten to 30 basis points range with CapEx at these levels.

Okay, great. Second is your net tranche converts come up at the end of this month, if they end up getting put to you how should we think about the impact that you could face on your interest expense or your share repurchase activity for the remainder of the year?

I don't think it would impact our share repurchase activity. It would impact our interest expense or reported interest expense.

You're really a week away, Troy, from knowing that to put it in your model rather than us speculating about it today.

We've been --

I'm not trying to short shift your answer.

We've been reasonably good at --our objective will be to keep the bonds outstanding, so I suspect -- based upon past practice I think we've had a pretty good track record at making the appropriate supplemental interest payments if they're necessary to keep the bonds outstanding. I would suspect we'll do that again at this time.

Okay, good. And then looking at the environment and your client losses and just trying to understand a little bit more how you view your organic view in the quarter, has the environment changed that substantially or should we consider the organic growth this quarter, which is a deceleration from last quarter, as being primarily driven by some of the client losses that you had and the lag in tick-up of the new activity that you've won earlier this year and late last year?

There was an impact to those things for sure, which muted it a bit, but there is an economic headwind out there and we're not immune from it. I think what we're seeing in the new business areas we're winning, which is great. We've seen this in past recessions where it takes a little longer to ramp up into start to spending associated with those new businesses -- new business wins. This has happened four times that I can remember pretty clearly in my career. It seems to be true this time around, as well. When that changes, how that changes, nobody gets a memo. It's just a lagging effect and at some point it will resume normal activity, it's just we're seeing that delay. So a win that you get today, which you'd expect to start to see revenue in more normal times three months from now, you might not see that revenue coming in for five or six months and that's pretty classic.

Four things to highlight in organic growth. First of all we've pointed this out for a few years now. There is a Q1, Q3, versus Q2, Q4 organic difference. We've tended to have slower organic growth in Q2 and Q4, which I think is driven largely by changes in revenue recognition policy -- I shouldn't say policy, revenue recognition and client contracting as clients shift. Second is the timing of the Dell, AT&T losses and not seeing some of the offsetting larger wins coming through. And finally I think we're seeing a -- we saw a positive benefit in the quarter of a mix shift towards CRM. So I think those four things really drove the organic growth this quarter, and some positive and some negative. But basically I think at 4.8% I think organic growth overall was in line with what we would have expected going into the quarter. And the difference between us being pleased versus great is in absolute terms $30 million, so we can't get to that granular when we're talking about such a small number.

In terms of those that are adversely affecting organic growth which is the most substantial?

I think they're probably about equal. I think the Q1, Q2 phenomena is about a point and I would think the Dell, AT&T is probably about a point.

Point, right.

Okay, great. And then new business wins in the quarter?

$1.1billion.

Yes, just over $1.1 billion.

Great. I'll let someone else, thanks a lot.

Thank you. And we do have a question from the line of Jason Helfstein with Oppenheimer. Please go ahead.

Hi, thanks, three questions. The first, is there any kind of lag between when money is, let's say, pulled out of advertising and then moved into marketing services is there a lag where they're strategizing where the money's going to go? The second question, does slower advertising have an impact on your working capital, so working capital is down year over year, is that because of slower advertising or because of timing of the quarter close? And last question, the leverage ratio is down year over year, would you guys expect to essentially raise leverage to buy back some more stock or should we assume that you guys will be somewhat cautious with increasing leverage as a result of the economic backdrop? Thanks.

Third thing first, we'll continue to be cautious. I think that's our -- I view it as sensible as opposed to cautious, but as Randy has said I think many, many times, for the activities of dividends, capital, most acquisitions and in dividend repurchases they're the result of the free cash flow that we generate, so we're not stepping away from that at this point. That'll all be done within our own ability to manage that. Your first question, there is nothing scientific or measurable that I can tell you. That really depends client by client. It aggregates into where I don't see any -- I can't give you any generalizations as to somebody walking away from a broadcast type of commitment and then reinvesting its money in CRM. That has more to do with bottom-up plans rather than industry type of trends. And your second question --

It was a working capital question. Working capital came in in-line. I don't have enough insight or details to say whether or not that was because of any -- if there was any change because of our mix of business. I think working capital, for us cash flow in the quarter was pretty consistent based on the past. so I didn't see anything there.

Okay, thank you.

Thanks. And our next question then comes from the line of Ben Schachter with UBS Securities. Please go ahead.

I was wondering if we could drill down a little bit deeper into the UK and understand what are the key verticals or what the key things are going on affecting growth there? And also to clarify one of the earlier questions, in terms of what you've seen throughout the quarter, my understanding of how you answered was that basically June was the same as the early months and you didn't see any particular weakness in June. Just want to do clarify that. Thanks.

That's true. The performance that we saw throughout the quarter was very consistent with plan and it wasn't any noticeable deceleration in June at all in terms of the UK.

I don't think there was anything that really stood out as far as --

Let me just see if I --

Why don't we go on to another question and we'll take a look at some numbers to come back to that one, but I don't think there was anything that stood out.

All right. Just on the US organic, when you start to think about when that can recover -- not getting ahead of yourselves, but what do you think are going to be the leading indicators to how that can actually begin to reaccelerate again?

When you go through some of the things that I said affected organic growth you have to look at those with respect to domestic and international, as well, so while I mentioned Dell and AT&T are about a point those are not predominantly domestic losses. So that kind of doubles up because you've effectively got half of our revenue in the United States and those two items that are predominantly US were one point in total, it's really two points to the US. So I'm not sure that US really slowed quite as dramatically from an economic perspective as the numbers really appear. I think that offset with CRM is also probably a little bit stronger here in the US.

Okay. Go ahead.

Oddly enough in the UK it's probably in the aggregate about 10% of our business. The only consistent companies that was really -- that had a deceleration was our recruitment advertising business, which we fully expect and anticipate and has been going on. It muted growth. We went from being slightly positive in the first quarter to flat in the second quarter and there's -- just from a cursory look there's nothing that speaks to any trend that I can tell you. They've suffered from financial services declines, as well, there plus a little nervousness in their overall economic situation, so I'm sorry I don't have anything more specific to tell you.

And the last question, in terms of digital and the acquisitions you might be interested in there, what types of digital companies are you most interested in? Platform, specific verticals, what are you thinking there?

We're always looking at a variety of things. One, we're looking to fill, I'll say,, holes or vacancies in our current capabilities both from a geography standpoint. Each of our existing brands is looking to fill out their capabilities to better serve their client needs. We're always looking for great quality, additional platforms. Right now we have a very extensive digital capability, both from a stand-alone basis, as well as we've focused our -- or our agencies have focused on building the digital capabilities within their traditional businesses. As we've always said we think digital is really more of a medium than a discipline, although that -- the capabilities need to be built to make sure we're able to serve our clients in that medium.

Okay. Thanks.

Sure.

Thank you. Our next question then comes from the line of Catrina Fallon with Citi. Please go ahead.

Yes, good morning.

Good morning, Catrina.

Good morning. So when we hear discussions about Proctor and Gamble keeping a keen eye on spending, Nissan perhaps trimming $100 million from their ad spend, maybe even Anheuser Bush having to reign in spend after being acquired, how is this pull back going to manifest itself itself over the next year or so? So for instance, if a $100 million campaign becomes $90 billion where will we see that pull back and is this primarily in media buying or what other mediums might we see that weakness?

If you see it, for instance, in media buying you won't see it through our numbers because most of that money is going out to third parties.

Okay.

It's not revenue that we capture, we're agent for, so we do the campaigns, the amount of money that gets spent in media. So if there's a move from traditional type of advertising media platforms to other techniques and ways to reach consumers, the shift in one oft times is very positive to us, not a negative. Even though it may affect the media sector say in the US it doesn't have the same impact to our numbers. In many cases we can generate more revenue through the marketing services that some of that money's diverted to.

Great, and then one other question. You've said that you do receive a larger share of the pie for digital campaign. Can you give us some color on the contribution in a campaign like that for creative, whether it's website development, display buying, ad word buying, and then within that then what are the areas of strength and how do the margins compare to this type of work versus traditional advertising?

Margins are pretty comparable. As far as the work goes there's significantly more work that we do. If we're doing -- say, we're building websites or web presence, web marketing ideas, all of that wave is really ours, so if a client were to spend $10 million in traditional media much of that money is going to the media. Another hunk of money is going to third parties that are actually, I'll say, producing the commercial and then we're getting paid for the design, architecture, creative work. When you throw that on the web we're getting paid for the design, architecture, creative work, plus the execution work and very little money is really going to third parties. If we're doing online, say, media buying and planning, key word search, banner ads, rich media, whatever, again the commission percentage or the fee percentage to our agencies is generally much higher than TV. It's obviously a lot more work to spend $20 million on online than it is to spend $20 million in a TV campaign, so the commissions are generally multiples of each other. Behind it with the [ND] margin, the margins are about the same.

And are you seeing a transition -- are clients talking about -- certainly there's the move to the web, but then between TV and magazines and radio are you seeing some specific areas of strength and weakness?

I haven't really heard of anything standing out in a dramatic way. Different clients have different plans and different thing they're trying to execute.

They're also -- if you take a look at the automotive sector, which I think clearly is cut back in terms of its media spending, I think that has had a real impact on all those categories. Certainly broadcast TV. Certainly print, because people are trying -- and the same area -- same spending reduction has been an increase in terms of online type of investments and ways to reach consumers (inaudible) the showroom. So certain industry sectors I think traditionally have been heavier in one media or another and so where you have difficulties in a sector you'll see a greater impact.

Great. Thank you.

Thank you. I think we have time for one more question.

Okay, great.

One more questioner.

Thanks. And that question will come from the line of Matt Chesler with Deutsche Bank. Please go ahead.

Good morning. A follow up on the accelerating growth that you're seeing in CRM. Beyond the mix shift between traditional and marketing services that you spoke about, was there anything unusual that took place in CRM in the quarter? Is there -- are your acquisitions concentrated at all in this area? What was organic growth in the second quarter in CRM look like relative to organic growth in the first quarter in CRM?

It accelerated quite a bit in the second quarter and I don't think the acquisitions are concentrated in the CRM space. And frankly FX is probably a little bit lower in CRM than it is in traditional media advertising, as well.

The organic growth accelerated 1Q to 2Q in CRM?

Yes.

In your prepared remarks you highlighted Asia as being strong but didn't specifically call out China?

China was very strong.

China was very strong?

Yes.

Can you provide some commentary on the progress of Beijing-related Olympic spending relative to your expectations?

I can't. Maybe John can.

I can't with any accuracy. No, I didn't bother to try to dissect it. I apologize.

Okay. And finally the pace of new business pitches earlier in the year seemed to be running a little bit slower. Have you noticed any changes industry wide or with regard to the pitches that you're involved in and the pace? Are they still running slower than usual this year and if so are you expecting or waiting for a pick up?

Yes, I'm still weighting for a pick up. It has been a bit slower than in the recent past. Again, this follows a pattern of just when you get economic slow down there tend to be fewer pitches when you're in the middle of that. At least that's historically what I've experienced and we 'e in that same area right now, I think. There's activity but not blockbuster activity.

Finally, can you make any commentary regarding the level of new pitches and you're involvement in that relative to your investment and your margins?

I'm not quite sure that I understood the question,.

Is there any near-term relationship between the amount of new pitch activity that you're involved in and the margins that you're able to deliver quarter by quarter?

There's probab -- pitch cost, there's definitely a cost associated with it, so there may be something. There's nothing that I can really pull out of the numbers and say that it had this affect or that effect. As a percentage of our overall cost base I don't think those numbers probably really stand out one way or the other. Keep in mind when we're talking about pitch activity I think we're largely addressing the bigger pitches, sort of the three Rs in a cloud of dust type work happens every day around the world with all our agencies. That activity certainly continues and that base of new business, which is very important to the consistency of Omnicom, is out there and I think remained in the quarter just as robust as it has been. It's the -- sort of the larger one-off pitches that are harder to time. They're not -- there's probably only maybe in a big year 15 or 20 of those and they don't happen on necessarily a steady quarter-to-quarter basis.

Thank you.

Thank you and I'll take thank everyone again for taking the time to listen to our call. We'll talk to you soon.

Great, thank you very much. And ladies and gentlemen, that concludes our conference for today. Thanks for your participation and for using AT&Ts executive teleconference. You may now disconnect.