宏盟集團 (OMC) 2011 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Omnicom third-quarter 2011 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 would like to now introduce you to today's conference call host, Executive Vice President, Chief Financial Officer of Omnicom Group, Mr. Randall Weisenburger. Please go ahead.

Good morning. Thank you for taking the time to listen to our third-quarter 2011 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 be presenting this morning. This call is also being simulcast and will be archived on our website.

Before we start, I have been asked to remind everyone to read the forward-looking statements and other information that's included on Page 1 of 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 actual events or results may differ materially. I would also like to remind you that during the course of the call, we will discuss some non-GAAP measures in talking about Omnicom's performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in the presentation materials.

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 and then both John and I will be happy to take questions.

Thank you, Randy, and good morning, everyone. This morning, I would like to give you my perspective on our third quarter performance and share with you our thoughts on the progress against our key initiatives. Let me start with our performance for the quarter. The third quarter reflected very strong operating performance, including significant organic growth and continued margin improvement. Organic growth was up 7.2% over the same period of 2010. Growth was particularly strong in our advertising and CRM businesses, and geographically, all of our major markets experienced solid organic growth.

This performance is particularly notable given the worsening of economic and capital market conditions since our last earnings call. We're watching these events carefully to anticipate the impact they may have on our Business. Given this backdrop, our agency management teams are balancing effective growth strategies with a continued eye towards controlling their expense structures. While we remain cautious about the economy, we are encouraged by our discussions with our clients. Marketers remain focused on investing in their brands and differentiating their products and services and they are seeking agency partners that can provide innovative ideas that help them navigate through an increasingly complex marketing environment. We believe that our agencies have the best talent in the business that help us to compete more effectively.

During the quarter, we also continued to execute on several of our strategic initiatives. We continue to make solid progress on our portfolio review and other initiatives to improve our margin performance. Our margins for the quarter reflected continued improvement and while there's still work to be done, we remain on course to achieving our goal of returning to 2007 margins by 2012. Randy will discuss our margin performance in more detail later on in the call.

We also continue to execute against our strategic priority of building a deeper presence in rapidly growing markets and disciplines while still growing our business in the developing markets. During the quarter, we closed transactions in India, Vietnam, and New Zealand and expanded our offerings in healthcare through the acquisition of Synergy in the UK. Today over 22% of our revenue is from Asia and Latin America and other rapidly developing markets, up from 18.5% this time last year. While these acquisitions will further solidify our presence in the developing markets, our agencies in Asia were once again recognized as leaders for creating ground breaking award winning work that delivers value for our clients.

In September, Omnicom Group agencies captured the top 2 Network of the Year rankings at the Spike Asia Advertising Festival in Singapore. For the second consecutive year, DDB was named Network of the Year and BBDO took second. In addition, the DDB group Singapore and Meuter Communications placed second and third for Agency of the Year. Omnicom agencies also won 4 Grand Prixs.

Turning to some of our digital initiatives, our Distance Learning Digital Education program, which we discussed at the beginning of the year, has begun to be rolled out in the fourth quarter. We have always recognized that each of our agencies must develop digital skill sets in their respective disciplines and they are meeting these demands extremely well. The program will further enhance the development of our talent.

Overall, we are very pleased with both the financial performance of our Business and the progress we've made on our strategic initiatives. Now, let me touch on a few more specific points about our performance during the quarter. In the US, we saw organic growth of 5.8% versus the third quarter of last year, driven by our brand advertising and CRM businesses. Growth was very strong in the UK, and almost all of our agencies had solid organic growth. In continental Europe, our results were quite positive in spite of the region's sovereign debt problems. Germany and France experienced solid growth, while the Netherlands was negatively impacted by a client loss in that country, but that client was retained by another Omnicom agency in the US.

We also saw strong performance in eastern Europe, including Russia, Poland, and the Czech Republic. Southern Europe, which at this point is small for us, was positive with the exception of Greece. Asia, Latin America, and the Middle East continue to perform very well, all experiencing double-digit growth during the quarter, even though Asia continued to be negatively impacted by our performance in Japan. As these developing markets, together with our new investments in these markets continue to grow, our businesses continue to diversify globally. Our US and non-US revenues were almost evenly split in the third quarter.

Our growth is also coming across a spectrum of industries we serve. Revenues are up in every significant industry category, with auto, technology, retail, travel and entertainment, all having performed particularly well. We continue to believe the highly diversified nature of our business, by geography, by discipline, and by industry help us to take advantage of growth opportunities and our experience demonstrates that we've been able to maintain greater stability even in more volatile economic environments.

In closing, we're very pleased with the operating performance of our Business and the progress we're making towards our strategic priorities. Looking forward, our performance will clearly be affected by a number of external factors. The ability of European leaders to deal with the region's sovereign debt problems, Washington's ability to foster economic growth, and the role that rapidly growing economies in Asia and other parts of the world will play, not only economically, but politically. Even with this backdrop, we continue to focus on the things that we can control, developing and recruiting the best talent to our agencies, and delivering innovative ideas for our clients.

Now, I'll turn the call over to Randy, who will take you through our financial performance, and then we'll both be available for questions.

Thank you, John. Once again, it was an excellent quarter for our Company. Our agencies performed very well and were recognized by their clients with more than $1.4 billion in net new business wins this quarter. In spite of continued uncertainties in the domestic and global economies, we continued to record strong organic revenue growth in most of our major markets, and in all of our targeted growth markets. Again this quarter, we had positive organic growth across each of the industries that we serve. And our agencies also continued to progress in leveraging our people and resources more effectively and managing our costs. We once again achieved substantial margin improvements this quarter and we continue to track well towards the margin targets that we set for ourselves for 2012.

Now, turning to the details of our financial performance, combining our very strong organic growth performance with the positive FX impact, our year-over-year revenue grew 12.9%, bringing revenue for the quarter up to $3.38 billion. With good cost control, our EBITA increased 19.6% to $397 million. Our resulting EBITA margin was 11.7%, which was about a 60 basis point improvement from last year. And our operating income, or EBIT, increased 18.9% to $373 million.

Net interest expense for the quarter was $31.9 million, up $2.1 million from Q3 of last year, and up $4.3 million from the second quarter. The increase versus Q2 was primarily the result of reduced interest income earned on our cash balances, and our settlement during the quarter of various fixed-to-floating interest rate swaps we had in place with respect to our 2016 notes. While that transaction resulted in a $33 million cash gain, that gain will be amortized over the remaining 5-year life of the bonds as a reduction of interest expense.

On the tax front, our reported tax rate for the quarter was 34.3%, which continues to track to our expected operating rate for 2011. As a result, net income for the quarter increased 16.7% to $203.7 million, and when combined with a year-over-year share reduction of 7.3%, diluted earnings per share in the quarter increased to $0.72 per share, or 26.3%.

On Page 3, we take a closer look at our revenue performance. First, with regard to FX, while US dollar exchange rates were fairly volatile during the quarter, overall on a year-over-year basis, the dollar was weaker versus most of the major currencies that we operate in. The net result was a positive FX impact on revenue for the quarter of $117.6 million, or 3.9%. Looking ahead, if FX rates stay where they are currently, in Q4, they would continue to have a positive impact, although less than 1%. And they would then turn negative in Q1, but again, by less than 1%.

Revenue growth from acquisitions net of dispositions increased revenue by about $54 million in the quarter, or about 1.8%. The 2 larger acquisitions we completed in the first quarter, Clemenger and Communispace, were the most significant drivers of our acquisition growth, offset by several dispositions, which were primarily in the United States. We continue to work on a couple of additional dispositions that we anticipate completing by year end or early next year. And I'm happy to say the pipeline of potential acquisitions at this point is very strong. This quarter, we completed 4 excellent acquisitions, all in international markets, and we anticipate completing several more before year end.

With regard to organic growth, we had another strong quarter, up 7.2%, or $215 million. As I mentioned earlier, we continue to see year-over-year growth across every industry sector that we serve. There appear to be 3 primary drivers of our organic growth. First, for the past year or so, our agencies have performed very well on the new business front. And as I mentioned this quarter, net new business wins were again very strong at $1.4 billion. Second, many of our clients have continued to restore their levels of marketing spending after reducing them in late 2008 and in 2009. And finally, our agencies are continuing to expand the scope of the services they are providing their clients to support the many new technologies that are being developed and used by marketers today.

Turning to our mix of business, brand advertising accounted for 45% of our revenue and marketing services, 55%. As for their respective growth rates, brand advertising's organic growth was up a strong 9.1%, and marketing services was up 5.7%. Within the marketing services category, CRM had 8.6% organic growth. Within this sector, branding, field marketing, events, and sales promotion all had outstanding performances. The public relations sector picked up in the quarter with organic growth increasing to 4.2% and specialty communications decreased by 4.8%. This was primarily the result of the client in our recruitment marketing business and lower client spending with some of our specialty healthcare agencies. Although overall spending by pharmaceutical and healthcare clients across our networks and disciplines increased about 2.6% in the quarter.

On Slide 5, our geographic mix of business in the quarter was split almost 50/50 between the US and international markets. In the United States, revenue increased $86 million, or 5.3%. Acquisitions net of dispositions reduced revenue by $7 million, and organic growth continued to be strong at 5.8%, even though we are cycling on strong year-over-year comparables. International revenue increased $300 million, or about 21.8%. FX increased revenue by $118 million. Acquisitions net of dispositions increased revenue by $61 million, or 4.4%, and organic growth, while the results were mixed by country, overall improved to 8.9% in the quarter, or $122 million. Specifically, in Asia, we had strong performances in China, Australia, South Korea, Singapore, and Hong Kong. We also continued to have very good results in Latin America and the Middle East. And in Europe, results continue to be mixed. The UK and Russia performed very well. France and Germany were up modestly. We also had solid performances in Belgium, Poland, Sweden, and Turkey.

Slide 6 shows our mix of business by industry. There were no significant changes in our mix of business in the quarter. And as I previously mentioned again this quarter, we experienced positive growth across each of the industry segments that we serve. The strongest sectors for us in the quarter were autos, technology, travel and entertainment, and financial services, with all experiencing very solid year-over-year growth.

Turning to Slide 7, our cash performance year-to-date was in line with our expectations. We generated approximately $751 million of free cash flow after CapEx and excluding changes in working capital. Our primary uses of cash year-to-date have been dividends to our common shareholders of $199 million, dividends paid to minority interest shareholders of $70 million, acquisitions including earnout payments net of the proceeds we received from the sale of investments was $327 million, and share repurchases net of the proceeds received from stock issuances under our employee share plans totaled $586 million. Combined, this resulted in a net use of cash year-to-date of approximately $430 million.

Slide 8 shows our current capital structure. Our net debt position at the end of the quarter was approximately $2.3 billion, an increase of about $780 million over the last 12 months. That increase was driven primarily by our return of capital to shareholders through both dividends and share repurchases, which for the last 12 months totaled about $1.7 billion. Gross or total debt at the end of the quarter was $3.2 billion, which was effectively unchanged from last year and last quarter. Our leverage ratio, or total debt to EBITDA ratio, stands at 1.7 times, while our net debt to EBITDA ratio is approximately 1.2 times. And our interest coverage ratio remained very strong at 12 times.

I should also mention that last week, we amended our bank credit facility, extending the term of the facility to October of 2016. We also increased the size of the facility from $2 billion to $2.5 billion and at the same time, we were able to reduce the annual fees that we pay, as well as the interest rates that we would pay if we were to draw down the facility.

And finally, on Slide 9, our return on invested capital and return on equity for the last 12 months increased to 15.7% and 24.5% respectively. There are several other supplemental slides included in the presentation materials for your review. But at this point, I'm going ask the operator to open the call for questions.

(Operator Instructions) Tim Nollen, Macquarie.

First of all, in emerging markets, the growth continues to accelerate. We've seen some good numbers from consumer companies reporting in China. I just wonder if you could talk about if the fundamental growth just continues to accelerate or are you actually getting some nice market share gains in countries like China? Secondly, could you please talk about your margin improvement? Is it possible to break out how much of the 60 points increase was due to some of the specific efficiency moves you've made recently and how much is really due to fundamental growth? Thanks.

Good morning.

Good morning.

In emerging markets, I think we're benefiting at the moment by both. We are expanding in markets. We're growing our presence, and as a result, we're regaining both local clients, but more importantly, we're gaining additional assignments with clients that we have existing relationships in other parts of the world. That against the backdrop of it's an expanding market.

With respect to your second question on margin improvement, I'll defer to Randy. This is part of an overall effort on the part of the Company.

First of all, the answer is no, there's no way for us to break out how much of the improvement is a result of cost savings initiatives as opposed to efficiencies, which is really based on increased utilization at each of the individual agencies. We're probably somewhat indifferent to where the results are coming from. We're certainly looking for efficiencies on a continuous basis. We're also looking to improve utilization rates at every one of our agencies. So we'll probably leave it at that.

All right, thanks.

Alexia Quadrani, JPMorgan.

First, did you see any changes as the quarter progressed, any notable changes in September versus the previous 2 months? And is there anything you're seeing when you look into fourth quarter that would imply a change to what you saw in the third quarter?

We didn't see any great variance between any of the months in the quarter, in response to your first question. Right now, based upon the information that we have, business is still holding up. People are still confident in marketing. We listen to the news, though, every day, as everyone else does. And so we remain optimistic, but cautious.

We are -- it is worth noting, we are cycling on a different comp in the fourth quarter of last year, if people remember last year in the fourth quarter, we had a significant step-up in organic growth versus the prior couple quarters. So, we have to take that into consideration, thinking about the year-over-year growth in the fourth quarter.

And when you talk to your clients, usually in sort of November-December, I would assume you get a little bit of sense how budgets are starting to get formed for the following year, 2012. Do you think that will still be the case, or do you think the visibility will be pushed out a bit and advertisers may want to see how the year ends up, the holiday season before they really get a better sense of what they are spending next year?

It's too early to tell. I mean, at this point, we are progressing, talking to people, and -- that's a rather fluid conversation once you get into those months. A lot has to do with the macroeconomic backdrop in which you're having the conversations. So we're yet to have them.

Okay, and then just last question, on the use of cash, I know Randy, you mentioned some acquisitions you hope to complete by the end of the year. Can you just talk a bit about how you see the buyback? You guys are in obviously such a strong position, the buyback was less aggressive in the third quarter as it had been versus the first half. I guess how do you prioritize that going forward?

Well, we'll take it month by month. We'll see how the acquisitions go. But, last year going I guess probably in the fourth quarter going into fourth quarter, we talked about utilizing the deleveraging that we had done in 2009. We said that we were going to spend about $1 billion of additional free cash flow, between the fourth quarter of last year and 2011. We're basically there. At this point in time, we've spent about $1 billion after our free cash flow between the fourth quarter of '10 and the first 3 quarters of '11. So, now we'll -- we have a constant conversation with our Board, evaluate our acquisition opportunities, et cetera, and we'll go from here.

But I guess generally, you would feel the buyback would sort of longer-term still be a priority in terms of cash, even if you can't quantify the amount right now though, is that fair?

Absolutely. And you can tell from our track record over the past 12 months, between dividends and share repurchases, we've returned to shareholders about $1.7 billion.

Okay, thanks very much.

Matt Chesler, Deutsche Bank.

So after the good progress you made on the margins in this particular quarter, can you give us a sense for your expectations for how that balances out between, what we might see for the balance of 2011 and 2012, and maybe more importantly, what's your level of confidence that you can get to your 2007 target? I think it's roughly 13.4% in an environment of where organic revenue growth is hard to come by?

At this point, we won't -- I'm not comfortable making a prediction for the fourth quarter. But at this point, for 2012, for the full year, we are still pretty confident that we're going to hit our objectives of getting back to that 2007 level based upon what we know today and the actions that we've taken up into today.

I think that's right. I think we're tracking, on plan and I think we're doing -- I think our agency has done an extremely good job in 2011. In addition to the results that they have achieved in 2011, they have laid the groundwork for making further progress in 2012. So I don't -- I haven't seen anything that would change our confidence levels about achieving those objectives for the full year of 2012.

Are we at a point now where the agencies are implementing actions that were already planned and taken and we'll start to see the benefits accrue in coming quarters, or are there still initiatives and programs yet to be implemented that could then have future impact once they start to accrue?

The answer is yes. The good news about Omnicom is, we're a large number of small numbers. There are very large number of initiatives that are going on all the time. Some are in later stages and some are in very new stages. And with the number of innovative people that we have throughout our agencies, new ideas are coming up continuously to keep the progress going forward. So yes to both.

Okay. Are you willing to share a little detail within the operating expense line, maybe in terms of some of the numbers we tend to focus on from quarter to quarter in terms of severance incentives, any incremental severance deltas between the third quarter of last year that are worth calling out, or in severance comp as well?

I don't know that it's worth calling out. Severance was up fairly significantly this quarter versus last year this quarter. We tend not to call those things out too often, but, I think right now overall we're tracking very well.

All right, thank you.

William Bird, Lazard.

Yes, I was just wondering if you could talk a little bit about international growth. The quarter was really strong. Was just wondering if there was anything unusual that contributed to that and just curious as to what you're seeing for Q4 for international.

There wasn't anything terribly unusual. It's part of our an overall effort. As Randy said, I think on the call, the growth is really the result of new business, it's the result of growth of our existing clients, and often times it's mitigating against the loss of clients as well. So we're seeing pretty strong growth across the board, except for in a couple of markets that haven't fully recovered like Japan.

Having said that, the fourth quarter, we are on track as we sit here today. We do this every third quarter call. I'll just remind you that there's always a bit of revenue in the fourth quarter that we can't predict because of the way people spend and finish up their budgets, and that doesn't really become obvious to us until sometime in mid-November. But we don't see anything negative today other than macro headlines and that hasn't yet gotten reflected in client spending habits.

Part of what we're also seeing in the international markets. We pointed this out really at the end of 2010 of what we expected was going to happen in 2011. The emerging markets have continued to be very strong growers. They had very strong growth last year as well, but some of the other markets that were fairly significantly negative last year have come back to neutral to I'll say marginally positive. That's allowing the faster growing emerging markets to drive the overall international number that much more, their positive impact being felt more regularly. I think very few markets in Europe were negative this quarter. That certainly wasn't the case in 2010.

And could you also just talk about Euro markets. Have you really seen much change in the tone of business from Q3 to Q4?

Nothing measurable at the moment. Obviously given the headline risk of what's going on in those marketplaces, we watch it every day and it's subject to change every day, but based on what we know right now, we're simply cautious about it.

And Randy talked a bit about severance. I think he characterized it as being up significantly in Q3. Was just kind of wondering if you could maybe put a little more color around that, is it that you're going into motion on cost cuts because you're seeing anything, or is it just that you're managing tighter, given some of the risks in the world today?

I think we've been managing, trying to manage very tightly all year. As I pointed out, there's a number of initiatives that have been going on in various stages of completion, in various markets around the world. We're comparing 2 numbers that are 12 months apart. So we're comparing, I say severance was up significantly. That's Q3 of this year versus Q4 of last year. That's really a matter of what was happening in each of those quarters. We're, again, we're constantly taking different actions at different points of time, and the part of the reason we don't generally break them out is because it's just -- many times, it's just timing.

Great, thank you.

Michael Nathanson, Nomura.

Let me follow up first on the project spending in the fourth quarter. I think John, you mentioned by mid-November you have a handle on kind of what comes through. Can you remind us how big you guys think that discretionary element could be for the fourth quarter?

Normally it's around -- historically basis, it's $200 million to $300 million.

Okay, and then if you look at the UK results specifically, the growth there is pretty exceptional. I mean outside of Google, nothing grows that fast in UK media. So it's pretty impressive. And the question would be Randy mentioned there was 3 different drivers for your business. New business wins, budgets restored, and services expanded. So I wondered if you spent any time looking at UK and trying to figure out what's driving those results, if you looked at them in those 3 different descriptions that Randy just put out there.

All 3.

All 3.

Certainly in the UK market that's the case.

Yes, which is fair. There's couple of new business wins in there as well.

Okay, and you guys probably don't spend time looking at it, but do you think the market's growing anywhere near that fast, or this is a good share gain story for you guys?

No, I think that's our performance in the market. I don't think it's reflective necessarily of UK GDP.

And then last would be specialty, over the years, I know recruitment has been some of you guys have called out in the past. How big is recruitment now within the specialty mix and what's the status of that? Is that a potential disposal? And then healthcare, give us some color on the healthcare line, especially what's going on there in detail?

There, I think we've seen -- and healthcare's the largest sector in specialty. Those are our specialty healthcare agencies. As I pointed out, healthcare overall was up 2.5%, 2.6% in the quarter. So the overall category's doing fine. I think we're seeing, or felt in this quarter some spending shifts from some of our specialty agencies maybe into some of our, I'll say more traditional agencies or network agencies.

And slightly in healthcare, in terms of what you're seeing in the quarter, were the effect of 1 or 2 losses that our specialty agencies suffered earlier in the year, impacting the numbers for the third quarter.

Okay, and then on the recruitment concept, how much left to go? How big is that for your overall annual revenues? And what's the status of that as a potential disposal?

It's a little more than $100 million of annual revenue. And we'll probably leave it at that.

Okay. Thanks.

Craig Huber, Access 342.

My first question's a housekeeping question. How many shares did you guys buy back on the quarter, please?

Hold on one second.

The number's close by. They just have to get it.

Running for numbers. 1,302,000.

Okay. Then my other question, on the UK, obviously strong growth has been talked about here. Do you think that's sustainable here in the fourth quarter, or is it just too early to tell? I mean, that's in light of the real difficult economic condition over there.

This was UK growth?

Yes.

It's really too early to tell. I've said this for a number of years. When we start looking at individual country markets and we're looking at year-over-year, quarter-over-quarter growth rates, some relatively small movements can adjust those numbers pretty significantly. John pointed out that the growth in the UK market isn't that the UK economy is growing that significantly faster than everywhere else in the world. It's our agencies within the market have done a very good job on new business front.

Some of that new business has happened at varying times, so when it's going to cycle is hard to say. It could be specific client spending or client actions -- most of this will tend to average out over time. Fortunately, our agencies in the UK are extremely strong and are performing very well at this point.

Your guys' margin goal for 2012 is 13.4% EBITA margin, you expressed high confidence of getting there several times. I'm just wondering, what's sort of the minimum organic revenue growth you would need in order to get to 13.4%? In other words, do you think you could get there if you got 3% organic revenue growth next year?

I think so. The higher the organic revenue growth obviously will be a little bit easier but it's really dependent upon where that organic revenue growth is coming from. We would probably be the happiest if we had uniform organic revenue growth everywhere and stabilized to improving economy globally. We're probably not going to be lucky enough to have that, but we can always I guess wish for it. I think our agencies again, are doing extremely good job at controlling their costs and starting a number of initiatives that are driving their efficiencies.

We're pretty confident that if the market or the economies tend to continue to make positive progress, that we're going to be able to achieve those objectives. If for some reason there's a significant double dip, that's going to be much more difficult. That's not what we're expecting to occur though.

And lastly, as you think forward here on the organic revenue growth front, the discussions you guys are having with your clients ongoing basis here, given how bad marketing and advertising budgets were slashed in 2008 and 2009, is there a general sense among your clients that they probably cut too severely in 2008 and 2009, and that if the economy did roll over hard going forward here, that they would likely not cut as severely as they did in '08 and '09, given the long-term implication of what it means to the brands in the marketplace?

I don't think I could categorize specific conversations the way you just did in the aggregate. Every company is trying to be nimble. Every company is trying to do it better, cheaper, faster. 2008 at this point, 2009 was a long time ago. Circumstances this time around I think are slightly different than what they were then. And so the solutions are going to be different. But we haven't had -- I haven't had conversations other than individual conversations that would rise to the level of being able to comment on your comment.

Okay, thank you.

James Dix, Wedbush.

Randy, even after you cautioned about analyzing quarterly growth by country, permit me this 1 transgression. Just on the US, if we look at your growth organically kind of on a 2-year basis, so smoothing for the big surge you got in the fourth quarter last year, any reason to think that you're tracking for much different growth in the fourth versus the third? And then secondly, in the UK, who are you winning the share from broadly in that market? And then just more generally, geographically, has the pace of new business activity changed materially over the last quarter? And then I had just 1 follow-up on leverage.

First questions first. Since every fourth quarter there is that $300 million to $400 million and since slightly over 50% of our business is in the US, believe me, when and how that comes in has an impact on whether you're at 5.8% or 5.7% organic growth, we don't get that granular at this point in our planning.

Right. Mathematically on your 2-year analysis, which I've had this conversation with a number of investors. I'm not 100% sure that I buy into the 2-year analysis, but I know some of you guys do. Our fourth quarter organic growth in the US last year was very strong, if the 2-year analysis worked, if our underlying performance was the same, the year-over-year measured performance, the sequential performance of the agency stayed the same and everything kind of moved along from third quarter to fourth quarter, the year-over-year measurement would be down, if that's what you're addressing. If the year-over-year measurement stayed the same, it would mean an equally large organic growth in the fourth quarter to last year's fourth quarter. I don't suspect that would be the case.

Last year in the fourth quarter, I think more of that project revenue returned to normal and we saw a fairly large step-up from Q3 to Q4 in organic growth. I don't think we'll see that year-over-year step up certainly in the fourth quarter this year, and if you do your 2-year analysis on the year-over-year basis, it should step down a little bit, if the actual performance stays in line with what we've just seen in Q3.

And when you get into specific countries I mean, this quarter our performance was $3.4 billion or approximately. $10 million changes the specific organic growth of a particular country. I mean, that's how granular the numbers get.

I really don't believe the 2-year analysis works as we get to smaller and smaller markets. I think when you get -- the US is obviously a very large market and is very diversified, so maybe that 2-year analysis works here. But as we move down further and further, John pointed out in his comments the Netherlands. So you get a client movement in the Netherlands that can be a very significant impact on the Netherlands that has nothing to do with the economy in the Netherlands. That's a global account that was being run out of the Netherlands that got moved to another 1 of our markets that in the market it got moved to, that account change wasn't big enough to really move the needle, but in the Netherlands, it was very much big enough to move the needle, especially on a quarter-to-quarter, year-over-year kind of basis. So again, I'm not 100% sure of the 2-year analysis works. I'm almost positive it doesn't work in the smaller market analysis. It may make some sense in a market that's big enough like the United States.

Okay, and just on the share, the share gains in the UK, kind of the pace of the new business. And then my follow-up on leverage was just do you have a sense compared to 2008 to 2009 that you would be comfortable being at a higher level of leverage over the next year or so than you were back then?

Well, I think we said that we're going to get back to the dollar amount of leverage that we had in sort of the 2008 timeframe.

Okay.

Delever the Company about $1 billion in 2009. We -- through the first 3 quarters of 2010, we basically spent our free cash, as we normally do, between dividends, acquisitions, and share repurchases. Then we stated, I believe it was sometime in the fourth quarter of 2010 that we would put that $1 billion of leverage back in place. We've largely done that at this point. From here on out, we have a constant conversation with our Board of Directors and we're going to be constantly evaluating I'll say our leverage positions relative to our operating performance in the backdrop of the marketplace.

I don't think we have a perspective that we're going to increase leverage. I certainly don't think we're going to be increasing leverage in a dramatic way. We are very confident with the stability of our Business, the operation's performed extremely well, even in the 2009 timeframe. So I think we feel very comfortable where we're at and we'll continue to evaluate.

Okay. Just on the share shifts, who you think you're winning share from and the pace of new business activity, is that changing?

We don't know of a single individual company I could target and say we're wining share from XYZ, that new business, the way it works in the industry is you're invited and you can't trigger accounts, putting in, having accounts put into review. So it's a pretty reactive type of process and then you try to do the best that you can where you are. Proactive is in saving accounts and preventing accounts that you already serviced from going into review. So it's a very fluid quarter-to-quarter situation and it depends on individual advertisers electing to review part of their businesses.

And in some respect, it's a long-term gain. The proactive -- the most proactive piece that our agencies do is the development of their talent. We certainly feel that we have the best agencies in the industry in almost every country, but it's the focus on that talent development that on a long-term basis allows us to hopefully continuously win share and become a better and bigger partner to our clients.

Great. Thank you.

Dan Salmon, BMO Capital Markets.

Good morning, guys. My question is on a smaller area of your business, but one that's been getting a lot of attention, is the agency trading desk Accuen, maybe just tell us how business is accelerating there. And then just maybe 2 specific questions on hiring, sort of the challenges and what you're seeing there and then secondly, if whether or not you're working with clients to collect sort of a specialized group of technologies and customizing it per client or whether there's more of a standard technology stack that you tend to use there.

There's a couple of questions there. If I get some of them wrong, please correct me. The whole digital transformation that's going on in the media is for the most part, it's all organic. It's 100%. It's been green field from the time it was started probably 18 months ago. We work with a lot of different technology partners and we're very happy, I'm very happy with the growth and the progress that we've made, and I only see that area and those capabilities as expanding as we go forward, especially as you -- as digital inventory, video, bunch of other things become available, it just opens up new avenues for clients to intelligently deploy and plan to spend their money. We're tracking very well and I'm very pleased with our progress. That was the first question. Then, I'm sorry, somewhere on the third question, I'm not sure I'm going to be clear. So could you repeat them?

Well, maybe just some specifics on hiring there. There's obviously some highly technical skills involved and then secondly, on whether or not you are building more customized solutions for clients or whether there's more of a standard set of technologies that you use across the client base?

Well, I, but the people who are responsible, are aggressively hiring. People with all sorts of talent, and we're finding that all the expansion that we do in this area pays for itself very, very quickly. We've expanded our capabilities, which were started, primarily based in the US, to Asia in the last 7 or 8 weeks, I think. We've got it up and running. And there are expansion plans going on in Europe as well. So there's hiring in all 3 of those places. Now, the way we're getting to the technological solutions is really the combination of us developing platforms which work across quite a number of clients, and then specifically working with partners to create solutions which in part are customized for specific clients.

Also, experience plays a big role there. This is a fairly new area for everyone. It's really been around for maybe, maybe it's a couple years. We're also extending the spot that we're looking for talent, bringing in a range of expertise from mathematicians and data analysts and technologists, as well as people that have experience in marketing and new technology medias. And as far as custom technology versus standard platforms, I think with a lot of things with Omnicom, the answer is both. We're certainly developing a platform that allows us to be flexible around specific client needs. And there's an awful lot of learning that is going on with each client engagement and the experience that our people are getting.

That's great, thank you.

I think that was about all the time we have. So thank you all very much for taking the time to listen to our call.

Thank you. Ladies and gentlemen, this will conclude our conference call for today. We thank you for your participation and for using AT&T executive teleconference service. And you may now disconnect.