宏盟集團 (OMC) 2014 Q4 法說會逐字稿

Ladies and gentlemen, good morning, and welcome to the Omnicom fourth quarter 2014 earnings release conference call.

(Operator Instructions)

As a reminder, this conference call is being recorded. At this time, I'd like to now introduce you to your host for today's conference call, Vice President of Investor Relations, Shub Mukherjee. Please go ahead.

Good morning. Thank you for taking the time to listen to our fourth quarter 2014 earnings call. On the call with me today is John Wren, President and Chief Executive Officer; and Phil Angelastro, Chief Financial Officer.

We hope everyone has had a chance to review our earnings release. We have posted on our website, at www.omnicomgroup.com, both our press release and the presentation covering the information that we will be reviewing this morning. This call is also being simulcast, and will be archived on our website.

Before we start, I've been asked to remind everyone to read the forward-looking statements and other information that we have included at the end of our investor presentation. And to point out that certain of the statements made today may constitute forward-looking statements, and that these statements are our present expectations, and that actual events or results may differ materially. I would also like to remind you that during the course of the call, we will discuss some non-GAAP measures in talking about Omnicom's performance.

You can find the reconciliation of those measures to the nearest comparable GAAP measures in the presentation materials. We are going to begin this morning's call with an overview of our business from John Wren. Then, Phil Angelastro will review our financial results, and then we will open up the line for your questions.

Thank you, Shub. Thank you for joining us this morning. I'm pleased to speak to you about our fourth quarter and the full year 2014 business results. As you've seen in our press release, Omnicom had a solid fourth quarter, with organic growth of 5.9%, giving us a strong finish to the year. Before I discuss our results in detail, I want to reflect upon a number of factors that impact Omnicom, our clients, and their consumers in countries where they operate.

First, from a macroeconomic perspective, recent declines in oil and commodity prices are helping the consumer, and many industries and countries. At this point, the US economy looks to be the biggest beneficiary of these changes, with the decline in oil prices likely being additive to US GDP in 2015.

When you move from the US to the global economy, we're seeing a divergence, for the first time, in central bank policies and actions. Central banks, from Australia to Europe to Canada, have been lowering borrowing costs to try to kick start growth in their economies. As a result, their currencies have declined versus the US dollar.

At Omnicom, a little over 46% of our revenues are generated outside the United States. The significant change in exchange rates resulted in a 3.1% reduction in our revenue in the fourth quarter, and will impact our reported results in 2015. At the same time, it's important to point out that most of our non-US operations are naturally hedged, as both revenue and expenses are in the same currency. Both Phil and I will discuss the impact of foreign currency fluctuations in more detail later in the call.

From an industry perspective, we're undergoing a major transformation, as new digital tools and platforms emerge, with media and technology evolving at an astonishing pace. In 2014, digital ad spend worldwide exceeded $137 billion, a 15% increase. We expect that shift to digital will only accelerate over the next five years.

There were also changes at Omnicom in 2014. In May, we made a mutual decision with Publicis to terminate our proposed merger, which had been announced in July of 2013. And later in the third quarter, we made leadership changes in top positions at Omnicom Corporate and the TBWA Network.

Given these macro industry & Company events, I'm delighted with the results we report this morning. Our performance in this environment says a lot about the strength of our culture, the quality of our people, and the depth of our leadership and governance.

Let me now turn to our revenue performance by region. In the fourth quarter, North America grew 8.3%, driven by the continued strong performance of our media business, as well as solid results in public relations and our specialty healthcare business. In the UK, our agencies continued to perform very well, with revenue up 6.2% in the quarter.

On the Continent, overall growth was 1.2%. More specifically, the Euro currency markets were flat. Germany was positive, while France and the Netherlands continued to drag on the region.

We're hopeful that the latest central bank actions, combined with structural reforms, will lead to stability, and ultimately, economic growth. Growth in the rest of the region was relatively strong, led by Sweden and Turkey, and Russia was up, despite economic turbulence.

Latin America was down slightly in the quarter, due to the loss of a government account in Chile in mid-2014. Asia's growth was up 3.2%, with key contributors this quarter being India and Singapore. We also had strong growth throughout the Middle East.

As promised, our margins for the quarter were on plan. This result was achieved despite negative margin pressures, due to the currency declines I discussed earlier.

For the full year 2014, Omnicom's worldwide organic growth was 5.7%. Our total revenue increased to $15.3 billion, and our earnings per share was $4.23, a 10.2% increase from 2013, after excluding related costs to the proposed Omnicom Publicis merger.

Turning to our cash flow and return on capital, in 2014, we generated just shy of $1.6 billion in free cash flow, an increase of $125 million year over year. We returned approximately $1.5 billion of cash to shareholders, through dividends and net share repurchases.

As you may recall, post the termination of the proposed Publicis/Omnicom merger, our Board of Directors increased our quarterly dividend by 25%, to $0.50 per share, and we resumed our share repurchase program. Looking forward, our practice for use of cash, dividends, acquisitions and share repurchases remains unchanged, as does our commitment to a strong balance sheet and maintaining our credit rating.

As we move into 2015, given the current environment, we remain focused on the things we can control. Our management teams are dedicated to servicing their clients' needs, attracting and retaining the best talent, while at the same time being laser focused on managing costs.

I want to thank our people, our clients, and all of our stakeholders, for their contributions to our fourth quarter, and to the full year results for 2014. Our strong and consistent performance are a testament to the fact that Omnicom's long-term strategies are working.

As I have said before, we are attracting, retaining and developing top talent, expanding our capabilities in both new markets and new service areas, building our digital data and analytical capabilities by investing in our agencies and partnering with innovative technology companies, and delivering big ideas, based upon meaningful consumer insights, across all of the channels that we operate. Our ability to stay on top or ahead of the changes in our industry comes down to having talented people at all levels of the organization. Simply put, we have the best talent in the business, which is why we win more than our fair share of the industry's recognition, awards and business.

Last quarter, Omnicom agencies continued their tradition of being most creatively awarded companies in the world. Let me just mention a few of the highlights.

BBDO was named most awarded agency network in the world in 2014 by the Gunn Report, for the ninth consecutive year. DDB was the second most awarded network.

OMD was named global media agency of the year by Adweek. Advertising Age honored adam&eveDDB as international agency of the year, and Alma DDB won multicultural agency of the year.

At the Campaign Asia Pacific agency of the year awards, TBWA and DDB won creative agencies for the year in Japan, Korea, Malaysia, New Zealand, Southeast Asia, Philippines and Indonesia, and there were many others. I want to congratulate all of our people and agencies for their outstanding performance and creativity in 2014.

As I mentioned earlier, and as you all know, our industry is becoming increasingly complex, and our clients are looking to us for ways to navigate this rapidly changing landscape. At Omnicom, we are continually expanding our capabilities to meet our clients' needs. Technology is providing the tools, and we are providing the brains, to deliver actionable consumer insights, develop better ways to target consumers, and then reaching them across many different disciplines and media, to give Omnicom clients the best possible solution.

Our internal investments in people, our technology partnerships and our acquisitions have allowed us to expand our Company and participate in these rapidly growing areas. 2014, more than any year I can remember, was the year that we truly saw the convergence of technology, creativity and media change the way our agencies operate.

Several events come to mind. As part of our partnership deals with tech companies, our creative talent is working side by side with engineers from Facebook, Google, Instagram, Twitter and others, and the net result is increasing innovative solutions for our clients.

As an example, Lowe's, which was among the first to use Vines as a marketing tool, with its award winning Fix In Six campaign, launched its next generation of Vines, using Tap Thru and Hypermade. These are new, innovative technologies that deliver unique and differentiated content to consumers.

The campaign for Lowe's is a fully integrated effort. Together, our agencies and tech partners did everything from creative and targeting to media placement and analytics.

We are seeing this trend play out, as we broaden our reach and functionality of Annalect's data management platform, an investment we began in 2013. As an example, data analysts from Annalect are part of the creative and digital teams servicing multiple clients.

These teams are leveraging data and analytics to help inform planning and creative, to deliver relevant content to optimize campaigns with realtime insights. The result is much greater precision, delivering the right message to the right audience, at the right time, and on the right device.

Finally, our acquisitions are also supplementing our expansion into rapidly growing areas. Earlier this month, we acquired TLGG, a strategic consulting and digital agency in Germany.

Late in 2014, we purchased Washington-based DDC Advocacy, an innovative CRM agency for clients in the Public Affairs space. And Omnicom's DAS took full ownership of Critical Mass, a leading global digital shop. In 2015, we continue to focus our acquisition efforts in key markets and areas of growth, including media, data and analytics, CRM, production and healthcare.

Looking back on a year of unprecedented changes, Omnicom continues to be an industry leader, embracing new technologies, delivering outstanding creativity for our clients and their brands, and generating an exceptional total return for shareholders. I want to recognize our more than 70,000 people for bringing their A games to our clients every day.

I'll now turn the call over to Phil for a closer look at the numbers.

Thank you, John, and good morning. As John said, our operating companies have continued to perform very well, delivering against their operating and strategic objectives, and maintaining their focus on meeting the needs of their clients. As a result of the excellent performance of our agencies, revenue for the quarter came in at just about $4.2 billion, up 3.4%.

The year-over-year increase was driven by continued strong organic growth of 5.9%. This despite a considerable FX headwind this quarter of 3.1%. FX was negative this quarter across virtually every currency we operate in. I'll discuss our revenue growth in detail in a few minutes.

Turning to the figures below revenue, a quick reminder. As you know, we terminated the merger this past May.

During the fourth quarter of 2013, we incurred $13.3 million of merger-related costs. These costs are included in our GAAP results for 2013.

In discussing our performance for the quarter, my comments will compare the current quarter to last year's Q4 results, excluding the impact of the merger-related expenses. You can find this non-GAAP presentation in the supplemental financial information section on Slides 19 through 24.

So turning to Slide 19. Our EBITA for the quarter increased to $609 million from $589 million, an increase of 3.5% compared to Q4 last year. The resulting EBITA margin for the quarter was 14.5%, unchanged versus Q4 last year.

As said previously, the sharp decline in value relative to the US dollar, or virtually all currencies we operated in, negatively impacted our revenues across all of our international operations. Because the vast majority of our expenses are denominated in the same local currencies as our revenues, the negative impact of FX on our margins in the quarter was manageable.

Despite this FX headwind, we continue to see a positive impact from our efforts to drive efficiencies throughout our organization and our agencies, and to control our costs. Operating income, or EBIT, performed similarly to EBITA, increasing $15 million, or 2.6%, to $579 million, and our operating margin of 13.8% was down slightly versus Q4 2013, due to the increase in amortization on our intangible assets.

Now turning to the items below operating income. Net interest expense for the quarter was $30 million, down $1.4 million from the third quarter, and down $9.8 million year over year. As compared to Q3, while we incurred additional interest expense related to the $750 million of 10-year Senior Notes that we issued early in the fourth quarter, the increase was effectively offset by the impact of the fixed to floating interest rate swaps we entered into late in the third quarter, related to our 2020 Senior Notes.

Net interest expense was also reduced by additional interest income, earned by our international Treasury centers, as a result of higher than average cash balances in Q4 as compared to Q3. Versus last year, net interest expense was down $9.8 million in the quarter. This was primarily due to the positive impact of the interest rate swaps we entered over the past year, in mid Q2 and late Q3.

Net of the additional interest expense related to the new issuance of Senior Notes, in Q4 of 2014, plus benefits from our cash management efforts, in the form of increased interest income earned by our international Treasury centers. Our quarterly tax rate of 33.2% is in line with our normal expectations.

Earnings from our affiliates were up slightly in the quarter, to $5.7 million. And the allocation of earnings to the minority shareholders in our less than fully owned subsidiaries increased $3.4 million, to $43.4 million, as a result of improved performance at several of our existing subsidiaries that have local minority owners, as well as at several of our new acquisitions.

As a result, net income was $329.5 million. That's an increase of $15.7 million, or 5%, versus Q4 last year, and an increase of 9.7%, compared to the 2013 reported amount.

Now turning to Page 21. The remaining net income available for common shareholders for the quarter, after the allocation of $5.6 million of net income to participating securities, which for us, are the un-vested restricted shares held by our employees, was $323.9 million, an increase of 5.7% versus Q4 last year. You can also see our diluted share count for the quarter was 249.9 million, which is down 4.1% versus last year, as a result of the resumption of our share buyback program during the second quarter of 2014. Given our overall strong performance in the quarter, diluted EPS for the quarter was $1.30, an increase of $0.12, or 10.2%, versus Q4 2013, or up $0.17, and 15%, compared to the 2013 reported amount.

On Slides 22 through 24, we provide the summary P&L, EPS, and other information for the full year. To save some time, I will just give you a few highlights.

Full-year revenue was up 5%, driven predominantly by organic growth of 5.7%, with FX swinging from positive for the first 9 months of the year to slightly negative for the year, and net acquisitions turning from negative for the first 9 months of the year to slightly positive for the year. EBITA increased 4.3%, to $2.05 billion, while our full-year EBITA margin was 13.4%, down about 10 basis points versus last year. As a reminder, the 2014 EBITA amounts include $8.8 million from merger-related costs incurred earlier in the year.

Our effective tax rate for the year was 32.8%, slightly below our operating rate of 33.2%, reflecting the impact of the tax benefit we recognized upon termination of the merger in the second quarter. The benefit related to merger expenses recognized in 2013, which were required to be capitalized for tax purposes at that time.

Net income for the year was $1.1 billion, up 7.6% over 2013. And our full-year diluted EPS was $4.24 per share, up $0.40 versus 2013's non-GAAP amount of $3.84, and up $0.53 versus our reported 2013 amount of $3.71.

Excluding the impact of merger expenses, and the related tax benefits from both years, full-year diluted EPS for 2014 was $4.23 per share, up 10.2%, versus 2013 diluted EPS of $3.84.

Turning back to Slide 7, we shift the discussion to our revenue performance. First, with regard to FX.

On a year-over-year basis in the fourth quarter, the US dollar strengthened against every one of our major currencies, most notably the Euro, as well as the Australian and Canadian dollars, the real, the ruble, and the yen. This decreased our revenue for the quarter by $129 million, or 3.1%.

Looking ahead, considering the recent steep decline in the value of all major currencies against the dollar, in a relative short period of time, if FX rates for 2015 stay where they are, FX could have a negative impact on our revenues of approximately 5.5% during the first quarter of 2015, and approximately 5% for the year. Given it is only early February, it's hard to predict what will happen to FX rates for the balance of the year.

Revenue from acquisitions, net of dispositions, increased revenue by $26 million, driven by our recent acquisitions in Brazil, Chile, Germany, Turkey and the UK, as well as here in the US. With the transactions that we have completed through December 31, we expect acquisitions, net of dispositions, to add about 50 to 60 basis points to revenue in the first quarter and the year.

And finally, organic growth was positive $240 million, or 5.9%, this quarter. It was another strong quarter, with positive organic growth across all of our markets, with the exceptions being France, Italy, the Netherlands, Japan and South Korea, and the smaller markets of Latin America.

The primary drivers of our growth this quarter included the continued excellent performance across our media businesses, driven by the continuing expansion of our media offerings and new business wins, continuing strength domestically and in the UK, with the PR and specialty businesses turning in solid performances this quarter. In addition to the strong performance in the US and the UK, our agencies in the emerging markets continued to perform very well.

This quarter, we had excellent performances in India, Mexico, and the UAE. In the Euro markets, overall organic growth was basically flat.

Germany and Spain were again positive, as they have been for several quarters, with the French and Dutch markets still struggling. And we continue to see generally good performance across our businesses in our other markets, including Brazil, China, India, and our non-euro markets in Europe. Although the rate of growth continues to be somewhat uneven, market by market.

Slide 8 covers our full-year revenue performance, which is basically in line with this quarter's results, except for FX, which was slightly positive through the first nine months, before turning slightly negative for the year.

On Slides 9 and 10, we present our regional mix of business. During the quarter, the split was 57% for North America, 10% for the UK, 18% for the rest of Europe, 10% for Asia Pacific, 3% for Latin America, and 2% for Africa and the Middle East.

Turning to the details on Slide 10, in North America, we had organic revenue growth of 8.3%. Again, primarily driven this quarter by the performance of our media businesses, healthcare and PR businesses. The UK once again had a very strong quarter, and has been consistently positive organically for the last two years.

The rest of Europe was up 1.2%, led by a solid performance in Germany, continuing strong performance in Spain, and our other non-euro markets in Europe. On the downside, France and the Netherlands continued to struggle.

Asia Pacific was up 3.2%. We had strong performances across the region, with India and Singapore leading the way with double-digit growth. China also had a solid quarter, especially in light of a difficult comp versus Q4 of 2013, while Japan and South Korea, also facing difficult comps versus Q4 of 2013, experienced softness in the quarter.

Latin America overall was down slightly. The positive performance in Brazil, also facing a difficult comp versus Q4 of last year, and Mexico, was offset by weakness in Chile, related to the loss of a significant client in that market, which will continue to cycle into the first half of next year. And Africa and the Middle East region, although off a small base, was up 14%, led by a very strong quarter from our businesses in the UAE.

Slide 11 shows our mix of business for the quarter, which, again, was split about evenly between advertising and marketing services. As for their respective organic growth rates, brand advertising was up 8.5%, primarily driven by the excellent performance of our media businesses, and marketing services overall was up 3.4%.

Within marketing services, CRM, coming off a robust performance in Q4 of 2013, was up 1%. The performance was mixed by business and discipline in Q4. Our events and field marketing businesses had a challenging quarter, while the direct marketing, sales promotion and research businesses had strong performances, with strength across several markets.

Public relations was up 8.5%, relative to a challenging Q4 2013, and reflecting strength in the US and the UK in 2014. Specialty communications was up about 9.4%, on the strength of our healthcare businesses in the US and the UK, partially offset by some weakness in Japan.

On Slide 12, we present our mix of business by industry sector, keeping in mind these are year-to-date figures for total growth, not just organic growth. As you can see, we're up in almost all categories.

The larger changes were in our telecom and other industries group. Telecom continues to be impacted by the loss of BlackBerry. And within other, we benefited from new business wins and project spending from our services clients.

Turning to our cash flow performance on Slide 13. In 2014, we generated $1.58 billion of free cash flow, excluding changes in working capital, an increase of 8.6% versus 2013. As for our primary uses of cash on Slide 14, dividends paid to our common shareholders were $468 million, up significantly from last year.

As a reminder, in 2013, we only made three dividend payments, because we paid our normal Q1 dividend in the fourth quarter of 2012. Additionally, we increased our quarterly dividend earlier this year.

Dividends paid to our non-controlling interest shareholders totaled $111 million. Capital expenditures were $213 million, which was in line with our expectations for the year.

Acquisitions, including earn-out payments, net of proceeds received from the sale of investments, totaled $207 million. And stock repurchases, net of the proceeds received from stock issuances under our employee share plan, totaled $994 million.

Since we restarted our share repurchase program in mid-May, post the termination of the merger, we have purchased about 14.3 million shares net. As a result, we out-spent our free cash flow by about $410 million for the year.

Turning to Slide 15. Focusing first on our capital structure, as you may be aware, we issued $750 million in 10-year Senior Notes, at 3.65%, during the fourth quarter. As a result, our total debt increased to $4.6 billion as of December 31, and our leverage approximates our historic norms. And our net debt position, at the end of the quarter, was $2.2 million.

The increase in our net debt of $869 million, over the past year, was driven primarily by the use of cash in excess of our free cash flow, as we just discussed, as well as the negative impact of FX translation on our cash balance at December 31, 2014 of approximately $275 million. In spite of the increase in our debt, our ratios remain very strong.

Our total debt to EBITDA was 2 times, and our net debt to EBITDA ratio was 1 time. And due to both a decrease in our interest expense and the increase in EBITDA, our interest coverage ratio improved to 12.6 times.

Turning to Slide 16, we continue to successfully build the Company through a combination of prudently priced acquisitions and well-focused internal development initiatives. For the last 12 months, our return on invested capital increased to 20.3%, and return on equity increased to 34.3%. And finally, on Slide 17, we track our cumulative return of cash to shareholders since 2004. The line on the top of the chart shows our cumulative net income from FY04 through FY14, which totaled $10 billion. And the bars show the cumulative return of cash to shareholders, including both dividends and net share repurchases, the sum of which, during the same period, totaled $10.8 billion, for a cumulative payout ratio of 108%. And that concludes our prepared remarks. Please note that we've included a number of other supplemental slides on the presentation materials for your review. But at this point, we're going to ask the Operator to open the call for questions. Thank you.

(Operator Instructions)

Our first question today comes from the line of Alexia Quadrani representing JPMorgan.

Hi, thank you. My first question is just on the strong growth you saw, the organic growth, in the US in the quarter? Is there any way you can give us a sense about how much contribution the programmatic was to that growth in the quarter? And then I have a follow-up question, really, about the FX headwinds we're going to be seeing in -- or continue to be seeing in 2015. Do you think it's possible to still maintain your margins in 2015 with that headwind? Maybe from the natural leverage you get from the healthy organic growth you're seeing? Thanks.

Good morning, Alexia. As we told you in the third-quarter call, we were cycling on our programmatic business during the fourth quarter. And I believe the contribution to the gross in the quarter was about $20 million. Your second question on FX, at this point, we're hoping that FX moderates as we go through the year. And looking at the first quarter, and we've looked at it in detail, we believe we can maintain the margin in the first quarter. As Phil was speaking, I'm looking at the news a little bit, and seeing Egypt came out this morning, every central bank seems to do something new every day. So I can give you the assurance through the first quarter.

Okay, and then just a quick follow-up. On the client loss in Latin America, I think you mentioned, which created difficult performance in that quarter. Do you know if that was a one-time project? Or is that something that will be a headwind for the whole year?

That was a project -- that was a client in Chile. We expect, in the first half of 2015, that's going to have a bit of a headwind, as we cycle on it. It started the end of the second quarter of 2014. So there will be a little bit of negative impact in Chile, at the beginning of next year.

Okay, thank you very much.

Sure.

Our next question comes from the line of David Bank with RBC Capital Markets.

Hi, thanks very much. Actually, a little bit of a follow-up to the first question, on the margin targets. I guess which -- realizing the difficulty of reading the [TVs] in a macro landscape that's hugely volatile, and central banks doing all kinds of conflicting things, can you give us a broad sense of what the organic top line range needs to be, in order for you to maintain your current level of margins?

I'll let Phil take a shot at this, and then I'll add [to some].

Yes, I'm not sure that we look at it that way. But certainly, the key to a lot of our businesses is being able to manage utilization rates. And the more growth we have, the easier it is to manage those utilization rates, the easier it is to maintain and/or grow your margins. What we strive to do that, regardless of what the growth rates are, across all of our businesses. So FX is certainly going to pose a bit of a challenge for us, from a margin perspective, which is why I think we're not projecting and predicting and committing to what our margin is going to be for the full year 2015. But we always strive to find the right balance.

We're always looking for efficiencies, and trying to make our businesses more effective in the way they manage their cost structure. We had a number of initiatives that have been going on for some time in the areas of Real Estate, IT, and some others, that we certainly continue to see the benefit of. And we expect, and continue, to push those initiatives in 2015, so that they can help us offset whatever challenges FX does present for us. But as we had said earlier, the businesses themselves are largely hedged naturally, in terms of the local currency of the expenses is the same as the local currency of the revenue, so that's helpful. But it's still certainly a challenge, and we're going to continue to work through it every day.

Okay, John, you said you had a follow-up?

No, I said I'd listen to Phil. (laughter) And then (multiple speakers) -- and he got it all.

Thanks, guys.

Our next question is from the line of Peter Stabler with Wells Fargo Securities.

Good morning. Thanks for taking the question. John, wanted to ask you about the media business. Separate from the programmatic stuff, media has been called out by you guys, and your leading competitors, as a significant contributor and out-performer -- I don't know, maybe for the last four to six quarters. Wondering if you could give a little perspective on what you think the drivers are of this out-performance is? Is it the complexity of the landscape? We hear a lot about pricing pressure in media pitches, but it just doesn't seem to be the case. So any perspective here would be great. Thanks very much.

Certainly. I do think the complexity of the marketplace has caused people to pay more attention to media. And in the thinking about media, there's -- god knows how many places you can place your messaging today. But focusing, and getting that right, is becoming increasingly important. So the analysts, the people that we employ, the digital channels, or channels that we select for the client to place that media, is -- it's a critical attention in this environment.

And we won, I believe, more than our fair share of media accounts, being planning assignments, or buying assignments, over the last several years. And it's being reflected in the numbers now. If you saw the trade magazines yesterday, OMD was named agency of the year. So we're getting the recognition not only in the business that we get, but also from peer groups and industry groups

I know it's tough for you to forecast. But as you look at 2015, do you think media could be an out-performer for this year, as well?

I do.

Thanks very much.

Our next question is from the line of Tim Nollen representing Macquarie. Please go ahead.

Hi, thank you very much. I wonder if you could give a comment, please, at this stage, beginning-ish of the year, of what client -- how client budgets feel, if I could put it that way? It seems like your organic performance has been very strong, despite what has felt like some crimping of budgets. I wonder if you would comment a bit on if there's any expansion of budget opportunities this year in general? Or maybe if you have seen some pent-up demand? Or do you still feel like advertisers are just holding back? And if you have any specific sector commentary, that would be great, considering, especially, the consumer packaged goods sector? Thanks.

In general, what we've seen to date, in the process, is the budgets are similar to the budgets of 2014, with growth in a few categories, more so than others. I think the other dynamic that's occurring is, as channels are developed, and you can utilize them, and you measure a better ROI on them, you'll see a shift in the dollars. Which, for some, it will look like growth, because it will be. And for others, there's that money shifted from different channels of media, it will seem like there's a lack of growth. So overall, though, I think budgets are growing consistent with GDP growth in most markets.

Any specific sector commentary?

I suspect the German car dealers are going to have a grand time in 2015, because of the currency swings. There are different sectors, different dynamics, which drive those sectors.

Okay, thanks very much.

We have a question from Craig Huber with Huber Research Partners.

Yes, good morning. I've got a few questions. Your comment about the currency impact on the margin in the quarter, I think you said, was slight. Should we assume that's 0 to 7 basis points year over year? That is my first question.

I didn't understand the question. So could you --

What was the impact, please, on currency on margins, year over year, in the quarter? Can you quantify that?

In Q4? Yes, I'd say that there was an impact, but it was relatively small, less than 10 basis points, in the quarter.

Okay. And then typically, each quarter, you guys shoot to have net new business wins of $1 billion, maybe a little bit higher. What was that in the fourth quarter, please?

That was about [$1.25] billion for the quarter.

Okay. Phil, on the debt side, how much room do you think you have to add more debt, potentially to buyback more stock or small acquisitions, and not impact your credit rating?

I think we don't exactly look at it that way, in terms of how much more leverage we could or would like to add. I think the goal here, and the approach, has always been to maintain our rating, which I guess you commented on there. But I think we're going to look at our free cash flow in 2015 the same way we always have. And I think, certainly, share buybacks is going to be a component of what we do with our cash.

We're going to continue to pay a healthy dividend. We'll do acquisitions opportunistically, as the opportunities arise. And we would certainly like to do more of those in 2015. There may be some opportunities, given some of the weaknesses in currencies, perhaps, but we don't have a fixed number, going into 2015, that we plan on spending on acquisitions, or plan on spending on share buybacks. But certainly, it will be a healthy component of how we use our cash.

And then lastly, John, if I could ask, as you think about this year, in terms of organic revenue growth for 2015, if I recall correctly, I think a year ago, you guys thought organic revenue for 2014 would be up 4% to 4.5%? Is your feeling somewhat similar, as you head into 2015?

I'm actually a little bit more cautious than that, at this point. I see it more around 3.5%. And then we'll see, as markets and things develop. The way to read that prediction is, I'm cautiously optimistic. And we will do our damnedest to beat it. But that's as much as I'd be willing to commit over the phone, in February.

Thank you.

Our next question is from the line of Julien Roch representing Barclays.

Yes, good morning. Thank you for taking the question. The question on use of cash, I know you have just said that you didn't have a fixed number in mind, in terms of buyback and M&A for 2015, but it would be a healthy proportion of your cash. But I guess, if we start with your current net debt to EBITDA, maybe have an indication of where you would like to be at the end of the year?

And that way, we can make our own assumption, between dividend buyback and M&A. But having, maybe, an indication of the overall envelope for 2015 would be useful. That's my first question. The second one is on programmatic. You said the impact was about $20 million in Q4. Could we have the same number for the full year, please? Those are my two questions.

On the first one, I think where we are at year end 2014, in the 2 times range, for total debt to EBITDA, is probably where you can expect us to be. That's roughly been where we've been historically. We continue to look to maintain that ratio. I think that would be a good guide.

I think the net debt number is a little bit harder to predict, given the currency impact on that number. So I think we're going to focus on the latter, or the gross debt number, a little bit more. And in terms of programmatic, I think we may have mentioned it earlier in our responses. But the contribution to growth was about $20 million or so. And it reflects some of the cycling, in Q4, on a strong performance in Q4 of 2013 that we had mentioned on the call.

No, you did mention the $20 million, but that was for Q4. I was hoping we could get that number for the full year?

The full year, the business itself, for the full year, is a little less than 2% of our revenues. And for the full year, I think the number was -- just give me a minute here. The full year, the number was probably around in the [$140 million] range.

Okay, thank you very much. Very useful.

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

Good morning, everyone. Phil, just a quick one for you. You noted, in your prepared remarks, a little higher international cash balance contributing to the investment income. I was just curious, are we facing a situation where that balance is growing a little bit faster than you're finding uses of it for, considering that's largely M&A? Do we have a situation where you feel like you are feeling a little constricted in what you can do with that? I'm just curious to hear how those dynamics of where the cash is are changing.

No, I think the comment, specifically related to higher international cash in Q4 versus Q3 of this year, so that we typically see in the fourth quarter relative to the third quarter. I think it was part of the explanation of the change in interest from Q3 and Q4. So we don't see it growing any different than we have in the past. I think we certainly are focused on bringing as much cash that's overseas back to the US as we can, in a tax efficient way.

That's something we focus on on a daily basis, frankly, because we would rather have it back in the US to deploy it. But I think, given the current FX environment, the current economic environment, we think we're likely to see some opportunities in Europe. And frankly, in some of the other markets outside the US, that might be a little more attractive to us, from a pricing perspective. And if we do find them in 2015, we're going to be happy to complete those acquisitions.

Okay, great. Thank you.

We have a question from the line of Ben Swinburne representing Morgan Stanley.

Thanks, good morning. Two questions. John, just going back to your outlook for 2015, last year, you guys did almost 6% organic. I realize programmatic drove part of that strength, but the underlying business grew quite nicely. Why do you think 2015 will grow a couple hundred basis points slower? Is programmatic part of that deceleration? It would seem like the macro tail winds in the US are strong, QE in Europe is potentially going to help. I'm just curious if you could add a little more color there? And then I just wanted to ask you about the Facebook relationship next.

Sure. The programmatic, we have cycled on that, and we have not gone into the supply side of that. So I'm expecting good growth from it, but not the type of growth we've had, as we were starting it up. In terms of the marketplace, we continue to win businesses, there's no question. Thank god we do. But with all of the unrest in the world, I'm just being optimistic but conservative, in observing the obvious, that it appears that the entire world's economy is slowed down a bit. And we can make claims that we're going to outgrow that historically.

We've been -- historically, we do at least 100 basis points better than GDP growth, but there's a great deal of unrest out there. And so we will alter that estimate, as we get more sight on it, as we go through the year. But as of right now, I'm very comfortable with the 3.5%. And I think that's what we're going to see for the -- until some of these things start to clear up.

Got it. And just on the Facebook relationship, announced with a lot of fanfare back in the Fall. Can you just update us on client response? And how that partnership is progressing, from a data perspective? And if I could sneak one more, back on programmatic, to Phil on -- is there any impact to free cash flow, particularly working capital, from programmatic? You had a big year-over-year swing in working cap that impacted free cash flow. Just wanted to see if that had to do with programmatic?

On programmatic? No, not at all.

And our relationship with Facebook has been outstanding. They've been -- they've given us a great deal of resources associated with the projects we're working on together, and the relationship between Omnicom, Annalect and Facebook is very, very strong. They're good partners.

Okay, thanks.

I think given the timing, Operator, of the market open, I think we have time for one more call.

Thank you. Our final question today will come from the line of James Dix with Wedbush Securities.

Good morning, guys. Just one follow-up on your growth outlook for 2015. John, you mentioned the potential impact, in the US, from lower energy prices. Just curious whether you're seeing any impact on the client budget planning, so far? Or is that just something you expect to see, if those lower oil prices continue?

And then secondly, just longer term, John, you also mentioned you expected an accelerating shift to digital. Some of your senior operating management has been public about trying to get clients to think about moving more of their budgets to video, in particular. Just curious as to what your view is, of the potential impact on television budgets? Since that's really the biggest source of spending for most of your clients, globally? And how you think that dynamic plays out of the digital shift? Thank you.

Sure. The first part of your question? Gas prices. (multiple speakers) At this point, we haven't seen clients come in with new budgets, as a result of it. It just seems -- the cut in gas prices, from where we sit, is like a tax break for the American consumer. And if history bears out, that consumer will be out spending money. Clients will anticipate and react to that, as it becomes a reality, later in -- I think, later throughout 2015. At least, we're hopeful that that's going to be the case. And the second part of the question -- I'm sorry, I didn't write it down. Can you repeat the second part?

Sure. Just what you think the implications are, in particular, for TV budgets? Given your commentary that you think the shift to digital could be accelerating over the longer term. And some public commentary by some of your senior operating management that clients should be thinking about shifting more of their budget to video, in particular.

Yes, our folks do believe that there will be a shift -- a greater shift, or a continuing shift, to digital -- or really, streaming type of activities. The device in which it gets streamed on is not as important to us, so we don't focus on it. So there are a lot of TV owners that own -- media owners that own alternate channels, or own content that would be interested in, in order to get it to be streamed. So I'm not expert enough to comment, in general, on the TV business. But I do see, anything that can be streamed on whatever device you have to stream it on, that's where I see the increase coming.

Great. Thank you very much.

Thank you. Thanks, everybody, for joining the call.

Ladies and gentlemen, that does conclude our conference for today. We thank you for your participation, and using the AT&T executive teleconference. You may now disconnect.