Interpublic Group of Cos Inc. Earnings Call Nuggets: Client Losses Impact, Q1 Growth
Client Losses Impact
Alexia Quadrani – JPMorgan: If you could give us a bit more detail on the impact of the client losses you were dealing with in the quarter, was January the first month of the revenue loss in SC Johnson and do you think we will be hit with the same sort of magnitude in the second quarter? And when do you circle past sort of any other notable client losses that are still impacting the quarter?
Michael I. Roth – Chairman and CEO: Well we had indicated and actually we started to seeing the loss of SC Johnson in December of last year. So didn’t wait till January before we saw the impact. What we said in our call that we expected about 2% to 3% headwinds for the full year and what we indicated it was over weighted if you will in the first half of the year. So we will continue to see those headwinds certainly through the first six months but we will continue to see some headwinds through the balance of the year. If you view what’s interesting about the headwinds is that it’s somewhat over weighted in the U.S., LatAm and Continental Europe, which explains some of the lower organic growth numbers that we are putting out there with respect to those markets. So if we use the first half of the year, if we use anywhere from 3% to 3.5% in terms of headwinds that should give you a good idea and that should start trailing off towards the end of the year.
Alexia Quadrani – JPMorgan: Were there anything else real sizeable that are also I guess above the normal course of business that also impacted Q1 or is it really the SC Johnson.
Michael I. Roth – Chairman and CEO: Obviously that was a big factor, well of course we had the Microsoft Media and we did have the Home Depot media flowing through, but again if look at it from a full year perspective, when we say we’re comfortable with 3% organic that takes into account the headwinds and basically how we see the flow through impact of that throughout the year.
Alexia Quadrani – JPMorgan: So it sounds like the headwinds are the same and not getting worse. Maybe even getting a little bit better in 2Q when comps get a little bit easier. We should see, I guess there is, I know you don’t give quarterly guidance. But there is reasons to believe things get a little bit better in the second quarter in terms of…
Michael I. Roth – Chairman and CEO: It only took you a few minutes before he asked already about the second quarter Alexia, but look we again, we don’t give quarterly results forecast. We look at it from a full year, obviously there’s some opportunities in new business wins that will factor into our results. So all we could say is that you see the existing headwinds that we have, we are comfortable with our overall objectives. I hope to see some good positive announcements on some of the new business opportunities we are seeing and all of that will impact our second quarter results.
Alexia Quadrani – JPMorgan: Well just one more but big picture question, on McCann in the U.S. I know you highlighted in some of your prepared remarks about the strength you are seeing outside the U.S. In the U.S. itself are you seeing, did you see growth year-over-year at McCann and I guess any color on where McCann is versus you hoped it to be at this point.
Michael I. Roth – Chairman and CEO: McCann obviously we made continuing investments in new talents in McCann and just recently I met with the senior management team there, I am feeling real good about our leadership at McCann and where that’s heading they have terrific plans, in terms of opportunities that are out there. Of course, once in a while you see some losses that I’ll anticipate the question before it comes. We just recently saw movement of some business out of McCann LA, not significant in terms of dollars, but it is with Nestle. On the other side, you’ll see an announcement recently of McCann U.S. winning a new project with Nestle Waters. So, that’s the nature of our business. We win some business, we lose some business. When we give you a full year forecast, it factors in all the business opportunities and potential business we see.
David Bank – RBC Capital: Two questions, the first is if you look at the growth that you have generated in the first quarter and then I guess extrapolated to your guidance for the full year, could you talk about how much of that organic growth or how much growth is sort of a function of new business wins versus existing clients? Did that surprise you at all in the first quarter? Then, second sort of related question is, if you think about the agency business, you win some and you lose some. We had a sense about these headwinds and stuff, but the reality is sometimes you win sometimes you lose. If you look at the 200 to 300 basis points headwinds, how much of the 200 to 300 basis points is really kind above and beyond in your mind that win some lose some? Thanks very much.
Michael I. Roth – Chairman and CEO: Yeah. Let me talk about the fiscal. This is a first quarter, so it’s hard to pinpoint exactly how much is new business versus not, but the fact is, in the first quarter, the growth that we are seeing is from our existing clients, okay. The roll-off of our losses we know and how that’s going to impact us, and that’s why we give you the numbers that we’ve given you. But we won’t see new business wins impact until later on in the year. We’re starting to see some of it in the second quarter, but it should be through the rest of the year. The other thing to keep in mind is that if you look at the organic changes in our first quarter last year. We had some very impressive organic growth in the quarter, for example in the U.S. we had 8.8% organic growth in the first quarter. So that’s a very difficult hurdle with some headwinds to overcome. So we’re pleased with the change that we’re seeing in the United States facing that kind of organic growth. The same when you go to LatAm, LatAm we had almost 14% organic growth in the first quarter last year. So to show growth on top of that is fairly impressive. So that’s exactly why when we give guidance, if you will, we talk about it from a full year perspective because we look and anticipate some loss business. We know about our existing client base. We’ve already always stated that our strength is in our existing client base, we win some, we lose some. And the bulk of our organic growth from our existing clients is what drives our business and that’s how we operate our businesses.
David Bank – RBC Capital: If I could get to sort of a follow-up, so I think we understand that you guys have been really transparent pointing out the headwinds. If you look at the year, is it – normally like what is kind of the normal range of headwind. I guess what I am asking is, where you would you point it out, there was like a 100 basis points in either direction?
Michael I. Roth – Chairman and CEO: Perfect question, last year we had about 2% headwinds. So to put one on top of the other, with every year we’re going in with 2% and last year we had terrific organic performance versus our sector. So we were able to on a full year basis overcome 2% headwinds. Obviously, we’re driving to do the same for this year. It’s only the first quarter we’ll be announcing some positive win. We have a whole year ahead of us and so that is – if you want to keep that in mind we’ve been able to overcome those kind of headwinds before and still show very strong performance.