The Interpublic Group of Companies, Inc. (NYSE:IPG) Q4 2022 Earnings Call Transcript

The Interpublic Group of Companies, Inc. (NYSE:IPG) Q4 2022 Earnings Call Transcript February 9, 2023

Operator: Good morning, and welcome to the Interpublic Group Fourth Quarter and Full Year 2022 Conference Call. This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Jerry Leshne: Good morning. Thank you for joining us. This morning, we are joined by our CEO, Philippe Krakowsky and by Ellen Johnson, our CFO. We have posted our earnings release and our slide presentation on our website, interpublic.com. We will begin our call with prepared remarks to be followed by Q&A. We plan to conclude before market open at 9:30 Eastern time. During this call, we will refer to certain non-GAAP measures. We believe that these measures provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance. We will also refer to forward-looking statements about our company. These are subject to the uncertainties and the cautionary statement that is included in our earnings release and the slide presentation and further detailed in our 10-Q and other filings with the SEC. At this point, it is my pleasure to turn things over to Philippe Krakowsky.

Philippe Krakowsky: Thanks, Jerry, and thank you for joining us this morning. As usual, I’ll start with a high-level view of our performance in the quarter and the full year and our outlook for the year ahead. Ellen will then provide additional detail, and I’ll conclude with updates on key developments at our agencies to be followed by Q&A. We’re pleased to share another year of strong performance. Before turning to the numbers, I’d like to once again thank our more than 58,000 colleagues around the world whose dedication to our clients and one another are exceptional, along with our expertise spanning creative marketing services, technology and data management, that’s what continues to be at the heart of our performance. Turning to our results.

For the full year, organic growth was 7%. Our adjusted EBITDA margin was 16.6%, both are at the levels we shared with you in our last update in October. It’s worth noting that a year ago at this time, we looked ahead to full year 5% organic growth on top of very challenging multiyear comps and performance throughout the year drove consistent increases to that 7%. We grew in every world region and broadly across client sectors. Our three year organic growth stack, therefore, stands at 14%. The level of performance that speaks to the strength and relevance of our offerings, particularly in services and sectors demanding precision and accountability. In our fourth quarter, organic net revenue growth was 3.8%, which brings three year growth performance to 9.7%.

That means that, as expected, growth slowed in the fourth quarter consistent with global macroeconomic and geopolitical crosswinds, which we’re all aware of. Notwithstanding slowdowns across the global economy and with that, a broadly more cautious marketing and media environment, our growth continued in every world region during the fourth quarter. Overall, U.S. organic growth was 2.4% despite dilution from certain units in the portfolio on top of a very strong 12.1% a year ago. Organic growth in our international markets was 6.1% on top of 11% a year ago. By sector, growth in the fourth quarter was led by our clients in the auto and transportation sector, followed by the retail, our other sector of industrial and government and health care.

Going the other way, second telco, which for us is our second largest client sector began to show the impact of – but I guess we could refer a sector-specific issues, which we’re forecasting will continue to present headwinds for us for at least the first half of 2023. Also in Q4, we felt the largest quarterly impact of the late 2021 loss of a large food and beverage client which will finish running off at the end of Q1 this year. Each of our operating segments grew organically in the quarter. In Media, Data & Engagement Solutions organic growth was 5%, led by double-digit growth at IPG Mediabrands. Increases at our digital specialists, which we’ve called out previously, weighed significantly on segment and group-wide growth in the quarter and the year.

Our Integrated Advertising & Creativity Led Solution segment grew 2.6%, paced again by IPG Health, which posted high single-digit growth performance. Our segment of Specialized Communications & Experiential Solutions grew 3.5% organically with leadership from the full range of our experiential and sports marketing offerings. Turning to profitability and expenses in the quarter. Our teams continued their outstanding execution, effectively navigating today’s complicated economic environment. This, in turn, led to the strong fourth quarter margin performance we’re reporting today. We’ve been able to deliver this result while continuing to invest in our offerings and to take significant real estate actions in the quarter that will further our structural operating efficiencies going forward.

Fourth quarter net income was $297.2 million as reported. Our adjusted EBITDA was $568.4 million, which is before a noncash charge in the quarter for those real estate actions. Adjusted EBITDA margin in the quarter was 22.3%, and that brings full year adjusted EBITDA to $1.57 billion and margin on net revenue of 16.6%. I think it’s worth reflecting that at that margin level, we’ve successfully consolidated 260 basis points of margin improvement over the last three years, along with that very strong three year growth stat that I mentioned earlier. Fourth quarter diluted earnings per share was $0.76 as reported and was $1.02 as adjusted for the real estate restructuring charge, intangible amortization and the disposition of small nonstrategic businesses.

In sum, our fourth quarter completes a year of strong financial performance across the key performance metrics of growth, adjusted EBITDA and earnings per share. During the quarter, we also closed on the acquisition of RafterOne, a leading e-commerce implementation partner, which brings additional scale and capability to our offerings in an area of growth and strategic importance. Over the course of 2022, we also returned capital to shareholders in the amount of $777 million between dividends and share repurchases. Given the continuing strength of our operating results and confidence in our strategic trajectory, our Board has once again raised IPG’s quarterly dividend by 7% to $0.31 per share. This marks our 11th consecutive year of higher dividends, which, as you know, continued uninterrupted through the pandemic.

Our Board also authorized an additional $350 million share repurchase program on top of the $80 million remaining in our previous authorization. Turning to discussion to 2023 and our outlook for the year. There remains a meaningful degree of macroeconomic uncertainty. Visibility, therefore, is somewhat challenged. I think it’s fair to say that clients are approaching 2023 with equal parts conviction in the need to be in the market, as well as an increased level of conservatism. That’s not to say that they are any less focused on the need to drive for growth into the new year or to invest in the transformation of their business. It’s just that we’re seeing budgeting decisions made with more deliberation. And it’s also fair to say that there’s significant variability within our client portfolio from client to client.

We’re confident that the strongest growth areas of our business such as consultative media services, health care marketing, experiential marketing, commerce as well as data management and data sales will continue to perform strongly despite the broader economic situation. We’re also confident in our operational rigor and flexible cost model. Our actions in the fourth quarter to further reduce our occupied real estate footprint by nearly 7% demonstrates our consistent and ongoing focus on identifying and acting on opportunities to rethink our business model and improve efficiency. So bridging all of these moving parts together, we expect organic net revenue growth for 2023 of 2% to 4% on top of those industry-leading multiyear comparators and further expansion of our adjusted EBITDA margins to 16.7% for the full year.

Our priorities for the year remain consistent. First, to build on IPG’s strategic differentiation, which for us means to focus on the people, talent and capabilities that enable us to solve a broader set of business problems, and which further our evolution into a higher-value solutions provider, as well as strong execution when it comes to integrating our agency’s expertise through open architecture solutions. Second, to combine those client focused offerings with operational excellence, which is always important, but never more so than in an uncertain economic climate. Delivering on these goals and our new financial targets, as well as our long-standing commitment to return of capital should lead to another year of value creation for all of our stakeholders.

At this point, I’m going to hand things over to Ellen for a more in-depth view of our results.

Ellen Johnson: Thank you. I hope everyone is well. I would like to join Philippe and thank our people for their terrific accomplishments. As a reminder, my remarks will track to the presentation slides that accompany our webcast. Beginning on slide two of the presentation. Fourth quarter net revenue was essentially flat from a year ago, with organic growth of 3.8%. That brings organic growth for the year to 7% and our three year growth to 14%. Adjusted EBITDA in the quarter before a net restructuring charge was $568.4 million and margin on net revenue was 22.3%. Our restructuring charge in the quarter, resulting from having identified further opportunities to optimize our real estate portfolio. We reduced our occupied real estate footprint by approximately 500,000 square feet or 6.7%.

The net charge in the quarter was $101.7 million, which we expect will result in $20 million of permanent expect savings, which will be realized as we move forward. There was no severance involved in these most recent actions. You’ll recall that in 2020, we reduced our lease footprint by 1.7 million square foot, and the additional actions are a recognition that in the wake of the pandemic operating model has changed with respect to office space. While we will still continue to optimize our square footage in the normal course of our business, we do not anticipate additional restructuring charges. Our diluted earnings per share in the quarter was $0.76 as reported and $1.02 as adjusted to exclude the restructuring charge, the amortization of acquired intangibles and a small amount operating loss from business dispositions.

Our adjusted diluted EPS was $2.75 for the full year. We concluded the year in a strong financial position with $2.5 billion of cash on the balance sheet and with 1.6 times gross financial debt to EBITDA as defined in our credit facility. We repurchased 3.2 million shares in the fourth quarter, bringing our full year repurchases to $10.3 million, returning $320 million to our shareholders in 2022. Our Board increased a quarterly dividend to $0.31 and authorized another $350 million repurchase program, in addition to the $80 million remaining on our prior authorization. Turning to slide three, you’ll see our P&L for the quarter. I’ll cover revenue and operating expenses in detail in the slides that follow. Turning to the fourth quarter and full year revenue on slide four.

Our net revenue in the quarter was $2.55 billion, an increase of $1.6 million from a year ago. Compared to Q4 ’21, the impact of the change in exchange rates was negative 3.9%. Net acquisitions added 20 basis points. Our organic net revenue increase was 3.8% and which on the right-hand side of this slide brings us to 7% for the full year. Further down the slide, we break out segment net revenue performance. Our Media, Data & Engagement Solutions segment grew 5% organically on top of 11.9% in the fourth quarter of 2021. As you can see on the slide, the segment is comprised of IPG Media brands, Acxiom, Kinesso and our digital specialist agencies. IBP Media brands grew at double-digit rate. As first noted on our third quarter call, R/GA and Huge are in the process of transforming their business models and have soft performance, which weighed significantly on the overall segment growth.

That’s something we will not lap until the back half of this year. At the right-hand side of the slide, organic growth was 6.4% for the full year. Organic growth at our Integrated Advertising & Creativity Led Solution segment was 2.6%, which was on top of 10.3% a year ago. As a reminder, the segment is comprised of IPG Health, McCann, MullenLowe, FCB and our domestic integrated agencies. Our growth in the quarter was led by a strong increase in IPG Health, which grew in the high single digits. For the year, the segment grew 7.1% organically. At our Specialized Communications & Experiential Solutions segment, organic growth was 3.5%, which compounds 15.2% in last year’s fourth quarter. This segment is comprised of Weber Shandwick, Golin, Jack Morton, Momentum, Octagon and DXTRA Health.

We will lap a high single-digit increases in our experiential solutions. For the year, the SC&E segment increased 8.5% organically. Moving to slide five, our revenue growth by region in the quarter. The U.S., which was 63% of our fourth quarter net revenue grew 2.4% organically on top of 12.1% in last year’s fourth quarter. We had notably strong growth at IPG Mediabrands, IPG Health, MRM and Jack Morton experiential. Decreases at our digital specialists R/GA and Huge weighed on our U.S. growth rate by 160 basis points in the quarter. International markets were 37% of our net revenue in the quarter and increased organically. You’ll recall the same markets increased 11% a year ago. In the U.K., organic growth in the quarter was 9.4% led by notably strong performance in media, experiential and at MullenLowe.

Continental Europe grew 5.7% organically. We were led by very strong growth in Spain, while Germany and France were relatively flat year-over-year. In Asia Pac, organic growth was 3% in the quarter with strong results in Australia, Japan and China, while India decreased. In LatAm, we grew 5.8% organically on top of 22.5% a year ago. Our other international markets group, which consists of Canada, the Middle East and Africa, grew 6.9% organically on top of 18.7% a year ago, which reflects notably strong growth in the Middle East followed by Canada. Moving on to slide six and operating expenses in the quarter. Our fully adjusted EBITDA margin in the quarter was 22.3% compared to 19.3% in 2021, an increase of 300 basis points. As you can see on this slide, we had operating leverage on each of our major cost lines.

Our ratio of salary and related expenses as a percentage of net revenue was 61% compared with 62.2% in last year’s fourth quarter. Underneath that ratio, we delevered on our expenses for base pay, benefits of tax as headcount increased to support revenue growth. We ended the quarter with headcount of 58,400, an increase of 5% from a year ago. Our expenses for temporary labor, performance-based incentive compensation and severance were all notably lower than a year ago. Our office and other direct expenses decreased as a percentage of net revenue by 160 basis points to 13.5%. That reflects leverage due to lower occupancy expenses. We also reduced all other office and other direct expense compared to last year as a percent of net revenue, which reflects lower client service costs consulting and employee-related expenses.

Our SG&A expense was 1.2% of net revenue, a decrease of 10 basis points. Turning to slide seven. We spent detail on adjustments to our reported fourth quarter results in order to give you better transparency and a picture of comparable performance. This begins on the left-hand side of our reported results and steps through to adjusted EBITDA, excluding restructuring and our adjusted diluted EPS. Our expense for the amortization of acquired intangibles in the second column was $22.1 million. The real estate restructuring charges were $101.7 million and the related tax benefit was $26 million. Below operating expenses are losses on the disposition of small nonstrategic businesses was $8.3 million, which is shown in column four. At the foot of the slide, you can see the after-tax impact per diluted share of these adjustments, which bridges our diluted EPS as reported at $0.76 to adjusted earnings of $1.02 per diluted share.

Slide eight similarly depicts adjustments for the full year, again, for continuity and comparability. Our amortization expense was $84.7 million. Our charge for restructuring was $102.4 million. Dispositions over the course of the year resulted in a book loss of $3.8 million. The result is adjusted EBITDA of $1.57 billion and diluted EPS of $2.75. Our adjusted effective tax rate for the full year was in line with our expectations at 24.8%. On slide nine, we turn to cash flow for the full year. Cash from operations was $608.8 million, cash used in working capital was $672.3 million compared with cash generated from working capital of $743.4 million a year ago. As we’ve pointed out in the past, working capital is volatile. In each of the previous 3 years, we had very strong working capital results.

And over the last 4 years, we generated a total of $1.4 billion. Our investing activities used $460 million. That mainly reflects our acquisition of RafterOne and our CapEx in the year. Our financing activities used $869.5 million, representing our common stock dividend and repurchases of our shares. Our net decrease in cash for the year was $719.1 million. Slide 10 is the current portion of our balance sheet. We ended the year with $2.5 billion of cash and equivalents. Slide 11 depicts the maturities of our outstanding debt and our diversified maturity schedule. Total debt at year-end was $2.9 billion. As you can see on the schedule, we have $250 million maturity in 2024 and then our next scheduled maturity is not until 2028. In summary, on slide 12, our teams continue to execute at a high level.

I would like to again recognize the accomplishments of our people and the strength of our balance sheet and liquidity have us well positioned to continue our track record of success, both financially and commercially. And with that, I’ll turn it back to Philippe.

Philippe Krakowsky: Thanks, Ellen. As you can see from our results, our strategy, talent and culture continue to drive innovation, creativity and collaboration that fuel our clients’ success in an increasingly digital economy. Over the past 3 years, we’ve organically added $1.2 billion of revenue to our business as well as increased adjusted EBITDA by over $360 million since the start of 2020. Credit to our teams for those very strong results. Throughout this period, what we’re seeing play out are the accelerated technology-driven shifts in media and consumer behavior that our company had anticipated and against which we’ve made significant investments. Our expertise in first-party data management, performance media and accountable marketing solutions are all areas relevant to marketers looking to build their brands while also delivering business outcomes.

Vital to our strong performance are our media, data and health care offerings. These specialized assets have evolved their offerings to combine marketing services with emerging communication channels and technology is to help clients find new ways to identify and interact with individual consumers. As you saw in October, we continue to look for strategic areas of investment. With our RafterOne acquisition, we brought a talented and specialized team into the IPG network, to architect and implement scaled sales force solutions that connect brands with customers through end-to-end commerce experiences in both B2B and B2C settings. The RafterOne team will help us deliver creative campaign that work smarter for our clients by building meaningful relationships in digital marketing platforms.

Enterprise marketing suites like Salesforce and Adobe formed the foundation of so many brands marketing technology stacks, and our company can serve as a bridge between those brands, their consumers and these platforms, strengthening every touch point in the customer journey. We continue to invest in this important growth area and recently announced that we brought on board our first Chief Commerce Strategy Officer. He joins us from Accenture where he oversaw their omnichannel commerce practice. At IPG, he’ll connect our existing channel and platform expertise, including strong and scaled teams at MRM, RafterOne, reprise media and IPG platform services as well as others across our entire portfolio. And he’ll orchestrate how our company supports clients as they build out commerce solutions and integrate them with a full breadth of their marketing programs.

Turning now to the highlights of agency level performance in Q4. As we’ve mentioned, results were once again led by our media, data and technology offerings. Media performed very strongly to close out a successful year. And during the quarter, we saw a series of notable wins, including Celebrity Cruises at Mediahub, Energy Australia, the REIT tension of major client Merck and the addition of assignments on AWS at initiative and the onboarding of Moneysupermarket Group at UM where earlier this week, we also announced that we welcomed the new Global CEO to the agency. As we speak, IPG Mediabrands is also hosting their third annual equity upfront which provides opportunities for clients and our agencies to engage directly with diverse owned media partners, including black, API, Hispanic and LGBTQIA owned media which is vital to establishing the kinds of partnerships that can change buying patterns in the industry.

Acxiom continues to be a strong contributor to the performance of our media agencies as well as others in the group who’ve incorporated audience-led methodologies into how they develop strategic insights and creative work. During the quarter, Acxiom brought in new logo wins and contract renewals in the automotive, CPG, financial services, insurance, retail and travel and entertainment sectors. They were recognized as a leader in the Snowflake Modern Marketing stack report and also launched a new integration with a customer data platform, Telium to enhance deterministic modeling capabilities. Turning to IPG Health. That network continued to deliver strong results for us in the quarter, compounding very strong — excuse me, again, trailing growth since we created the group approximately 15 months ago.

While growing with nearly every existing client, IPG Health also focused on expanding its presence globally through some strategic alliances, notably in Europe. And the caliber of their creative work was honored at the 2022 M&M awards, where the network was named large Healthcare Network of the Year. At our global advertising networks, we continue to see the benefit of our investment in strong differentiated agency cultures which are driving distinctive ideation and creativity, and we’re seeing that recognized again and again in the industry. FCB won significant accolades during its first full year under its new leadership team, who was named as 1 of the 10 most innovative advertising agencies of 2022 by Fast Company. It was honored as the #2 network overall in Cannes and was once again named Festival’s top rank North America network, thanks to powerhouse offices in New York, Chicago and Toronto, which it bears noting are all leaders in leveraging data to power audience insights and creativity.

With a new CEO in place at the beginning of the fourth quarter, McCann saw new business wins with Smirnoff which make it part of the Diageo roster and post-consumer brands. McCann also launched work for recently won clients Converse and Prudential. Additionally, the agency was named Network of the Year to 2022 EpicaAwards for the fifth time at 6 years and McCann New York won Epica innovation Grand Prix for Mastercard’s Touch Card, the accessible card standard for blind and partially cited people. More recently, McCann also announced a series of senior organizational changes, elevating key internal leaders and adding new executives to the agency. MullenLowe Group continued to secure new business as it had throughout the year. With the addition of Ferro International, , National Highways in England, Lifestyle Fashion in India and the Barcelona football club in Spain.

We also announced the new global CEO for MullenLowe promoting the key female leader from within our organization, who’s known across the industry as a champion of creativity, a strong growth driver and someone fully committed to diversity and inclusion. Among our domestic independent agencies as part of the agency’s goal to help reshape our industry, the Martin Agency announced their commitment to hire a minimum of 50% directorial and editorial talent from underrepresented groups for all their video content production. At our earn and experiential agencies, performance was led by Octagon, Jack Morton and Momentum, all of which posted strong growth in the quarter. With more than 3 decades of World Cup experience, Octagon was very active with a range of clients at this year’s tournament.

For example, with a long-time client Budweiser, the agency ran a range of on-site activations in Doha, managed complex global influencer campaigns and hosted nearly 0.5 million consumers who are fans and viewing events around the world. Jack Morton continued to deliver outstanding performance and launched a sponsorship consulting practice, which has dubbed Jack39 and continue to build out JackX, which is their global experience innovation practice which creates events of the combined content with Web 3.0 times. Among our public relations firms during the quarter, Golin had several wins, including a product launch for new alcohol brands, corporate communications work for food products and services brand and then being named the influencer AOR for household appliances manufacturer globally.

Weber Shandwick announced new client wins with HP in North America and IKEA and the U.K. And the network also launched what it’s calling the business Society and Society Futures, which is a C-suite offering that combines public affairs, corporate affairs as well as organizational design and consultancy. During the quarter, DXTRA Health posted strong gains, winning a large global oncology assignment for a major pharma clients. And in addition, its leader was named to PR Week Health Influencer 30, which is the annual list of most influential individuals in health care communications. At the holding company level, as you know, we have a long-standing commitment to ESG and DE&I as key strategic priorities. And as you may have seen last week, we announced that IPG has been included on the Bloomberg Gender Equality Index for the fourth consecutive year and was recognized for the first time as a top-rated ESG performer by Sustainalytics.

We were also once again included in the FTSE for good Index, and Newsweek’s America most Responsible Companies 2023 and Forbes featured us on both its America’s Best Large Employers list as well as the world’s top female-friendly company for 2022. As a business in which human capital is so vital to our success, our culture, including an intentional approach to ESG has long been an important part of our strategy for attracting and retaining top talent, whether in strategic, creative, data analytics or engineering roles, or across a range of other skill sets that have become key to our evolving offerings. Looking ahead, we believe IPG remains well positioned for the future. Much of our growth in recent years as well as in 2022 was fueled by disciplines that most actively tap into our data and precision marketing capabilities as well as our exceptional health care marketing offerings.

These are growing parts of our portfolio that continue to develop into more structural and secular revenue streams. We know the world in which we live is increasingly digital and that more than ever, clients need help from us in using audience-led thinking to solve for a widening set of business problems and opportunities. We’ve been leaders in this space and 2023 will be a year in which we consolidate those gains and prepare to further evolve the way in which we deliver this expertise to marketers is to elevate the value of the services and solutions we provide. In addition, we’re confident that our commerce and experiential disciplines, which not today figuring as large in our revenue mix will continue to grow going forward. As stated earlier, despite the broader uncertainty that we’re seeing at a macroeconomic level, we expect to deliver growth in 2023 of 2% to 4% on top of a very strong record that has compounded for a number of years.

And consistent with that level of growth, we foresee adjusted EBITDA margin expansion to 16.7%. Of course, another key area of value creation remains a strong balance sheet and liquidity. And our ongoing commitment to capital returns is clear in the actions that were announced by our Board today, which also speaks to the confidence in our strategic position and future prospects. Part of our balanced approach to capital allocation, we’ll continue to further invest behind the growth of our businesses by developing our people and continuing to differentiate our offerings. This includes a disciplined approach to M&A focusing on opportunities that are consistent with strategic growth areas, primarily commerce and Performance Media, business transformation and consultancy.

We thank our clients our people and those of you on this call for your continued support. And with that, let’s open the floor for questions.

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Q&A Session

Q – David Karnovsky: Hi, thank you. Philippe, you noted client uncertainty at a conviction to stay invested. I wanted to see if you could provide some insight into your conversations with marketers, how they manage that balance and kind of what factors are keeping them tipped into the side of remaining in the market? And then just on the guide overall, that range is a little wider than we’re used to seeing. Is that all due to the economy? And should we think of macro is maybe the main driver in pushing you towards the lower or upper end?

Philippe Krakowsky: Maybe I’ll take them backwards if that’s okay with you. I mean I think if you think about our budgeting process, right, it’s bottoms up with our operators. We do, in fact, as you suggest, go client by client. We look at pipeline. And then with our larger clients, obviously, we’re able to engage with them directly. And I think what we’re pointing out there is just that I think what’s happening is that the caution that we’re seeing is less a function of the specifics of what’s going on right now. I think it’s just the open-endedness, the concern about a potential downturn somewhere along the line as we get further into 2023. But again, if you go back to how we build the budget, that bottoms up, look at clients, factor in the pipeline, clearly factor in a view of the macro, and we’re going to have a geographic or a client or even a business mix that’s specific to us.

And then we did call out a couple of places. As you know, I think we’re quite direct and kind of clear about what’s going on in the business, where are we taking the business. So we call that a couple of places where some things require attention and some things are having an impact as we look at the year ahead. So I would say that, that’s how we got to the range the fact that the range is broader than one would see in other years is reflective of that sense of uncertainty. I think you’re seeing broader ranges when companies are going out there. And I would say we’re comfortable at the midpoint of that range.

David Karnovsky: Okay. And then maybe 1 for Ellen. I wanted to ask a question about longer-term margins. So as IPG pushes to become more of a higher-value solutions partner, as you guys raised it, how does that potentially impact your margin trajectory? Should we necessarily think of higher value services is translating to higher margins in addition to higher growth? Or are there other kind of considerations like specialized labor that could offset that we should consider?

Ellen Johnson: Sure. Thank you for the question. Very optimistic about the opportunity to increase our margins going forward. And I would point to, we have a long track record of doing so. I mean if you look at the past couple of years, we’ve increased our margins 260 basis points since 2019. So I think it’s a combination of several factors. One, as you point out, I think high-value services is a continued opportunity for us. But also, I think we have a good track record of translating growth profitably into margin expansion. We manage our costs in a very disciplined way. And we’re continuously looking at opportunities on business transformation. We have a large portion of our revenue in shared services. We manage our real estate portfolio centrally. So put all those things together, I do think that there is opportunity for margin expansion as we move ahead.