Operator: Good morning, ladies and gentlemen and welcome to the Omnicom Second Quarter 2013 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. As a reminder, this conference call is being recorded.
At this time, I'd like to introduce you to today's conference call host, Executive Vice President, Chief Financial Officer of Omnicom Group, Mr. Randall Weisenburger. Please go ahead.
Randall J. Weisenburger - EVP and CFO: Good morning. Thank you for taking the time to listen to our second quarter 2013 earnings call. We hope everyone had a chance to review our earnings release. We have 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've been asked to remind everyone to read the forward-looking statements and other information that's 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'd also like to remind you that during the course of the call, we'll 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.
John D. Wren - President and CEO: Good morning. Thank you for joining us on the call. We are now half way through 2013, and I'm pleased to say that our performance continues to demonstrate the strength, diversity, and stability of our business.
On a global basis, our top and bottom line was consistent with our internal forecast. As you can see in our deck, organic growth was 2.8%, and margins increased during the quarter. Regionally, our performance broadly reflected the different macroeconomic conditions in global markets.
Our business in the United States continues to grow at a steady pace that is slightly faster than the overall economy. In Asia and Latin America, we're experiencing stronger growth, and as you might expect, the Eurozone remains a key geographic challenge.
Before discussing the highlights of our second quarter performance, let me start by providing an update on the progress we are making on our key strategic initiatives. More than at any time in our history, our Company and the agencies are aligned around the common set of strategies that are essential to our growth. These strategies share a goal of helping us meet the rapidly changing needs of our clients by giving them access to the best people and the latest technologies where and when they need it.
First is attracting, retaining and developing top talent; next is expanding our global footprint and moving into new service areas; third is building upon our digital and analytical capabilities by investing in our agencies and partnering with innovative technology companies in key markets around the world; and finally, by delivering innovative solutions using meaningful consumer insights across disciplines and platforms for the benefit of our clients. Our progress is really a reflection of the caliber and contributions of our people.
I'm happy to report our agencies continued a tradition of creativity and innovation with the record year of (Cannes). Omnicom won more than 240 lines across all marketing disciplines, categories and geographies.
Let me just mention a few of the highlights. BBDO and DDB were two of the top three networks for the seventh consecutive year. Omnicom Media Group earned the most wins of any media agency holding company in the media category for the second year in a row and OMD Australia was Media Agency of the Year.
Ketchum was the only public relations firm to win lines across multiple categories. Finally, demonstrating our breadth and depth, Omnicom agencies for more than 35 countries, representing 145 brands won lines.
It's also worth noting that many of our winning Cannes entries were the result of multiple Omnicom agencies working together on behalf of our biggest accounts. This reflects an important trend in our industry as many clients are telling us that they want greater collaboration, cooperation and efficiencies around the world.
On the digital front, we're also benefiting from stronger capabilities that blur the lines between disciplines and geographies. We continue to see a proliferation of new platforms and an increasing desire from our clients to create effective campaigns that work across all media channels, technologies and devices.
As I said before, the way to succeed in this environment is to drive digital skill sets at every agency and partner with the right technology leaders. This allows us without bias or silos to develop and integrate the most effective digital strategies.
For example, at Annalect, our primary data and analytical business, we have incredible talent that is developing innovative partnerships and leveraging cutting-edge technologies and tools to collect data in real time and convert it into actionable insights.
Accuen, which already operates in the United States, Europe and Asia is extending its programmatic ad buying system into Latin America to service the growing needs of our clients in that region.
Last month, Annalect also announced the global deal with Salesforce.com that will allow us to use the Salesforce marketing cloud to build a suite of social tools. This partnership will support social media offerings across all Omnicom agencies that allow them to deliver more dynamic, real-time content. This is just one of many examples of our open-source approach to partnering with media, data and research companies. This strategy allows us to employ the latest technologies, and at the same time, reduce our investment in technologies that may become outdated.
Now let me turn to our second quarter results. As I mentioned, organic growth globally was up 2.8%. Revenue growth in the quarter was well-balanced between the U.S. at 2.7%, and the international markets at 2.8%. With the exception of the euro markets, all of our regions experienced solid growth. Randy will provide more details when he makes his remarks. As a result of our top line performance and focus on expense management, we continue to drive strong cash flow.
Our balance sheet remains extremely sound, giving us the flexibility to utilize our free cash flow in a disciplined manner for dividends, prudent acquisitions and share repurchases. Overall, Omnicom's performance this quarter reflects our commitment to delivering the highest quality work for our clients, expanding our capabilities to continue to effectively market across the globe in a digital world and building strong agency cultures.
I will now turn the call back to Randy, who will take you through the numbers in more detail.
Randall J. Weisenburger - EVP and CFO: Thank you, John. As John said, our agencies had an excellent performance in Q2, benefiting from their continuous focus on delivering new, innovative and insightful ideas and services to their clients, while relentlessly driving their own cost efficiencies. As a result, revenue came in right on track at $3.6 billion, and our EBITA margin for the quarter increased almost 20 basis points to 15.1%, bringing EBITA for the quarter up to $548 million. Operating income or EBIT for the quarter increased 3.3% to $523 million, and the resulting operating margin was 14.4%, also a year-over-year improvement of about 20 basis points.
Looking at the items below operating income, net interest expense for the quarter was $40.7 million, up $5.8 million from Q2 of last year and just about flat with the first quarter. The year-over-year increase is primarily due to the interest cost on the $1.25 billion of 10-year notes we issued last year.
If you remember, the first tranche of $750 million was issued early in Q2, and the second tranche of $500 million was issued mid-Q3. Together, they have a blended interest rate of about 3.4%. On the tax front, our reported rate for the quarter was 33.9%. While the rate was down slightly from last year, there were a few ups and downs in the quarter from discrete items that pushed the rate up just a bit.
For the full year, we still expect our operating tax rate to be around 33.6%, which is about where we are for the first six months. Net income for the quarter was $289.5 million, which was a solid increase of 2.4%.
On Slide 3, we show the computation of diluted EPS. The increase in net income combined with the year-over-year reduction in our diluted share cap of 4.6%, resulted in an EPS for the quarter of $1.09, which was an increase of 6.9%.
On Slide 4, we take a closer look at our revenue performance. First, with regard to FX, on a year-over-year basis, the U.S. dollar strengthened against most of our major currencies, except for the euro and the Chinese Yuan. The net result reduced revenue in the quarter by $18.7 million or about 0.6%. Looking ahead, if rates stay where they are currently, we expect FX to be negative by about 1% in Q3 and about 1.5% in Q4.
Revenue from acquisitions net of dispositions decreased revenue by $4.3 million and in the quarter we completed the sale of our recruitment marketing business. So for the next few quarters absent new acquisitions, we could have negative acquisition revenue of between 70 and 100 basis points.
With regard to organic growth, we had another very solid quarter, up 2.8% or $99 million. As we've talked about before, this quarter we were up against strong comparables, including specific Olympic related revenue of about $50 million.
A couple other areas worth mentioning this quarter. We continue to have excellent performance from our media operations, driven by both solid new business activities and new services. Our specialty pharma and healthcare businesses are benefiting from a combination of recent wins and increased activity from clients and our agencies in many of the emerging markets, China, Russia, India, the U.A.E, Turkey, Colombia and Chile to name a few continue to have strong double-digit growth.
Turning to our mix of revenue by discipline on Slide 5, brand advertising accounted for 48% of our revenue and marketing services 52%. As for their respective growth rates, brand advertising's organic growth was 4.3%, driven by strong growth in our media businesses as well as good new business performance in the second half of last year. However, this was offset to some extent by recent moves of Gillette and (Chevy).
Our marketing and services was 1.4% in aggregate. Within marketing services CRM was down 0.5%, primarily driven by declines in our sports and events businesses when compared to the second quarter of last year when they had the benefit of significant Olympics-related revenues. Our public relations businesses continue to have very good results posting organic growth of 3.8% and specialty communications had an outstanding quarter up 7.8%, predominately driven by strong results across the board from our specialty healthcare businesses.
On Slide 6 and 7, our geographic mix of business in the quarter was split 52% domestic and 48% international. In the United States revenue increased $44.4 million or 2.4%. Organic growth continued to be very solid, up 2.7% and acquisitions net of dispositions was down $6.7 million or three-tenth of a percent.
International revenue increased $32 million or about 1.9%, FX created headwind, causing revenue to decline $19 million. Acquisition net of dispositions increased revenue $2.4 million and organic growth which continues to be very mixed by region, increased this quarter to 2.8% or $48 million.
In Europe of the larger countries, Russia and the U.K. continued to perform very well, while Germany and France were down. In the U.K. increased spending by our consumer products and telcom clients led our traditional agencies especially our media agencies to a solid quarter.
The Eurozone markets in aggregate were down 3% organically and in Asia we had strong performances across most of the region with double-digit growth in China, India, Hong Kong, Singapore, Thailand, Malaysia and Indonesia, and in Latin America, we continue to have standout results in Brazil, Chile and Columbia.
Slide 8 shows our mix of business by industry. As the chart shows, we had strong performance in the quarter in the travel and entertainment sector, which was primarily driven by a couple of recent new business wins as well as the consumer products, telcom and pharma sectors which resulted from a balance of new business wins and increased spending. Obviously, we were down in the auto sector primarily due to the (Chevy) move.
Turning to Slide 9, our cash performance for the first six months of the year was on track and consistent with last year. We generated just over $700 million of free cash flow excluding changes in working capital.
On Slide 10, the breakdown of our primary uses of cash over the same six months included dividends to our common shareholders of about $107 million. The year-over-year decrease reflects the fact that we accelerated our normal January dividend payment to December last year. Dividends paid to minority interest shareholders of $60 million, and capital expenditures of $69 million. CapEx this year is down year-over-year, primarily due to a couple of sizeable office moves and a long-term lease renewal that occurred last year that had significant buildout involved. Acquisitions including earnout payments, net of the proceeds received from the sale of investments totaled $45 million. Share repurchases net of the proceeds received from stock issuances under our employee share plans totaled $492 million. All-in, we overspent our free cash flow by about $71 million for the six months.
Slide 11 shows our current capital structure. As we believe everyone is aware, we redeemed $407 million of our convertible notes during the second quarter for a combination of cash and stock. That reduced the amount of convertible notes outstanding down to $253 million and that coupled with the second tranche of senior notes issued in Q3 of 2012 brings our total debt balance up to just over $4 billion.
Also, year-over-year our net debt position increased by $377 million to $2.63 billion, primarily as a result of share buybacks over the past 12 months. As a result of the increase debt, our total debt-to-EBITA ratio stands at 1.9 times and our net debt-to-EBITA ratio is only 1.2 times. Our interest coverage ratio at 10.8 times remains very strong.
On Slide 12, we show our ROIC and our ROE metrics, both of which continue to be very strong. Our return on invested capital for the trailing 12-month period increased to 17.5% and our return on equity for the same period increased to almost 32%.
Finally on Slide 13, which tracks a total cash payout to shareholders shows that since 2002 we've returned just over 100% of our net income to shareholders through the combination of dividends and share repurchases.
That concludes our prepared remarks. There are several other supplemental slides included in the presentation materials for your review, but at this point I'm going to ask the operator to open the call for questions.
Operator: James Dix, Wedbush Securities.
James Dix - Wedbush Securities: Just three things. I guess, when you look at the growth within the advertising discipline, are there any longer term trends you think worth pointing in terms of organic growth and I guess also margin trends between your media agencies as opposed to the other agencies within that category, just curious on that. Secondly, just your thoughts on what the amount of pending large (pitches) is in the market at the moment, and in particular, what's your outlook for picking up some auto business to take advantage of your resources there. Finally, there has been some trade press on some renewed push by procurement, which I assume is ever present, or changes in some types of payment terms, in particular, how quickly they would be paying for certain types of services. Just wondering how we should be thinking about developments there. Is there anything really new there? Is there anything we should be thinking about in terms of modeling cash flow going forward?
Randall J. Weisenburger - EVP and CFO: That was long enough. I forgot the first question.
James Dix - Wedbush Securities: I've got it (ramped) down, Randy.
Randall J. Weisenburger - EVP and CFO: I'm kidding. I'll let John go.
John D. Wren - President and CEO: We'll start from the bottom up. In terms of procurement, there has always been pressure, there continues to be pressure to drive efficiencies. With respect to balance sheet cash flow, we've turned down and not accepted clients that we could have won because we weren't prepared to accept the terms that they were offering. We're not a bank. I think if you speak to my competitors, they'll both – all three agree with that concept. That's not what we're here for. Anybody who wants to treat us like a bank can go to a bank. The second (thing), pending large pitches, there is a couple around. We don't try to aggregate them. We just believe in ourselves, and we believe that if we get up to the plate, we'll score well. There is no – not to my knowledge; big car pitches up at the moment, but I have great confidence in the capabilities of the people who were on the Chevy business, that when one does come up, we'll have a very good chance at it. Then your first question...
Randall J. Weisenburger - EVP and CFO: On the car front, we have excellent roster of auto clients already, three major global accounts, so it's not like we're short of auto.
John D. Wren - President and CEO: But we always accept the next one if we can handle it. Then, in terms of your first question, which was the distinction in margins between the media agencies and the advertising disciplines, I think?
James Dix - Wedbush Securities: Yes.
John D. Wren - President and CEO: They are roughly the same level, Randy?
Randall J. Weisenburger - EVP and CFO: The media agencies have strong margins. There is more investment in the systems and technology, especially with some of the new areas of programmatic trading and I'll say digital marketing, behavioral marketing. I think we get a pretty comparable return on capital in both areas. That's probably all there, so we say about it. On an absolute reported margin basis, the media business is a little bit higher. You also asked about growth in advertising, the strong growth in advertising; the way we operate the business, I think a lot of that is being driven by digital, or what other people might break out as digital. We operate our businesses on a much more integrated basis, and we're certainly seeing strong growth with providing services to utilize new technologies.
Operator: John Janedis, UBS.
John Janedis - UBS: Randy, there has been some concern in the market that the tone of business in the emerging markets slowed a bit, in both Asia and Latin America. I know you spoke to it briefly, but did you see any sign of that trend in China, India, or Brazil, as we exit the quarter or start the third quarter?
Randall J. Weisenburger - EVP and CFO: China and India were very strong for us. Brazil is not growing as fast as China and India right now. Brazil is a much more developed market in many ways.
John D. Wren - President and CEO: But there are – the balance of this year, we know as next year you start with a lot of major global events that will run through 2016, so we are very bullish about Brazil in the near-term.
John Janedis - UBS: Then separately, you had accelerating growth in the U.K. and it appeared very much in the Olympics comp and the European, I guess, money looks like it's stabilized, are you guys feeling a little bit more comfortable about the region going forward?
John D. Wren - President and CEO: Well, the U.K. was benefited a little bit by a switch in a packaged goods company which we were handling out of our French office last year this time and we switched to our London office, that plus the Olympics. So France wasn't as down as much as the reported numbers would have you believe in the U.K., which was very strong – was still very strong but not as strong as the reported numbers. Spain, Southern Europe seems to be bottoming out. I think you still have concerns and we still have some concerns in the very short-term about France and Germany until after the election, but nothing dramatic; just there is a bit of a headwind.
Randall J. Weisenburger - EVP and CFO: It does feel like its stabilizing. It's not necessarily rebounding yet, but one step at a time.
Operator: Craig Huber, Huber Research Partners.
Craig Huber - Huber Research Partners: Few questions one at a time if I could. Typically, you will give us what your net billings number was in the quarter. I think your goal was generally about $1 billion per quarter. What was it this last quarter, please?
Randall J. Weisenburger - EVP and CFO: We were right about $800 million with Chevy and a couple other thing, or Gillette. As I've always said, if a couple of big moves, big changes up or down going to effect the quarter. So, I think our base was very strong. Came in pretty much as we would expect. But with the Gillette, loss it just pushed us down below $1 billion.
Craig Huber - Huber Research Partners: Switching over to the U.K. I guess a little bit further on this if I could Randy or John. The 7.4% organic number there; how much was that impacted on year-over-year basis organically from the Olympics revenue got year ago? Also, can you just talk a little bit further about this switch of the business being booked at France over to London? That just basically start at the beginning of the second quarter – (indiscernible) talk about it?
Randall J. Weisenburger - EVP and CFO: I think the Olympics was around $15 million to $20 million in the U.K. I don't have the number at my fingertips, but I think it is in that category.
John D. Wren - President and CEO: I have seen the number for the third quarter of that move, but I don't have it sitting in front of me, but it was just we changed personnel and where the lead on that global piece business was from, at the clients request. So was neutral to the overall Omnicom, but if you're examining microscopically the countries, it had an impact on to the benefit of the U.K. and to the detriments of France.
Randall J. Weisenburger - EVP and CFO: We've talked about these things a few times. There is a handful of places in the world that are really global centers that you can really handle global piece of the business out of it. I think last year, and maybe it was the year before, we had a – where a piece of business moved from the Netherlands to the United States. When you deal in some of those international markets on these global pieces of business, when you have a move to either in or out, it can look pretty impactful in that market. If it happens to go into a place like the United States, it tends to get blended away a little bit because of just the size of the market. But as John points out, it's net neutral for overall Omnicom revenues. It just makes these country numbers look different than what the actual market economy is. Many times I think when we talk about revenue growth in a country, people take that as to the strength of the country or the strength of the market in that market, and that's certainly one aspect of it, but wins and losses are at times an overwhelming aspect of it, especially as we get to the smaller markets.
Craig Huber - Huber Research Partners: I'm sorry, just for the timing of this switch between the countries that basically start at the beginning of the second quarter?
John D. Wren - President and CEO: I don't know if it was late in the first quarter and just probably we didn't have an impact where I spoke of it in the last call.
Randall J. Weisenburger - EVP and CFO: I think the move started in the first quarter, but again it takes a little while to move a sizable piece of business.
Craig Huber - Huber Research Partners: Then my final question please, when you think about your Southeast Asian markets, China, maybe Australia, is the rate of growth in those markets from the comp – is the rate of growth slowing there given the economic slowness we hear now over there?
Randall J. Weisenburger - EVP and CFO: I don't think China is, Australia probably is – last year we benefited, we finally consolidated Clemenger and with that quite a bit of activity was going on around it, where we were able to expand the business, probably a little bit faster than normal so that's steady, but China still remains a very strong double-digit growth market.
Craig Huber - Huber Research Partners: You've not seen it slow at all to any material level?
John D. Wren - President and CEO: Not for our business, no.
Operator: Alexia Quadrani, JPMorgan.
Townsend Buckles - JPMorgan: This is (Townsend Buckles) for Alexia. Can you say how much of an impact of recent account losses had on the quarters specifically (indiscernible) Gillette as you called out and what we should expect in coming quarters?
Randall J. Weisenburger - EVP and CFO: No, that's not something that we really break out client-by-client.
Townsend Buckles - JPMorgan: I guess as we look at the U.S. growth it slowed a bit from Q1. I mean would you say that most of that would reflect those losses, if you can say?
Randall J. Weisenburger - EVP and CFO: The problem with the question is, I can take any bad thing or I can take any good thing and probably account a quarter to any one of them, but there is 100 of them every quarter. So to try to isolate and say that the quarter is down because of a Gillette – the Gillette move or I can also say it was up because of this move. This stuff balances out. We don't really look at it quite that way, we prefer to never have any account losses. We prefer to only have account wins, but unfortunately, both happened.
Townsend Buckles - JPMorgan: Your sale of Hodes, I think that's been a bit of a drag on the business in the past. Should we expect this to have a positive impact on organic growth and profitability going forward? Will that be meaningful at all?
Randall J. Weisenburger - EVP and CFO: It will definitely be positive on organic growth and margins going forward. Three years ago, it had a bigger impact, but right now, the impact because of the business, while it was not positive, was starting – was stabilizing at a very low number. So it was – the benefits of losing its headwind on organic growth, again, will be positive but not significantly positive and kind of the same thing with margins, it will be positive but not noticeably.
John D. Wren - President and CEO: If you recall, we didn't call it out specifically, but implied in what we said in 2010 of the agencies that we felt were no longer strategic to the business, and we wanted to, in an orderly fashion, dispose of them. Hodes was probably the largest of the remaining items on that list, and it just took us until now to dispose of it in an orderly fashion.
Townsend Buckles - JPMorgan: Then just lastly, if you could talk just generally about how you're seeing the second half of the year in terms of client sentiment in spending plans?
John D. Wren - President and CEO: Right now, we're in the process of reforecasting for the second half and we're not quite down with that process. But we haven't seen any major swings in attitude from what we had previously had forecasted.
Randall J. Weisenburger - EVP and CFO: Yeah, and we're certainly comfortable with what we've been talking about if you go on along. I mean, this quarter, the margins were up. Our agencies have done an extremely good job of pressing their own efficiencies. So I think we're certainly more comfortable with the full year than we were – well, I mean I guess we've always been comfortable with it, but it's certainly encouraging to see how this quarter came out.
Operator: William Bird, Lazard Capital Markets.
William Bird - Lazard Capital Markets: Yes, as a follow-up. Just as you look at kind of the second half and you think about kind of how some of your leading clients are behaving, would you expect kind of a growth profit that would be consistent with the first half or somewhat different?
Randall J. Weisenburger - EVP and CFO: We've got a little bit less headwind in the – certainly at least in the third quarter and we had – we've talked about it a couple of times, some specific Olympic revenue in the first half that as a headwind, we're not going to have that for the second half. I think all the client conversations that I've heard, remain pretty consistent with what we thought at the beginning of year. So at this point, I think, we think we feel pretty positive about the year.
William Bird - Lazard Capital Markets: As you alluded to earlier, there is some natural chop in business from quarter-to-quarter, is there anything to read into the moderation in U.S. growth in Q2?
Randall J. Weisenburger - EVP and CFO: I don't think so.
William Bird - Lazard Capital Markets: Then finally, can you talk a bit about just your strategy around programmatic buying in Accuen?
Randall J. Weisenburger - EVP and CFO: I'm going to let John do that. I'm going to go back to your other point about the U.S., I mentioned the Olympics spending, the Olympics happen to be in London, all the work that we did wasn't in London, so a piece of it was there, but frankly much more was in the United States.
John D. Wren - President and CEO: Digital buying of media is done by machines, is if you are standing on the floor of the NASDAQ as opposed to any traditional media shop. Increasingly the capabilities of what we can do, we are – I hold the long-term belief that eventually traditional media or a lot of traditional media will get purchased that way. So where we have a client need, we've been expanding the service and opening up the capability country – major country by major country and it improves every day, because it was more volume, more activity, it just expands and it can probably continue to expand for the foreseeable future in terms of what it can do.
Randall J. Weisenburger - EVP and CFO: The labor in that space is really in developing the technology and developing the insights. So, as of right now, while the buying uses a lot more technology, the development of that technology, the programing and insights that we give from one client to the next is still obviously very labor intensive.
John D. Wren - President and CEO: As you can imagine the publishers are changing their algorithms constantly. So, we are changing our algorithms constantly.
William Bird - Lazard Capital Markets: Just a final question, based on the numbers you gave Randy, just on the acquisition headwind from the (Hodes) sale. Is it roughly $100 million business and annualized and I'm just curious to what the organic growth was on that business?
John D. Wren - President and CEO: The number about right, about $100 million and it was costing us $2 million to $5 million a quarter in negative organic growth.
Operator: Anthony DiClemente, Barclays.
Anthony DiClemente - Barclays: I have one for Randy and one for John. Randy, just looking at the auto number being down 11%, I know a lot of that is owing to the Chevy move and maybe you can quantify the exact impact of that. But just wanted to hear, if there is anything organic going on in the automotive? We've heard that in the TV upfront, some of the (tone of) business was maybe slightly slower. So just want to hear if there is anything that we can isolate at auto? Then the second question for John, I appreciate your comment about growing your digital capability at your agencies. I am always trying to figure out there are these independent ad technology firms that pop up and that have material or legitimate businesses and business models. Did you think that the digital capabilities that your agencies are taking share from the independents or not? So I just also want to ask that question in the context of your need to build in digital via acquisition as digital matures, I guess the hope would be that more of your growth is organic as digital matures and the need for those bolt-on acquisitions actually sort of diminishes.
Randall J. Weisenburger - EVP and CFO: I may take a stab at both of them and then John can correct me on second one. So our major auto clients are doing quite well. I think the bulk of the change this quarter really was the Chevy move. We have a lot of different auto businesses. Our three major accounts are doing quite well, and the rest of it is probably – if there is anything else, it's probably project business. On the media technology front, there is a very interesting ecosystem that's been developed where there are a number of companies that are being established to hopefully sort of knock down roadblocks in the development of the space. As the space evolves, issues pop up and people try to attack those issues. Many of those technologies, the better ones we're partnering with were maybe even buying some of their services. I think that'll continue to go on for quite some time, as frankly, as the space evolves, more and more little roadblocks pop up as people move forward. Our people are obviously also developing solutions around those issues and we're happy to find the best answer for our clients and it's inevitably going to be a combination of utilizing solutions developed by third parties, developing some of our own solutions and there will inevitably be some places at least as of right now that haven't appeared yet that we're going to find solutions necessary to keep moving forward.
John D. Wren - President and CEO: The only thing I would add to that is with all the digital channels that are now available to reach the desired audiences, clients understand the complexity and they are actually looking for partners that can holistically handle both their digital requirements and their traditional requirements and whilst small very successful startups when you compare them to the size of a company like Omnicom may win $20 million which may return 10% growth for them. That's not much of a challenge to us and we think the long-term trend is clients looking for people that you can depend on to provide insights and to reach those audiences holistically.
Operator: Tim Nollen, Macquarie Research.
Tim Nollen - Macquarie Research: Two questions, please. First, nice to see a bit of margin expansion in the quarter after you hadn't really promised any necessarily this year. I just wonder if there is any updated thoughts on what we could expect from margins, particularly having seen you attained your margin target last year. Secondly, it might be a little bit philosophical, but seeing that the moderation in economies in emerging markets, I'm wondering if you can gauge whether emerging market ad spending might follow the typical cyclical patterns that we see in the U.S. and Europe, or if by contrast, and I get the sense this is what's happening, at least in China, just the structural growth in consumer spending means there just remains strong demand for your services.
John D. Wren - President and CEO: I should have written down the question, so…
Randall J. Weisenburger - EVP and CFO: On margins, we had a really good quarter. Our agencies are making great progress and are very focused on finding internal efficiencies. I don't think, at this point, we're making promises on margins any different than we said before, but we're very happy with the work that's been done in the quarter and are going to continue to put all the focus we can on finding every efficiency possible.
John D. Wren - President and CEO: The only thing I might add to that is, as we look to the third and the fourth quarter, we're not internally forecasting margin improvement, but we're not – when you compare just those quarters, but we're not forecasting that they will be down. So the gains we've had in the first six months will flows through. Your second philosophical question…?
Tim Nollen - Macquarie Research: Should I repeat the second one? Maybe I shouldn't have said philosophical. It's a scary word. It's just understanding kind of the cyclical versus the structural growth trends in emerging markets. So whether we get moderation in economies in China, Brazil, India, whatever the countries may be, does that lead to moderation in ad spending, as we typically see in the U.S. and Europe, or by contrast, is there just enough strong structural growth and consumer spending growth in these markets that your business could remain just fine?
John D. Wren - President and CEO: I think in our situation, it is slightly different. In the United States, we are very large. So we are impacted by GDP and (traffic). In some of those other markets, we don't have as much market share and we still have the opportunity to get – gain new clients as well as be impacted by their economic situation. So we haven't tried to drill down and understand every nuance about the differences between 7.5% and 8.5% growth in China, because for instance, we still have the opportunity to win new business. So, philosophically, we haven't spent the energy to try to gauge that impact because we haven't reached 100% market share yet.
Randall J. Weisenburger - EVP and CFO: Our client – it depends on the market as well, but our client base, I think at this point is largely focused on getting themselves more and more entrenched and established in those markets. So I would think that their spending patterns won't exactly follow the economy, which is good for us. Basically, it's saying that the structural growth kind of outweighs the cyclical growth or cyclical patterns.
John D. Wren - President and CEO: I have never said this before, but I'm sure one of my competitors is prepared to (come to) Chinese what their growth will be for the next year. So you might the question …
Operator: Matthew Chesler, Deutsche Bank.
Matthew Chesler - Deutsche Bank: Thanks for squeezing me in. You're more comfortable with the full-year, but are still reviewing the plan. You spoke a little bit about how you're coming in slightly ahead year-to-date on the margins. What's your level of comfort and increased confidence in terms of the top line momentum, or is it really just the conversion of that into profitability?
Randall J. Weisenburger - EVP and CFO: I think we had the toughest headwinds in the first half of the year, so if I go through and if we're right about those headwinds and that they just disappear, and it wasn't money shifted around, I think we feel pretty good with where we're at through the first six months, so that gives us more confidence in the numbers that we were talking about for the full year.
John D. Wren - President and CEO: You know just from following us, we're constantly doing bottoms-up and then looking at what we're doing. So whilst confident, we're not ones to overpromise at this point.
Matthew Chesler - Deutsche Bank: Yeah, I definitely appreciate that. We still have a half of the year to go. I'm just trying to understand, things seem to be certainly on track through this first six months, and some of the parts of the business are de-risked, and you're executing well. Just trying to understand what you think the risks are to the back half of the year and what could prevent a situation where we're not sitting here in January and you're telling us that you came in slightly ahead of what your formal plan had been?
Randall J. Weisenburger - EVP and CFO: There is always – there is a fairly big number every year in Q4, at the very end of Q4. It is very difficult for us to predict if that spending pattern follows, I'll say historic patterns, then we're going to be in – we're going to have a good year. We're going to certainly be able to achieve our targets and all the numbers that we've talked about. But it always makes us nervous, because frankly those numbers don't start to solidify until late in the fourth quarter. So, could that – could something affect that? Sure it could. We don't expect it will, because frankly the historic patterns are fairly consistent, but it's difficult to forecast.
Matthew Chesler - Deutsche Bank: You also had mentioned the strong performance of your specialty healthcare practice. Is that – how much of that is related to agency performance as opposed to – I'm just trying to get a color on whether you think that broadly speaking healthcare marketing has reached a point where seeing overall growth industry wide at this point?
John D. Wren - President and CEO: Well, I mean, we have had some new business wins. I think when you get outside of the United States, especially in emerging markets. I think there is a lot of potential growth for healthcare and in healthcare spending, especially as people move up into the middle class or what they call the middle class. The limitation on our side will be can we find in the talented trained people to take that business not whether it's healthier, it's not healthier, I believe it's very healthy and it's an opportunity if we can execute against it in the correct marketplace.
Randall J. Weisenburger - EVP and CFO: We also want some very good pieces of new business last year, some (pitches) that were out there. The revenue didn't really come through, the spending didn't come through to drive that. I think we're starting to see some of that now. Looking at some of our peers numbers, they are mentioning that healthcare is strong for them as well. I am not sure if it's as strong as ours or not. I haven't compared the relative numbers, but they are talking about healthcare positively. So I would guess hearing that market commentary that the healthcare category is picking up its spending, which makes some sense when I tie together some of the wins we had last year and the numbers sort of not showing up then, but they're showing up now and the overall backdrop. It has traditionally been a very good space. It seems like we're back on that track.
Randall J. Weisenburger - EVP and CFO: Thank you all for taking the time to listen to our call. Have a great day.
Operator: Thank you. Ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation and for using AT&T Executive TeleConference Service. You may now disconnect.