The Interpublic Group of Companies, Inc. (IPG) Earnings Call Transcript & Summary

Good day, everyone, and welcome to day 1 of UBS' 50th TMT Conference here in New York. I am Richard Eary, and I head up UBS' media franchise in Europe. And today, I have the great pleasure of hosting Philippe Krakowsky, Chief Executive Officer from IPG; and Ellen Johnson, Chief Financial Officer, for a virtual fireside chat. Just before we get started, if anyone joining the call today has any questions for Philippe and Ellen then please use the conference app and submit questions, and I'll be more than happy to ask them on your behalf as we get through to the end of the session. So Philippe, Ellen, thank you very much indeed for joining today. Welcome back, Ellen, and welcome Philippe and many thanks for being here. I think it's been pretty much an extraordinary year for everyone. And I think if we sat here last year, I'm not sure many of us would have forecast or predicted the strength of the recovery that we've seen this year. I think for IPG now, on your guidance, is now 6% above 2019 levels for this year and the broader agency groups are probably 2% to 3% above. If we look at Q3, the strength was probably even stronger. Looking at IPG or your numbers, 11% above Q3 '19, the broader agency grew 5%. And again, I think from listening to the ad panel this morning where we had Magna, Zenith and GroupM on the stage, it looks as though that strength is going to continue into next year, subject to a few probably puts and takes, but the broader universe was forecasting 9% to 12% advertising growth for next year, supported by a cyclic recovery, U.S. midterms, sport events, continued strength in digital. So hopefully, a very good backdrop as we transition into the next 12 months.

So maybe before we go into sort of like some big high sort of level questions, maybe for Ellen, maybe if we can maybe touch on probably what people are wanting to hear initially is that, has there been any sort of fallout from the new variant of COVID recently or any sort of supply chain issues that may derail a fourth quarter or have an impact as we go into next year?

Well, thanks, Richard. And as I said, it's nice to be here, although it would be nicer obviously still to be live. So we'll hope that's the case to next go around. At the macro level, I don't think that I would say to you that we've seen anything that would lead us to say anything or comment differently relative to what we shared with investors previously. So I would say tone of the business remains solid. It's an interesting time because you're asking those 2 questions at a time of year that seasonally got a bit less clarity to it, right? So there is not new news in the fourth quarter with inherent flexibility and client budgets heading into the holiday season with project assignments that are definitely a bigger factor in the fourth quarter. But I think we see a tone that's consistent with where we've been going back at least a couple of months now. So clients are interested in and committed to activating in the marketplace. I think pandemic specific, obviously, there's still the potential for some sort of unpredictability. And so the new variant, as we were saying prior to going on-air, has led to some initial wariness, right? But I think that's the extent of it at this point. And so I think it's way too soon to say whether it's going to have an impact, what that impact might be. In the same way that I think had it not come along, we would have asked ourselves what would the impact of colder weather be in some of the larger kind of northern hemisphere markets, right? So what I've observed, though, is as we've sort of gone through the public health crisis each time through, it seems like marketers have become better adapted at sort of figuring out how they're going to play in the -- as the public health situation moves around, right? So in April of last year, it was very different than when people started to sort of say, "Okay, how do we still stay in market? How are we going to engage." And then I think the government and the social reactions are also not as dramatic as in early phases of the crisis, right? So in terms of supply chain, I think our thinking is, if there is an impact to be felt it will be felt during the course of 2022. And we're still in the early -- well, relatively early phases of our planning process for '22. So when that's complete, we'll obviously share kind of where we're at. But we've got a client base that's scale. It's sort of national or it's multinational. They have a very integrated and sort of holistic approach to marketing. So I don't think they're going to look at a moment in time, and they're not going to want to pull away from a consumer saying, on a considered purchase, when they're part of the way through their purchase cycle and then walk away for a couple of months and let a competitor walk in and engage with that consumer at a point at which a decision is being made. So, so far, even in auto, we're not seeing a sign of it. And again, I'd say we'll go through the bottoms-up planning process, which is by client, by agency, by discipline, by region. And for now, we're not seeing anything markedly different than what we shared on the call in late October.

Just for way -- sort of on Q4, Philippe. I mean, obviously, as you mentioned, at the start of your comments about, obviously, it's a normal time of sort of volatility because of project-based work. Is there anything in there that we should be aware that is either positive or negative because I think that when people were initially looked at the full year guidance, people were a little bit worried of the sort of step change down in terms of whether that was a conservatism around Q4 guide. So just wondering whether there's anything that we should draw into that?

As I said, I think what we're seeing is consistent with where we were. And as we said then, I think that it was really more of a phasing thing and the fact that the recovery had been so pronounced in Q2 and Q3 and that the restart in 2020 had happened in the fourth quarter. So for us, we understand the compulsion, the interest in trying to look at the quarter-to-quarter and draw certain conclusions, but we're in this really unprecedented period. So I think that the human need to say, "Hey, from this and this and this, what do I extrapolate?" We're seeing a really strong year. And as you said, obviously, the news around what the macro market looks like for media and marketing, the forecast you saw today is pretty heartening as well.

If we look at sort of the big picture, I mean, the agency groups, as a whole, probably not necessarily ourselves because you outperformed through that sort of slowdown where we went through 2016, really second half of 2016, through to 2019 pre COVID, where industry growth, as a whole, for the agencies, in general, was sort of probably flat lining to a degree after, obviously, strong growth before that, if we look now coming out of COVID, I mean, would you suggest that we are now seeing a sort of a structural recovery in marketing services as we come out of COVID? Or is this much more a cyclical-level recovery that could maybe beat around? Maybe, if you can give us some thoughts on that.

Sure. I mean, look, in this year, clearly, I think what we're seeing is cyclical and structural, right? And so the nature of what we do as a sector means that we're always going to have that exposure to the cyclical because we've got clients across such a broad base of industries and geographies, right? So that's been a benefit. And as I said, the tailwinds look like they're going to continue next year. But I think significantly for us, when you think about sustained focus on a strategic objective and then on value creation. Our growth over that multiyear period where the sector has been flat, and we've been consistently up 3%, 4% annually. I think reflects that we've positioned ourselves and are capitalizing on some structural currents that have really been transforming the marketplace, right? And so I think that as awful as what we've all experienced from a public health point of view and as tragic as it's been, I think it's brought forward the trends in digitization of media and consumer behaviors, right? And those have been developing for some time, right? And we've been observing them going back away and then 3, 4, 5 years ago, we've been evolving our company and our capabilities to be ready for those shifts, right? And so I think the question is companies are going through -- they're focusing on and they're going through a digital transformation journey. They're trying to understand how do we go direct to consumers, how are we better positioned to engage in digital channels and have a much more immediate and direct interaction with whoever is in their franchises. And then data has obviously become immensely important regardless of the industry that you're in, and then the velocity of change keeps picking up. So I think inherent in your question is, is there something structural happening? I believe so, yes. I think that as we've evolved, you're going to see competitors and maybe some folks in some of the more direct adjacencies pivot, try to take advantage of this as well. And so it's how do you help companies in a very complex, digital economy? How do you help them pull together all of the pieces, the content and the messaging, the delivery of those messages, whether it's an AdTech ecosystem or in the MarTech ecosystem and then having set the whole structure up so that you're able to take that signal back on board and do intelligent things with it. And so -- and then do that at scale, right? So I think that from where I sit, across every touch point, the brand experience, the application of data, all of those are long-term, I think, net positives. The accelerated change clearly represents an opportunity if you've got the capabilities. And then I would invite Ellen to just chat a bit because, I think if you think about it there's financial performance going forward with a standard kind of underlying or ongoing growth. And then there is commercial models that begin to be available to us as an industry, definitely to us as IPG, as a result of these higher-value services that have to do with combining the creative side of the business and the data tech side of the business.

Sure. As Philippe mentioned, these higher-value solutions, which I'll call them, give them -- give us the opportunity to further diversify our revenue stream and really to focus on high-growth barriers. So for example, we have tech now that we can and do license. We have the ability to sell data. And these are things that help our clients better identify who are their high-value audiences or what's the optimal mix of media to use to reach them? And what's the right time to reach them? And what's the right frequency? And how do we help them avoid duplicating those messages? So these are all things now that with the combination of data and technology we're able to help our clients. And for us, it's a diversification, as I mentioned, of revenue streams in different commercial models. The other thing which I would say is that some of these solutions use machine learning and artificial intelligence. And what that does is it really allows us to increase our effectiveness of our offerings and allows us to measure it. And what that does is if we can have more outcome-based or performance-based measures and we can modify them to really adjust the KPI to what's most relevant for our clients. So it's a win-win situation. We improve the efficiency of their media, and we approve the results for ourselves. So it's a really exciting time.

Thanks, Ellen, Philippe. It was interesting that I think Zenith put up in the panel this morning where they presented an outlook over the last sort of 5, 10 years where ad spend as a percentage of GDP was sort of broadly flattish. And coming out in '21 and then going forward, there was supposed to be the sort of step change, which was, I think that they've talked about is obviously a boom period going back to where we were in the '90s. I don't know whether you'd sort of concur with that optimism or not?

I would agree that the opportunity exists, and that excites us, as I said, because we've been doing any number of things going back now 4, 5 years to position us to be able to bring these range of capabilities together. So I would say, yes, if you think about the way in which we currently engage or have traditionally engaged with clients, which is, as a provider of professional service, then when you integrate this layer of technology and data, you have a hybrid, which makes you a higher value provider of the service. And then there is this net new component where -- whether it's the kinds of models where we really can have true performance, compensation or the circumstances that are almost SaaS-like, where we can license tech and we can -- it's a consultant model plus something. So yes, I think that, that opportunity clearly exists.

Just on the technology side. And obviously, there's been a lot of changes in the industry from technology, IDFA, cookies. Can you just talk us through latest thoughts in terms of how you think that's going to impact the model in the industry? And how you're positioned for those changes?

Sure. I'm trying to figure out to sort of pick apart the strengths, right? So there is privacy, which in and of itself, I think, is going to be very, very key. And that has to do with what consumers' expectations will be of how we are respectful of their personal information. There is regulation which I think will be related, obviously, and yet may truck along in different pathways because as we know, what's going on in Europe may not be immediately sort of congruent to what happens in the United States, other parts of the world may tag along a little bit later. And then I think there's sort of innovation in AdTech where there's a lot going on and now trying to bridge the gap between AdTech and MarTech. So there's a lot of interrelated issues here. And sort of from the top, I would say that anyone that handles consumer data, and this was one of the reasons that really one of the things that informed our perspective early on, it was a, sort of, "Do you buy or do you rent the data." And the issue, I think, for us, was never "You're going to have to find data any number of places and pull together data ecosystems to solve for specific client needs and for use cases." But the first-party data management piece having that be core we felt was very important because anytime anybody handles consumer data, you become accountable to a higher level of responsibility from an ethical point of view, from a reputational risk to your clients' point of view. So even if it's passing through you, you take on that responsibility. So to our mind, it was important to actually take control of that and sort of roll up sleeves and full on, be in on that. And so Acxiom was really key to that. And you've got a company that has privacy by design at the core, and they've got a multi-decade history of approaching data in a way that's very transparent and has a sort of an ethical compass to it. So that was one. I think the second is addressability is coming, it has been for a while. The pandemic has clearly accelerated that as well. And when we see what's been going on in terms of the appetite that consumers have for content and the way in which we're seeing unbundling and over-the-top and lots of things that say that people are going to take on the content as they see fit. And so you've got addressable media, which I think is going to become more and more important. And then you need that really holistic 360 view of the consumers, right? And so I mean, that explains for us why it actually made sense why the Kinesso layer, which is where we build the APIs and the analytics tools so that the data is accessible and actionable by all the agencies. And what I see -- it's very funny, we were chatting just before we came on again about was to have been with a major client this morning at a sort of senior management top to top that got -- that became a virtual or gone, I'm here today, but global CPG client. And the refrain over the course of a couple of hours this morning to their immense credit was something we're seeing again and again with many of our clients. How do I build up my repository of first-party data? So how do I get more data that is truly mine? How do I get more value from the data that I have? Where do I find either ways to bring it to life or partnerships that allow me to then bring it to life? And you've got a very broad range of readiness for that. You've got some industries, some clients that are data poor and that are further behind and some that are very, very sophisticated in this regard. But everybody is purely focused on, I would say, kind of taking control of your own destiny when it comes to your data, strategy and your first-party data. And then I think the last piece is identity, right? Because essentially, as cookies go away, as device identification also kind of splinters further, what everybody is saying is, from that data, how do I build a graph so that I've got a clear line of sight? We say that, again, all of our companies and all of our clients that you really have to be immensely focused, audience-first. People say digital-first, we say kind of audience-first, because the deeper you go into and the better you're able to identify their existing audiences so that you can generate kind of increase the returns from your existing franchise and/or prospective audiences. And so again, and to Ellen's point, we can do some really interesting things with predictive analytics there. Again, this morning, it was terrific to hear a client saying that they are focused very much on -- consistent with the increase in digital spend, all of these other competencies, and we see that as super promising from whatever we say.

And I assume they are all complex to do the better as is for you guys?

Yes.

If we switch gears a little bit and just maybe talk about inflation. Obviously, inflation is on everyone's sort of minds at the moment. Can you just talk us through what inflation means for your businesses and the agency business as a whole? I would imagine as a sort of cost plus model or increasing in cost plus, it may be presumed as a positive effect if you can pass that inflation through to drive better top line, but it would be interesting to hear your thoughts in terms of how inflation you think will impact the business over the next sort of 12, 18 months?

Well, why don't I -- I will invite Ellen to start, and I may tack on a thought or 2?

Sure. I think it's been a really long time since any of us have been in an inflationary environment. And so much has really changed in business, in the economy and the industry since that time. So I'm not quite sure history would be the best indicator here. If I look back over the past year, basically since April of what happened, you can see it's been a real positive for our growth. Consumer demand is very strong and people have a lot of disposable income. But I think what's really important is what Philippe was talking about and using that CPG client as an example. There is an overwhelming urgency on the sense of many, many of our clients the need to undertake digital transformation. As Philippe mentioned, to get more first-party privacy compliant data. E-commerce has only just become -- it's still relatively small compared to what it can be and that trend really accelerated during the pandemic. So there is this urgency to drive transformation, to have more one-on-one relationships with your clients, to be able to go more direct to consumer. And all those factors are really good demand generators for our business and I think a real positive. And so I would point to not just sector or secular trends, but to the structural trends, which I really think are going to favor our industry and our business, in particular that I think some of the decisions we've taken over the past several years have made us really poised to be able to accelerate and to excel in this environment. And then going back to the high-volume services and products that we're talking about, which are really sold not on a cost plus but on different manners and whether it's performance-based or the SaaS-based opportunities we now have, all of those really give us a great opportunity for margin-accretive options. And I really believe will be positive drivers for growth in our business going forward. As far as -- yes, go on.

No, no. I think what's interesting is that, of course, the question around in a cost-plus model, is it the case that one can and one engages in those discussions with clients, but with a consumer base that does have a lot of disposable income. And I think it will lead potentially to a shift. It will be another sort of incremental sort of tailwind to a shift to more and more of the kind of very precise, very accountable marketing, which is where the industry is heading anyway or the industry should be. I mean as I said, where we've been sort of orienting the company for a couple of years now. So I think we may see it there as well, that it will be a function of needing to spend this dollar given that there's a tightening, where do I spend it and how much clarity do I have that it's linked to ROI.

Are there any sort of looking at things that may derail the ability to pass-through any sort of wage inflation? I think that talking to a number of peers, obviously, wage inflation has been running at sort of 4% to 5% this year, and obviously, will probably stay elevated next year. Is there any sort of things that will limit the ability to pass that through?

Maybe I'll start just there. I'd say a couple of things. One is, we do have certain compatibility in certain times to pass on inflation. The other is, I would say, in some of these -- as things become more measurable, the more things that you can charge based upon outcomes and performance, the less that becomes an issue. And lastly, even in a competitive environment, if there were to be more activity we're really good on the new business front. I mean you look at us -- even this past year and over the last several years, we've been net new business positive. So if the environment becomes even more competitive than it currently is, I feel like we're in a good position there as well.

Yes. I would just add that I think it's TBD, whether or not the wage inflation thing is there's obviously a fair bit being reported around it. Headlines, as I often say, tend to run either ahead or behind, but often ahead of reality. And I think last year, understandably, people were not moving around a lot. This year there was kind of a broader loosening and people said, "If in fact, there was pent-up demand, I'll look and think about what my next job might look like." But I don't know that, that's necessarily something that we live with for an inordinate period of time. So managing through that is something I think we'll be able to do.

Ellen, just as you mentioned there in terms of net account wins positive, obviously, the last couple of years. As we go into '22, it feels as though that maybe '22 is going to be a more normal-ish year, if that's the right phrase? Whereas obviously, 2021 was more elevated in terms of pitch activity where that was sort of a catch-up phase from 2020 or not, I don't know. But how does 2022 map out for you in terms of opportunities from offense and defense? And therefore, how should we think about that?

I would say it's really early to see whether '22 is going to be an elevated year from a pitch perspective or not. But as you mentioned, if you look at our past track record in those years when there is opportunity, we've done pretty well. But I think there's always opportunity to bring some more of these higher value, more consultative solutions to our existing clients. So even if there is not a lot of pitch activity, I still think there's plenty of opportunity for growth. We have more and more innovative solutions, and it's really our job and our responsibility to bring those to our clients and continuing to deepen those relationships.

Can you just touch on sort of mix now, in terms of revenues. Obviously, you've actually had a pretty positive mix in terms of both geographic and sector mix, which has obviously helped the growth profile of the businesses. I mean how do we think about that mix going forward? Is that still expected to be a headwind -- sorry, a tailwind for the business? Or does some of those growth basically really starts to slow down?

Well, I mean if I look at it, the fact of having strong businesses in some of the areas where there has been growth and having built those businesses over time. I don't think that those sort of more secular currents go away. So whether that's strong consultative media business, whether that's the data and tech piece, as mentioned, whether that is health care, which for us, is a pretty scaled business and has been a really strong grower over time and where we have both built outstanding capabilities and now as of a few months ago, sort of, realign some of those capabilities for what we think will be continued growth. And then I think the geographic mix has also been something which, generally speaking, is kind of a net positive to us, and I think all of those are still very much in place.

In terms of just on the health care side, I mean the health care side of the business has been phenomenal in terms of the performance. I think going back to 2017, it was like 23% of revenues and largely it was up to 26%. I mean can we continue to think of that in terms of, obviously, double-digit growth as we go through the medium term? Or when do that does to sort of growth rates start to slow?

Look, I mean, I think it's a bigger and bigger part of the economy everywhere, right? And so I think that's a leading indicator that would be quite positive. I think that as we've said on a number of occasions, it's a part of the space that we -- again, as we were evolving the business and reorienting things a number of years ago, we focused on it because there is a component to the business that is more technical and requires a level of sophistication that is greater and that's clearly an opportunity. I think if you're, as I said, sort of in a consultative plus kind of space with an interest in engaging with clients, there is a sophistication around this technology segmentation, putting intelligence to work behind the marketing. And for us, it's in a bunch of places. So it's the specialist agencies. It's also a significant component of what's been going on in media that's been driving growth. There's a sizable offering within the PR space. And we've got one of the 2 largest PR firms in the world, and it's a big part of their growth. And then I think as an industry, it's well positioned just because their R&D pipeline seems robust relative to a couple of years ago. And clearly, they've helped us collectively get through this extremely trying time. And so to my mind, that feels like all of those should mean that we can continue to see strong performance there.

From a company level, I mean, what are the major sort of potential headwinds there, if there are any, that you would sort of call out that sort of may derail things over the next sort of 12 months or maybe sort of have a bit of a drag on the business?

Well, I mean, I think as I said at the outset, the uncertainties around pandemic continue to be with us. And so you need to at least be aware, we're not seeing that kind of impact our line of sight to the end of this year. But as we go through the planning process for next year, we'll keep an eye on that. We will keep an eye on supply chain. We haven't seen it impact us to date. If there is sort of variant-induced economic hit, it will impact some of our businesses, which we're fortunate are relatively a small component of our mix. So experiential and events was hurt in 2020. And then the speed at which we can move this data-led approach through the portfolio, so places in any of our sectors, not specific to us, I don't think. But I think that businesses need to kind of evolve at speed to keep up with these changes or to be part of this ecosystem to be part of this connected framework, where in order to have the content you generate be impactful or really be meaningful. You have to have that understanding of the consumer at a very individual level. And then you have to have it set up so that you can push it out and take advantage of the ways in which the sort of broad technology infrastructure allows you to put these messages out. And so I think, to my mind, there's nothing that we're not sort of aware of, there's some macro uncertainty and then there's kind of the rate at which you can keep transforming the business, but I don't see anything that is sort of the tripwire as it were.

If we look at sort of -- obviously, as the business has evolved, and not just yours, but other sort of businesses within the sector. If you look at capabilities now, I mean, do you feel that there are capabilities that you'd like to bring into the business. And maybe you can discuss what those could be, big or small? Or whether you're sort of happy with the capabilities with inside?

That's a fair question. I mean I think we're fine. I think we feel that there are no material gaps. And so the portfolio has all of the component parts and all of the tools are sort of in the arsenal that we require. In terms of acquisitions, what might you see or where are areas of interest for us, I think unsurprisingly, right? So e-commerce is an area where we're strong, what I'd like us to be stronger? Absolutely, I can't imagine that anybody would say otherwise. So I think we'll look at all of the things that are net new and coming into that equation. So whether it's social commerce, whether it's influencer but again, with a tech underpinning, with something that sits underneath it that really does kind of drive to results. So that's one area. We've got business transformation capabilities in various places within the portfolio. That's another area where I think that where we define the right opportunity, the right fit, we would be thinking about and looking at that. Our M&A strategy has been pretty consistent. And I think we -- with the one exception of Acxiom, where we saw this rate of change in the data space and the need for something at that scale, that could do something very complicated very well. But to my mind, I think we're in a focused approach because we feel that we've got what we need to help clients. And when we see something, we'll clearly look. I think you have to also consider that right now, valuations are pretty high, but nothing jumps out.

You touched on transformation there. Obviously, with the Acxiom and then obviously -- subsequent obviously sort of evolvement of basically Kinesso. Transformation, obviously, with obviously the way the businesses are transforming the business is accelerated by COVID. Is there anything there that is a game changer that would allow you to accelerate that part of the business? Or is it much more sort of small add-on businesses?

No. I mean, I think, again, it's less about what we need to do to enhance those businesses, I think it's more of the connective tissue between those businesses and the rest of the portfolio. So CX, and again, I mean, whether it's an MRM, a huge -- Reprise, which is doing a great deal of e-comm work coming out of their sort of long-standing experience with the funnel -- deep into the funnel on the digital space. So I know, I think, for us, it would be measured, and I don't think it's -- like I said, I think we want to be strategic about it. But I think it's more in that business transformation components of commerce, connected commerce, I think that's where we're really going to be looking.

Ellen, maybe to bring you back into the conversation. Could we -- could you sort of -- as we think about margins for next year, and as we go forward, can you sort of like help us think about the puts and takes as we go into next year? Obviously, maybe you'll have some benefit in terms of depending what happens on bonuses, but then wage inflation, travel come back in. So maybe if you -- I know you touched on it on the results a little bit and you were going to update everyone probably on the full year results, but maybe if you can give us maybe your thoughts or updated thoughts in terms of how we should think about margin profiles as we go into next year and the year after maybe?

Sure. I mean, I would start with the fact that we've really have this algorithm of converting growth into profitable and expanding margins, and we've done that for a number of years. So I would start there. I would also add that I don't think we've reached a ceiling. However, coming out of this very unusual time, there will be a lot of ins and outs as we model 2022. I would start with what we know is permanent, and that we did a very large structural restructuring last year, and those savings, we feel really, really good about because of the nature of them. So whether we took out and streamlined layers of management, whether we focused more on near-shoring or offshoring or whether we reduced our real estate portfolio by 15%, those things will be about $160 million worth of savings. And then like I mentioned, those should be permanent. When you look more at the ins and the outs, as you mentioned, incentives, which are performance based, and we set our targets very earlier in this year. So yes, I do think incentives will normalize after this year. If you look at '21, we've had some extra leverage in our payroll because based on the very, very strong growth we've had, hiring has lagged. On the other side, tempo has run pretty high. So you'll have some ins and outs there. T&E, that's a difficult one. I think there will be pent-up demand. I think travel, in general, is a good sign. If you get past the first quarter and after the winter, we'll let normalize to something closer to 2019 levels, yes. Do I hope that there will be learnings from the pandemic kind of focus on sustainability with permanently change the way we do so things? I hope so. So does it wind up 70% to 80%? It's probably not a bad range, but you'll have to model it according to the cyclicality and the fact that there will be pent-up demand once it opens up. And then I would add these high-value services that I keep talking about. They should be permanently margin-accretive and really lead us to be able to expand our margins going forward. So the long way of saying '22, I think, will be complicated. We're not alone. I think we're in good company with a lot of companies facing similar things. But I would really go back, look at 2019, pre-pandemic, we were a 14% margin business. This year, we're going to be close to 17%, and we don't believe we've had a ceiling.

And Ellen, can I just draw on a couple of comments, just on the incentives. Maybe if you can, maybe provide a little bit more color in terms of what you stated so far in terms of the impact on incentives this year and what it is on a normalized year, so we can understand like what the potential positive benefit will be for next year?

Yes. I mean 2020, if you look at what we paid as a percentage of revenue, it was probably a little bit light given the year that it was, but -- so it wasn't 100%, but it was still a pretty decent amount. So I would go back historically and look at percentages of revenue in this year, yes. It will be elevated due to the fact that they are based on performance and our targets were set in the beginning of the year back in February when we didn't even have enough visibility to give guidance. And you can see us really have increased through April and July and even through the last earnings call.

And just can you touch on sort of talent and potentially, I mean, agency businesses have historically been quite of high-churn business. Presumably, as you bed down different capabilities, there is a potential to reduce that. Is that a material opportunity for you to help on the margin side as well to improve the talent retention levels as well within the business?

I think -- maybe I'll start and Philippe will jump in because Philippe has run talent for quite so long, so I don't want to -- but there's a lot of things you do to retain talent, right? Competitive pay is one, but a lot of it is about the culture and the values of the atmosphere that you represent. And we've had a value system that's been part of our DNA for a long time. And whether that is a respect and appreciation for diversity, inclusion, sustainability, as I mentioned, or media responsibility. For all those things, I think, are really key in creating an atmosphere that people want work in. We also really respect our agency brands and have unique personalities and cultures, which we think is a talent draw. So those things are all important. And we're becoming very creative in the way that we're actually recruiting people. We're looking at broadening the pools of people that we recruit from whether that's trying to bring working moms back into the workforce or to look at neurodiversity programs, which we have, and all of those things, we think -- and are showing up because we are able to and still attracting what we think is some of the best talent in the industry. So I'll let Philippe comment since he is the expert in this.

No, no, I wouldn't add a whole lot. I mean I think talent has always been a big part of our strategy, and I think it is to us in good stead to focus, as Ellen says, on the places where people engage with us, which is at the agency brands. And I think culture has mattered as well. And I think that it matters more actually and more in terms of attracting and retaining. We've got a quite stable sort of senior teams across the group. But I think that what you stand for and how you show up in that sense that as a company, you have a purpose clearly matters to people in the middle into younger staff. And again, in some ways, I think we believe that we're distinctive relative to peers there, and so we've clearly got to look at ways to attract and retain that have the full gamut. They have clearly the compensation component, but then they have the -- are you solving interesting problems in a holistic way and are you connected to an organization that you feel good about being a part of.

If I -- obviously, the tone of the conversation outside of what we don't know around COVID has been pretty positive. But if we just sort of conscious of time and just sort of end on, what do you see as the sort of long-term competitive threats to the business model? And what could come out of less feel that could derail the momentum that you're actually on at the moment?

I mean it's odd because I would just actually go back to my answer previously, which is, I think you can see what good looks like or you can see what it is that we are sort of focused on and where we are headed. And as I often say, there is no business, there is nobody we deal with on the compliance side who is not focused on and concerned about how their business is going to thrive in a more and more digital economy. And so to my mind that requires us to continue to move at speed to transform and to stay on the course that we're on and just make sure that we're sort of hitting the gas in appropriate measure. And so I think it's a function of staying on the course we're on and making sure that we're sort of at the right speed along the way. At a broad macro level, over -- well over a decade ago, everybody was sort of disintermediation on the part of X, Y or Z, I think that we've clearly demonstrated that there's a future if you bring that combination of professional service and data/technology layer. So to my mind, it's as much about continuing that change management journey as anything else. And then you'll probably see us do some things as we did earlier this year to continue to make sure that the portfolio is sort of appropriately configured, aligned internally so that we're -- I often say to our folks, "Be clear on what you're really good at. So stay focused on the 3 or 4 things your organization is great at and how it fits into this bigger hole, don't say that you're good at twinning because increasingly, it's impossible for anybody to be good at everything." But I think it's about sort of managing change and moving at the appropriate click.

Excellent, Philippe. I think we're sort of running up to tentative hours and sort of running out of time. So just to say thank you very much to both of you. Hopefully, we'll be able to do this in person next year. And I hope the families are safe, and Happy Christmas, and look forward to catching up in the new year.

Best to you as well. Thank you.

Thank you.

Cheers. Take care. Thank you very much indeed.

Cheers.