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

Well, good afternoon. Welcome to Citi's AppEconomy Conference. I'm Jason Bazinet. I cover the media and internet sectors here at Citi. We have disclosures available to the right of the video player or under the Citi Disclosures tab if you're viewing this via Velocity. I'm very pleased to have IPG CFO -- CEO, excuse me, Philippe Krakowsky joined us today. Philippe, thank you for joining us.

Well, thank you, and thanks for having me to chat this afternoon.

Of course, of course. And I guess for investors that have dialed in, if you do have a question for Philippe, if you type it into the question box, it will come to me and I'd be more than happy to relay it to Philippe. So maybe I can just start with a high-level question. I mean you've been, I think, at IPG for 2 decades, but relatively new to the CEO role, about a year, I think. And I just wonder what -- as you sort of look at the landscape for the ad agencies where IPG sits within that broader ecosystem. What are your goals, let's say, over the next 3 to 5 years?

That is a big question. So I guess I will take a bit of time with it just because it sort of frames up, I'm sure what the rest of the discussion is because I'd say 3 to 5 years, given the pace of change we're dealing with is actually a pretty meaningful horizon. So yes, 2 decades. And I think that the range of roles that I've played at the company probably forms the answer that I'll give you in terms of where we're headed. As you know, those roles include running strategy for the group, where we're seeing talent for the group. And we're clearly a professional services business that's in the midst of evolving and so the talent piece is important in terms of my answer to you. But then also running the media operations, which I think are probably the most forward-leaning in terms of digital and technology and data, and that's both pre and post the Acxiom acquisition because we were building out our own stack. And then lastly, I think one of the things I spent a lot of time doing is pulling together these integrated teams that we call open architecture, which I think are really vital because you're increasingly solving these very complex integrated business challenges. You said the advertising agency sector, I think we're clearly kind of evolved beyond marketing services to now marketing services plus that data and tech component. And so I think there's a big opportunity for us to be more valuable kind of higher order partners to our clients. And so those 3 to 5 years, I think, are informed if you -- as you do look carefully at what's going on in our business, we've been evolving the business probably over the last 4 to 5 years. And I think that really lays plenty of bread crumbs in terms of sort of you're not going to see a significant new strategic direction or some kind of a course correction. I think what you're going to see is a quickening of the pace as we become sort of a hybrid of data tech and marketing services, and then I think a heightened focus on execution and implementing the strategy that we've been pursuing, right? And I think that in a nutshell, that strategy is to build and leverage the tech and data capabilities to elevate the value of our services to combine those marketing and creative kinds of areas of expertise and those disciplines, which reach across so many communications channels with these new skill sets that make the work more impactful and more accountable. And then ultimately, I think, the lean in is towards helping clients adapt to and succeed in an increasingly digital economy. Right?

That makes sense. That makes a lot of sense.

I think at a macro level, that's really it. And so keep the client lens first and foremost. You've written about this in the past, when we embedded digital into all of our agencies going back quite a few years. We didn't silo them. And so that will continue. The data and tech component will continue. On the talent side, because we're a professional services business, I think that people would think that we focus on creative and strategic skill sets, which we do, but now we bring technology, e-commerce, data skill sets into the mix. And so in a funny way, '20 was appearing back on some of the older skill sets in '21, where we've added a lot of people into the organization was, a quickening of the pace like I said, in refreshing and building even more of that into the mix. And then I'm sure we'll talk about sort of the things we're leaning into, which are the forward-looking bids, which are addressability, I think, identity resolution and the kinds of areas where you're thinking about putting data to work really applying data into marketing in ways that are more sophisticated. And I think clients are excited about because they make the work that we do with them more efficient, they give them kind of more of a parity position in the digital ecosystem, which I think is important to them. And then, again, I'm sure we'll talk about some of the continuity in terms of our commitment to sound financial fundamentals. You promoted me or you added a growing responsibility, I mean.

I had a choice .

I'd say that -- like I said, it's this idea of focusing on the areas of marketing that are the most dynamic, which are being driven by digital technology. So personalized interactions with consumers, an on-demand kind of economy, you're solving for sort of fragmentation as a marketer. And at the same time, there's been a lot of opacity in the digital ecosystem. So how do you become kind of more a master of your own destiny or how do you take charge of your own destiny so that I'm not using gender language there. But it's -- I think we see a lot of opportunity that has been reflected in our performance in the last couple of years. And it's also a question of continuing along that path. And as I said, trying to kind of step on the gas in terms of some of those developments and just execution.

You know, it's so interesting because I always have to be, on the one hand, a little bit humble when I look at sort of the multiples that the buy side is describing to businesses. But then on the other hand, have to sort of lean in and express a view when I just see sort of a disconnect between what TheStreet is paying for a company and what I think it's worth. And for IPG, it just strikes me that the disconnect is profound in that when I look at sort of the performance of your firm, you've grown faster than a lot of peers. I think at least the agencies that I cover, they grow earnings every single year unless there's some sort of macroeconomic adverse effect like the great financial crisis or COVID. And yet the multiples are so low that I have to -- I think that, that piece that you talked about is sort of leaning into the tech side where TheStreet begins to think of you more as business services and less as someone that just traffic sort of in media buying is sort of the key to the puzzle. So I'm glad to hear you say or articulate your strategies the way you articulated them. So 1 question. I know that the buy side always tends to take a very complicated story and it tended to still any company down to 1 metric, right? And it's sort of how the buy side sort of gets operating leverage, I guess, across the portfolio. But for a firm like yours, all they seem to care about is really organic growth. Like that organic growth number is the key sort of metric that everyone uses. And you guys have done a lot better than peers, but I'd love to just understand if you could unpack backward looking why you think you've outperformed your peers? Is it Open Architecture? Is it Acxiom? And how confident can investors be that your outperformance can continue vis-a-vis the industry over the next 3 to 5 years?

Well, I mean, I think if you look at it, to your point, you try to unpack what has happened and kind of the backward-looking piece of it. I'd say clearly, our goal is continued outperformance, right? And obviously, the comps get tougher because we've had consistently strong results. But I think that there's been so much volatility because of the pandemic. And one of the things that's been interesting is that when people start focusing on that multiyear horizon, and then look back at a 2- or a 3-year growth stack for a company and you get a much clearer line of sight into sustainable performance or whether or not what you're seeing is, as you said, that the macro or the cyclical that's impacting the sector or whether it's something specific. And for us, I think it has been the decision to move away from a more traditional approach to it, to your point, where you are just a broker or a trader and where what you're clearly saying is the opportunity to take the services we provide, add this layer of intelligence of software and now with Acxiom data and then have it means that the value of the services clearly is heightened. And then also begin to create and unpack some new models and some new ways of generating growth that are more interesting from where we sit because you do see some new opportunities with the software component and where the data component of things. So I guess I'd say -- back to your first question, clearly, some competitors have seen what we've done. They're going to look at that playbook. They're going to then follow which makes sense. And so for us, the challenge is not to stand still, right? And so I think that we're coming out of the pandemic stronger when it comes to the relevance of our offerings because some of the bets we've made early, have only been accelerated by the pandemic. So digital behavior among consumers, the need on the part of marketers to accelerate their business transformation and their adoption of ways to go to market that allow them to really engage directly with consumers. And as I said, to take control over their first-party data. And so all of those things we see as opportunities to keep pushing along on that growth. I think integration is, as you said, an Open Architecture for us. That's a 15-year journey where you're always kind of work-in-progress, but that's also being validated. And then certain areas whether it's health care, whether it's media services and then data and tech, those are places where we're strong and places where I think there continues to be sort of tailwinds. So to our mind, we understand the challenge, but we embrace it, and that continues to be the goal is to keep showing that consistent multiyear outperformance.

That's great. So a lot of investors know that you -- that IPG has a particular strength in health care, and there was an announcement you made maybe 6 months ago, I think it was, where you decided to combine or align FCB Health and McCann Health into 1 new entity called IPG Health. And I just wondered what prompted that change? And how has it been received by clients? And if it succeeds, how should we, on the outside sort of look at your results and see that whatever changes you've made have worked?

Well, look, I mean, I think that is a sort of as a vertical, that has been a standout performer for us. And so we've been investing behind it for some time. And what you have there are clients who are pretty sophisticated when it comes to the need to have the investment decisions they made guided by as much information as possible, be as precise as possible in terms of how they reach consumers. And then also to do that in a really, really careful, thoughtful privacy compliant way. So I mean we've seen in that space clients for whom some of the trend lines that we've been observing and then some of the bets we've been making for some time were in our favor. And then it shows up across our portfolio. So there is a significant sort of inside of media, we do quite a bit with clients in the health care space inside of a Weber Shandwick, for example, in the PR space. There's a sizable and robust quite healthy health care practice. Their sibling agency, Golin, is building something like that. But the 2 sizable specialist agencies, I think to my mind, so as you say, kind of a year plus, into the job, a place where I wanted to be sure that we were putting really light assets into alignment was in this space, right? And so what we basically have is we've got these very strong brands that have a lot of sort of congruence or a lot -- there's a lot of complementarity to them, right? And so their specialty services that are one that might not be at the other, there's geographic fit where, again, we felt that there was real upside. And we've generally wanted -- we've looked at opportunity, and we've wanted to solve for it organically. We've obviously gone external with M&A when and as necessary. But generally, it's been an organic fix to these sorts of things or an attempt to look at opportunity and realize it that way. So I mean I think what informed it was the sense that they're strong assets. They're accretive to us in terms of their growth and their margin. And by aligning them -- and in essence, I think they were originally incubated many years ago inside the ad agencies. And this has really gone to the point where there was enough maturity that we wanted that, like I said, specialty services. You got 5,000-plus people you want them to proactively manage their careers. So we want to be sure that instead of having to leave us, we find new roles for them in this bigger sort of network. We get sort of shared investment in new capabilities and skill sets. So I think for us, that was what drove it and clients have responded quite positively there. And they sort of see the benefits of some of what I just shared with you. So I think that you'll just see it be something that continues to -- it will be reflected in our overall growth. And then you'll see the percentage of our overall revenue picture that it represents, and I think we'll track progress pretty clearly over the next few years.

Okay. Okay. What about supply chain? This is one of the more common questions we get sort of across our coverage universe is people are very nervous about the supply chain disruptions. Is that something that investors should be nervous about tactically over the next 12 months? Or do you feel like your clients have sort of figured it out, it's navigatable. There's not really going to be any sort of material implication for a firm like that [indiscernible]?

That's a really fair question. And I think the sensitivity to answering it in this format at this time is obviously just that where we are in the calendar is a little awkward, right? And so ultimately, we talked about this on our fourth -- on our third quarter call. We haven't -- at that point, we said we hadn't seen material impact, and I don't think we've seen anything that deviates from the observations that we made at that time. And then in terms of planning for the -- for '22, we're just about complete on that process. It will continue for, I'd say, the balance of this month. And then obviously, in February, we'll take you all through a pretty detailed look of how we see the year going forward. I mean I think the thing to remember is we have clients who skew to multinational or national in terms of scale, right? And so as we said, they approach marketing in a very holistic way and in a very integrated way. And so I don't think that they're going to look at a moment in time. I think they're going to sort of understand that there's a disruption that's in the macro system. But for example, if we think about a big considered purchase, automotive being the one that clearly comes to mind, do you engage with an individual on their purchase journey and then decide that because of what's going on, you're going to drop them for a couple of months and somebody else might jump the line and begin a dialogue with that person. And then when they really are in market or when the inventory flow is there, again, you've really lost out that opportunity. So I think that they -- our clients are pretty smart about saying, hold on a minute, is that a trade-off I'm willing to make when the payoff is what it is. So I think that if there's an impact to supply chain, I think it would be sometime in '22, maybe it's a timing impact. Maybe it's a where do budgets flow in terms of certain kinds of activities impact. But as I said to you, relative to the last time that we were in a position where we could make the disclosure nothing changed from that point to now that led us to think that we should raise our hand and share with all of you that something had changed.

Okay. So this is maybe -- I could be accused of talking my own book. But we -- as you mentioned earlier that you guys tend to trade-off of organic growth, and I can't help but think that since we're entering this new sort of inflationary environment, there's still sort of a debate about whether it's transitory or not. It certainly feels like a good guy, at least in terms of nominal organic growth even if it's nominal and doesn't really translate to a lot of real incremental earnings. Have you -- have we gotten to the point in the inflation narrative where you feel like that could, if inflation persists, be a benefit to your top line?

Well, I mean, look, I think you're right. I think it's nominal, right? So people look at our space and go, okay, GDP, GDP plus, is that nominal or real. We've been the outlier that we've been the consistent exception to the rule that does outgrow that. So I'd say, I don't know, it's been so long since inflation was a tree and our industry has changed so much. I don't think if you look at history and go, hey, here's -- but if you kind of go all right, it's been higher now since April, May last year, right? And so I guess what we've seen in that time line kind of falls into the so far, so good bucket, right? So if there's more economic activity, as you say, and if there's more macro growth, I think that is going to be constructive. I think consumers clearly, there's wage growth, there's disposable income, and it has fuel demand. And so barring some major disconnect. For the moment, I think we're navigating it. And I think that maybe a modest tailwind, that's my guess.

Okay. Okay. Okay. You mentioned one of your goals very early on was around talent retention, hanging on to folks. And it just seems like this is also a very strange labor market relative to history. We're watching labor force participation rates drop. We're watching sort of the velocity of consumers sort of -- or employee sort of switched jobs going up during COVID. At the same time, we're seeing real record growth in terms of small business formation, right? So a lot of new entrepreneurs, maybe gig economy or whatever. Is anything sort of noticeably different in the backward looking in terms of your ability to navigate this successfully to hang on to folks? Do you feel like you're navigating it reasonably well in terms of employees?

No. I think we're navigating it well. I mean I think the '20 -- there's I think -- again, because the headlines do go to parts of the economy that might not be directly analogous to us, right? And that we have a highly educated, highly trained, high -- I mean, again, professional services, so the nature of the folks who are part of our world and technology, you know it's a sort of an IP business. So I think that, that means that I don't think that the macro headlines are as...

Applicable.

Relevant. But it's not to say that they're not. I'm just trying to [indiscernible]. So I guess I'd say that for me, what's interesting is the segment of the labor market that's been really competitive for the last couple of years, has been that data and technology space, right? And I think for us, we incubated a big programmatic media business, which is a software-driven business that we organically built inside of our media businesses. We've got MarTech specialization at a number of our digital agencies. And then as I said, health care has a workforce that is -- that has specialized kind of higher-end expertise. And I think that -- we do run it like businesses that are analogous to the ones where we're competing for talent. So we talk about product road maps. We do a cadence of product development in scrums and the kinds of things that, again, you would see in software. And the difference is that people are making -- if you're really going to buy the story about the startup or they're truly distinctive and unique there may be 3 or 4 massive players in the tech space, then maybe that's talent we don't compete as effectively for. But if you want to work on big projects that are interesting and varied at a big company that has stability but a lot of dynamism to it, I think we've shown that we can actually compete. And I think other things that are interesting are, we source talent in unusual places. We've got a whole neuro-diversity talent initiative to bring folks in with some of the tech skills. We've got a lot -- we bring people who've been out of the workforce and help train them up so they can kind of get back on a lot of working moms in Europe, for example, for a lot of our more digitally and tech advanced businesses. And then we do a lot of our own incubation work. So we have a program inside of Kinesso and Acxiom that they come up with 50 or 100 ideas, they curate them and then they present them to our CFO, to the CEO of Media brands and to me. And then we literally end up deciding which ones we're going to invest behind. So there are lots of ways in which I think we compete for talent pretty effectively. And it is -- it's a challenging labor market, which I think will also probably find some kind of level.

Yes. What about account reviews, Philippe? It seems like there is this whole flurry of activity a couple of years ago. And then maybe you can correct me if I'm wrong, I felt like during the COVID period, everything sort of died down. Do you think it's going to sort of pick up again and we'll go back to normal or above normal since we went through this as well?

I'd say that I think 2020 was depressed, right? I think that '21, I would say, was active, it was busy, but not an explosive level of busy, right? And so we started the year with a couple of big wins that were exciting for us, say, a T-Mobile, for example, or Morgan Stanley E-Trade which was a really interesting media plus data combo for us. And then we kind of closed it in the middle, I think we had a couple of big new Open Architecture opportunities. I'd say to you that the thing that I think may make it somewhat different is, so '21 I think, was, like I said, strong, I mean, I think there was a consistent pipeline. I think '22 will be the same. I don't know whether there is kind of the [ trimando ] years what people -- or [indiscernible] years as people sort of refer to them. If only because some of the kind of activity that we do now isn't as -- like in health care, we had a really sizable win in the middle of the year that would have never gotten the level of industry attention that some of the more old CPG brands get, right? And I think it's because there's a little rearview mirrorism to the business where people still focus on things as they were. And if a client is coming to you and saying -- to an Acxiom and saying, can you redesign my entire unified data layer for my -- at the enterprise level, and that's a multiyear contract. They don't really want to -- they're not going to talk to the trades about it, and we're not going to -- so I think we may see less of the really bonanza years. But I think at the moment, what I think is that we've got solid healthy pipeline. And it's more so in the integrated Open Architecture type opportunities and definitely in media because that's where there's been the greatest uptake on data and tech.

Okay. So one of the things in my seat that sort of confusing as I look back to last year, and I think you raised your organic revenue guidance 3x, right? Are you sort of...

Oh, yes. Which was not normal.

No, it's not normal. And it's also during the same tenure when you're sort of the new guy, right? And so I don't know whether to infer that it was just a very uncertain environment or if it's just your sort of style to be conservative, but what sort of color would you give us around the unusual sort of raising...

I'd say that not would -- none of us get to go into and come out of a global pandemic, again, because I doubt we'll be around 100 years from now, right? So I think that it was more a function of -- there was a cyclical piece to it, which was just the economy bounced back I think, both sooner and stronger than anybody anticipated, right? And we wanted, I think, is not to be conservative, but coming off of a '20 that was so challenging and where we performed meaningfully better than peers. But I think we just wanted to be really transparent about what we were seeing and when we saw it. But I think we go back to a cadence in which we give you our view on the year, and then we track to that year. Now that's not to say that when you asked the question about kind of our growth relative to peers, I think there is a component to our growth. It has been not just about the cyclical. And so I think that, that still feels to me like it means there's opportunity for us, but you'll see that baked into our plan for a year when we walked you through it in February.

Okay. Okay. On the last couple of earnings calls, you highlighted media as an area of real strength. And can you just talk about what drove that? And are the sort of foundational elements in place for that to continue? Or does that go harken back to the fact that the economy sort of came back a lot faster and sharper than everyone thought?

No. I mean I would say that the performance in media has been there for us for, I'd say, 4 or 5 years, right? And so it goes back to the very first question you asked. Strategically, I think that -- very strategic, the place where now we're seeing it in more and more of the business. But it was the first place where we were seeing massive data flows back and a lot of signal on which we could act and clients who were keen to see what we could do to take all of that and increase the effectiveness of the work we do with them and then give them a stronger foundation from which to be kind of self-reliant in the digital ecosystem. So I think what, for us, we changed the model on media going back away now. And we walked away from what you said at the outset, which is being a broker trading or trading your own inventory and decided that being agnostic to the outcomes, being focused on outcomes and then going to clients with a more consultative model was where we wanted to go. And so one of our big agencies in that space, UM, is very early into that with -- their positioning with better science, better art, better outcomes for clients, and that really resonated. And now initiative has a whole way of taking kind of cultural velocity and then tying it into this data and tech stack. So for us, I think we see more and more opportunity there, right? And then at Reprise, which is also part of media brands, we've been building a really strong intersection of e-commerce and media investment. So we see a lot of growth potential there. Dynamic content is another place where the media agencies are well positioned to do more. And then we've got this really strong kind of media independent in our space called Mediahub that kind of grew up alongside Mullen. And as they've become more and more connected to the data and tech stack in the last couple of years, we've seen them perform really well. So to our mind, that's still a really dynamic part of this space.

Okay. Okay. Now Apple made some big changes regarding privacy. During the course really of 2021, and I think a lot of people expect Alphabet to follow suit. What -- is that something that is not relevant to your business? Is it incredibly relevant to your business? And if it is relevant, are you a net beneficiary of that?

Very relevant. So I think top line, very relevant and a significant opportunity, right? And so to my mind, if you think about -- again, one of the key reasons why for us, the Acxiom acquisition was so important. And instead of our, hey, we'll build it organically, the impetus to bring into the company a scaled asset with very deep first-party data management expertise and a lot of credibility in the space. There was a story actually in one of the industry papers today about clients being interested in data clean rooms, right? And so I think to my mind, clients are saying to us increasingly, how do we get that 360 view of the individual consumer? How do we get more first-party data that is our own? And then how do we apply intelligence to that first-party data so that we could be making kind of the smartest decisions and that isn't just about the ad tech world now, it's also about kind of which is paid, but it's about owned and over time, it will be about earned. So it's about the MarTech, the MarTech side of things, right? And so I think if you handle data, you're held to a very high level of responsibility in terms of are you complying from a regulatory point of view, and are you treating the data ethically? And are you respectful of privacy? And so I think that there will be an onus on partners who bring expertise and who can help you navigate that as a company that's going to market. So any kind of -- and then the kind of the cookies is funny because -- if you think about -- like for us, the trajectory was sort of evident a couple of years ago where you go, their proxies to begin with, right? And they erode as a signal pretty quickly in terms of do you really want to be making decisions on something that is at arm's length from the reality and starts to kind of become less and less relevant pretty quickly, right? So I think we see this complicated world and this kind of higher standard of how are you going to live in a world where the nature of what you're solving for is more complex and yet the rules are more demanding. And so I think that onboarding the first-party data in ways that are sort of respectful of privacy on the front end, organizing it and making it actionable. And then understanding the broad ecosystem, whether it's the publishers, whether it's the MarTech ecosystem, I think helping clients with build their proprietary ID graphs. So that, as I said at the outset, they can feel like they are more and more in control of their own destiny in this space. All of that from where we sit with the skill sets that we have is opportunity.

Okay. I'm going to ask a question -- and this is another one of these areas where I sort of have gone out on a limb and might even be incorrect on this, but let me try and frame the debate that goes on in the buy side. So in 2021, we saw just massive amounts of growth in just aggregate advertising, right? In broad brush stroke, the non-digital stuff was sort of flat. But man, the digital guys just printed huge numbers. And this narrative started off like we are in this new paradigm, right, of high -- and more advertising for dollar economic activity because people would say things like it's the below the line dollars or moving above the line, right? And advertising is the new rent. And I looked at it and said, I think there's a far more prosaic explanation, which is with personal consumption growth instead of being 3% or 4%, grew like 12% last year or 13%. And of course, marketers are going to spend more if consumers are spending more. And so this is not a new paradigm. We're not in some new regime because the digitization of everything has been going on for 2 decades. And yes, we went through a little bit of a blip with COVID were accelerated, but then it all sort of came back to trend on things like e-commerce or streaming. And so I'm sort of a lone saying the ad intensity, right, the ad outlay per dollar of economic activity is not really going to change. It's the same old, same old. And everybody else on the buy side is nowhere in this new paradigm. Does that make sense as a question? And do you have a view in terms of who might be right?

Well, look, I think I like to hear you're a contrarian. And I'm intrigued that as a guy who has the background you do that you come into the space you're in with a consultant's mindset, you're sort of saying how about another way to try to do the analysis. And so I guess -- and I'm not looking to [indiscernible] on you. I'm actually saying to you that I think the 2 can both be true. And what I mean by that is -- so you look at this massive growth number for '21, which is at least in part a catch-up because '20 was depressed. And it is clearly an acceleration of a trend that we've been seeing for a long time where people should have been putting more budgets into digital channels. And so -- but the interesting thing is it's sort of the disconnect for me is that that's like the revenue that goes to the media suppliers, right? It doesn't really speak to whether or not in some of those other theses about the new rent can be still through. So I guess what I would sort of say is I think it will probably find a level in that what you're pushing at is something that is worth our thinking about it, which is let's not get like overly excited about it. But by the same token, for our business, whether it's business transformation work, whether it's data management work, data sales, the things we can do with these new products where we're licensing our IP or doing outcome-based models. And then the kind of work you do with an audience-first approach to consumer journey and consumer experience, I look at businesses that we've got in our portfolio that need further transformation like the events and experiential business. So I think there is opportunity for greater intensity around marketing activity. I think there's opportunity for what we do. I think that if you just look at the expenditure on the media owner side or the media supplier side, you do get some distortion. So like I said, I think that both can be true.

Okay. Okay. That's super helpful. Your EBITDA margins have just been great, right, and continue to expand. And I wonder without giving any sort of forward-looking commentary, at least in our seat, there are so many sort of puts and takes that have happened here where like you get some T&E sort of tailwinds because people aren't traveling as much.

[indiscernible] back home which is kind of [indiscernible] love to go, we were elsewhere, but yes.

Yes. And I think there are some structural things you guys have done with some of your rent expense, which is probably permanent, right? And so how would you just sort of frame on a backward-looking basis, is it fair to say that the margin expansion that's happened is durable? Or should investors sort of say, well, now, some of these things are indeed transitory?

Yes. I mean I think there are a lot of puts and takes, right? And so if you kind of go, okay, going into -- so in '19, so first -- last full year, pre-COVID, that number's at 14%. And if you look at our latest guidance for '21, that number is 280 basis points north of that. And so what's in there? What's in there is the restructuring that we did as part of the fact that '20 require that we look hard at the business, not that we don't always, but to our mind, it was a strategic restructuring and there was $160 million of cost that we said come out and are permanent. So there's a step forward there. Then I think that there's a lot of growth, and that growth in '21 has the benefit of you can't hire to keep -- fully keep up with that growth. So benefit, temporary costs, labor costs go up. So a little up, a little down. T&E is very, very depressed. And when we are back at the point where we can -- I think we'll learn lessons from and we'll go to some permanent flexible hybrid model. And so when those costs come back in, I think it will be a good thing because I think that it will be when we're investing in travel that involves seeing clients, bringing people together to innovate or to do training or to do the kinds of things that help us continue to evolve the business model. And then, look, when there is growth, we consistently have proven that, as Jerry Leshne, our IR guy says there's a really strong algorithm that when there's growth, we can keep growing margins. So we've taken that meaningful step forward. We'll look at the ins and outs. And then, again, in February, tell you what we think the right number is for '22, but we don't see that there is a cap here. We see opportunity to keep building the margin sort of in that 3- to 5-year horizon, your first question.

Okay. Here's my last question. So you guys had a $500 million debt pay down in the fourth quarter of last year. I look at your debt metrics, they look really good. I don't think you have a leverage target, if I remember correctly. But it seems to me that 2022 could be the first year where we begin to augment the dividend with buybacks. Does that sound to you as crazy?

No. I would say to you that on capital returns, we've got a strong history. We have always said we want to be balanced in our approach. We've consistently increased the dividend over time, and we continue to do that through the pandemic. And the suspension of share repurchase was for a specific reason at a moment in time to deleverage after Acxiom, right?

Yes.

So we've always said we look forward to resuming them and that we would kind of analyze the appropriate timing and that the fact that we've done, as you just said, which is that payback of the $500 million in October is an important milestone. So I would sort of shrink it down to as we turn our focus to completing the planning process for '22, which I mentioned to you on one of the earlier questions is ongoing and will be completed. I'd say that returning to share repurchase is an important priority. And so it's a very timely question.

Okay. Perfect. Well, Philippe, this has been fantastic. I'm sorry that I demoted you at the very beginning of the call to CFO, but it's a great conversation.

I have a super CFO partner. So that's very fortunate in that regard.

Very good. Well, thank you so much for the time. We really appreciate it.

All right. Thank you.

Thank you. Be well.

You, too.