Omnicom Group Inc (OMC) — Q2 2022 Earnings Call Transcript

Thank you for joining our second quarter 2022 earnings call. With me today are John Wren, Chairman and Chief Executive Officer; and Phil Angelastro, Executive Vice President and Chief Financial Officer. On our website, omnicomgroup.com, we posted a press release along with the presentation covering the information we'll review today as well as a webcast of this call. An archived version will be available when today's call concludes. Before we start today, I'd like to remind everyone to read the forward-looking statements, non-GAAP financial and other information that we've included at the end of our investor presentation. Certain of the statements made today may constitute forward-looking statements and these statements are our present expectations. Relevant factors that could cause actual results to differ materially are listed in our earnings materials and in our SEC filings, including our 2021 Form 10-K. During the course of today's call, we will also discuss certain non-GAAP measures. You can find the reconciliation of these to the nearest comparable GAAP measures in the presentation materials. We will begin the call with an overview of our business from John and then Phil will review our financial results for the quarter. After our prepared remarks, we will open up the line for your questions. I'll now hand the call to John.

Thank you, Greg. Good afternoon, everyone, and thank you for joining us today. We're pleased to share our second quarter results. Our second quarter performance was very strong. We exceeded our expectations with organic growth of 11.3%, which was broad-based across our agencies, disciplines, regions and client sectors. Operating profit margin for the quarter was 15.2%, 70 basis points higher than our comparable margin in 2021. Our agency management teams continue to grow their top line while closely managing costs in line with revenue. Earnings per share for the quarter was $1.68, up 15.1% versus the comparable amount in 2021. Finally, our cash flow, liquidity and balance sheet remain very strong and we continue to support our primary uses of cash, dividends, acquisitions and share repurchases. Phil will cover our results in more detail during his remarks. During the quarter, we continue to focus on evolving our existing capabilities to meet the needs of our clients and prospects. Most notably, we expanded and strengthened our e-commerce and retail media capabilities. At the Cannes Lions Festival of Creativity in June, we announced a number of first-of-its-kind e-commerce collaborations with Amazon, Instacart, Kroger and Walmart. We now have more than 1,500 certified experts helping our clients navigate the complexity of executing media and driving sales on retail media platforms. The commerce partnerships we recently announced will provide us with additional access to online and in-store transactions and audiences, so we can deliver more precise and actionable consumer insights, more effective creative ideas and content and more targeted media for our clients. We are delivering these services by leveraging the power of our omni platform. We have developed omni commerce which integrates data about audiences, shopper behavior, media, content, shelf analytics, sales and inventory. Omni commerce enables us to maximize brand awareness and increase the effectiveness of our clients' retail media investments, driving product sales and profitability. We're pleased to see our efforts in this critical area being recognized in a recent Forrester report which noted that Omnicom Media Group leads across our peer set in retail and commerce media, audience intelligence capabilities, optimization and operations automation. Going forward, we will continue to invest organically and through acquisitions in e-commerce and retail media as well as in our other growth areas, including performance media, CRM and Precision Marketing, digital transformation and MarTech Consulting and the health sector. As we continue to expand the capabilities of Omni, we are maintaining our privacy-first approach in how we aggregate and manage data on behalf of our clients and partners. To oversee these efforts, we recently appointed Brian Clayton as Omnicom's Chief Data Privacy Officer. Brian has an extensive background in data privacy that incorporates data ethics, governance and protection. He will be a key member of our team as we continue to protect the privacy and security of the data we manage. Clients are rightfully demanding greater insight and control over their data as third-party cookies come to an end and increasingly complex data privacy laws and regulations emerge around the globe. Our approach is to ensure that we have Omnicom-wide privacy practices, frameworks and programs that safeguard the security of client data, employee data and data we obtain from third-party partners. Continuing with some key leadership additions, I'm pleased to announce the appointment of Matt McNally as CEO of Omnicom Health Group. He succeeds Ed Weiss, who recently announced his retirement. Christina Hansen was named U.S. CEO of OMD. Christy has served as the network's Global Chief Strategy Officer since 2018. She succeeds John Osborn, who after more than 30 years with Omnicom, is stepping back to focus on his long-standing work with nonprofit organizations. In June, we attended the Cannes Lions. Omnicom agencies for more than 30 countries won over 120 Lions. Two of our creative networks, DDB and BBDO, placed in the top five in the Network of the Year competition. In media, OMD won Media Network of the Year, which was followed by a recent report from Forrester naming Omnicom Media Group as having the strongest current offering in the marketplace. Congratulations to all our agencies and people on their exceptional performance. DE&I continues to be a top priority for us. During the quarter, we issued our diversity, equity and inclusion performance report. I encourage our people and stakeholders to read the report on our website and know we are committed to keep building on our progress moving forward. Overall, we are very pleased with our progress on our key strategic initiatives and our first half financial results. Our notable new partnerships and continued investments in high-growth areas position us extremely well to service our clients now and in the future. While we remain confident in our strategies and execution, we're retaining a healthy level of caution due to the existing macro factors, including the ongoing war in Ukraine, the effects of the pandemic across markets, the continuing disruption of global supply chains and the economic risks posed by higher inflation and rising interest rates. Even with this backdrop, we are continuing to see strong demand for our services, and based on our first half results, are increasing our organic revenue growth forecast to between 6.5% to 7% for the full year in 2022. We also continue to anticipate delivering the same strong operating margin of 15.4% in 2022 that we delivered in 2021. Before I finish, I'd like to address the ongoing challenges our people are facing around the globe. The war in Ukraine continues to impact the lives of our colleagues and their families in Ukraine and is having an effect on our people around the world. We remain steadfast in supporting them for as long as needed. In the U.S., we continue to encounter mass shootings, senseless acts of gun violence and racially motivated hate crimes. My heart goes out to the families of the victims of these crimes. Finally, the Supreme Court's decision to overturn Roe v. Wade was a step back in the advancement of women's rights and is having a detrimental effect on many of our colleagues. We're committed to ensuring our people have equal access to health services no matter where they live in the United States. Our actions with respect to the Ukraine war and the recent Supreme Court decisions reflect our commitment to always put the safety and well-being of our colleagues first. I will now turn the call over to Phil for a closer look at our financial results.

Thanks, John. As John said, our second quarter results were very solid. Organic growth continued at a very high rate, driven by performance across all of our disciplines. Our growth delivered healthy operating margins and good earnings per share performance. And we continue to return a significant portion of our free cash flow to our investors through dividends and additional share buybacks. Let's go into the financial details of the quarter, beginning on Slide 4. This view of the reported income statement shows adjustments to make the second quarter of the prior year comparable as well as making the six months for both 2021 and 2022 comparable. As we described last year, for the second quarter of 2021, operating expenses in the second quarter of last year benefited from a gain on the sale of a subsidiary. Interest expense includes a charge in the second quarter of last year on the early extinguishment of debt. And income tax expense in the second quarter of last year was also impacted by the early extinguishment of debt. In addition, as we discussed last quarter, for the year-to-date 2022 period, operating expenses included charges arising from the effects of the war in Ukraine in the first quarter of this year, and income taxes were also impacted by these charges. As you can see at the bottom of the slide, the net effects of these items resulted in strong EPS of $1.68 versus $1.46 from Q1 of 2021 as adjusted, representing EPS growth of 15.1% in the second quarter. For the six months, EPS of $3.07 as adjusted grew 10% from $2.79, also as adjusted. Our reported tax rate was 26.5% this quarter, the same level we expect for the remainder of the year. Net interest expense for Q2 of $40.1 million declined by $6.8 million from $46.9 million in Q2 of 2021, excluding the charge from the early extinguishment of debt last year, as previously discussed. The decline was principally driven by an increase in interest income in Q2 of 2022 of approximately $4 million. Given our principal debt is fixed rate, we expect net interest expense to decline in the second half compared to the prior year as interest income increases due to higher investing rates compared to 2021. Lastly, our diluted share count was down almost 5% year-over-year in the second quarter due to our ongoing share repurchase activity. Now let's look at our results in more detail, beginning with revenues on Slide 5. Reported revenues were flat as another quarter of strong organic growth at 11.3% was offset by the negative impact of foreign exchange rates and disposition revenue in excess of acquisition revenue. Both of these impacts were expected as we saw the dollar continue to strengthen globally and as we pass the final two months of our divestiture of a specialty media subsidiary last June, which was included in our Advertising & Media discipline in the U.S. The year-to-date results closely mirror the second quarter. If rates stay where they were as of July 15, we estimate that the impact of foreign exchange rates will reduce our revenue by approximately 6% in the third quarter and by 4.5% for the year. Based on deals completed to date, we expect the impact from net acquisitions and dispositions will result in a reduction of our revenue by approximately 1% in the third quarter, primarily resulting from the disposition of our businesses in Russia, and by approximately 4.5% for the full year. Turning to Slide 6. It's clear that our organic strength was broad-based across all of our disciplines. Advertising & Media, our largest category, posted 8% organic growth in the quarter, with strong performance in both our media and our creative agencies. Precision Marketing continued its strong performance with 21% organic growth in the second quarter. Commerce & Brand Consulting was up 11%, led by our branding and design agencies. Experiential had organic growth of 37%, but it's worth noting that lockdowns in Q2 in China weighed on these otherwise good results. As a reference, in reported dollar terms for the first six months of 2022, this discipline has reached approximately 80% of its pre-pandemic revenue levels. Execution & Support was up 9%, led by our merchandising and point-of-sale businesses. PR was up a very strong 16%, reflecting growth from both long-standing and new clients and increased business activity across many sectors of the economy. And Healthcare, which is 10% of our revenues, grew an impressive 9%. Turning to Slide 7. We once again saw strong organic growth rates in every region with the exception of Asia-Pacific, which was impacted by the lockdowns in China, as I just mentioned. This was nicely offset by acceleration in the U.S., Europe and the U.K. In the U.S., which is more than half of our revenues, our 10.7% organic growth was primarily driven by growth in Advertising & Media, Public Relations, Precision Marketing and Healthcare. Outside of the U.S., growth was led by Europe, which was primarily driven by Advertising & Media, Experiential and PR. Despite the headwinds in Experiential in Asia, the region saw strong results in Advertising & Media, brand consulting and Healthcare. Looking at revenue by industry sector on Slide 8 relative to the second quarter of 2021. The broad distribution of our clients remained relatively stable. As a percentage of the total, we did see an increase in technology, offset by reductions in both retail and travel and entertainment, two sectors that have both been impacted by the economy and by some lingering pandemic effects. Let's now turn to Slide 9 and look at our operating expenses for the quarter. In total, our operating expenses were relatively flat, which is a good result given the strong growth in our business, tight labor markets in several regions and our continued investment in our strategic focus areas. Salary and related service costs were 50.5% of revenue compared to 50.9% last year after adjusting 2021 for amounts related to acquisitions and dispositions. Third-party service costs were 21.4% of revenue compared to 20.1% last year, also after adjusting for amounts related to acquisitions and dispositions with the increase reflecting growth in our businesses. Occupancy and other costs, which are less directly linked to changes in revenue, were flat year-over-year. We will continue to manage our real estate footprint in alignment with how people are working in our offices post-pandemic. And it's also worth mentioning that our rent expense was down this quarter. S&A expenses were up 7.5% year-over-year, following the increase in our business activity, including higher marketing and professional fees compared to last year. Turning to Slide 10. Our second quarter operating profit was $541.6 million, a 4.6% increase from last year and our operating profit margin of 15.2% on total revenues was well above the comparable amount for last year of 14.5% as adjusted. Please turn now to Slide 11 for our cash flow performance. As you know, we define free cash flow as net cash provided by operating activities, excluding changes in working capital, which are generally positive for us on an annual basis. Free cash flow for the first six months of 2022 was $768 million, down $28 million or 3.5% from the first half of last year. However, $48 million of the charges we recorded in the first quarter for the effects of the war in Ukraine were cash-related. Absent this, we were up a bit year-over-year. Regarding our uses of cash, we used $294 million of cash to pay dividends to common shareholders and another $38 million for dividends to non-controlling interest shareholders. Our capital expenditures of $43 million were at normal levels. Acquisitions net of dispositions and other items were $289 million. And lastly, our net stock repurchases during the first quarter were $393 million, including another $100 million in the second quarter. As we said on our call in April, for the full year 2022, we expect we will spend at our historical annual range of around $500 million to $600 million. On Slide 12 is an overview of our credit, liquidity and debt maturities. There were no changes in our outstanding debt during the second quarter, and our gross leverage at June 30 was 2.4x. In addition to $3.3 billion of cash and short-term investments, we also have a $2 billion U.S. commercial paper program, backed by our $2.5 billion revolving credit facility. I'll end my prepared remarks today on Slide 13, which shows our strong return on invested capital of 24.4% for the 12 months ended June 30, a 41.9% return on equity. These are very strong and very competitive returns and reflect Omnicom's consistent operating performance and approach to capital allocation. At this point, operator, please open the lines up for questions and answers. Thank you.

So maybe first question, you could just talk a little bit about how the business compares today to what it was like in previous cycles. A lot of change in the industry, a lot of it has changed in the complexion of the Company as you've bought and sold certain businesses. So maybe, John, I would just love to get your take on how different the business is maybe to some of the last times we were heading into a more volatile macroeconomic environment? And then to kind of follow up on that, you gave the flattish margin guidance for the year on a really strong organic growth number. What I'm wondering is, let's just say that maybe next year the growth isn't going to be so good because of the macro for the industry. Does it also mean that the margins are pretty steady? Have we just kind of reached a point where the margins are kind of steady through the cycle? Or should we expect margins to be down a bit if organic growth slows down? I would just love to get your view on the margins. Thank you.

Okay. This has probably been my fourth time navigating through a recession, having experienced three others before this. I believe the portfolio is currently more fit for purpose than at any time in my career. You've rightly pointed out that we've dedicated significant effort to refining the portfolio. Over the past 18 months, we've been adding to the areas that show the highest growth potential. I refer to it as fit for purpose. I'm satisfied with our current standing and the management changes we've implemented. While there are always minor adjustments to be made, there are fewer issues to address now than at any other time in my career. We're pleased with our progress and continue to invest in areas that we believe will enhance our revenue next year and beyond. These investments are being made currently and are already reflected in the reported numbers. Regarding margins, it's too early to forecast what next year's margins will be. However, we have consistently aimed to maintain margins, and in instances where we had time to plan, we have managed to do so. We're always assessing our major expenses, which involve aligning staff with revenue, and our management is very capable in this regard. The second largest expense, real estate, continues to improve for us each year.

Yes, just one clarifying point. You mentioned that margins in 2022 were flat. If you exclude the non-recurring gain from the business disposal we had last year in the second quarter and keep the margins flat, that actually indicates an improvement of over 30 basis points year-on-year. As John mentioned, we are always focused on becoming more efficient by utilizing outsourcing, offshoring, and automation. There are many uncertainties ahead, but we continuously strive for greater efficiency and aim to deliver improvement in the future.

I haven't experienced as many recessions as some of you, but I have gone through three. Historically, when a company misses earnings, it seems like another does too, and the buy-side then realizes we are in a recession. This is the first time I can recall that the buy-side is convinced there is a recession even when there isn’t much concrete evidence of a slowdown. My question is whether the pessimism from the buy-side seems justified to you based on what you’re hearing from your clients, not just for this year but potentially for next year?

Well, we just got back from the Cannes Festival where we had the occasion to be personally with quite a number of our largest clients. And if I had to characterize a point of view, everybody is cautious because of the unknowns that are out there. But most sophisticated marketers who have lived through past recessions know that if they cut back too dearly, they lose sales as the recoveries start to happen. So people are very cautious about serious cutbacks as long as there's no dramatic trauma in the marketplace. So, we'll know more because every one of our reforecast and then certainly once we get into planning towards the end of the year for next year, is done from a bottoms-up point of view, where we're speaking to individual offices, managers, people who have day-to-day contact with clients. And we also get sight on media spending and some commitments that they have to extend into the coming months to help us manage our organization.

I'll continue the discussion on the possibility of a recession, which seems to be a widely accepted notion. However, it's noteworthy that your numbers do not indicate any signs of this so far. My question is, during previous recession periods, we observed a clear transition from traditional media to digital media or from brand advertising to targeted marketing. I'm curious about your perspective on what might happen if there is any slowdown next year. Specifically, what areas are there left to shift to digital? Also, what segments within that might be strong enough to sustain growth? You mentioned connected TV and e-commerce several times during this call, so any further insights on these resilient or potentially growing areas would be appreciated.

Sure, Tim. Looking ahead, there will be several areas where advertising will be crucial, particularly with the streaming wars I expect to emerge next year. As subscription services shift to ad-supported models, this will create new opportunities for our clients. With our data and capabilities to optimize client spending, we can leverage this to demonstrate that every dollar invested yields a return. When clients compare to previous periods, as I mentioned earlier, I genuinely believe we have a more balanced and effective portfolio than ever before in my career. We are more agile and able to adapt to various requirements for reaching customers, with a strong focus on Precision Marketing. Essentially, our goal is to sell products, attract clients, and ensure inventory moves. While I’m pleased with our progress, I strive for continuous improvement, which is why we're always investing. Our emphasis on e-commerce is critical, not just for this year and the next, but also when considering projections for the upcoming years. We are making investments to ensure we remain effective as we move forward. I hope that addresses your question, Tim.

Yes. No. That's great. Could I ask one quick follow-on?

Certainly.

Sure.

It seems I'm being picky here, but I noticed that your revenue in Q2 and year-to-date shows that Asia-Pacific was underperforming in Q2, with a significant slowdown from Q1. Could you clarify whether this is related to the China lockdowns, or explain why this particular issue stands out compared to the others?

Yes. I think China is the exception, and we felt that probably most dearly in our executional businesses, where the shutdowns prevented us and prevented clients from having trade shows and other types of affairs, which are generally a part of our revenue. So shutdowns do affect those executional areas more than almost any other area.

Wondering if you could stick to your performance through the quarter. Outside of events with China, which you just spoke about, were there any observed changes in client budgets and some of the headlines were macro worsened even at the margin? And then, John, as it relates to areas like digital transformation or CRM which have had really strong tailwinds coming out of the pandemic, would you expect client spend here to adjust down with a softening economy? Or is the investment that marketers are making right now a lot more structural than that?

I believe that the investments clients are making are structural and they will continue. We haven't announced it, we've already won business. It doesn't really start until the first quarter of next year. So I have reason to believe my statement. The first part of your question, I'm sorry, if you would.

Just about performance through the quarter, did you observe any changes in client budgets, some of the headlines around macro worsened, obviously leaving aside the China event stuff that you just spoke about.

Sure. No other macro trends that I can point out. There are always puts and takes in terms of what clients are doing. And I'd say on balance, because of the portfolio and because of the agility that we've developed, we're able to shift with clients as that occurs.

We're not as focused on a monthly number, David. I wouldn't say that we saw any trends in the months of this second quarter that were unusual that would lead us to conclude anything different other than yes, it was a very good quarter, and our expectations have gone up as a result of it as John had indicated earlier.

I have two questions. First, regarding the M&A environment. John, you've mentioned wanting to invest more capital in acquisitions. You have made some progress this year, but has the changing market landscape affected your willingness to pursue acquisitions? Have seller multiples adjusted at all considering that private market valuations seem to be aligning more with public market valuations? Have your target areas shifted in any way? Additionally, I have a follow-up.

Our focus remains unchanged. I've discussed the areas of greatest interest in my prepared remarks, and that aligns with our position throughout the year. I believe that while I'm still waiting to see changes, potential targets are beginning to adjust their expectations, though not quickly enough for us in light of capital costs and the impact this might have. Looking back 24 to 30 months ago, we're returning to a more normal state as the Federal Reserve raises rates, and other global markets may follow suit to stabilize their currencies and markets. This change will likely make deals more reasonable compared to last year's valuations.

Great. I was wondering if you could help us understand the full year guidance a bit. You've exceeded the expectations for the first half compared to what you outlined earlier this year, showing substantial growth. From rough estimates, it seems you're up 11.5% in the first half and guiding for a 6.5% to 7% increase for the year. This suggests fairly low single-digit growth for the second half. Is this due to continued cautiousness and a practical approach like we saw in the first half? Or do you have solid visibility, suggesting this is where we should expect to be? It certainly indicates a significant slowdown from the strong first half you've experienced.

You've known us for quite a while, and once again, I refer back to my prepared remarks. We remain cautious, and you are aware of that. We have increased our guidance slightly over the past two quarters, considering where we stand for six months. This is simply our cautious approach. We tend to avoid overextending ourselves. For those who have followed us for an extended period, there's always been caution regarding the volume of project business that occurs at the end of the year, especially concerning the upcoming fourth quarter. I'll have a clearer picture by October, but at this point, we prefer not to project what might come through because we aim to be cautious and hope to exceed expectations if possible.

Yes. And that came through last year, right, in the fourth quarter?

It did, oddly enough. I mean in the last over two decades, I think it's occurred in all but two years. So, but again, that leads to the question of whether there will be heat in Europe in the fourth quarter or not.

So yes, I think our expectations as it relates to our Experiential and execution businesses are probably rightly cautious and more cautious than certainly the rest of the portfolio as we head into the second half. Overall, I think we're cautious mainly because of the things that are outside of our control.

And thank you for getting that question out of the way.

Great. Following up on an earlier question on margins as it relates to the recession as well. So in prior economic downturns, you've been able to effectively manage margins given the variable cost nature of your business model. But now you expect to have over 10,000 engineers at the Company this year. This is much more compared to less than 1,000 engineers around five or so years ago. So my question is does having more engineers or technical talent, does that meet your operating cost model more fixed and less variable than it was in prior economic downturns? And in this context, how are you thinking about managing margins, if there is a recession?

A key factor in our cost flexibility is that our incentive pools are determined individually for each company, with targets set based on performance, which considers the overall profit and loss of that unit. This approach is crucial for navigating short-term challenges. Additionally, we have increased our engineering workforce, primarily offshore, and we have no plans to reduce our engineering staff, as they are making substantial contributions to our current operations and our future needs. I do not foresee any changes in this regard. The shift in our employee composition is not harmful to our management capabilities.

So a couple of follow-ups on retail media and e-commerce services. First, I probably asked this before, I'll probably ask it again, spend? And sort of related to that, can you talk about retail media traction beyond the CPG vertical broadly? And then second, on e-commerce services, I'd say there's a bit of a debate among investors right now and whether we're seeing e-commerce simply go through a lull right now as a broad reopening happens or whether the long-term opportunity really isn't as big as everyone's pandemic peak expectations? Are you seeing that from clients? Are they pulling back in big e-commerce projects or pausing to evaluate that further?

It's a discussion that varies from client to client. Each client recognizes that this will increasingly shape how they reach and serve their customers. The packaged goods segment you mentioned is a reasonable part of our overall portfolio, and it maintains a balanced position. This plays into the various factors we’re observing. Looking ahead, we see this as a significant area. We are ready and have identified acquisition targets in this space. Additionally, we're investing in technology development for commerce to support anticipated business growth. It’s important not to compare our situation to the market impacts experienced during COVID when people were largely confined to their homes. There may be a temporary slowdown for those companies, but the importance of this sector is growing for our clients and, consequently, for us as we progress.

I'd just add, it's another area of increased complexity for our clients to navigate. And as a result, it benefits us because we can help them navigate some additional choices that they now have. We can help them find customers on a new retail media platform inside a video game, etc. The more complexity feeds into the capabilities that we have to help our clients reevaluate or evaluate the decisions they have to make about where to most efficiently spend their marketing dollars. So we certainly believe e-commerce is here for the long run. It's not going away. We're going to continue to make investments on our side, and we think clients will continue to do so on their side as well.

And the proof point of this is how many boxes I have to break up every week that are delivered to my house.

Similar question what Ben had earlier. Just looking at this on a three-year basis, our first quarter up about 12% organically, put it up about 10% versus 1Q of '19. Second quarter, post some numbers here, up 11.3% organic was up 6.5% versus 2Q of '19. But then using your top end of your guidance for the year of 7% for organic revenue puts the second half of the year up, call it, 2.5% to 3%. But again, looking at that versus the second half of '19, it will only be up 1%, 1.5%. I mean that's quite a deceleration. I know you've said repeatedly you're trying to be cautious here. But I'm just curious, I'd love to hear your thoughts on this. Is there something else working in here too that the overall environment is significantly slowing as well? And if that is the case, I'd love it if you could just touch on some of the areas globally or by client verticals to help explain that significant slowdown. And again, I realize you're saying you're being cautious here. I don't blame you at all. I just want to hear your thoughts further, please.

Yes. Except for the executional business is to require social gatherings, which are affected by closings, which Phil talked about. The math of what you're talking about is absolutely correct, and it's reflected in us being cautious. I think there's only one short paragraph in my prepared remarks, as you can go back and look at where I emphasized that word. We endeavor every day to exceed our forecast. So that's not a prediction in this environment. I don't know if I did justice to your question.

Yes, Craig, the portfolio is quite a bit different than it was in '19 now here in 2022. So, I can certainly say we're not focused on 2019 anymore and looking back to how we're growing relative to three years ago is not something that we spend any time on. We're focused on the portfolio we have today and how the business is doing today. As it relates to '19, I don't think there's any meaningful trends that we would draw where the world has changed quite a bit since then and our portfolio has changed quite a bit since then. I think as far as the numbers go in the second half, 2.5-plus percent is just about right in terms of what 7% for the year would be. I think we've touched on our cautious outlook and how we've looked at the guidance that we provided, and we're pretty comfortable with that guidance.

Sure. My other question is on Asia. In the second quarter at 4.7% organic number, if you took out China, can you tell us the rest of Asia-Pacific be similar up low double digits, similar organically to the rest of the portfolio? How would it attract taking out China?

If you give Phil a moment, he'll do his best to respond to your question. You should remember that this is the third time we've forecasted revenue this year, and there have been many quarters before that. Given our inexperience, you can expect us to be cautious.

So, I think it's safe to say the rest of the portfolio in Asia performed consistently in terms of organic growth with the rest of our portfolio and the reported numbers.

Certainly, I'm going to thank you all for joining us today. We really appreciate your time, and we look forward to seeing you at investor events over the coming weeks and months. Thanks a lot.

Thank you.