Michael Roth, Chairman of the Board and Chief Executive Officer:
Well, it’s both. See, here’s what we do, and I think it’s worth explaining. What we do is, we have our midyear reviews. And all of our agencies come in, and they take a look at their existing pipeline, their opportunities, potential projects that they have. And all of our agencies do have a piece of their business that they don’t have as clear a line of sight but, historically, because of the nature of their clients, and so on, they expect to receive those types of projects.
So, it’s a combination of knowledge that the clients will be doing this, and that’s in their numbers. It’s opportunities where they believe they can create revenue with clients because they have ideas, or they’re already working with clients - and, frankly, some of these you haven’t sold through yet to the clients. And the other one is, they have six months to generate, what we call “to be generated,” and those numbers overall are reasonable given where we are and where our clients are.
So this isn’t just a number we say we have to achieve - which I think is the gist of your question - we have to achieve 3 - 4%; therefore, you have to generate this amount of money. Our business units come in with their business insights and where they think their business is. It’s not that we come in and tell them, this is the number you have to get. Obviously, if they’re very low, we have a healthy conversation on where they can seek opportunities to raise it, but that’s normal business, and that’s true every year. So it’s a little more, I’ll call it sophisticated, although it’s not an exact science, where our business units know their clients and conversations that they have with them are pending.
And just to follow up on some of the consumer goods stuff. You referenced what Unilever was talking about, but also that 80 basis points in the quarter. So, if I just put all that in context: (1) is it correct to assume that, in order to make the low end of your guidance, the majority of the rebound we’re going to see in growth is going to be domestic? And then, (2) what kind of assumption about that 80 bps of drag from consumer do you need to step up for you to get there on the domestic side?
Well, first of all, since 60%, 62% of our business is from the U.S., so you can assume that we’re making an assumption that, that’s where we’re going to see recovery, particularly on the project side.
And we don’t see a big recovery in consumer goods. Obviously, if you just took the Unilever announcement, there are other opportunities within the consumer goods clients. Particularly what they’re looking at is consolidating. A lot of these big clients have thousands of agencies all over the world. That is clearly - and we’ve been arguing for years that that’s an inefficient way to operate, and they argue, well, local markets, and so on. Well, I think what we’re going to see, and this isn’t - I’m not just saying Unilever - in general, you’re going to see clients looking at the efficiencies of their agency structure. And we believe we’re in very good stay with many of our - most of our - clients, and, therefore, when they’re looking to consolidate a lot of these local agencies, it makes sense that we take on that work. So, we may have reduced spending overall, but if we pick up a bigger share of wallet from those clients, that makes up the delta. So I think it’s more of that than us saying all of a sudden is, they’re going to see the light and increase their spending by 20%.
And just a last one, does the Army materially factor into your outlook for the second half of the year since I know there’s kind of a binary outcome there?