Our revised financial targets for the full year are for significant margin expansion of 40 basis points compared to a year ago, with one to two percent organic growth for the full year. We will, of course, strive to do better, but we feel these are appropriate goals as we head into the always-important fourth quarter.
Following our industry-leading growth of the last several years, we have focused on executing an effective program to bring expenses fully into line with this year’s revenue reality, so as to drive margin.
In those areas of the business where our growth has slowed, the levers are headcount, temporary labor and short-term discretionary expenses, such as travel. As reflected in the quarter, we also have in place a pay-for-performance incentive model, in which revenue growth against the target set at the beginning of the year is one of the principal performance metrics in addition to margin expansion.
Looking a bit further ahead, as clients return to a growth agenda, which is their only path to sustained valued creation, we expect to see improvement in our organic revenue performance.
Our pipeline of new business opportunities remains strong overall. In addition to pitching and winning new business, we are aggressively cross-selling services, and continuing to deliver on the open-architecture, integrated opportunities that have historically been a significant contributor to our growth.
At this stage, I’ll turn things over to Frank for additional detail on our results and join you after his remarks for an update on key trends in the business, and on our operating units, to be followed by our Q&A.
Frank Mergenthaler, Executive Vice President and Chief Financial Officer:
Thank you, Michael. Good morning.
As a reminder, I will be referring to the slide presentation that accompanies our webcast.
On slide 2, you’ll see an overview of results, a number of which Michael touched upon:
Organic growth was 50 basis points in the quarter, and was 1.1% for the first nine months.
While our top-line slowdown puts pressure on overall profitability, we nonetheless drove higher Q3 margin and operating profit. Operating profit was $219 million, compared to $208 million, an increase of 5.3%, with operating margin of 11.5%, an increase of 70 basis points.
For the first nine months, operating profit was $455 million, which is flat with a year ago, and our margin was also equal to the nine months of 2016.
Third-quarter diluted EPS was $0.37, and was $0.31 as adjusted for (1) the disposition expense of small non-strategic agencies, and (2) a sizeable benefit for tax credits in the quarter. That is comparable to $0.32 reported and $0.31 as adjusted a year ago.
For the nine months, the adjusted comparison is $0.63 this year, compared with $0.66 a year ago, due to a higher adjusted tax rate so far this year.
Q3 average fully diluted shares decreased 2.6% from last year due to our share repurchase program.
Turning to slide 3, you’ll see our P&L for the quarter. I’ll cover revenue and operating expenses in detail in the slides that follow.