UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 8-K
_______________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 22, 2016
The Interpublic Group of Companies, Inc. | ||
(Exact Name of Registrant as Specified in Charter) | ||
Delaware | 1-6686 | 13-1024020 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
909 Third Avenue, New York, New York | 10022 | |
(Address of Principal Executive Offices) | (Zip Code) | |
Registrant’s telephone number, including area code: 212-704-1200 | ||
(Former Name or Former Address, if Changed Since Last Report) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On April 22, 2016, The Interpublic Group of Companies, Inc. (i) issued a press release, a copy of which is attached hereto as Exhibit 99.1 and incorporated by reference herein, announcing its results for the first quarter of 2016, (ii) held a conference call to discuss the foregoing results and (iii) posted an investor presentation, a copy of which is attached hereto as Exhibit 99.2 and incorporated by reference herein, on its website in connection with the conference call.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1: Press release dated April 22, 2016 (furnished pursuant to Item 2.02)
Exhibit 99.2: Investor presentation dated April 22, 2016 (furnished pursuant to Item 2.02)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
THE INTERPUBLIC GROUP OF COMPANIES, INC. | |
Date: April 22, 2016 | By: /s/ Andrew Bonzani |
Name: Andrew Bonzani Title: Senior Vice President, General Counsel and Secretary | |
FOR IMMEDIATE RELEASE | New York, NY (April 22, 2016) | |
Interpublic Announces First Quarter 2016 Results
• | Strong organic revenue increase of 6.7% and reported revenue increase of 3.9% |
• | First quarter operating income of $20.9 million, compared to income of $7.8 million a year ago, in seasonally small first quarter |
• | Reported diluted earnings per share was $0.01, and break-even as adjusted for below-the-line items |
• | Company states it is well-positioned to achieve high end of 2016 organic revenue growth target of 3% - 4% and to expand full-year operating margin by 50 bps or better |
Summary
Revenue
• | First quarter 2016 revenue was $1.74 billion, compared to $1.68 billion in the first quarter of 2015, with an organic revenue increase of 6.7% compared to the prior-year period. This was comprised of an organic increase of 8.3% in the U.S. and 4.3% internationally. |
Operating Results
• | Operating income in the first quarter of 2016 was $20.9 million, compared to $7.8 million in 2015. |
• | Operating margin was 1.2% for the first quarter of 2016, compared to 0.5% in 2015. |
Net Results
• | First quarter results include a non-operating pre-tax loss of $16.3 million on the sales of businesses, in "Other (Expense) Income, net," which is chiefly non-cash. This amount includes losses on completed dispositions and the classification of certain assets as held for sale. |
• | The income tax benefit in the quarter includes valuation allowance reversals of $12.2 million as a consequence of the classification of assets as held for sale, as well as a benefit of $7.5 million related to the adoption of the Financial Accounting Standards Board Accounting Standards Update 2016-09. |
• | First quarter 2016 net income available to IPG common stockholders was $5.4 million, resulting in earnings of $0.01 per basic and diluted share. This compares to net loss |
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
available to IPG common stockholders a year ago of $1.8 million and break-even earnings per basic and diluted share.
“We are pleased to report another quarter of very strong performance, driven by solid contributions from across the portfolio. Our results reflect growth with existing clients, as well as new business wins, and strength in all geographic regions, led by notable domestic performance,” said Michael I. Roth, Interpublic’s Chairman and CEO. “Our digital expertise - whether embedded within all of our agency networks or at our stand-alone specialist agencies - continues to make us a valued partner for clients as they respond to an increasingly complex media and marketing landscape. Another key differentiator for IPG is our long-standing commitment to integrated ‘open architecture’ solutions customized to client needs. First quarter profit performance demonstrates that we are focused on driving further margin expansion. We also remain committed to our robust capital return programs. While the first quarter is seasonally small for us, our results position us to deliver on the high end of our 2016 target of 3% - 4% organic revenue growth and to expand full-year operating margin by 50 basis points or better. The caliber of our people and our offerings, coupled with strong operating discipline, is a winning combination that will ensure we continue to deliver for clients and further enhance shareholder value.”
Operating Results
Revenue
Revenue of $1.74 billion in the first quarter of 2016 increased 3.9% compared with the same period in 2015. During the quarter, the effect of foreign currency translation was negative 3.1%, the impact of net acquisitions was positive 0.3% and the resulting organic revenue increase was 6.7%.
Operating Expenses
Total operating expenses increased 3.2% in the first quarter of 2016 from a year ago, compared with revenue growth of 3.9%.
Salaries and related expenses were $1.27 billion in the first quarter of 2016, an increase of 4.6% compared to the same period in 2015.
Staff cost ratio, which is total salaries and related expenses as a percentage of total revenue, was 73.0% in the first quarter of 2016 compared to 72.5% in the same period in 2015, in the seasonally small first quarter, due to higher expenses for long-term performance-based compensation and severance.
During the first quarter of 2016, office and general expenses were $450.2 million, a decrease of 0.6% compared to the same period in 2015, due to the impact of changes in foreign currency translation and decreased pass-through expenses. Office and general expenses were 25.8% of revenue in the first quarter of 2016 compared with 27.0% a year ago.
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
Non-Operating Results and Tax
Net interest expense of $16.8 million increased by $3.1 million in the first quarter of 2016 compared to the same period in 2015.
The income tax benefit in the first quarter of 2016 was $15.6 million on loss before income taxes of $13.0 million, compared to a benefit of $1.4 million on loss before income taxes of $5.6 million in the same period in 2015. The income tax benefit in the first quarter of 2016 was primarily driven by valuation allowance reversals of $12.2 million, as a consequence of the classification of certain assets as held for sale, in addition to a benefit of $7.5 million on the early adoption of the Financial Accounting Standards Board Accounting Standards Update 2016-09, which requires all excess tax benefits and tax deficiencies on employee share-based payment accounting to be recognized in earnings instead of as additional paid-in capital, on a prospective basis.
Balance Sheet
At March 31, 2016, cash, cash equivalents and marketable securities totaled $680.3 million, compared to $1.51 billion at December 31, 2015 and $741.2 million at March 31, 2015. Total debt was $1.74 billion at March 31, 2016, compared to $1.76 billion at December 31, 2015.
Share Repurchase Program and Common Stock Dividend
During the first quarter of 2016, the company repurchased 2.5 million shares of its common stock at an aggregate cost of $53.7 million and an average price of $21.67 per share, including fees.
During the first quarter of 2016, the company declared and paid a common stock cash dividend of $0.15 per share, for a total of $59.9 million.
For more information concerning the company's financial results, please refer to the accompanying slide presentation available on our website, www.interpublic.com.
# # #
About Interpublic
Interpublic is one of the world's leading organizations of advertising agencies and marketing services companies. Major global brands include BPN, CRAFT, FCB (Foote, Cone & Belding), FutureBrand, Golin, Huge, Initiative, Jack Morton Worldwide, MAGNA GLOBAL, McCann, Momentum, MRM//McCann, MullenLowe Group, Octagon, R/GA, UM and Weber Shandwick. Other leading brands include Avrett Free Ginsberg, Campbell Ewald, Carmichael Lynch, Deutsch, Hill Holliday, ID Media and The Martin Agency. For more information, please visit www.interpublic.com.
# # #
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
Contact Information
Tom Cunningham
(Press)
(212) 704-1326
Jerry Leshne
(Analysts, Investors)
(212) 704-1439
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
Cautionary Statement
This release contains forward-looking statements. Statements in this release that are not historical facts, including statements about management's beliefs and expectations, constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined under Item 1A, Risk Factors, in our most recent Annual Report on Form 10-K. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following:
• | potential effects of a challenging economy, for example, on the demand for our advertising and marketing services, on our clients' financial condition and on our business or financial condition; |
• | our ability to attract new clients and retain existing clients; |
• | our ability to retain and attract key employees; |
• | risks associated with assumptions we make in connection with our critical accounting estimates, including changes in assumptions associated with any effects of a weakened economy; |
• | potential adverse effects if we are required to recognize impairment charges or other adverse accounting-related developments; |
• | risks associated with the effects of global, national and regional economic and political conditions, including counterparty risks and fluctuations in economic growth rates, interest rates and currency exchange rates; and |
• | developments from changes in the regulatory and legal environment for advertising and marketing and communications services companies around the world. |
Investors should carefully consider these factors and the additional risk factors outlined in more detail under Item 1A, Risk Factors, in our most recent Annual Report on Form 10-K.
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED SUMMARY OF EARNINGS FIRST QUARTER REPORT 2016 AND 2015 (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Three months ended March 31, | |||||||||||
2016 | 2015 | Fav. (Unfav.) % Variance | |||||||||
Revenue: | |||||||||||
United States | $ | 1,091.2 | $ | 1,003.8 | 8.7 | % | |||||
International | 650.8 | 672.2 | (3.2 | )% | |||||||
Total Revenue | 1,742.0 | 1,676.0 | 3.9 | % | |||||||
Operating Expenses: | |||||||||||
Salaries and Related Expenses | 1,270.9 | 1,215.2 | (4.6 | )% | |||||||
Office and General Expenses | 450.2 | 453.0 | 0.6 | % | |||||||
Total Operating Expenses | 1,721.1 | 1,668.2 | (3.2 | )% | |||||||
Operating Income | 20.9 | 7.8 | 167.9 | % | |||||||
Operating Margin % | 1.2 | % | 0.5 | % | |||||||
Expenses and Other Income: | |||||||||||
Interest Expense | (22.6 | ) | (20.9 | ) | |||||||
Interest Income | 5.8 | 7.2 | |||||||||
Other (Expense) Income, Net | (17.1 | ) | 0.3 | ||||||||
Total (Expenses) and Other Income | (33.9 | ) | (13.4 | ) | |||||||
Loss before Income Taxes | (13.0 | ) | (5.6 | ) | |||||||
Benefit of Income Taxes | (15.6 | ) | (1.4 | ) | |||||||
Income (Loss) of Consolidated Companies | 2.6 | (4.2 | ) | ||||||||
Equity in Net Income of Unconsolidated Affiliates | 0.1 | 0.0 | |||||||||
Net Income (Loss) | 2.7 | (4.2 | ) | ||||||||
Net Loss Attributable to Noncontrolling Interests | 2.7 | 2.4 | |||||||||
Net Income (Loss) Available to IPG Common Stockholders | $ | 5.4 | $ | (1.8 | ) | ||||||
Earnings (Loss) Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.01 | $ | 0.00 | |||||||
Diluted | $ | 0.01 | $ | 0.00 | |||||||
Weighted-Average Number of Common Shares Outstanding: | |||||||||||
Basic | 400.6 | 411.1 | |||||||||
Diluted | 409.3 | 411.1 | |||||||||
Dividends Declared Per Common Share | $ | 0.15 | $ | 0.12 | |||||||
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES RECONCILIATION OF ADJUSTED RESULTS (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||||||||||
Three months ended March 31, 2016 | |||||||||||||||||||
As Reported | Losses on Sales of Businesses | Valuation Allowance Reversals | Adoption of ASU 2016-09 | Adjusted Results | |||||||||||||||
(Loss) Income Before Income Taxes | $ | (13.0 | ) | $ | (16.3 | ) | $ | 3.3 | |||||||||||
Benefit of (Provision for) Income Taxes | 15.6 | 0.4 | $ | 12.2 | $ | 7.5 | (4.5 | ) | |||||||||||
Equity in Net Income of Unconsolidated Affiliates | 0.1 | 0.1 | |||||||||||||||||
Net Loss Attributable to Noncontrolling Interests | 2.7 | 2.7 | |||||||||||||||||
Net Income Available to IPG Common Stockholders | $ | 5.4 | $ | (15.9 | ) | $ | 12.2 | $ | 7.5 | $ | 1.6 | ||||||||
Weighted-Average Number of Common Shares Outstanding - Basic | 400.6 | 400.6 | |||||||||||||||||
Add: Effect of Dilutive Securities | |||||||||||||||||||
Restricted Stock, Stock Options and Other Equity Awards | 8.7 | 1.4 | 7.3 | ||||||||||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 409.3 | 1.4 | 407.9 | ||||||||||||||||
Earnings Per Share Available to IPG Common Stockholders - Basic | $ | 0.01 | $ | (0.04 | ) | $ | 0.03 | $ | 0.02 | $ | 0.00 | ||||||||
Earnings Per Share Available to IPG Common Stockholders - Diluted | $ | 0.01 | $ | (0.04 | ) | $ | 0.03 | $ | 0.02 | $ | 0.00 | ||||||||
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
FIRST QUARTER 2016 EARNINGS CONFERENCE CALL April 22, 2016
Overview – First Quarter 2016 Page 2 See reconciliations of organic revenue change on page 16 and diluted EPS on page 18. • Organic revenue growth was 6.7%, 3.9% as reported U.S. organic growth was 8.3% International organic growth was 4.3% • Operating income was $21 million, an improvement from operating income of $8 million a year ago, in seasonally small Q1 • Operating margin was 1.2%, an improvement of 70 basis points • Diluted EPS was $0.01, and was break-even as adjusted for below- the-line items
2016 2015 Revenue 1,742.0$ 1,676.0$ Salaries and Related Expenses 1,270.9 1,215.2 Off ice and General Expenses 450.2 453.0 Operating Income 20.9 7.8 Interest Expense (22.6) (20.9) Interest Income 5.8 7.2 Other (Expense) Income, net (17.1) 0.3 Loss Before Income Taxes (13.0) (5.6) Benefit of Income Taxes (15.6) (1.4) Equity in Net Income of Unconsolidated Aff iliates 0.1 - Net Income (Loss) 2.7 (4.2) Net Loss Attributable to Noncontrolling Interests 2.7 2.4 5.4$ (1.8)$ Earnings (Loss) per Share Available to IPG Common Stockholders Basic 0.01$ 0.00$ Diluted 0.01$ 0.00$ Weighted-Average Number of Common Shares Outstanding Basic 400.6 411.1 Diluted 409.3 411.1 Dividends Declared per Common Share 0.15$ 0.12$ Three Months Ended March 31, Net Income (Loss) Available to IPG Common Stockholders Operating Performance (Amounts in Millions, except per share amounts) Page 3
$ % Change March 31, 2015 1,676.0$ Total change 66.0 3.9% Foreign currency (51.9) (3.1%) Net acquisitions/(divestitures) 5.5 0.3% Organic 112.4 6.7% March 31, 2016 1,742.0$ Three Months Ended 2016 2015 Total Organic IAN 1,401.6$ 1,345.1$ 4.2% 7.6% CMG 340.4$ 330.9$ 2.9% 3.2% Change Three Months Ended March 31, Revenue ($ in Millions) Page 4 See reconciliation of segment organic revenue change on page 16. Integrated Agency Networks (“IAN”): McCann Worldgroup, FCB (Foote, Cone & Belding), MullenLowe Group, IPG Mediabrands, our digital specialist agencies and our domestic integrated agencies Constituency Management Group (“CMG”): Weber Shandwick, Golin, Jack Morton, FutureBrand, Octagon and our other marketing service specialists
Total Organic United States 8.7% 8.3% International (3.2%) 4.3% United Kingdom 0.4% 3.5% Continental Europe (4.8%) 1.7% Asia Pacific (3.0%) 2.7% Latin America (15.7%) 11.6% All Other Markets 3.8% 7.4% Worldwide 3.9% 6.7% Three Months Ended March 31, 2016 Geographic Revenue Change Page 5 “All Other Markets” includes Canada, Africa and the Middle East. See reconciliation of organic revenue change on page 16.
(0.9%) 0.9% 3.8% 3.7% (10.8%) 7.0% 6.1% 0.7% 2.8% 5.5% 6.1% 6.3% (12.0%) (10.0%) (8.0%) (6.0%) (4.0%) (2.0%) 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Q4-05 Q4-06 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Q4-13 Q4-14 Q4-15 Organic Revenue Growth Page 6 See reconciliation on page 17. Trailing Twelve Months Q1-16
Salaries & Related 2016 2015 $ Total Organic Three Months Ended March 31, 1,270.9$ 1,215.2$ 55.7$ 4.6% 7.6% % of Revenue 73.0% 72.5% Three months severance 23.8$ 17.3$ 6.5$ 37.6% % of Revenue 1.4% 1.0% Office & General 2016 2015 $ Total Organic Three Months Ended March 31, 450.2$ 453.0$ (2.8)$ (0.6%) 2.7% % of Revenue 25.8% 27.0% Three months occupancy expense (ex-D&A) 126.1$ 121.7$ 4.4$ 3.6% % of Revenue 7.2% 7.3% Change Change Operating Expenses ($ in Millions) Page 7 See reconciliation of organic measures on page 16.
(1.7%) 1.7% 5.3% 8.5% 5.7% 8.4% 9.8% 9.8% 8.4% 10.5% 11.5% 11.5% 9.3% (4.0%) (2.0%) 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Q4-05 Q4-06 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Q4-13 Q4-14 Q4-15 Operating Margin Page 8 Trailing Twelve Months Q1-16 For the twelve months ended December 31, 2013, reported operating income of $598.3 includes our Q4 2013 restructuring charge of $60.6. Excluding this charge, adjusted operating income was $658.9, and adjusted operating margin is represented in green. ($ in Millions)
(3) During Q1 2016, we early adopted Financial Accounting Standards Board Accounting Standards Update 2016-09, which requires all excess tax benefits and tax deficiencies on employee share-based payment accounting to be recognized in earnings instead of as additional paid-in capital, on a prospective basis. Adjusted Diluted Earnings Per Share Page 9 (Amounts in Millions, except per share amounts) See full reconciliation of adjusted diluted earnings per share on page 18. As Reported Losses on Sales of Businesses Valuation Allowance Reversals Adoption of ASU 2016-09 Adjusted Results (Loss) Income Before Income Taxes (13.0)$ (16.3)$ 3.3$ Benefit of (Provision for) Income Taxes 15.6 0.4 12.2$ 7.5$ (4.5) Diluted EPS Components: Net Income Available to IPG Common Stockholders 5.4$ (15.9)$ 12.2$ 7.5$ 1.6$ Weighted-Average Number of Common Shares Outstanding 409.3 1.4 407.9 Earnings Per Share Available to IPG Common Stockholders 0.01$ (0.04)$ 0.03$ 0.02$ 0.00$ Three Months Ended March 31, 2016 (1) (3) (1) During Q1 2016, we recorded losses on sales of businesses in our international markets, primarily in Continental Europe. This amount includes losses on completed dispositions and the classification of certain assets as held for sale. (2) During Q1 2016, we recorded valuation allowance reversals as a consequence of the classification of certain assets as held for sale in Continental Europe. (2)
March 31, December 31, March 31, 2016 2015 2015 CURRENT ASSETS: Cash and cash equivalents 673.4$ 1,502.9$ 734.3$ Marketable securities 6.9 6.8 6.9 Accounts receivable, net 3,718.9 4,361.0 3,781.4 Expenditures billable to clients 1,774.2 1,594.4 1,497.8 Other current assets 312.6 228.0 367.1 Total current assets 6,486.0$ 7,693.1$ 6,387.5$ CURRENT LIABILITIES: Accounts payable 5,785.1$ 6,672.0$ 5,468.5$ Accrued liabilities 620.6 760.3 618.7 Short-term borrowings 131.7 150.1 135.7 Current portion of long-term debt 2.0 1.9 2.0 Total current liabilities 6,539.4$ 7,584.3$ 6,224.9$ Balance Sheet – Current Portion ($ in Millions) Page 10
2016 2015 NET INCOME (LOSS) 3$ (4)$ OPERATING ACTIVITIES Depreciation & amortization 63 57 Deferred taxes (28) (32) Non-cash loss on sales of businesses 16 - Other non-cash items 28 13 Change in working capital, net (690) (785) Change in other non-current assets & liabilities (41) (30) Net cash used in Operating Activities (649) (781) INVESTING ACTIVITIES Capital expenditures (27) (20) Acquisitions, net of cash acquired (27) - Other investing activites (5) - Net cash used in Investing Activities (59) (20) FINANCING ACTIVITIES Common stock dividends (60) (49) Repurchase of common stock (54) (51) Net (decrease) increase in short-term bank borrowings (25) 34 Tax payments for employee shares withheld (19) (16) Distributions to noncontrolling interests (4) (1) Acquisition-related payments - (2) Excess tax benefit from share-based payment arrangements - 9 Exercise of stock options 4 9 Net cash used in Financing Activities (158) (67) Currency Effect 37 (58) Decrease in Cash & S/T Marketable Securities (829)$ (926)$ Three Months Ended March 31, (1) As part of the adoption of FASB ASU 2016-09, we have reclassified the tax payments for employee shares withheld balance into Financing Activities in both periods presented. This amount was previously included in Change in working capital, net in Operating Activities. Additionally, the excess tax benefit from share-based payment arrangements amount is now reflected within Net Income for Q1 2016, as prospective adoption was required. Cash Flow ($ in Millions) Page 11 (1) (1)
$2,325 $2,102 $1,923 $1,719 $1,756 $1,644 $1,654 $1,722 $1,762 $1,744 $1,000 $1,500 $2,000 $2,500 $3,000 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 3/31/2016 $2,431 (1) Includes current portion of long-term debt, short-term borrowings and long-term debt. (2) Includes our November 2012 debt issuances of $800 aggregate principal amount of Senior Notes, which pre-funded our plan to redeem a similar amount of debt in 2013. Total Debt (1) ($ in Millions) Page 12 (2)
Summary Page 13 • Q1 a solid start on FY-16 performance objectives • Sustained traction from key strategic initiatives Quality of our agency offerings, creative talent, embedded digital, and “open architecture” solutions Performance in high-growth disciplines and largest regions Effective expense management • Focus is on continued growth and margin improvement • Financial strength continues to be a source of value creation Raised dividend and authorized new share repurchase program (as previously announced in February)
Appendix
Q1 Q2 Q3 Q4 YTD 2016 Depreciation and amortization of fixed assets and intangible assets 38.0$ 38.0$ Amortization of restricted stock and other non-cash compensation 23.1 23.1 Net amortization of bond discounts and deferred financing costs 1.4 1.4 Q1 Q2 Q3 Q4 FY 2015 Depreciation and amortization of fixed assets and intangible assets 38.7$ 39.5$ 38.1$ 40.7$ 157.0$ Amortization of restricted stock and other non-cash compensation 16.8 16.4 16.5 20.6 70.3 Net amortization of bond discounts and deferred financing costs 1.4 1.4 1.4 1.6 5.8 2015 2016 Depreciation and Amortization ($ in Millions) Page 15
Three Months Ended March 31, 2015 Foreign Currency Net Acquisitions / (Divestitures) Three Months Ended March 31, 2016 Organic Total Segment Revenue IAN 1,345.1$ (44.2)$ (1.2)$ 101.9$ 1,401.6$ 7.6% 4.2% CMG 330.9 (7.7) 6.7 10.5 340.4 3.2% 2.9% Total 1,676.0$ (51.9)$ 5.5$ 112.4$ 1,742.0$ 6.7% 3.9% Geographic United States 1,003.8$ -$ 3.7$ 83.7$ 1,091.2$ 8.3% 8.7% International 672.2 (51.9) 1.8 28.7 650.8 4.3% (3.2%) United Kingdom 164.9 (9.3) 4.3 5.7 165.6 3.5% 0.4% Continental Europe 155.1 (6.2) (3.9) 2.6 147.6 1.7% (4.8%) Asia Pacific 187.8 (10.9) 0.2 5.0 182.1 2.7% (3.0%) Latin America 77.5 (18.7) (2.5) 9.0 65.3 11.6% (15.7%) All Other Markets 86.9 (6.8) 3.7 6.4 90.2 7.4% 3.8% Worldwide 1,676.0$ (51.9)$ 5.5$ 112.4$ 1,742.0$ 6.7% 3.9% Expenses Salaries & Related 1,215.2$ (38.1)$ 1.5$ 92.3$ 1,270.9$ 7.6% 4.6% Office & General 453.0 (15.6) 0.4 12.4 450.2 2.7% (0.6%) Total 1,668.2$ (53.7)$ 1.9$ 104.7$ 1,721.1$ 6.3% 3.2% Organic Components of Change Change Reconciliation of Organic Measures ($ in Millions) Page 16
Last Twelve Months Ending Beginning of Period Revenue Foreign Currency Net Acquisitions / (Divestitures) Organic End of Period Revenue 12/31/05 6,387.0$ 40.4$ (107.4)$ (56.2)$ 6,263.8$ 3/31/06 6,323.8 (10.9) (132.6) 81.5 6,261.8 6/30/06 6,418.4 (8.8) (157.5) (68.5) 6,183.6 9/30/06 6,335.9 (13.9) (140.4) 15.6 6,197.2 12/31/06 6,263.8 20.7 (165.5) 57.8 6,176.8 3/31/07 6,261.8 78.4 (147.2) 16.0 6,209.0 6/30/07 6,183.6 102.4 (124.7) 166.6 6,327.9 9/30/07 6,197.2 137.3 (110.9) 209.2 6,432.8 12/31/07 6,176.8 197.5 (70.7) 233.1 6,536.7 3/31/08 6,209.0 217.8 (45.9) 280.6 6,661.5 6/30/08 6,327.9 244.8 (12.6) 282.4 6,842.5 9/30/08 6,432.8 237.4 32.8 317.2 7,020.2 12/31/08 6,536.7 71.5 87.6 243.0 6,938.8 3/31/09 6,661.5 (88.3) 114.7 91.9 6,779.8 6/30/09 6,842.5 (286.2) 139.2 (275.3) 6,420.2 9/30/09 7,020.2 (390.1) 115.2 (636.4) 6,108.9 12/31/09 6,938.8 (251.6) 69.1 (748.9) 6,007.4 3/31/10 6,779.8 (88.2) 36.0 (705.4) 6,022.2 6/30/10 6,420.2 59.1 2.0 (316.9) 6,164.4 9/30/10 6,108.9 117.7 9.6 60.1 6,296.3 12/31/10 6,007.4 63.3 17.0 419.6 6,507.3 3/31/11 6,022.2 21.0 18.2 583.7 6,645.1 6/30/11 6,164.4 61.5 12.4 535.8 6,774.1 9/30/11 6,296.3 119.1 (7.7) 539.5 6,947.2 12/31/11 6,507.3 122.2 (8.6) 393.7 7,014.6 3/31/12 6,645.1 92.9 (1.4) 310.0 7,046.6 6/30/12 6,774.1 (14.3) 14.5 247.3 7,021.6 9/30/12 6,947.2 (117.2) 39.7 95.8 6,965.5 12/31/12 7,014.6 (147.6) 41.8 47.4 6,956.2 3/31/13 7,046.6 (143.7) 48.2 41.3 6,992.4 6/30/13 7,021.6 (111.4) 56.9 65.8 7,032.9 9/30/13 6,965.5 (80.3) 49.5 128.2 7,062.9 12/31/13 6,956.2 (80.4) 50.3 196.2 7,122.3 3/31/14 6,992.4 (89.9) 51.2 263.1 7,216.8 6/30/14 7,032.9 (80.6) 51.6 308.1 7,312.0 9/30/14 7,062.9 (53.5) 74.3 369.0 7,452.7 12/31/14 7,122.3 (75.5) 95.3 395.0 7,537.1 3/31/15 7,216.8 (125.7) 98.4 386.1 7,575.6 6/30/15 7,312.0 (223.5) 85.3 426.5 7,600.3 9/30/15 7,452.7 (336.2) 58.3 449.9 7,624.7 12/31/15 7,537.1 (408.5) 23.7 461.5 7,613.8 3/31/16 7,575.6 (388.5) 11.9 480.8 7,679.8 Components of Change During the Period Reconciliation of Organic Revenue Growth ($ in Millions) Page 17
(1) The following table reconciles our reported results to our adjusted non-GAAP results that excludes the losses on sales of businesses in our international markets, primarily in Continental Europe, valuation allowance reversals as a result of the classification of certain assets as held for sale, and the effect of the adoption of ASU 2016-09. The losses on sales of businesses amount includes losses on completed dispositions and the classification of certain assets as held for sale during the first quarter of 2016. Management believes the resulting comparisons provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance. Reconciliation of Adjusted Results (1) (Amounts in Millions, except per share amounts) Page 18 As Reported Losses on Sales of Businesses Valuation Allowance Reversals Adoption of ASU 2016-09 Adjusted Results (Loss) Income Before Income Taxes (13.0)$ (16.3)$ 3.3$ Benefit of (Provision for) Income Taxes 15.6 0.4 12.2$ 7.5$ (4.5) Equity in Net Income of Unconsolidated Aff iliates 0.1 0.1 Net Loss Attributable to Noncontrolling Interests 2.7 2.7 5.4$ (15.9)$ 12.2$ 7.5$ 1.6$ Weighted-Average Number of Common Shares Outstanding - Basic 400.6 400.6 Add: Effect of Dilutive Securities Restricted Stock, Stock Options and Other Equity Aw ards 8.7 1.4 7.3 Weighted-Average Number of Common Shares Outstanding - Diluted 409.3 1.4 407.9 Earnings Per Share Available to IPG Common Stockholders - Basic 0.01$ (0.04)$ 0.03$ 0.02$ 0.00$ Earnings Per Share Available to IPG Common Stockholders - Diluted 0.01$ (0.04)$ 0.03$ 0.02$ 0.00$ Three Months Ended March 31, 2016 Net lncome Available to IPG Common Stockholders - Basic and Diluted
Metrics Update
SALARIES & RELATED Trailing Twelve Months (% of revenue) Base, Benefits & Tax Incentive Expense Severance Expense Temporary Help OFFICE & GENERAL Trailing Twelve Months (% of revenue) Professional Fees Occupancy Expense (ex-D&A) T&E, Office Supplies & Telecom All Other O&G FINANCIAL Available Liquidity $1.0 Billion 5-Year Credit Facility Covenants Category Metric Metrics Update Page 20
64.0% 63.8% 64.0% 60.0% 62.0% 64.0% 66.0% 3/31/2015 12/31/2015 3/31/2016 % of Revenue, Trailing Twelve Months Salaries & Related Expenses Page 21
2016 2015 Salaries & Related Expenses (% of Revenue) Page 22 Three Months Ended March 31 “All Other Salaries & Related,” not shown, was 3.4% and 3.2% for the three months ended March 31, 2016 and 2015, respectively. 1.4% 1.0% 0.0% 1.0% 2.0% 3.0% Severance Expense 4.0% 3.9% 0.0% 2.0% 4.0% 6.0% Temporary Help 4.6% 3.9% 0.0% 2.0% 4.0% 6.0% Incentive Expense 59.6% 60.5% 50.0% 55.0% 60.0% 65.0% Base, Benefits & Tax
25.4% 24.7% 24.5% 21.0% 23.0% 25.0% 27.0% 3/31/2015 12/31/2015 3/31/2016 % of Revenue, Trailing Twelve Months Office & General Expenses Page 23
1.8% 1.7% 0.0% 1.0% 2.0% 3.0% Professional Fees 7.2% 7.3% 4.0% 6.0% 8.0% 10.0% Occupancy Expense (ex-D&A) 13.4% 14.4% 10.0% 12.0% 14.0% 16.0% All Other O&G 3.4% 3.6% 2.0% 3.0% 4.0% 5.0% T&E, Office Supplies & Telecom 2016 2015 Office & General Expenses (% of Revenue) Page 24 Three Months Ended March 31 “All Other O&G” includes production expenses, depreciation and amortization, bad debt expense, adjustments for contingent acquisition obligations, foreign currency (gains) losses, restructuring and other reorganization-related charges (reversals), long-lived asset impairments and other expenses.
$741 $856 $881 $1,510 $680 $983 $983 $984 $996 $996 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/2016 Cash, Cash Equivalents and Short-Term Marketable Securities Available Committed Credit Facility Available Liquidity ($ in Millions) Page 25 Cash, Cash Equivalents and Short-Term Marketable Securities + Available Committed Credit Facility
Last Twelve Months Ending March 31, 2016 I. Interest Coverage Ratio (not less than): 5.00x Actual Interest Coverage Ratio: 18.83x II. Leverage Ratio (not greater than): 3.50x Actual Leverage Ratio: 1.56x Interest Coverage Ratio - Interest Expense Reconciliation Last Twelve Months Ending March 31, 2016 Interest Expense: $87.5 - Interest income 21.4 - Other 6.7 Net interest expense : $59.4 EBITDA Reconciliation Last Twelve Months Ending March 31, 2016 Operating Income: $885.0 + Depreciation and amortization 232.9 + Other non-cash charges 0.5 EBITDA : $1,118.4 Covenants (1) Calculated as defined in the Credit Agreement. $1.0 Billion 5-Year Credit Facility Covenants ($ in Millions) Page 26 (1) (1)
Cautionary Statement Page 27 This investor presentation contains forward-looking statements. Statements in this investor presentation that are not historical facts, including statements about management’s beliefs and expectations, constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in our most recent Annual Report on Form 10-K under Item 1A, Risk Factors. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following: ➔ potential effects of a challenging economy, for example, on the demand for our advertising and marketing services, on our clients’ financial condition and on our business or financial condition; ➔ our ability to attract new clients and retain existing clients; ➔ our ability to retain and attract key employees; ➔ risks associated with assumptions we make in connection with our critical accounting estimates, including changes in assumptions associated with any effects of a weakened economy; ➔ potential adverse effects if we are required to recognize impairment charges or other adverse accounting-related developments; ➔ risks associated with the effects of global, national and regional economic and political conditions, including counterparty risks and fluctuations in economic growth rates, interest rates and currency exchange rates; and ➔ developments from changes in the regulatory and legal environment for advertising and marketing and communications services companies around the world. Investors should carefully consider these factors and the additional risk factors outlined in more detail in our most recent Annual Report on Form 10-K under Item 1A, Risk Factors.