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): July 25, 2017
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02. Results of Operations and Financial Condition.
On July 25, 2017, 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 second quarter and first six months of 2017, (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 July 25, 2017 (furnished pursuant to Item 2.02)
Exhibit 99.2: Investor presentation dated July 25, 2017 (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: July 25, 2017 | By: /s/ Andrew Bonzani |
Name: Andrew Bonzani Title: Senior Vice President, General Counsel and Secretary | |
FOR IMMEDIATE RELEASE | New York, NY (July 25, 2017) | |
Interpublic Announces Second Quarter and First Half 2017 Results
• | Second quarter reported revenue decrease of 1.7%; organic revenue increase was 0.4% and was 1.0% excluding the impact of lower pass-through revenue. |
• | First half reported revenue decrease of 0.6%; organic revenue increase was 1.5% and was 1.7% excluding the impact of lower pass-through revenue. |
• | Second quarter operating income of $206.5 million and operating margin of 11.0%. |
• | Second quarter diluted earnings per share of $0.24 and $0.27 as adjusted for below-the-line items, compared with $0.38 and $0.33 as adjusted a year ago. |
• | First half diluted earnings per share of $0.29 and $0.32 as adjusted for below-the-line items, compared with $0.40 and $0.36 as adjusted a year ago. |
• | Company remains committed to delivering its full-year performance target of 50 basis points of operating margin expansion and achieving the low end of its 3%-4% organic growth range. |
Summary
Revenue
• | Second quarter 2017 revenue decreased 1.7% to $1.88 billion, compared to $1.92 billion in the second quarter of 2016, with an organic revenue increase of 0.4% compared to the prior-year period. This was comprised of an organic increase of 0.7% in the U.S., which was 1.7% excluding the impact of lower pass-through revenues, and no organic change internationally. |
• | First half 2017 revenue decreased 0.6% to $3.64 billion, compared to $3.66 billion in the first half of 2016, with an organic revenue increase of 1.5% compared to the prior-year period. This was comprised of an organic revenue increase of 1.7% in the U.S., which was 1.8% excluding the impact of lower pass-through revenues, and 1.0% internationally. |
Operating Results
• | Operating income in the second quarter of 2017 was $206.5 million, compared to $224.3 million in 2016. Operating margin was 11.0% for the second quarter of 2017, compared to 11.7% in 2016. |
• | For the first half of 2017, operating income was $236.2 million, compared to operating income of $247.3 million in 2016. Operating margin was 6.5% for the first half of 2017, compared to 6.8% for the first half of 2016. |
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
Net Results
• | Income tax provision in the second quarter of 2017 was $75.4 million on income before income taxes of $170.1 million. |
• | Second quarter 2017 net income available to IPG common stockholders was $94.7 million, resulting in earnings of $0.24 per basic and diluted share, and $0.27 per adjusted diluted share. This compares to net income available to IPG common stockholders a year ago of $156.9 million, resulting in earnings of $0.39 per basic share and $0.38 per diluted share, and $0.33 per adjusted diluted share. |
• | Income tax provision in the first half of 2017 was $73.3 million on income before income taxes of $184.9 million. |
• | First half 2017 net income available to IPG common stockholders was $116.2 million, resulting in earnings of $0.30 per basic share and $0.29 per diluted share, and $0.32 per adjusted diluted share. This compares to net income available to IPG common stockholders a year ago of $162.3 million, resulting in earnings of $0.41 per basic share and $0.40 per diluted share, and $0.36 per adjusted diluted share. |
• | For the three and six months ended June 30, 2017, net income available to IPG common stockholders included net losses of $13.1 million and $12.2 million, respectively, on sales of businesses in "Other (Expense) Income, Net". Excluding losses on sales of businesses, our diluted earnings per share for the three and six months ended June 30, 2017 would have been $0.27 and $0.32, respectively. Adjusted diluted earnings per share was $0.33 and $0.36 in the respective prior year periods. Refer to reconciliations in the back for more detail. |
“Client spending in the quarter reflected increased caution, but we don’t see evidence of a broad-based economic downturn. Across the portfolio, we remain confident in the outstanding quality of our people and our work. This is confirmed by industry-leading performance at the most important award competitions that recognize creative excellence and marketing effectiveness,” said Michael I. Roth, Interpublic’s Chairman and CEO.
“Our offerings are highly competitive due to long-standing investments we have made in talent, especially embedding digital expertise within all of our companies, as well as in leading-edge programs that foster innovation and position us to help clients succeed in an age of data-driven and technology-enabled marketing. Applying these capabilities across our client roster positions us to achieve the low end of our 3% - 4% organic growth target for the year. We will also stay highly focused on costs, in order to build on our strong record of driving margin improvement, and we remain committed to delivering 50 basis points of operating margin expansion in 2017. Combined with the strength of our balance sheet and our commitment to capital return, that means there is significant potential at IPG for further value creation and enhanced shareholder value,” concluded Mr. Roth.
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
Operating Results
Revenue
Revenue of $1.88 billion in the second quarter of 2017 decreased 1.7% compared with the same period in 2016. During the quarter, the effect of foreign currency translation was negative 1.1%, the impact of net divestitures was negative 1.0%, and the resulting organic revenue increase was 0.4%. Excluding the decrease in organic pass-through revenue in the second quarter of 2017, the organic revenue increase would have been 1.0%.
Revenue of $3.64 billion in the first half of 2017 decreased 0.6% compared with the first half of 2016. During the first half of 2017, the effect of foreign currency translation was negative 1.0%, the impact of net divestitures was negative 1.1%, and the resulting organic revenue increase was 1.5%. Excluding the decrease in organic pass-through revenue in the first half of 2017, the organic revenue increase would have been 1.7%.
Operating Expenses
Total operating expenses decreased 0.9% in the second quarter of 2017 from a year ago, compared with revenue decrease of 1.7%, and decreased 0.3% in the first half of 2017 from a year ago, compared with revenue decrease of 0.6%.
During the second quarter of 2017, salaries and related expenses were $1.24 billion, an increase of 0.8% compared to the same period in 2016. During the first half of 2017, salaries and related expenses were $2.51 billion, an increase of 0.7% compared to the same period in 2016.
Staff cost ratio, which is total salaries and related expenses as a percentage of total revenue, was 65.7% in the second quarter of 2017 compared to 64.1% in the same period in 2016, and was 69.1% in the first half of 2017 compared to 68.3% in the same period in 2016.
During the second quarter of 2017, office and general expenses were $439.1 million, a decrease of 5.4% compared to the same period in 2016. During the first half of 2017, office and general expenses were $887.9 million, a decrease of 2.9% compared to the same period in 2016.
Office and general expenses were 23.3% of total revenue in the second quarter of 2017 compared to with 24.2% a year ago, and were 24.4% in the first half of 2017 compared to 25.0% in the same period in 2016.
Non-Operating Results and Tax
Net interest expense of $21.0 million increased by $2.1 million in the second quarter of 2017 compared to the same period in 2016. For the first half of 2017, net interest expense of $36.7 million increased by $1.0 million compared to the same period in 2016.
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
The income tax provision in the second quarter of 2017 was $75.4 million on income before income taxes of $170.1 million, compared to a provision of $43.7 million on income before income taxes of $205.8 million in the same period in 2016.
The income tax provision in the first half of 2017 was $73.3 million on income before taxes of $184.9 million, compared to a provision of $28.1 million on income before income taxes of $192.8 million in the same period in 2016.
Balance Sheet
At June 30, 2017, cash, cash equivalents and marketable securities totaled $660.8 million, compared to $1.10 billion at December 31, 2016 and $675.4 million at June 30, 2016. Total debt was $1.82 billion at June 30, 2017, compared to $1.69 billion at December 31, 2016.
Share Repurchase Program and Common Stock Dividend
During the second quarter of 2017, the company repurchased 2.5 million shares of its common stock at an aggregate cost of $60.0 million and an average price of $24.39 per share, including fees. During the first half of 2017, the company repurchased 4.8 million shares of its common stock at an aggregate cost of $115.0 million and an average price of $24.13 per share, including fees.
During the second quarter of 2017, the company declared and paid a common stock cash dividend of $0.18 per share, for a total of $70.5 million.
For further information regarding the company's financial results as well as certain non-GAAP measures and the reconciliation thereof, please refer to pages 18 and 19 of the earnings materials filed on Form 8-K here with and 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 Craft, FCB (Foote, Cone & Belding), FutureBrand, Golin, Huge, Initiative, Jack Morton Worldwide, MAGNA, 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.
# # #
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 SECOND QUARTER REPORT 2017 AND 2016 (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Three months ended June 30, | |||||||||||
2017 | 2016 | Fav. (Unfav.) % Variance | |||||||||
Revenue: | |||||||||||
United States | $ | 1,160.5 | $ | 1,169.1 | (0.7 | )% | |||||
International | 724.4 | 748.8 | (3.3 | )% | |||||||
Total Revenue | 1,884.9 | 1,917.9 | (1.7 | )% | |||||||
Operating Expenses: | |||||||||||
Salaries and Related Expenses | 1,239.3 | 1,229.5 | (0.8 | )% | |||||||
Office and General Expenses | 439.1 | 464.1 | 5.4 | % | |||||||
Total Operating Expenses | 1,678.4 | 1,693.6 | 0.9 | % | |||||||
Operating Income | 206.5 | 224.3 | (7.9 | )% | |||||||
Operating Margin % | 11.0 | % | 11.7 | % | |||||||
Expenses and Other Income: | |||||||||||
Interest Expense | (25.7 | ) | (24.5 | ) | |||||||
Interest Income | 4.7 | 5.6 | |||||||||
Other (Expense) Income, Net | (15.4 | ) | 0.4 | ||||||||
Total (Expenses) and Other Income | (36.4 | ) | (18.5 | ) | |||||||
Income Before Income Taxes | 170.1 | 205.8 | |||||||||
Provision for Income Taxes | 75.4 | 43.7 | |||||||||
Income of Consolidated Companies | 94.7 | 162.1 | |||||||||
Equity in Net Loss of Unconsolidated Affiliates | (0.1 | ) | (1.9 | ) | |||||||
Net Income | 94.6 | 160.2 | |||||||||
Net Loss (Income) Attributable to Noncontrolling Interests | 0.1 | (3.3 | ) | ||||||||
Net Income Available to IPG Common Stockholders | $ | 94.7 | $ | 156.9 | |||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.24 | $ | 0.39 | |||||||
Diluted | $ | 0.24 | $ | 0.38 | |||||||
Weighted-Average Number of Common Shares Outstanding: | |||||||||||
Basic | 392.3 | 400.1 | |||||||||
Diluted | 400.3 | 409.8 | |||||||||
Dividends Declared Per Common Share | $ | 0.18 | $ | 0.15 | |||||||
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 SECOND QUARTER REPORT 2017 AND 2016 (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Six months ended June 30, | |||||||||||
2017 | 2016 | Fav. (Unfav.) % Variance | |||||||||
Revenue: | |||||||||||
United States | $ | 2,272.3 | $ | 2,260.3 | 0.5 | % | |||||
International | 1,366.5 | 1,399.6 | (2.4 | )% | |||||||
Total Revenue | 3,638.8 | 3,659.9 | (0.6 | )% | |||||||
Operating Expenses: | |||||||||||
Salaries and Related Expenses | 2,514.7 | 2,498.3 | (0.7 | )% | |||||||
Office and General Expenses | 887.9 | 914.3 | 2.9 | % | |||||||
Total Operating Expenses | 3,402.6 | 3,412.6 | 0.3 | % | |||||||
Operating Income | 236.2 | 247.3 | (4.5 | )% | |||||||
Operating Margin % | 6.5 | % | 6.8 | % | |||||||
Expenses and Other Income: | |||||||||||
Interest Expense | (46.6 | ) | (47.1 | ) | |||||||
Interest Income | 9.9 | 11.4 | |||||||||
Other Expense, Net | (14.6 | ) | (18.8 | ) | |||||||
Total (Expenses) and Other Income | (51.3 | ) | (54.5 | ) | |||||||
Income Before Income Taxes | 184.9 | 192.8 | |||||||||
Provision for Income Taxes | 73.3 | 28.1 | |||||||||
Income of Consolidated Companies | 111.6 | 164.7 | |||||||||
Equity in Net Income (Loss) of Unconsolidated Affiliates | 1.1 | (1.8 | ) | ||||||||
Net Income | 112.7 | 162.9 | |||||||||
Net Loss (Income) Attributable to Noncontrolling Interests | 3.5 | (0.6 | ) | ||||||||
Net Income Available to IPG Common Stockholders | $ | 116.2 | $ | 162.3 | |||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.30 | $ | 0.41 | |||||||
Diluted | $ | 0.29 | $ | 0.40 | |||||||
Weighted-Average Number of Common Shares Outstanding: | |||||||||||
Basic | 392.0 | 400.4 | |||||||||
Diluted | 399.6 | 409.4 | |||||||||
Dividends Declared Per Common Share | $ | 0.36 | $ | 0.30 | |||||||
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 NON-GAAP RESULTS (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Three Months Ended June 30, 2017 | |||||||||||
As Reported | Net Losses on Sales of Businesses 1 | Adjusted Results | |||||||||
Income Before Income Taxes | $ | 170.1 | $ | (13.1 | ) | $ | 183.2 | ||||
Provision for Income Taxes | 75.4 | 75.4 | |||||||||
Effective Tax Rate | 44.3 | % | 41.2 | % | |||||||
Equity in Net Loss of Unconsolidated Affiliates | (0.1 | ) | (0.1 | ) | |||||||
Net Loss Attributable to Noncontrolling Interests | 0.1 | 0.1 | |||||||||
Net Income Available to IPG Common Stockholders | $ | 94.7 | $ | (13.1 | ) | $ | 107.8 | ||||
Weighted-Average Number of Common Shares Outstanding - Basic | 392.3 | 392.3 | |||||||||
Add: Effect of Dilutive Securities | |||||||||||
Restricted Stock, Stock Options and Other Equity Awards | 8.0 | 8.0 | |||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 400.3 | 400.3 | |||||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.24 | $ | (0.03 | ) | $ | 0.27 | ||||
Diluted | $ | 0.24 | $ | (0.03 | ) | $ | 0.27 | ||||
1 Includes losses on completed dispositions and the classification of certain assets as held for sale. | |||||||||||
Note: 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. | |||||||||||
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 NON-GAAP RESULTS (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Six Months Ended June 30, 2017 | |||||||||||
As Reported | Net Losses on Sales of Businesses 1 | Adjusted Results | |||||||||
Income Before Income Taxes | $ | 184.9 | $ | (12.2 | ) | $ | 197.1 | ||||
Provision for Income Taxes | 73.3 | 73.3 | |||||||||
Effective Tax Rate | 39.6 | % | 37.2 | % | |||||||
Equity in Net Income of Unconsolidated Affiliates | 1.1 | 1.1 | |||||||||
Net Loss Attributable to Noncontrolling Interests | 3.5 | 3.5 | |||||||||
Net Income Available to IPG Common Stockholders | $ | 116.2 | $ | (12.2 | ) | $ | 128.4 | ||||
Weighted-Average Number of Common Shares Outstanding - Basic | 392.0 | 392.0 | |||||||||
Add: Effect of Dilutive Securities | |||||||||||
Restricted Stock, Stock Options and Other Equity Awards | 7.6 | 7.6 | |||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 399.6 | 399.6 | |||||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.30 | $ | (0.03 | ) | $ | 0.33 | ||||
Diluted | $ | 0.29 | $ | (0.03 | ) | $ | 0.32 | ||||
1 Includes losses on completed dispositions and the classification of certain assets as held for sale. | |||||||||||
Note: 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. | |||||||||||
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 NON-GAAP RESULTS (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||||||
Three Months Ended June 30, 2016 | |||||||||||||||
As Reported | Losses on Sales of Businesses | Settlement of Certain Tax Positions | Adjusted Results 1 | ||||||||||||
Income Before Income Taxes | $ | 205.8 | $ | (3.7 | ) | $ | 209.5 | ||||||||
Provision for Income Taxes | 43.7 | $ | 23.4 | 67.1 | |||||||||||
Effective Tax Rate | 21.2 | % | 32.0 | % | |||||||||||
Equity in Net Loss of Unconsolidated Affiliates | (1.9 | ) | (1.9 | ) | |||||||||||
Net Income Attributable to Noncontrolling Interests | (3.3 | ) | (3.3 | ) | |||||||||||
Net Income Available to IPG Common Stockholders | $ | 156.9 | $ | (3.7 | ) | $ | 23.4 | $ | 137.2 | ||||||
Weighted-Average Number of Common Shares Outstanding - Basic | 400.1 | 400.1 | |||||||||||||
Add: Effect of Dilutive Securities | |||||||||||||||
Restricted Stock, Stock Options and Other Equity Awards | 9.7 | 9.7 | |||||||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 409.8 | 409.8 | |||||||||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||||||
Basic | $ | 0.39 | $ | (0.01 | ) | $ | 0.06 | $ | 0.34 | ||||||
Diluted | $ | 0.38 | $ | (0.01 | ) | $ | 0.06 | $ | 0.33 | ||||||
1 The effect of the adoption of the Financial Accounting Standards Board Accounting Standards Update 2016-09, which was previously included in this table in 2016, has now been removed as the effect of the adoption is reflected in both periods. | |||||||||||||||
Note: 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. | |||||||||||||||
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 NON-GAAP RESULTS (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||||||||||
Six months ended June 30, 2016 | |||||||||||||||||||
As Reported | Losses on Sales of Businesses | Valuation Allowance Reversals | Settlement of Certain Tax Positions | Adjusted Results 1 | |||||||||||||||
Income Before Income Taxes | $ | 192.8 | $ | (20.0 | ) | $ | 212.8 | ||||||||||||
Provision for Income Taxes | 28.1 | 0.4 | $ | 12.2 | $ | 23.4 | 64.1 | ||||||||||||
Effective Tax Rate | 14.6 | % | 30.1 | % | |||||||||||||||
Equity in Net Loss of Unconsolidated Affiliates | (1.8 | ) | (1.8 | ) | |||||||||||||||
Net Income Attributable to Noncontrolling Interests | (0.6 | ) | (0.6 | ) | |||||||||||||||
Net Income Available to IPG Common Stockholders | $ | 162.3 | $ | (19.6 | ) | $ | 12.2 | $ | 23.4 | $ | 146.3 | ||||||||
Weighted-Average Number of Common Shares Outstanding - Basic | 400.4 | 400.4 | |||||||||||||||||
Add: Effect of Dilutive Securities | |||||||||||||||||||
Restricted Stock, Stock Options and Other Equity Awards | 9.0 | 9.0 | |||||||||||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 409.4 | 409.4 | |||||||||||||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||||||||||
Basic | $ | 0.41 | $ | (0.05 | ) | $ | 0.03 | $ | 0.06 | $ | 0.37 | ||||||||
Diluted | $ | 0.40 | $ | (0.05 | ) | $ | 0.03 | $ | 0.06 | $ | 0.36 | ||||||||
1 The effect of the adoption of the Financial Accounting Standards Board Accounting Standards Update 2016-09, which was previously included in this table in 2016, has now been removed as the effect of the adoption is reflected in both periods. | |||||||||||||||||||
Note: 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. | |||||||||||||||||||
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
SECOND QUARTER 2017
EARNINGS CONFERENCE CALL
July 25, 2017
Overview – Second Quarter 2017
Page 2 See reconciliation of organic revenue change on page 18 and adjusted non-GAAP diluted EPS on pages 21 and 22.
• Total revenue change was -1.7%; organic revenue growth was +0.4%,
and was 1.0% excluding the impact of lower pass-through revenue
U.S. organic growth was +0.7%, and was +1.7% excluding lower
pass-through revenue
International organic change was flat
• Operating income was $207 million compared with $224 million
• Operating margin was 11.0% compared with 11.7%, bringing H1
operating margin to 6.5% compared with 6.8% in 2016
• Diluted EPS was $0.24, and was $0.27 as adjusted for below-the-line
business dispositions, compared with $0.38 reported and $0.33
adjusted diluted EPS in Q2-16
2017 2016
Revenue 1,884.9$ 1,917.9$
Salaries and Related Expenses 1,239.3 1,229.5
Office and General Expenses 439.1 464.1
Operating Income 206.5 224.3
Interest Expense (25.7) (24.5)
Interest Income 4.7 5.6
Other (Expense) Income, net (15.4) 0.4
Income Before Income Taxes 170.1 205.8
Provision for Income Taxes 75.4 43.7
Equity in Net Loss of Unconsolidated Affiliates (0.1) (1.9)
Net Income 94.6 160.2
Net Loss (Income) Attributable to Noncontrolling Interests 0.1 (3.3)
94.7$ 156.9$
Earnings per Share Available to IPG Common Stockholders:
Basic 0.24$ 0.39$
Diluted 0.24$ 0.38$
Weighted-Average Number of Common Shares Outstanding:
Basic 392.3 400.1
Diluted 400.3 409.8
Dividends Declared per Common Share 0.18$ 0.15$
Three Months Ended June 30,
Net Income Available to IPG Common Stockholders
Operating Performance
(Amounts in Millions, except per share amounts)
Page 3
(1)
(1)
(1) As part of the adoption of FASB ASU 2017-07, we have reclassified a portion of postretirement costs/(benefits) from
Salaries and Related Expenses to Other (Expense) Income, net. The amounts reclassified were $0.8 and ($0.5) for the
three months ended June 30, 2017 and 2016, respectively.
2017 2016 Total Organic 2017 2016 Total Organic
IAN 1,537.8$ 1,548.5$ (0.7%) 1.0% 2,945.4$ 2,950.1$ (0.2%) 1.6%
CMG 34 .1 369.4 (6.0 ) (2.2%) 693. 709.8 (2.3 ) .0
Change
Six Months Ended
Change
Three Months Ended
June 30, June 30,
$ % Change $ % Change
June 30, 2016 1,917.9$ 3,659.9$
Total change (33.0) (1.7%) (21.1) (0.6%)
Foreign currency (21.3) (1.1%) (38.4) (1.0%)
Net acquisitions/(divestitures) (19.4) (1.0%) (36.6) (1.1%)
Organic 7.7 0.4% 53.9 1.5%
June 30, 2017 1,884.9$ 3,638.8$
Three Months Ended Six Months Ended
Revenue
($ in Millions)
Page 4 See reconciliation of segment organic revenue change on pages 18 and 19.
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
Geographic Revenue Change
Page 5
“All Other Markets” includes Canada, Africa and the Middle East.
See reconciliation of organic revenue change on pages 18 and 19.
Total Organic Total Organic
United States (0.7%) 0.7% 0.5% 1.7%
Internatio al (3.3%) 0.0% (2.4%) 1.0%
United Kingdom (5.7%) 1.9% (8.1%) 1.0%
Continental Europe (7.4%) (2.5%) (4.4%) 1.7%
Asia Pacific (1.4%) (1.1%) (1.6%) (1.9%)
Latin America (3.5%) 0.0% 0.1% 1.6%
All Other Markets 2.9% 3.2% 6.4% 5.2%
Worldwide (1.7%) 0.4% (0.6%) 1.5%
Three Months Ended
June 30, 2017
Six Months Ended
June 30, 2017
(0.9%)
0.9%
3.8% 3.7%
(10.8%)
7.0%
6.1%
0.7%
2.8%
5.5%
6.1%
5.0%
3.2%
(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 Q4-16
Organic Revenue Growth
Page 6 See reconciliation on page 20.
Trailing Twelve Months
Q2-17
Operating Expenses
($ in Millions)
Page 7 See reconciliation of organic measures on pages 18 and 19.
Salaries & Related
2017 2016 $ Total Organic
Three Months Ended June 30, 1,239.3$ 1,229.5$ 9.8$ 0.8% 3.1%
% of Revenue 65.7% 64.1%
Six Months Ended June 30, 2,514.7$ 2,498.3$ 16.4$ 0.7% 3.0%
% of Revenue 69.1% 68.3%
Office & General
2017 2016 $ Total Organic
Three Months Ended June 30, 439.1$ 464.1$ (25.0)$ (5.4%) (2.7%)
% of Revenue 23.3% 24.2%
Six Months Ended June 30, 887.9$ 914.3$ (26.4)$ (2.9%) (0.2%)
% of Revenue 24.4% 25.0%
Change
Change
(1.7%)
1.7%
5.3%
8.5%
5.7%
8.4%
9.8% 9.8%
8.4%
10.5%
11.5%
12.0% 11.9%
9.3%
(3.0%)
(1.0%)
1.0%
3.0%
5.0%
7.0%
9.0%
11.0%
13.0%
Q4-05 Q4-06 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Q4-13 Q4-14 Q4-15 Q4-16Operating Margin
Page 8
Trailing Twelve Months
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)
Q2-17
As
Reported
Net Losses on
Sales of
Businesses
Adjusted
Results
Income Before Income Taxes 184.9$ (12.2)$ 197.1$
Provision for Income Taxes 73.3 73.3
Effective Tax Rate 39.6% 37.2%
Diluted EPS Components:
Net Income Available to IPG Common Stockholders 116.2$ (12.2)$ 128.4$
Weighted-Average Number of Common Shares Outstanding 399.6 399.6
Earnings Per Share Available to IPG Common Stockholders 0.29$ (0.03)$ 0.32$
Six Months Ended June 30, 2017
As
Reported
Net Losses on
Sales of
Businesses
Adjusted
Results
Income Before Income Taxes 170.1$ (13.1)$ 183.2$
Provision for Income Taxes 75.4 75.4
Effective Tax Rate 44.3% 41.2%
Diluted EPS Components:
Net Income Available to IPG Common Stockholders 94.7$ (13.1)$ 107.8$
Weighted-Average Number of Common Shares Outstanding 400.3 400.3
Earnings Per Share Available to IPG Common Stockholders 0.24$ (0.03)$ 0.27$
Three Months Ended June 30, 2017
Adjusted Diluted Earnings Per Share
Page 9
(Amounts in Millions, except per share amounts)
(1) During the six months ended June 30, 2017, we recorded net losses on sales of businesses, primarily in our
international markets. See full reconciliation of adjusted non-GAAP diluted earnings per share on page 21.
(1)
(1)
2017 2016
NET INCOME 95$ 160$
OPERATING ACTIVITIES
Depreciation & amortization 59 57
Deferred taxes 16 24
Net losses on sales of businesses 13 4
Other non-cash items 6 7
Change in working capital, net 25 (121)
Change in other non-current assets & liabilities 5 (31)
Net cash provided by Operating Activities 219 100
INVESTING ACTIVITIES
Capital expenditures (44) (36)
Acquisitions, net of cash acquired (10) (7)
Other investing activities (9) 1
Net cash used in Investing Activities (63) (42)
FINANCING ACTIVITIES
Net (decrease) increase in short-term borrowings (71) 75
Common stock dividends (70) (60)
Repurchase of common stock (60) (59)
Acquisition-related payments (36) (29)
Repayment of long-term debt (24) (1)
Distributions to noncontrolling interests (5) (3)
Tax payments for employee shares withheld (1) (3)
Exercise of stock options 4 6
Other financing activities - 1
Net cash used in Financing Activities (263) (73)
Currency Effect (12) 16
(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash (119)$ 1$
Three Months Ended June 30,
Cash Flow
($ in Millions)
Page 10
June 30, December 31, June 30,
2017 2016 2016
CURRENT ASSETS:
Cash and cash equivalents 657.6$ 1,097.6$ 672.6$
Marketable securities 3.2 3.0 2.8
Accounts receivable, net 3,762.2 4,389.7 3,945.0
Expenditures billable to clients 1,720.7 1,518.1 1,710.4
Assets held for sale 19.7 203.2 5.3
Other current assets 323.1 226.4 289.3
Total current assets 6,486.5$ 7,438.0$ 6,625.4$
CURRENT LIABILITIES:
Accounts payable 5,872.0$ 6,303.6$ 5,876.5$
Accrued liabilities 513.1 794.0 583.1
Short-term borrowings 237.7 85.7 192.9
Current portion of long-term debt 301.7 323.9 24.5
Liabilities held for sale 21.7 198.8 5.3
Total current liabilities 6,946.2$ 7,706.0$ 6,682.3$
Balance Sheet – Current Portion
($ in Millions)
Page 11 (1) Our 2.25% Senior Notes are due November 15, 2017.
(1)
Total Debt (1)
($ in Millions)
Page 12
$2,325
$2,102
$1,908
$1,701 $1,738
$1,623 $1,641
$1,706 $1,745 $1,690
$1,823
$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 12/31/2016 6/30/2017
$2,411
(2)
(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.
Summary
Page 13
• Foundation for sustained value creation in top talent and key
strategic initiatives
Quality of our agency offerings
Embedded digital & digital specialists
“Open architecture” solutions
• Effective expense management continues
• Focus is on continued growth and margin improvement
• Financial strength continues to be a source of value creation
Appendix
(1) As part of the adoption of FASB ASU 2017-07, we have reclassified $1.6 of postretirement costs from Salaries and
Related Expenses to Other Expense, net in each period presented.
2017 2016
Revenue 3,638.8$ 3,659.9$
Salaries and Related Expenses 2,514.7 2,498.3
Office and General Expenses 887.9 914.3
Operating Income 236.2 247.3
Interest Expense (46.6) (47.1)
Interest Income 9.9 11.4
Other Expense, net (14.6) (18.8)
Income Before Income Taxes 184.9 192.8
Provision for Income Taxes 73.3 28.1
Equity in Net Income (Loss) of Unconsolidated Affiliates 1.1 (1.8)
Net Income 112.7 162.9
Net Loss (Income) Attributable to Noncontrolling Interests 3.5 (0.6)
116.2$ 162.3$
Earnings per Share Available to IPG Common Stockholders:
Basic 0.30$ 0.41$
Diluted 0.29$ 0.40$
Weighted-Average Number of Common Shares Outstanding:
Basic 392.0 400.4
Diluted 399.6 409.4
Dividends Declared per Common Share 0.36$ 0.30$
Net Income Available to IPG Common Stockholders
Six Months Ended June 30,
Operating Performance
(Amounts in Millions, except per share amounts)
Page 15
(1)
(1)
Cash Flow
($ in Millions)
Page 16
2017 2016
NET INCOME 113$ 163$
OPERATING ACTIVITIES
Depreciation & amortization 131 120
Deferred taxes 2 (4)
Net losses on sales of businesses 12 20
Other non-cash items 19 36
Change in working capital, net (414) (816)
Change in other non-current assets & liabilities (16) (73)
Net cash used in Operating Activities (153) (554)
INVESTING ACTIVITIES
Capital expenditures (69) (63)
Acquisitions, net of cash acquired (13) (34)
Other investing activities (14) (5)
Net cash used in Investing Activities (96) (102)
FINANCING ACTIVITIES
Common stock dividends (141) (120)
Repurchase of common stock (115) (113)
Tax payments for employee shares withheld (38) (23)
Acquisition-related payments (36) (29)
Repayment of long-term debt (24) (1)
Distributions to noncontrolling interests (11) (7)
Net increase in short-term borrowings 154 55
Exercise of stock options 12 10
Other financing activities - 1
Net cash used in Financing Activities (199) (227)
Currency Effect 8 53
Decrease in Cash, Cash Equivalents and Restricted Cash (440)$ (830)$
Six Months Ended June 30,
Q1 Q2 Q3 Q4 YTD 2017
Depreciation and amortization of fixed assets and
intangible assets 41.0$ 41.3$ 82.3$
Amortization of restricted stock and other non-cash
compensation 29.7 16.3 46.0
Net amortization of bond discounts and deferred
financing costs 1.4 1.4 2.8
Q1 Q2 Q3 Q4 FY 2016
Depreciation and amortization of fixed assets and
intangible assets 38.0$ 39.8$ 39.7$ 42.7$ 160.2$
Amortization of restricted stock and other non-cash
compensation 23.1 16.8 19.1 26.6 85.6
Net amortization of bond discounts and deferred
financing costs 1.4 1.4 1.4 1.4 5.6
2017
2016
Depreciation and Amortization
($ in Millions)
Page 17
Three Months
Ended
June 30, 2016
Foreign
Currency
Net Acquisitions /
(Divestitures)
Three Months
Ended
June 30, 2017 Organic Total
Segment Revenue
IAN 1,548.5$ (14.8)$ (11.8)$ 15.9$ 1,537.8$ 1.0% (0.7%)
CMG 369.4 (6.5) (7.6) (8.2) 347.1 (2.2%) (6.0%)
Total 1,917.9$ (21.3)$ (19.4)$ 7.7$ 1,884.9$ 0.4% (1.7%)
Geographic
United States 1,169.1$ -$ (16.5)$ 7.9$ 1,160.5$ 0.7% (0.7%)
International 748.8 (21.3) (2.9) (0.2) 724.4 0.0% (3.3%)
United Kingdom 155.7 (17.6) 5.9 2.9 146.9 1.9% (5.7%)
Continental Europe 172.9 (5.4) (3.0) (4.4) 160.1 (2.5%) (7.4%)
Asia Pacific 217.7 (1.8) 1.1 (2.4) 214.6 (1.1%) (1.4%)
Latin America 86.8 4.6 (7.6) (0.0) 83.8 0.0% (3.5%)
All Other Markets 115.7 (1.1) 0.7 3.7 119.0 3.2% 2.9%
Worldwide 1,917.9$ (21.3)$ (19.4)$ 7.7$ 1,884.9$ 0.4% (1.7%)
Expenses
Salaries & Related 1,229.5$ (15.4)$ (12.4)$ 37.6$ 1,239.3$ 3.1% 0.8%
Office & General 464.1 (5.6) (7.1) (12.3) 439.1 (2.7%) (5.4%)
Total 1,693.6$ (21.0)$ (19.5)$ 25.3$ 1,678.4$ 1.5% (0.9%)
Components of Change Change
Organic
Reconciliation of Organic Measures
($ in Millions)
Page 18
(1)
(2)
(1)
(1) Excluding the decrease in worldwide organic pass-through revenue of $11.2, the organic revenue change would have
been $18.9, resulting in worldwide organic growth of 1.0%.
(2) Excluding the decrease in organic pass-through revenue of $11.5 in the U.S., the organic revenue change in the U.S.
would have been $19.4, resulting in U.S. organic growth of 1.7%.
Six Months
Ended
June 30, 2016
Foreign
Currency
Net Acquisitions /
(Divestitures) Organic
Six Months
Ended
June 30, 2017 Organic Total
Segment Revenue
IAN 2,950.1$ (24.6)$ (26.7)$ 46.6$ 2,945.4$ 1.6% (0.2%)
CMG 709.8 (13.8) (9.9) 7.3 693.4 1.0% (2.3%)
Total 3,659.9$ (38.4)$ (36.6)$ 53.9$ 3,638.8$ 1.5% (0.6%)
Geographic
United States 2,260.3$ -$ (27.5)$ 39.5$ 2,272.3$ 1.7% 0.5%
International 1,399.6 (38.4) (9.1) 14.4 1,366.5 1.0% (2.4%)
United Kingdom 321.3 (40.2) 11.1 3.2 295.4 1.0% (8.1%)
Continental Europe 320.5 (10.3) (9.3) 5.5 306.4 1.7% (4.4%)
Asia Pacific 399.8 (1.5) 2.6 (7.4) 393.5 (1.9%) (1.6%)
Latin America 152.1 11.9 (14.2) 2.4 152.2 1.6% 0.1%
All Other Markets 205.9 1.7 0.7 10.7 219.0 5.2% 6.4%
Worldwide 3,659.9$ (38.4)$ (36.6)$ 53.9$ 3,638.8$ 1.5% (0.6%)
Expenses
Salaries & Related 2,498.3$ (29.2)$ (28.4)$ 74.0$ 2,514.7$ 3.0% 0.7%
Office & General 914.3 (10.6) (14.0) (1.8) 887.9 (0.2%) (2.9%)
Total 3,412.6$ (39.8)$ (42.4)$ 72.2$ 3,402.6$ 2.1% (0.3%)
Components of Change Change
Reconciliation of Organic Measures
($ in Millions)
Page 19
(1) Excluding the decrease in worldwide organic pass-through revenue of $8.1, the organic revenue change would have
been $62.0, resulting in worldwide organic growth of 1.7%.
(2) Excluding the decrease in organic pass-through revenue of $1.2 in the U.S., the organic revenue change in the U.S.
would have been $40.7, resulting in U.S. organic growth of 1.8%.
(1)
(2)
(1)
Last Twelve
Months Ending
Beginning of
Period Revenue
Foreign
Currency
Net Acquisitions /
(Divestitures) Organic
End of Period
Revenue
12/31/05 6,387.0$ 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
6/30/16 7,600.3 (315.6) 10.8 426.1 7,721.6
9/30/16 7,624.7 (237.5) 16.4 374.7 7,778.3
12/31/16 7,613.8 (159.7) 15.3 377.2 7,846.6
3/31/17 7,679.8 (124.9) (7.4) 311.0 7,858.5
6/30/17 7,721.6 (113.2) (32.9) 250.0 7,825.5
Components of Change During the Period
Reconciliation of Organic Revenue Growth
($ in Millions)
Page 20
Reconciliation of Adjusted Results(1)
Page 21
(Amounts in Millions, except per share amounts)
As
Reported
Net Losses on
Sales of
Businesses
Adjusted
Results
As
Reported
Net Losses on
Sales of
Businesses
Adjusted
Results
Income Before Income Taxes 170.1$ (13.1)$ 183.2$ 184.9$ (12.2)$ 197.1$
Provision for Income Taxes 75.4 75.4 73.3 73.3
Equity in Net (Loss) Income of Unconsolidated Affiliates (0.1) (0.1) 1.1 1.1
Net Loss Attributable to Noncontrolling Interests 0.1 0.1 3.5 3.5
94.7$ (13.1)$ 107.8$ 116.2$ (12.2)$ 128.4$
Weighted-Average Number of Common Shares Outstanding - Basic 392.3 392.3 392.0 392.0
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 8.0 8.0 7.6 7.6
Weighted-Average Number of Common Shares Outstanding - Diluted 400.3 400.3 399.6 399.6
Earnings Per Share Available to IPG Common Stockholders - Basic 0.24$ (0.03)$ 0.27$ 0.30$ (0.03)$ 0.33$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.24$ (0.03)$ 0.27$ 0.29$ (0.03)$ 0.32$
Three Months Ended June 30, 2017 Six Months Ended June 30, 2017
Net lncome Available to IPG Common Stockholders
(1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the net losses on sales
of businesses, primarily in our international markets. This amount includes losses on completed dispositions and the
classification of certain assets as held for sale during 2017. 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)
Page 22
(Amounts in Millions, except per share amounts)
(1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the losses on sales of
businesses in our international markets, primarily in Continental Europe, and the release of reserves related to the
conclusion and settlement of a tax examination of previous tax years. The losses on sales of businesses amount
includes losses on completed dispositions and the classification of certain assets as held for sale during the second
quarter of 2016. The effect of the adoption of the Financial Accounting Standards Board Accounting Standards Update
2016-09, which was previously included in this table in 2016, has now been removed as the effect of the adoption is
included in both periods presented within this presentation. 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.
As
Reported
Losses on
Sales of
Businesses
Settlement
of Certain
Tax Positions
Adjusted
Results
Income Before Income Taxes 205.8$ (3.7)$ 209.5$
Provision for Income Taxes 43.7 23.4$ 67.1
Equity in Net Loss of Unconsolidated Affiliates (1.9) (1.9)
Net Income Attributable to Noncontrolling Interests (3.3) (3.3)
156.9$ (3.7)$ 23.4$ 137.2$
Weighted-Average Number of Common Shares Outstanding - Basic 400.1 400.1
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 9.7 9.7
Weighted-Average Number of Common Shares Outstanding - Diluted 409.8 409.8
Earnings Per Share Available to IPG Common Stockholders - Basic 0.39$ (0.01)$ 0.06$ 0.34$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.38$ (0.01)$ 0.06$ 0.33$
Three Months Ended June 30, 2016
Net lncome Available to IPG Common Stockholders
Reconciliation of Adjusted Results(1)
Page 23
(Amounts in Millions, except per share amounts)
(1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the losses on sales of
businesses in our international markets, primarily in Continental Europe, valuation allowance reversals as a result of the
disposition of those businesses in Continental Europe and the release of reserves related to the conclusion and
settlement of a tax examination of previous tax years. 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 half of 2016. The effect of
the adoption of the Financial Accounting Standards Board Accounting Standards Update 2016-09, which was previously
included in this table in 2016, has now been removed as the effect of the adoption is included in both periods presented
within this presentation. 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.
As
Reported
Losses on
Sales of
Businesses
Valuation
Allowance
Reversals
Settlement
of Certain
Tax Positions
Adjusted
Results
Income Before Income Taxes 192.8$ (20.0)$ 212.8$
Provision for Income Taxes 28.1 0.4 12.2$ 23.4$ 64.1
Equity in Net Loss of Unconsolidated Affiliates (1.8) (1.8)
Net Income Attributable to Noncontrolling Interests (0.6) (0.6)
162.3$ (19.6)$ 12.2$ 23.4$ 146.3$
Weighted-Average Number of Common Shares Outstanding - Basic 400.4 400.4
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 9.0 9.0
Weighted-Average Number of Common Shares Outstanding - Diluted 409.4 409.4
Earnings Per Share Available to IPG Common Stockholders - Basic 0.41$ (0.05)$ 0.03$ 0.06$ 0.37$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.40$ (0.05)$ 0.03$ 0.06$ 0.36$
Six Months Ended June 30, 2016
Net lncome Available to IPG Common Stockholders
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 25
64.0% 64.2%
64.6%
60.0%
62.0%
64.0%
66.0%
6/30/2016 12/31/2016 6/30/2017
% of Revenue, Trailing Twelve Months
Salaries & Related Expenses
Page 26
2017 2016
1.1% 1.0% 1.2% 1.2%
0.0%
1.0%
2.0%
3.0%
Severance Expense
Three Months Six Months
3.9% 3.8% 4.0% 3.9%
0.0%
2.0%
4.0%
6.0%
Temporary Help
Three Months Six Months
2.7% 3.0%
3.7% 3.8%
0.0%
2.0%
4.0%
6.0%
Incentive Expense
Six MonthsThree Months
56.1%
54.1%
58.1%
56.7%
45.0%
50.0%
55.0%
60.0%
Base, Benefits & Tax
Three Months Six Months
Salaries & Related Expenses (% of Revenue)
Page 27
Three and Six Months Ended June 30
“All Other Salaries & Related,” not shown, was 1.9% and 2.2% for the three months ended June 30, 2017 and 2016,
respectively, and 2.1% and 2.7% for the six months ended June 30, 2017 and 2016, respectively.
24.5%
23.8% 23.6%
21.0%
23.0%
25.0%
27.0%
6/30/2016 12/31/2016 6/30/2017
% of Revenue, Trailing Twelve Months
Office & General Expenses
Page 28
1.7%
1.5%
1.7% 1.6%
0.0%
1.0%
2.0%
3.0%
Professional Fees
Three Months Six Months
6.9% 6.6%
7.1% 6.9%
4.0%
6.0%
8.0%
10.0%
Occupancy Expense (ex-D&A)
Three Months Six Months
11.6%
12.7% 12.4%
13.1%
10.0%
12.0%
14.0%
16.0%
All Other O&G
Three Months Six Months
3.1%
3.4%
3.2%
3.4%
2.0%
3.0%
4.0%
5.0%
T&E, Office Supplies & Telecom
Three Months Six Months
Office & General Expenses (% of Revenue)
Page 29
Three and Six Months Ended June 30
“All Other O&G” primarily includes production expenses and, to a lesser extent, depreciation and amortization, bad debt
expense, adjustments to contingent acquisition obligations, foreign currency losses (gains), spending to support new
business activity, net restructuring and other reorganization-related charges (reversals), long-lived asset impairments and
other expenses.
2017 2016
$675
$895 $1,101 $778 $661
$995
$995
$995
$992
$992
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
Cash, Cash Equivalents and Short-Term Marketable Securities Available Committed Credit Facility
Available Liquidity
($ in Millions)
Page 30
Cash, Cash Equivalents and Short-Term Marketable Securities
+ Available Committed Credit Facility
Last Twelve Months
Ending June 30, 2017
I. Interest Coverage Ratio (not less than): 5.00x
Actual Interest Coverage Ratio: 18.48x
II. Leverage Ratio (not greater than): 3.50x
Actual Leverage Ratio: 1.54x
Interest Coverage Ratio - Interest Expense Reconciliation
Last Twelve Months
Ending June 30, 2017
Interest Expense: $90.1
- Interest income 18.6
- Other 7.3
Net interest expense : $64.2
EBITDA Reconciliation
Last Twelve Months
Ending June 30, 2017
Operating Income: $929.9
+ Depreciation and amortization 256.4
EBITDA : $1,186.3
Covenants
$1.0 Billion 5-Year Credit Facility Covenants
($ in Millions)
Page 31 (1) Calculated as defined in the Credit Agreement.
(1)
(1)
Cautionary Statement
Page 32
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.