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 24, 2018
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 24, 2018, 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 2018, (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 24, 2018 (furnished pursuant to Item 2.02)
Exhibit 99.2: Investor presentation dated July 24, 2018 (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 24, 2018 | By: /s/ Andrew Bonzani |
Name: Andrew Bonzani Title: Senior Vice President, General Counsel and Secretary | |
Exhibit 99.1
FOR IMMEDIATE RELEASE | New York, NY (July 24, 2018) | |
Interpublic Announces Second Quarter and First Half 2018 Results
• | Second quarter net revenue increase of 6.2% and organic net revenue increase of 5.6%; U.S. organic net revenue growth was 4.6%; International organic net revenue growth was 7.2%. |
• | First half net revenue increase of 6.0%; organic net revenue increase was 4.7% |
• | Second quarter operating income increase of 10.4% to $249.2 million |
• | Second quarter operating margin on net revenue of 12.8% compared to 12.3% in the prior year |
• | Second quarter diluted earnings per share of $0.37 and $0.43 as adjusted for dispositions of certain small, non-strategic businesses during the quarter, compared with $0.27 and $0.30 as adjusted a year ago |
• | First half diluted earnings per share of $0.34 and $0.45 as adjusted for business dispositions, compared with $0.33 and $0.36 as adjusted a year ago |
• | Company increases full year target for organic net revenue growth to range of 4.0% to 4.5%, and maintains target of 60-70 basis points of net operating margin expansion |
• | Company margin target excludes expected non-recurring transaction costs |
Summary
Revenue
• | Second quarter 2018 net revenue increased 6.2% to $1.95 billion, compared to $1.83 billion in the second quarter of 2017, with an organic net revenue increase of 5.6% compared to the prior-year period. This was comprised of an organic net increase of 4.6% in the U.S. and 7.2% internationally. Second quarter 2018 total revenue increased 9.4% to $2.39 billion, compared to $2.19 billion in the second quarter of 2017. |
• | First half 2018 net revenue increased 6.0% to $3.72 billion, compared to $3.51 billion in the first half of 2017, with an organic net revenue increase of 4.7% compared to the prior-year period. This was comprised of an organic net increase of 4.5% in the U.S. and 5.1% internationally. First half 2018 total revenue increased 7.3% to $4.56 billion, compared to $4.25 billion in the first half of 2017. |
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
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Operating Results
• | Operating income in the second quarter of 2018 was $249.2 million, compared to $225.7 million in 2017. Operating margin on net revenue was 12.8% for the second quarter of 2018, compared to 12.3% in 2017. |
• | For the first half of 2018, operating income was $288.0 million, compared to $260.4 million in 2017. Operating margin on net revenue was 7.7% for the first half of 2018, compared to 7.4% in 2017. |
Net Results
• | Income tax provision in the second quarter of 2018 was $63.6 million on income before income taxes of $211.5 million. |
• | Second quarter 2018 net income available to IPG common stockholders was $145.8 million, resulting in earnings of $0.38 per basic share and $0.37 per diluted share, and $0.43 per diluted share as adjusted for a non-operating loss of $19.8 million on the sales of businesses in "Other Expense, Net." This compares to net income available to IPG common stockholders a year ago of $107.7 million, resulting in earnings of $0.27 per basic and diluted share, and $0.30 per adjusted diluted share. |
• | Income tax provision in the first half of 2018 was $76.3 million on income before income taxes of $210.0 million. |
• | First half 2018 net income available to IPG common stockholders was $131.7 million, resulting in earnings of $0.34 per basic and diluted share, and $0.45 per diluted share as adjusted for a non-operating loss of $44.2 million on the sales of businesses in "Other Expense, Net." This compares to net income available to IPG common stockholders a year ago of $132.4 million, resulting in earnings of $0.34 per basic share and $0.33 per diluted share, and $0.36 per adjusted diluted share. |
• | As a reminder, 2017 results are as previously restated for the adoption of ASC 606. Refer to reconciliations in the back for more detail. |
“We are extremely pleased with our performance this quarter. Growth in the U.S. continued to be strong and international growth accelerated. The results were led by exceptional performance in media and at our creatively-led integrated agencies, as well as contributions from our digital services, public relations, events and sports marketing. This breadth highlights the competitiveness of our offerings, the talent of our people, the expanding value of our data and analytics practice, and our ability to bring collaborative open architecture solutions to market,” said Michael I. Roth, Interpublic's Chairman and CEO.
“This is an exciting time for our company. We continue to drive growth that leads our industry. Further, our announcement earlier this month to acquire Acxiom Marketing Solutions means that we are well-positioned to execute on the many opportunities that come with unrivaled industry resources in data management - capabilities that are key to driving future growth for our clients,” added Mr. Roth.
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
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“Our results year-to-date, coupled with our expectations for the remainder of the year, have led us to increase our organic growth target, and we now expect to deliver net revenue organic growth of 4 to 4.5% in 2018. We remain committed to furthering our long-term record of margin expansion with 60 to 70 basis points of improvement, as targeted coming into the year. We view our current performance and long-term strategy as significant factors that will continue to further value creation and enhance shareholder value,” concluded Mr. Roth.
Operating Results
Revenue
Net revenue of $1.95 billion in the second quarter of 2018 increased 6.2% compared with the same period in 2017. During the quarter, the effect of foreign currency translation was positive 1.4%, the impact of net divestitures was negative 0.8%, and the resulting organic net revenue increase was 5.6%. Total revenue of $2.39 billion in the second quarter of 2018 increased 9.4% compared with the same period in 2017.
Net revenue of $3.72 billion in the first half of 2018 increased 6.0% compared with the first half of 2017. During the first half of 2017, the effect of foreign currency translation was positive 2.1%, the impact of net divestitures was negative 0.8%, and the resulting organic net revenue increase was 4.7%. Total revenue of $4.56 billion in the first half of 2018 increased 7.3% compared with the first half of 2017.
Operating Expenses
Total operating expenses, excluding billable expenses, increased 5.6% in the second quarter of 2018 from a year ago, compared with net revenue growth of 6.2%, and increased 5.7% in the first half of 2018 from a year ago, compared with net revenue growth of 6.0%.
During the second quarter of 2018, salaries and related expenses were $1.29 billion, an increase of 5.2% compared to the same period in 2017. During the first half of 2018, salaries and related expenses were $2.62 billion, an increase of 5.7% compared to the same period in 2017.
Staff cost ratio, which is total salaries and related expenses as a percentage of net revenue, was 66.4% in the second quarter of 2018 compared to 67.0% in the same period in 2017, and was 70.5% in the first half of 2018 compared to 70.7% in the same period in 2017.
During the second quarter of 2018, office and other direct expenses were $333.3 million, an increase of 4.7% compared to the same period in 2017. During the first half of 2018, office and other direct expenses were $657.1 million, an increase of 4.1% compared to the same period in 2017.
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
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Office and other direct expenses were 17.1% of net revenue in the second quarter of 2018 compared to 17.4% a year ago, and were 17.7% in the first half of 2018 compared to 18.0% in the same period in 2017.
During the second quarter of 2018, selling, general and administrative expenses were $28.8 million, an increase of 41.9% compared to the same period in 2017. During the first half of 2018, selling, general and administrative expenses were $63.9 million, an increase of 15.1% compared to the same period in 2017.
Selling, general and administrative expenses were 1.5% of net revenue in the second quarter of 2018 compared to 1.1% a year ago, and were 1.7% in the first half of 2018 compared to 1.6% in the same period in 2017.
During the second quarter of 2018, depreciation and amortization was $44.0 million, an increase of 6.5% compared to the same period in 2017. During the first half of 2018, depreciation and amortization was $90.0 million, an increase of 9.4% compared to the same period in 2017.
Depreciation and amortization was 2.3% of net revenue in the second quarter of 2018 compared to 2.3% a year ago, and was 2.4% in the first half of 2018 compared to 2.3% in the same period in 2017.
Non-Operating Results and Tax
Net interest expense of $21.4 million increased by $0.4 million in the second quarter of 2018 compared to the same period in 2017. For the first half of 2018, net interest expense of $37.3 million increased by $0.6 million compared to the same period in 2017.
The income tax provision in the second quarter of 2018 was $63.6 million on income before income taxes of $211.5 million, compared to a provision of $81.6 million on income before income taxes of $189.3 million in the same period in 2017.
The income tax provision in the first half of 2018 was $76.3 million on income before income taxes of $210.0 million, compared to a provision of $81.3 million on income before income taxes of $209.1 million in the same period in 2017.
Balance Sheet
At June 30, 2018, cash, cash equivalents and marketable securities totaled $493.3 million, compared to $791.0 million at December 31, 2017 and $660.8 million at June 30, 2017. Total debt was $2.04 billion at June 30, 2018, compared to $1.37 billion at December 31, 2017.
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
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Share Repurchase Program and Common Stock Dividend
During the second quarter of 2018, the company repurchased 2.6 million shares of its common stock at an aggregate cost of $59.6 million and an average price of $23.43 per share, including fees. During the first half of 2018, the company repurchased 5.0 million shares of its common stock at an aggregate cost of $114.5 million and an average price of $23.02 per share, including fees.
During the second quarter of 2018, the company declared and paid a common stock cash dividend of $0.21 per share, for a total of $80.4 million.
For more information concerning the company's financial results, please refer to the accompanying slide presentation available on our website, www.interpublic.com.
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
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# # #
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, 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
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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, and our other filings with the Securities and Exchange Commission ("SEC"). 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, and our other SEC filings.
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED SUMMARY OF EARNINGS SECOND QUARTER REPORT 2018 AND 2017 (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Three Months Ended June 30, | |||||||||||
2018 | 2017 | Fav. (Unfav.) % Variance | |||||||||
Revenue: | |||||||||||
Net Revenue | $ | 1,948.2 | $ | 1,834.6 | 6.2 | % | |||||
Billable Expenses | 443.6 | 351.2 | 26.3 | % | |||||||
Total Revenue | 2,391.8 | 2,185.8 | 9.4 | % | |||||||
Operating Expenses: | |||||||||||
Salaries and Related Expenses | 1,292.9 | 1,228.9 | (5.2 | )% | |||||||
Office and Other Direct Expenses | 333.3 | 318.4 | (4.7 | )% | |||||||
Billable Expenses | 443.6 | 351.2 | (26.3 | )% | |||||||
Cost of Services | 2,069.8 | 1,898.5 | (9.0 | )% | |||||||
Selling, General and Administrative Expenses | 28.8 | 20.3 | (41.9 | )% | |||||||
Depreciation and Amortization | 44.0 | 41.3 | (6.5 | )% | |||||||
Total Operating Expenses | 2,142.6 | 1,960.1 | (9.3 | )% | |||||||
Operating Income | 249.2 | 225.7 | 10.4 | % | |||||||
Operating Margin on Net Revenue % | 12.8 | % | 12.3 | % | |||||||
Operating Margin on Total Revenue % | 10.4 | % | 10.3 | % | |||||||
Expenses and Other Income: | |||||||||||
Interest Expense | (26.1 | ) | (25.7 | ) | |||||||
Interest Income | 4.7 | 4.7 | |||||||||
Other Expense, Net | (16.3 | ) | (15.4 | ) | |||||||
Total (Expenses) and Other Income | (37.7 | ) | (36.4 | ) | |||||||
Income Before Income Taxes | 211.5 | 189.3 | |||||||||
Provision for Income Taxes | 63.6 | 81.6 | |||||||||
Income of Consolidated Companies | 147.9 | 107.7 | |||||||||
Equity in Net Loss of Unconsolidated Affiliates | (0.1 | ) | (0.1 | ) | |||||||
Net Income | 147.8 | 107.6 | |||||||||
Net (Income) Loss Attributable to Noncontrolling Interests | (2.0 | ) | 0.1 | ||||||||
Net Income Available to IPG Common Stockholders | $ | 145.8 | $ | 107.7 | |||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.38 | $ | 0.27 | |||||||
Diluted | $ | 0.37 | $ | 0.27 | |||||||
Weighted-Average Number of Common Shares Outstanding: | |||||||||||
Basic | 383.6 | 392.3 | |||||||||
Diluted | 389.5 | 400.3 | |||||||||
Dividends Declared Per Common Share | $ | 0.21 | $ | 0.18 | |||||||
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED SUMMARY OF EARNINGS SECOND QUARTER REPORT 2018 AND 2017 (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Six Months Ended June 30, | |||||||||||
2018 | 2017 | Fav. (Unfav.) % Variance | |||||||||
Revenue: | |||||||||||
Net Revenue | $ | 3,722.2 | $ | 3,509.9 | 6.0 | % | |||||
Billable Expenses | 838.7 | 739.7 | 13.4 | % | |||||||
Total Revenue | 4,560.9 | 4,249.6 | 7.3 | % | |||||||
Operating Expenses: | |||||||||||
Salaries and Related Expenses | 2,623.2 | 2,480.6 | (5.7 | )% | |||||||
Office and Other Direct Expenses | 657.1 | 631.1 | (4.1 | )% | |||||||
Billable Expenses | 838.7 | 739.7 | (13.4 | )% | |||||||
Cost of Services | 4,119.0 | 3,851.4 | (6.9 | )% | |||||||
Selling, General and Administrative Expenses | 63.9 | 55.5 | (15.1 | )% | |||||||
Depreciation and Amortization | 90.0 | 82.3 | (9.4 | )% | |||||||
Total Operating Expenses | 4,272.9 | 3,989.2 | (7.1 | )% | |||||||
Operating Income | 288.0 | 260.4 | 10.6 | % | |||||||
Operating Margin on Net Revenue % | 7.7 | % | 7.4 | % | |||||||
Operating Margin on Total Revenue % | 6.3 | % | 6.1 | % | |||||||
Expenses and Other Income: | |||||||||||
Interest Expense | (46.0 | ) | (46.6 | ) | |||||||
Interest Income | 8.7 | 9.9 | |||||||||
Other Expense, Net | (40.7 | ) | (14.6 | ) | |||||||
Total (Expenses) and Other Income | (78.0 | ) | (51.3 | ) | |||||||
Income Before Income Taxes | 210.0 | 209.1 | |||||||||
Provision for Income Taxes | 76.3 | 81.3 | |||||||||
Income of Consolidated Companies | 133.7 | 127.8 | |||||||||
Equity in Net (Loss) Income of Unconsolidated Affiliates | (2.0 | ) | 1.1 | ||||||||
Net Income | 131.7 | 128.9 | |||||||||
Net Loss Attributable to Noncontrolling Interests | — | 3.5 | |||||||||
Net Income Available to IPG Common Stockholders | $ | 131.7 | $ | 132.4 | |||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.34 | $ | 0.34 | |||||||
Diluted | $ | 0.34 | $ | 0.33 | |||||||
Weighted-Average Number of Common Shares Outstanding: | |||||||||||
Basic | 383.5 | 392.0 | |||||||||
Diluted | 388.9 | 399.6 | |||||||||
Dividends Declared Per Common Share | $ | 0.42 | $ | 0.36 | |||||||
Interpublic Group 909 Third Avenue New York, NY 10022 212-704-1200 tel 212-704-1201 fax
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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES RECONCILIATION OF ADJUSTED RESULTS (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Three Months Ended June 30, 2018 | |||||||||||
As Reported | Net Losses on Sales of Businesses 1 | Adjusted Results | |||||||||
Income Before Income Taxes | $ | 211.5 | $ | (19.8 | ) | $ | 231.3 | ||||
Provision for Income Taxes | 63.6 | 63.6 | |||||||||
Equity in Net Loss of Unconsolidated Affiliates | (0.1 | ) | (0.1 | ) | |||||||
Net Income Attributable to Noncontrolling Interests | (2.0 | ) | (2.0 | ) | |||||||
Net Income Available to IPG Common Stockholders | $ | 145.8 | $ | (19.8 | ) | $ | 165.6 | ||||
Weighted-Average Number of Common Shares Outstanding - Basic | 383.6 | 383.6 | |||||||||
Dilutive effect of stock options and restricted shares | 5.9 | 5.9 | |||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 389.5 | 389.5 | |||||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.38 | $ | (0.05 | ) | $ | 0.43 | ||||
Diluted | $ | 0.37 | $ | (0.05 | ) | $ | 0.43 | ||||
1 Includes losses on complete dispositions of businesses and the classification of certain assets 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
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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES RECONCILIATION OF ADJUSTED RESULTS (Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||
Six Months Ended June 30, 2018 | |||||||||||
As Reported | Net Losses on Sales of Businesses 1 | Adjusted Results | |||||||||
Income Before Income Taxes | $ | 210.0 | $ | (44.2 | ) | $ | 254.2 | ||||
Provision for Income Taxes | 76.3 | 0.4 | 76.7 | ||||||||
Equity in Net Loss of Unconsolidated Affiliates | (2.0 | ) | (2.0 | ) | |||||||
Net Income Available to IPG Common Stockholders | $ | 131.7 | $ | (43.8 | ) | $ | 175.5 | ||||
Weighted-Average Number of Common Shares Outstanding - Basic | 383.5 | 383.5 | |||||||||
Dilutive effect of stock options and restricted shares | 5.4 | 5.4 | |||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 388.9 | 388.9 | |||||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.34 | $ | (0.11 | ) | $ | 0.46 | ||||
Diluted | $ | 0.34 | $ | (0.11 | ) | $ | 0.45 | ||||
1 Includes losses on complete dispositions of businesses and the classification of certain assets 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
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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES RECONCILIATION OF ADJUSTED 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 | $ | 189.3 | $ | (13.1 | ) | $ | 202.4 | ||||
Provision for Income Taxes | 81.6 | 81.6 | |||||||||
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 | $ | 107.7 | $ | (13.1 | ) | $ | 120.8 | ||||
Weighted-Average Number of Common Shares Outstanding - Basic | 392.3 | 392.3 | |||||||||
Dilutive effect of stock options and restricted shares | 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 | $ | 0.27 | $ | (0.03 | ) | $ | 0.31 | ||||
Diluted | $ | 0.27 | $ | (0.03 | ) | $ | 0.30 | ||||
1 Includes losses on complete dispositions of businesses and the classification of certain assets 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
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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES RECONCILIATION OF ADJUSTED 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 | $ | 209.1 | $ | (12.2 | ) | $ | 221.3 | ||||
Provision for Income Taxes | 81.3 | 81.3 | |||||||||
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 | $ | 132.4 | $ | (12.2 | ) | $ | 144.6 | ||||
Weighted-Average Number of Common Shares Outstanding - Basic | 392.0 | 392.0 | |||||||||
Dilutive effect of stock options and restricted shares | 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 | $ | 0.34 | $ | (0.03 | ) | $ | 0.37 | ||||
Diluted | $ | 0.33 | $ | (0.03 | ) | $ | 0.36 | ||||
1 Includes losses on complete dispositions of businesses and the classification of certain assets 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
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SECOND QUARTER 2018 EARNINGS CONFERENCE CALL July 24, 2018
Overview - Second Quarter 2018 • Net revenue increased +6.2% o Organic net revenue growth was +5.6% U.S. organic growth was +4.6% International organic growth was +7.2% • Operating income was $249.2 million, an increase of 10.4% from a year ago, with operating margin expansion of 50 bps • Diluted EPS was $0.37, and was $0.43 as adjusted for sales of small, non-strategic businesses • Repurchased 2.6 million shares, returning $60 million "Organic growth" refers exclusively to the organic change of net revenue. See reconciliations of organic net revenue change Page 2 on pages 16 and 17 and adjusted non-GAAP diluted EPS on pages 18 and 19.
Operating Performance Three Months Ended June 30, 2018 2017 Net Revenue $1,948.2$1,834.6 Billable Expenses 443.6 351.2 Total Revenue 2,391.8 2,185.8 Salaries and Related Expenses 1,292.9 1,228.9 Office and Other Direct Expenses 333.3 318.4 Billable Expenses 443.6 351.2 Selling, General and Administrative Expenses 28.8 20.3 Depreciation and Amortization 44.0 41.3 Operating Income 249.2 225.7 Interest Expense, net (21.4) (21.0) Other Expense, net (16.3) (15.4) Income Before Income Taxes 211.5 189.3 Provision for Income Taxes 63.6 81.6 Equity in Net Loss of Unconsolidated Affiliates (0.1) (0.1) Net Income 147.8 107.6 Net (Income) Loss Attributable to Noncontrolling Interests (2.0) 0.1 Net Income Available to IPG Common Stockholders $ 145.8 $ 107.7 Earnings per Share Available to IPG Common Stockholders - Basic $ 0.38 $ 0.27 Earnings per Share Available to IPG Common Stockholders - Diluted $ 0.37 $ 0.27 Weighted-Average Number of Common Shares Outstanding - Basic 383.6 392.3 Weighted-Average Number of Common Shares Outstanding - Diluted 389.5 400.3 Dividends Declared per Common Share $ 0.21 $ 0.18 Page 3 (Amounts in Millions, except per share amounts)
Net Revenue Three Months Ended Six Months Ended $ % Change $ % Change June 30, 2017 $ 1,834.6 $ 3,509.9 Total change 113.6 6.2% 212.3 6.0% Foreign currency 24.9 1.4% 74.4 2.1% Net acquisitions/(divestitures) (14.9) (0.8%) (26.6) (0.8%) Organic 103.6 5.6% 164.5 4.7% June 30, 2018 $ 1,948.2 $ 3,722.2 Three Months Ended June 30, Six Months Ended June 30, Change Change 2018 2017 Organic Total 2018 2017 Organic Total IAN $ 1,629.1 $ 1,534.0 6.0% 6.2% $ 3,110.4 $ 2,925.1 5.2% 6.3% CMG $ 319.1 $ 300.6 3.7% 6.2% $ 611.8 $ 584.8 2.2% 4.6% Page 4 See reconciliations of segment organic net revenue change on pages 16 and 17. ($ in Millions)
Geographic Net Revenue Change Three Months Ended Six Months Ended June 30, 2018 June 30, 2018 Organic Total Organic Total United States 4.6% 3.9% 4.5% 3.6% International 7.2% 9.9% 5.1% 10.1% United Kingdom 14.7% 24.0% 11.3% 22.5% Continental Europe 11.7% 15.6% 6.1% 14.2% Asia Pacific 1.9% 4.3% 0.0% 3.7% Latin America 4.6% (4.3%) 7.2% 0.8% All Other Markets 3.8% 5.3% 3.0% 6.3% Worldwide 5.6% 6.2% 4.7% 6.0% “All Other Markets” includes Canada, Africa and the Middle East. Page 5 See reconciliation of organic net revenue change on pages 16 and 17.
Operating Expenses Three Months Ended Six Months Ended June 30, June 30, 2018 2017 % Increase 2018 2017 % Increase Salaries & Related $ 1,292.9 $ 1,228.9 5.2% $ 2,623.2 $ 2,480.6 5.7% % of Net Revenue 66.4% 67.0%70.5% 70.7% Office & Other Direct 333.3 318.4 4.7% 657.1 631.1 4.1% % of Net Revenue 17.1% 17.4% 17.7% 18.0% Selling, General & Administrative 28.8 20.3 41.9% 63.9 55.5 15.1% % of Net Revenue 1.5%1.1% 1.7%1.6% Depreciation & Amortization 44.0 41.3 6.5% 90.0 82.3 9.4% % of Net Revenue 2.3% 2.3% 2.4% 2.3% Page 6 ($ in Millions)
Adjusted Diluted Earnings Per Share Three Months Ended June 30, 2018 Net Losses on As Sales of Adjusted Reported Businesses (1) Results Income Before Income Taxes $ 211.5 $ (19.8) $ 231.3 Provision for Income Taxes 63.6 63.6 Diluted EPS Components: Net Income Available to IPG Common Stockholders $ 145.8 $ (19.8) $ 165.6 Weighted-Average Number of Common Shares Outstanding 389.5 389.5 Earnings Per Share Available to IPG Common Stockholders $ 0.37 $ (0.05) $ 0.43 Six Months Ended June 30, 2018 Net Losses on As Sales of Adjusted Reported Businesses (1) Results Income Before Income Taxes $ 210.0 $ (44.2) $ 254.2 Provision for Income Taxes 76.3 0.4 76.7 Diluted EPS Components: Net Income Available to IPG Common Stockholders $ 131.7 $ (43.8) $ 175.5 Weighted-Average Number of Common Shares Outstanding 388.9 388.9 Earnings Per Share Available to IPG Common Stockholders $ 0.34 $ (0.11) $ 0.45 (1) During the three and six months ended June 30, 2018, we recorded net losses on sales of businesses. Page 7 See full reconciliation of adjusted non-GAAP diluted earnings per share on pages 18 and 19. (Amounts in Millions, except per share amounts)
Cash Flow Three Months Ended June 30, 2018 2017 NET INCOME $ 147.8 $ 107.6 OPERATING ACTIVITIES Depreciation & amortization 61.3 59.0 Deferred taxes (10.2) 21.5 Net losses on sales of businesses 19.8 13.1 Other non-cash items (0.9) 6.2 Change in working capital, net (62.5) 5.1 Change in other non-current assets & liabilities 16.9 6.2 Net cash provided by operating activities 172.2 218.7 INVESTING ACTIVITIES Capital expenditures (38.7) (44.1) Acquisitions, net of cash acquired (8.3) (9.3) Other investing activities 12.5 (9.4) Net cash used in investing activities (34.5) (62.8) FINANCING ACTIVITIES Common stock dividends (80.4) (70.5) Repurchases of common stock (59.6) (60.0) Net decrease in short-term borrowings (49.5) (71.3) Acquisition-related payments (14.6) (36.3) Distributions to noncontrolling interests (6.7) (4.9) Repayment of long-term debt (4.7) (23.6) Tax payments for employee shares withheld (1.7) (1.1) Exercise of stock options 0.1 3.6 Other financing activities (0.1) 0.3 Net cash used in financing activities (217.2) (263.8) Currency effect (24.6) (11.8) Net decrease in cash, cash equivalents and restricted cash $ (104.1) $ (119.7) Page 8 ($ in Millions)
Balance Sheet – Current Portion June 30, 2018 December 31, 2017 June 30, 2017 CURRENT ASSETS: Cash and cash equivalents $ 493.2 $ 790.9 $ 657.6 Accounts receivable, net 4,247.7 4,585.0 3,762.2 Accounts receivable, billable to clients 1,945.8 1,747.4 1,720.9 Assets held for sale 19.6 5.7 19.7 Other current assets 439.3 346.5 362.5 Total current assets $ 7,145.6 $ 7,475.5 $ 6,522.9 CURRENT LIABILITIES: Accounts payable $ 5,738.8 $ 6,420.2 $ 5,338.9 Accrued liabilities 551.5 674.7 513.1 Contract liabilities 510.8 484.7 496.1 Short-term borrowings 757.6 84.9 237.7 Current portion of long-term debt (1) 0.1 2.0 301.7 Liabilities held for sale 26.5 8.8 21.7 Total current liabilities $ 7,585.3 $ 7,675.3 $ 6,909.2 Page 9 (1) Our 2.25% Senior Notes were repaid on November 15, 2017. ($ in Millions)
Total Debt (1) (2) (1) Includes current portion of long-term debt, short-term borrowings and long-term debt. (2) Includes our November 2012 debt issuances of $800 aggregate principal amount of Senior Notes, which pre-funded our Page 10 plan to redeem a similar amount of debt in 2013. ($ in Millions)
Summary • Strong Q2 & H1 revenue and margin • Driving revenue growth from key strategic initiatives ◦ Quality of our agency offerings, creative talent, media services, embedded and specialty digital ◦ Effectiveness of "open architecture" solutions ◦ Strength in data & analytics • Focus on continued expense discipline and additional margin improvement • Financial strength continues to be a source of value creation ◦ Solid investment grade ratings across the board ◦ Foundation to further enhance revenue and earnings growth Page 11
Appendix
Operating Performance Six Months Ended June 30, 2018 2017 Net Revenue $3,722.2$3,509.9 Billable Expenses 838.7 739.7 Total Revenue 4,560.9 4,249.6 Salaries and Related Expenses 2,623.2 2,480.6 Office and Other Direct Expenses 657.1 631.1 Billable Expenses 838.7 739.7 Selling, General and Administrative Expenses 63.9 55.5 Depreciation and Amortization 90.0 82.3 Operating Income 288.0 260.4 Interest Expense, net (37.3) (36.7) Other Expense, net (40.7) (14.6) Income Before Income Taxes 210.0 209.1 Provision for Income Taxes 76.3 81.3 Equity in Net (Loss) Income of Unconsolidated Affiliates (2.0) 1.1 Net Income 131.7 128.9 Net Loss Attributable to Noncontrolling Interests — 3.5 Net Income Available to IPG Common Stockholders $ 131.7 $ 132.4 Earnings per Share Available to IPG Common Stockholders - Basic $ 0.34 $ 0.34 Earnings per Share Available to IPG Common Stockholders - Diluted $ 0.34 $ 0.33 Weighted-Average Number of Common Shares Outstanding - Basic 383.5 392.0 Weighted-Average Number of Common Shares Outstanding - Diluted 388.9 399.6 Dividends Declared per Common Share $ 0.42 $ 0.36 Page 13 (Amounts in Millions, except per share amounts)
Cash Flow Six Months Ended June 30, 2018 2017 NET INCOME $ 131.7 $ 128.9 OPERATING ACTIVITIES Depreciation & amortization 138.7 131.1 Deferred taxes (31.0) 9.5 Net losses on sales of businesses 44.2 12.2 Other non-cash items 8.0 18.8 Change in working capital, net (837.5) (438.6) Change in other non-current assets & liabilities (11.8) (15.0) Net cash used in operating activities (557.7) (153.1) INVESTING ACTIVITIES Capital expenditures (61.5) (68.9) Acquisitions, net of cash acquired (8.5) (12.6) Other investing activities 12.4 (14.5) Net cash used in investing activities (57.6) (96.0) FINANCING ACTIVITIES Net increase in short-term borrowings 669.3 153.5 Exercise of stock options 7.0 11.8 Common stock dividends (161.2) (141.4) Repurchases of common stock (114.5) (115.0) Tax payments for employee shares withheld (28.0) (37.8) Acquisition-related payments (16.0) (36.3) Distributions to noncontrolling interests (10.6) (10.9) Repayment of long-term debt (4.7) (23.6) Other financing activities (0.3) 0.3 Net cash provided by (used in) financing activities 341.0 (199.4) Currency effect (27.5) 8.2 Net decrease in cash, cash equivalents and restricted cash $ (301.8) $ (440.3) Page 14 ($ in Millions)
Depreciation and Amortization 2018 Q1 Q2 Q3 Q4 YTD 2018 Depreciation and amortization of fixed assets and intangible assets $ 46.0 $ 44.0 $ 90.0 Amortization of restricted stock and other non- cash compensation 30.0 16.0 46.0 Net amortization of bond discounts and deferred financing costs 1.4 1.3 2.7 2017 Q1 Q2 Q3 Q4 FY 2017 Depreciation and amortization of fixed assets and intangible assets $ 41.0 $ 41.3 $ 42.2 $ 32.6 $ 157.1 Amortization of restricted stock and other non- cash compensation 29.7 16.3 13.8 22.2 82.0 Net amortization of bond discounts and deferred financing costs 1.4 1.4 1.4 1.6 5.8 Page 15 ($ in Millions)
Reconciliation of Organic Net Revenue Components of Change Change Three Months Net Three Months Ended Foreign Acquisitions / Ended June 30, 2017 Currency (Divestitures) Organic June 30, 2018 Organic Total Segment IAN $ 1,534.0 $ 19.4 $ (16.8) $ 92.5 $ 1,629.1 6.0% 6.2% CMG 300.6 5.5 1.9 11.1 319.1 3.7% 6.2% Total $ 1,834.6 $ 24.9 $ (14.9) $ 103.6 $ 1,948.2 5.6% 6.2% Geographic United States $ 1,127.6 $ 0.0 $ (8.5) $ 52.4 $ 1,171.5 4.6% 3.9% International 707.0 24.9 (6.4) 51.2 776.7 7.2% 9.9% United Kingdom 141.7 10.4 2.8 20.8 175.7 14.7% 24.0% Continental Europe 154.6 12.8 (6.8) 18.1 178.7 11.7% 15.6% Asia Pacific 205.3 5.3 (0.2) 3.8 214.2 1.9% 4.3% Latin America 85.7 (6.5) (1.1) 3.9 82.0 4.6% (4.3%) All Other Markets 119.7 2.9 (1.1) 4.6 126.1 3.8% 5.3% Worldwide $ 1,834.6 $ 24.9 $ (14.9) $ 103.6 $ 1,948.2 5.6% 6.2% Page 16 ($ in Millions)
Reconciliation of Organic Net Revenue Components of Change Change Six Months Net Six Months Ended Foreign Acquisitions / Ended June 30, 2017 Currency (Divestitures) Organic June 30, 2018 Organic Total Segment IAN $ 2,925.1 $ 60.3 $ (26.8) $ 151.8 $ 3,110.4 5.2% 6.3% CMG 584.8 14.1 0.2 12.7 611.8 2.2% 4.6% Total $ 3,509.9 $ 74.4 $ (26.6) $ 164.5 $ 3,722.2 4.7% 6.0% Geographic United States $ 2,184.7 $ 0.0 $ (18.4) $ 97.5 $ 2,263.8 4.5% 3.6% International 1,325.2 74.4 (8.2) 67.0 1,458.4 5.1% 10.1% United Kingdom 276.9 26.6 4.3 31.4 339.2 11.3% 22.5% Continental Europe 295.5 33.2 (9.3) 18.0 337.4 6.1% 14.2% Asia Pacific 379.0 14.6 (0.5) (0.1) 393.0 0.0% 3.7% Latin America 154.7 (7.6) (2.4) 11.2 155.9 7.2% 0.8% All Other Markets 219.1 7.6 (0.3) 6.5 232.9 3.0% 6.3% Worldwide $ 3,509.9 $ 74.4 $ (26.6) $ 164.5 $ 3,722.2 4.7% 6.0% Page 17 ($ in Millions)
Reconciliation of Adjusted Results (1) Three Months Ended June 30, 2018 Six Months Ended June 30, 2018 Net Losses Net Losses on Sales of Adjusted on Sales of Adjusted As Reported Businesses Results As Reported Businesses Results Income Before Income Taxes $ 211.5 $ (19.8) $ 231.3 $ 210.0 $ (44.2) $ 254.2 Provision for Income Taxes 63.6 63.6 76.3 0.4 76.7 Equity in Net Loss of Unconsolidated Affiliates (0.1) (0.1) (2.0) (2.0) Net Income Attributable to Noncontrolling Interests (2.0) (2.0) — — Net Income Available to IPG Common Stockholders $ 145.8 $ (19.8) $ 165.6 $ 131.7 $ (43.8) $ 175.5 Weighted-Average Number of Common Shares Outstanding - Basic 383.6 383.6 383.5 383.5 Dilutive Effect of Stock Options and Restricted Shares 5.9 5.9 5.4 5.4 Weighted-Average Number of Common Shares Outstanding - Diluted 389.5 389.5 388.9 388.9 Earnings per Share Available to IPG Common Stockholders: Basic $ 0.38 $ (0.05) $ 0.43 $ 0.34 $ (0.11) $ 0.46 Diluted $ 0.37 $ (0.05) $ 0.43 $ 0.34 $ (0.11) $ 0.45 (1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the net losses on sales of businesses, primarily from international markets. This amount includes losses on completed dispositions and the classification of certain assets as held for sale during 2018. 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 Page 18 our financial and operational performance. (Amounts in Millions, except per share amounts)
Reconciliation of Adjusted Results (1) Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 Net Losses Net Losses on Sales of Adjusted on Sales of Adjusted As Reported Businesses Results As Reported Businesses Results Income Before Income Taxes $ 189.3 $ (13.1) $ 202.4 $ 209.1 $ (12.2) $ 221.3 Provision for Income Taxes 81.6 81.6 81.3 81.3 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 Net Income Available to IPG Common Stockholders $ 107.7 $ (13.1) $ 120.8 $ 132.4 $ (12.2) $ 144.6 Weighted-Average Number of Common Shares Outstanding - Basic 392.3 392.3 392.0 392.0 Dilutive Effect of Stock Options and Restricted Shares 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 $ 0.27 $ (0.03) $ 0.31 $ 0.34 $ (0.03) $ 0.37 Diluted $ 0.27 $ (0.03) $ 0.30 $ 0.33 $ (0.03) $ 0.36 (1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the net losses on sales of businesses, primarily from 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 Page 19 our financial and operational performance. (Amounts in Millions, except per share amounts)
Metrics Update
Metrics Update Category Metric SALARIES & RELATED Trailing Twelve Months (% of net revenue) Base, Benefits & Tax Incentive Expense Severance Expense Temporary Help OFFICE & OTHER DIRECT Trailing Twelve Months (% of net revenue) Occupancy Expense All Other Office and Other Direct Expenses FINANCIAL Available Liquidity $1.5 Billion 5-Year Credit Facility Covenants Page 21
Salaries & Related Expenses Page 22
Salaries & Related Expenses (% of Net Revenue) Three and Six Months Ended June 30 2018 2017 “All Other Salaries & Related,” not shown, was 2.1% for the three months ended June 30, 2018 and 2017 and 2.1% Page 23 for the six months ended June 30, 2018 and 2017.
Office & Other Direct Expenses Page 24
Office & Other Direct Expenses (% of Net Revenue) Three and Six Months Ended June 30 2018 2017 “All Other” primarily includes production expenses, travel and entertainment, professional fees, spending to support new business activity, telecommunications, office supplies, bad debt expense, adjustments to contingent acquisition Page 25 obligations, foreign currency losses (gains), long-lived asset impairments and other expenses
Available Liquidity Cash, Cash Equivalents and Short-Term Marketable Securities + Available Committed Credit Facility Page 26 ($ in Millions)
$1.5 Billion 5-Year Credit Facility Covenants Last Twelve Months Ended Covenants June 30, 2018 I. Interest Coverage Ratio (not less than): 5.00x Actual Interest Coverage Ratio: 16.55x II. Leverage Ratio (not greater than): 3.50x Actual Leverage Ratio: 1.67x Last Twelve Months Ended Interest Expense Reconciliation June 30, 2018 Interest Expense: $90.2 - Interest Income 18.2 -Other (2.0) Net Interest Expense(1):$74.0 Last Twelve Months Ended EBITDA Reconciliation June 30, 2018 Operating Income: $966.0 + Depreciation and Amortization(1) 258.9 EBITDA(1): $1,224.9 Page 27 (1) Calculated as defined in the Credit Agreement. ($ in Millions)
Cautionary Statement 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, and our other filings with the Securities and Exchange Commission ("SEC"). 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, and our other SEC filings. Page 28