Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq32016earningsreleaseex.htm |
| 8-K - 8-K - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq32016earningsrelease8-k.htm |
THIRD QUARTER 2016
EARNINGS CONFERENCE CALL
October 21, 2016
Overview – Third Quarter 2016
Page 2 See reconciliation of organic revenue change on pages 18 and 19 and adjusted diluted EPS on page 22.
• Total revenue increased 3.0% in Q3 and 3.0% for the 9M YTD
Organic growth was 4.3% in Q3 and 4.8% for the 9M YTD
• Operating margin was 10.8% in Q3, an improvement of 50 bps
• Q3 diluted EPS was $0.32, and was $0.31 as adjusted for below-
the-line items, an increase of 15% from comparable Q3-15
• Repurchased 3.5 million shares in Q3, using $81 million
2016 2015
Revenue 1,922.2$ 1,865.5$
Salaries and Related Expenses 1,228.8 1,202.2
Office and General Expenses 486.2 471.4
Operating Income 207.2 191.9
Interest Expense (21.7) (21.3)
Interest Income 4.7 5.6
Other Income (Expense), net 6.1 (37.2)
Income Before Income Taxes 196.3 139.0
Provision for Income Taxes 63.8 61.1
Equity in Net Income of Unconsolidated Affiliates 0.2 0.1
Net Income 132.7 78.0
Net Income Attributable to Noncontrolling Interests (4.1) (3.1)
128.6$ 74.9$
Earnings per Share Available to IPG Common Stockholders:
Basic 0.32$ 0.18$
Diluted 0.32$ 0.18$
Weighted-Average Number of Common Shares Outstanding:
Basic 397.7 407.6
Diluted 407.9 415.5
Dividends Declared per Common Share 0.15$ 0.12$
Three Months Ended September 30,
Net Income Available to IPG Common Stockholders
Operating Performance
(Amounts in Millions, except per share amounts)
Page 3
2016 2015 Total Organic 2016 2015 Total Organic
IAN ,503.2$ ,484.1$ 1.3% 3.0% 4,453.3$ 4,351.3$ 2.3% 4.7%
CMG 419.0 3 1.4 9.9 9.4 1,128.8 1,066. 5.9 5.3
Nine Months Ended
Change
Three Months Ended
S ptember 30, September 30,
Change
$ % Change $ % Change
September 30, 2015 1,865.5$ 5,417.6$
Total change 56.7 3.0% 164.5 3.0%
Foreign currency (31.0) (1.7%) (115.9) (2.1%)
Net acquisitions/(divestitures) 8.2 0.4% 19.8 0.3%
Organic 79.5 4.3% 260.6 4.8%
September 30, 2016 1,922.2$ 5,582.1$
Three Months Ended Nine Months Ended
Revenue
($ in Millions)
Page 4
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
See reconciliation of segment organic revenue change on pages 18 and 19.
Total Organic Total Organic
United States 2.4% 1.8% 5.3% 4.8%
International 4.0% 8.1% (0.3%) 4.9%
United Kingdom 5.2% 16.4% 1.7% 7.1%
Continental Europe 3.7% 8.3% (1.4%) 3.2%
Asia Pacific 0.5% (1.4%) (2.9%) (0.8%)
Latin America 6.0% 17.8% (3.8%) 15.4%
All Other Markets 8.1% 5.6% 6.6% 6.7%
Worldwide 3.0% 4.3% 3.0% 4.8%
Three Months Ended
September 30, 2016
Nine Months Ended
September 30, 2016
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.
(0.9%)
0.9%
3.8% 3.7%
(10.8%)
7.0%
6.1%
0.7%
2.8%
5.5%
6.1%
(12.0%)
(10.0%)
(8.0%)
(6.0%)
(4.0%)
(2.0%)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Q4-05 Q4-06 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Q4-13 Q4-14 Q4-15
Organic Revenue Growth
Page 6
Trailing Twelve Months
Q3-16
See reconciliation on page 20.
4.9%
Salaries & Related
2016 2015 $ Total Organic
Three Months Ended September 30, 1,228.8$ 1,202.2$ 26.6$ 2.2% 3.5%
% of Revenue 63.9% 64.4%
Three months severance 13.0$ 15.0$ (2.0)$ (13.3%)
% of Revenue 0.7% 0.8%
Nine Months Ended September 30, 3,728.7$ 3,622.6$ 106.1$ 2.9% 4.9%
% of Revenue 66.8% 66.9%
Nine months severance 56.0$ 49.2$ 6.8$ 13.8%
% of Revenue 1.0% 0.9%
Office & General
2016 2015 $ Total Organic
Three Months Ended September 30, 486.2$ 471.4$ 14.8$ 3.1% 5.6%
% of Revenue 25.3% 25.3%
Three months occupancy expense (ex-D&A) 127.0$ 122.4$ 4.6$ 3.8%
% of Revenue 6.6% 6.6%
Nine Months Ended September 30, 1,400.5$ 1,379.5$ 21.0$ 1.5% 4.2%
% of Revenue 25.1% 25.5%
Nine months occupancy expense (ex-D&A) 379.0$ 354.4$ 24.6$ 6.9%
% of Revenue 6.8% 6.5%
Change
Change
Operating Expenses
($ in Millions)
Page 7 See reconciliation of organic measures on pages 18 and 19.
(1.7%)
1.7%
5.3%
8.5%
5.7%
8.4%
9.8% 9.8%
8.4%
10.5%
11.5% 11.7%
9.3%
(4.0%)
(2.0%)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Q4-05 Q4-06 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Q4-13 Q4-14 Q4-15
Operating Margin
Page 8
Trailing Twelve Months
Q3-16
For the twelve months ended December 31, 2013, reported operating income of $598.3 includes our Q4 2013
restructuring charge of $60.6. Excluding this charge, adjusted operating income was $658.9, and adjusted operating
margin is represented in green.
($ in Millions)
As
Reported
Gain on Sale
of Business
Adoption of
ASU 2016-09
Adjusted
Results
Income Before Income Taxes 196.3$ 3.9$ 192.4$
Provision for Income Taxes 63.8 0.3$ 64.1
Effective Tax Rate 32.5% 33.3%
Diluted EPS Components:
Net Income Available to IPG Common Stockholders 128.6$ 3.9$ 0.3$ 124.4$
Weighted-Average Number of Common Shares Outstanding 407.9 1.6 406.3
Earnings Per Share Available to IPG Common Stockholders 0.32$ 0.01$ 0.00$ 0.31$
Three Months Ended September 30, 2016
($ in Millions)
Page 9
Adjusted Diluted Earnings Per Share
(1) During the three months ended September 30, 2016, we recorded a gain on the sale of a business in our international markets.
(2) In 2016 we early adopted Financial Accounting Standards Board Accounting Standards Update 2016-09.
See full reconciliation of adjusted diluted earnings per share on pages 22 and 23.
(1) (2)
September 30, December 31, September 30,
2016 2015 2015
CURRENT ASSETS:
Cash and cash equivalents 891.6$ 1,502.9$ 874.3$
Marketable securities 3.0 6.8 6.9
Accounts receivable, net 3,714.4 4,361.0 3,848.3
Expenditures billable to clients 1,843.7 1,594.4 1,590.2
Other current assets 280.5 228.0 349.1
Total current assets 6,733.2$ 7,693.1$ 6,668.8$
CURRENT LIABILITIES:
Accounts payable 6,025.9$ 6,672.0$ 5,753.4$
Accrued liabilities 629.0 760.3 688.9
Short-term borrowings 133.0 150.1 128.3
Current portion of long-term debt 24.5 1.9 2.0
Total current liabilities 6,812.4$ 7,584.3$ 6,572.6$
Balance Sheet – Current Portion
($ in Millions)
Page 10
2016 2015
NET INCOME 133$ 78$
OPERATING ACTIVITIES
Depreciation & amortization 61 56
Deferred taxes 6 (34)
Non-cash (gain) loss on sales of businesses (4) 38
Other non-cash items 7 8
Change in working capital, net 318 155
Change in other non-current assets & liabilities (1) (19)
Net cash provided by Operating Activities 520 282
INVESTING ACTIVITIES
Capital expenditures (51) (31)
Acquisitions, net of cash acquired (14) (6)
Other investing activities - (4)
Net cash used in Investing Activities (65) (41)
FINANCING ACTIVITIES
Net decrease in short-term bank borrowings (83) (26)
Repurchase of common stock (81) (70)
Common stock dividends (60) (48)
Acquisition-related payments (8) (4)
Distributions to noncontrolling interests (4) (5)
Exercise of stock options - 1
Other financing activities 2 -
Net cash used in Financing Activities (234) (152)
Currency Effect (2) (63)
Increase in Cash & S/T Marketable Securities 219$ 26$
Three Months Ended September 30,
Cash Flow
($ in Millions)
Page 11
$2,325
$2,102
$1,923
$1,719 $1,756
$1,644 $1,654
$1,722 $1,762 $1,741
$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 9/30/2016
$2,431
Total Debt (1)
($ in Millions)
Page 12
(2)
(1) Includes current portion of long-term debt, short-term borrowings and long-term debt.
(2) Includes our November 2012 debt issuances of $800 aggregate principal amount of Senior Notes, which pre-funded
our plan to redeem a similar amount of debt in 2013.
Summary
Page 13
• Solid performance against FY-16 financial objectives
• Sustained traction from key strategic initiatives
Quality of our agency offerings, creative talent, embedded
digital, and “open architecture” solutions
Performance in high-growth disciplines
Effective expense management
• Focus is on continued growth and margin improvement
• Financial strength continues to be a source of value creation
Appendix
2016 2015
Revenue 5,582.1$ 5,417.6$
Salaries and Related Expenses 3,728.7 3,622.6
Office and General Expenses 1,400.5 1,379.5
Operating Income 452.9 415.5
Interest Expense (68.8) (62.5)
Interest Income 16.1 17.8
Other Expense, net (11.1) (36.4)
Income Before Income Taxes 389.1 334.4
Provision for Income Taxes 91.9 137.4
Equity in Net (Loss) Income of Unconsolidated Affiliates (1.6) 0.6
Net Income 295.6 197.6
Net Income Attributable to Noncontrolling Interests (4.7) (3.3)
290.9$ 194.3$
Earnings per Share Available to IPG Common Stockholders:
Basic 0.73$ 0.47$
Diluted 0.71$ 0.47$
Weighted-Average Number of Common Shares Outstanding:
Basic 399.5 409.7
Diluted 408.8 417.0
Dividends Declared per Common Share 0.45$ 0.36$
Net Income Available to IPG Common Stockholders
Nine Months Ended September 30,
Operating Performance
(Amounts in Millions, except per share amounts)
Page 15
2016 2015
NET INCOME 296$ 198$
OPERATING ACTIVITIES
Depreciation & amortization 181 170
Deferred taxes 2 (34)
Non-cash loss on sales of businesses 16 38
Other non-cash items 42 26
Change in working capital, net (500) (588)
Change in other non-current assets & liabilities (72) (48)
Net cash used in Operating Activities (35) (238)
INVESTING ACTIVITIES
Capital expenditures (114) (81)
Acquisitions, net of cash acquired (48) (6)
Other investing activities (10) (4)
Net cash used in Investing Activities (172) (91)
FINANCING ACTIVITIES
Repurchase of common stock (193) (172)
Common stock dividends (180) (147)
Acquisition-related payments (37) (32)
Net (decrease) increase in short-term bank borrowings (26) 29
Tax payments for employee shares withheld (23) (17)
Distributions to noncontrolling interests (11) (13)
Exercise of stock options 10 12
Excess tax benefit from share-based payment arrangements - 9
Other financing activities 1 2
Net cash used in Financing Activities (459) (329)
Currency Effect 51 (128)
Decrease in Cash & S/T Marketable Securities (615)$ (786)$
Nine Months Ended September 30,
Cash Flow
($ in Millions)
Page 16
(1)
(1) Excludes net purchases, sales and maturities of short-term marketable securities. See reconciliation on page 21.
(2) As part of the adoption of FASB ASU 2016-09, we have reclassified the tax payments for employee shares withheld balance into
Financing Activities in both periods presented. This amount was previously included in Change in working capital, net in Operating
Activities. Additionally, the excess tax benefit from share-based payment arrangements amount is now reflected within Net Income
for Q3 2016, as prospective adoption was required.
(2)
(2)
Q1 Q2 Q3 Q4 YTD 2016
Depreciation and amortization of fixed assets and
intangible assets 38.0$ 39.8$ 39.7$ 117.5$
Amortization of restricted stock and other non-cash
compensation 23.1 16.8 19.1 59.0
Net amortization of bond discounts and deferred
financing costs 1.4 1.4 1.4 4.2
Q1 Q2 Q3 Q4 FY 2015
Depreciation and amortization of fixed assets and
intangible assets 38.7$ 39.5$ 38.1$ 40.7$ 157.0$
Amortization of restricted stock and other non-cash
compensation 16.8 16.4 16.5 20.6 70.3
Net amortization of bond discounts and deferred
financing costs 1.4 1.4 1.4 1.6 5.8
2016
2015
Depreciation and Amortization
($ in Millions)
Page 17
Three Months
Ended
September 30, 2015
Foreign
Currency
Net Acquisitions /
(Divestitures) Organic
Three Months
Ended
September 30, 2016 Organic Total
Segment Revenue
IAN 1,484.1$ (23.5)$ (1.2)$ 43.8$ 1,503.2$ 3.0% 1.3%
CMG 381.4 (7.5) 9.4 35.7 419.0 9.4% 9.9%
Total 1,865.5$ (31.0)$ 8.2$ 79.5$ 1,922.2$ 4.3% 3.0%
Geographic
United States 1,138.5$ -$ 7.1$ 20.3$ 1,165.9$ 1.8% 2.4%
International 727.0 (31.0) 1.1 59.2 756.3 8.1% 4.0%
United Kingdom 165.4 (24.9) 6.4 27.1 174.0 16.4% 5.2%
Continental Europe 142.3 (0.1) (6.4) 11.8 147.6 8.3% 3.7%
Asia Pacific 216.9 2.9 1.1 (3.0) 217.9 (1.4%) 0.5%
Latin America 97.7 (7.1) (4.4) 17.4 103.6 17.8% 6.0%
All Other Markets 104.7 (1.8) 4.4 5.9 113.2 5.6% 8.1%
Worldwide 1,865.5$ (31.0)$ 8.2$ 79.5$ 1,922.2$ 4.3% 3.0%
Expenses
Salaries & Related 1,202.2$ (18.2)$ 2.6$ 42.2$ 1,228.8$ 3.5% 2.2%
Office & General 471.4 (7.8) (3.8) 26.4 486.2 5.6% 3.1%
Total 1,673.6$ (26.0)$ (1.2)$ 68.6$ 1,715.0$ 4.1% 2.5%
Components of Change Change
Reconciliation of Organic Measures
($ in Millions)
Page 18
Nine Months
Ended
September 30, 2015
Foreign
Currency
Net Acquisitions /
(Divestitures) Organic
Nine Months
Ended
September 30, 2016 Organic Total
Segment Revenue
IAN 4,351.3$ (96.5)$ (5.9)$ 204.4$ 4,453.3$ 4.7% 2.3%
CMG 1,066.3 (19.4) 25.7 56.2 1,128.8 5.3% 5.9%
Total 5,417.6$ (115.9)$ 19.8$ 260.6$ 5,582.1$ 4.8% 3.0%
Geographic
United States 3,254.4$ -$ 16.9$ 154.9$ 3,426.2$ 4.8% 5.3%
International 2,163.2 (115.9) 2.9 105.7 2,155.9 4.9% (0.3%)
United Kingdom 487.0 (43.1) 16.7 34.7 495.3 7.1% 1.7%
Continental Europe 474.8 (3.9) (18.1) 15.3 468.1 3.2% (1.4%)
Asia Pacific 636.4 (14.9) 1.5 (5.3) 617.7 (0.8%) (2.9%)
Latin America 265.7 (40.5) (10.3) 40.8 255.7 15.4% (3.8%)
All Other Markets 299.3 (13.5) 13.1 20.2 319.1 6.7% 6.6%
Worldwide 5,417.6$ (115.9)$ 19.8$ 260.6$ 5,582.1$ 4.8% 3.0%
Expenses
Salaries & Related 3,622.6$ (76.1)$ 5.4$ 176.8$ 3,728.7$ 4.9% 2.9%
Office & General 1,379.5 (33.0) (3.3) 57.3 1,400.5 4.2% 1.5%
Total 5,002.1$ (109.1)$ 2.1$ 234.1$ 5,129.2$ 4.7% 2.5%
Components of Change Change
Reconciliation of Organic Measures
($ in Millions)
Page 19
($ in Millions)
Page 20
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
Components of Change During the Period
Reconciliation of Organic Revenue Growth
2016 2015
INVESTING ACTIVITIES
Net cash used in Investing Activities per presentation (172)$ (91)$
Net purchases, sales and maturities of short-term marketable securities, net 4 -
Net cash used in Investing Activities as reported (168)$ (91)$
Nine Months Ended September 30,
($ in Millions)
Page 21
Reconciliation of Investing Cash Flow
($ in Millions)
Page 22
Reconciliation Adjusted Results - QTD (1)
As Reported
Gain on
Sale of
Business
Adoption of
ASU 2016-09
Adjusted
Results
Income Before Income Taxes 196.3$ 3.9$ 192.4$
Provision for Income Taxes 63.8 0.3$ 64.1
Effective Tax Rate 32.5% 33.3%
Equity in Net Income of Unconsolidated Affiliates 0.2 0.2
Net Income Attributable to Noncontrolling Interests (4.1) (4.1)
128.6$ 3.9$ 0.3$ 124.4$
Weighted-Average Number of Common Shares Outstanding - Basic 397.7 397.7
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 10.2 1.6 8.6
Weighted-Average Number of Common Shares Outstanding - Diluted 407.9 1.6 406.3
Earnings Per Share Available to IPG Common Stockholders - Basic 0.32$ 0.01$ 0.00$ 0.31$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.32$ 0.01$ 0.00$ 0.31$
Three Months Ended September 30, 2016
Net Income Available to IPG Common Stockholders - Basic and Diluted
(1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the gain on sale of
a business in our international markets and the effect of the adoption of ASU 2016-09. 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.
($ in Millions)
Page 23
(1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the net losses on
sales of businesses in our international markets, valuation allowance reversals as a result of the disposition of
businesses in Continental Europe, the effect of the adoption of ASU 2016-09 and the release of reserves related to
the conclusion and settlement of a tax examination of previous tax years. 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
Net Losses on
Sales of
Businesses
Valuation
Allowance
Reversals
Adoption of
ASU 2016-09
Settlement
of Certain
Tax Positions
Adjusted
Results
Income Before Income Taxes 389.1$ (16.1)$ 405.2$
Provision for Income Taxes 91.9 0.4 12.2$ 10.5$ 23.4$ 138.4
Effective Tax Rate 23.6% 34.2%
Equity in Net Loss of Unconsolidated Affiliates (1.6) (1.6)
Net Income Attributable to Noncontrolling Interests (4.7) (4.7)
290.9$ (15.7)$ 12.2$ 10.5$ 23.4$ 260.5$
Weighted-Average Number of Common Shares Outstanding - Basic 399.5 399.5
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 9.3 1.6 7.7
Weighted-Average Number of Common Shares Outstanding - Diluted 408.8 1.6 407.2
Earnings Per Share Available to IPG Common Stockholders - Basic 0.73$ (0.04)$ 0.03$ 0.03$ 0.06$ 0.65$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.71$ (0.04)$ 0.03$ 0.03$ 0.06$ 0.64$
Nine Months Ended September 30, 2016
Net Income Available to IPG Common Stockholders - Basic and Diluted
Reconciliation Adjusted Results - YTD (1)
As Reported
Loss on Sales
of Businesses
Ex - Loss on
Sales of
Businesses
As Reported
Loss on Sales
of Businesses
Ex - Loss on
Sales of
Businesses
Income Before Income Taxes 139.0$ (38.0)$ 177.0$ 334.4$ (38.0)$ 372.4$
Provision for Income Taxes 61.1 2.7 63.8 137.4 2.7 140.1
Effective Tax Rate 44.0% 36.0% 41.1% 37.6%
Equity in Net Income of Unconsolidated Affiliates 0.1 0.1 0.6 0.6
Net Income Attributable to Noncontrolling Interests (3.1) (3.1) (3.3) (3.3)
74.9$ (35.3)$ 110.2$ 194.3$ (35.3)$ 229.6$
Weighted-Average Number of Common Shares Outstanding - Basic 407.6 407.6 409.7 409.7
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 7.9 7.9 7.3 7.3
Weighted-Average Number of Common Shares Outstanding - Diluted 415.5 415.5 417.0 417.0
Earnings Per Share Available to IPG Common Stockholders - Basic 0.18$ (0.09)$ 0.27$ 0.47$ (0.09)$ 0.56$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.18$ (0.09)$ 0.27$ 0.47$ (0.08)$ 0.55$
Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015
Net Income Available to IPG Common Stockholders - Basic and Diluted
(1) During Q3 2015, we recorded losses on sales of businesses in our international markets, primarily in Latin America
and Continental Europe. This amount includes losses on completed dispositions and the classification of certain
assets as held for sale.
($ in Millions)
Page 24
Reconciliation of Loss on Sales of Businesses (1)
Metrics Update
Metrics Update
Page 26
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
64.1%
63.8% 63.8%
60.0%
62.0%
64.0%
66.0%
9/30/2015 12/31/2015 9/30/2016
% of Revenue, Trailing Twelve Months
Salaries & Related Expenses
Page 27
0.7%
0.8%
1.0%
0.9%
0.0%
0.5%
1.0%
1.5%
Severance Expense
Three Months Nine Months
3.9% 3.7% 3.9% 3.8%
0.0%
2.0%
4.0%
6.0%
Temporary Help
Three Months Nine Months
3.7% 3.9% 3.8% 3.8%
0.0%
2.0%
4.0%
6.0%
Incentive Expense
Nine MonthsThree Months
53.6% 53.3%
55.6% 55.5%
45.0%
50.0%
55.0%
60.0%
Base, Benefits & Tax
Three Months Nine Months
Salaries & Related Expenses (% of Revenue)
Page 28
Three and Nine Months Ended September 30
“All Other Salaries & Related,” not shown, was 2.0% and 2.7% for the three months ended September 30, 2016 and 2015,
respectively, and 2.5% and 2.9% for the nine months ended September 30, 2016 and 2015, respectively.
2016 2015
24.8% 24.7% 24.5%
21.0%
23.0%
25.0%
27.0%
9/30/2015 12/31/2015 9/30/2016
% of Revenue, Trailing Twelve Months
Office & General Expenses
Page 29
Office & General Expenses (% of Revenue)
Page 30
Three and Nine Months Ended September 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.
1.4%
1.6% 1.5% 1.6%
0.0%
1.0%
2.0%
3.0%
Professional Fees
Three Months Nine Months
6.6% 6.6%
6.8%
6.5%
5.0%
6.0%
7.0%
8.0%
Occupancy Expense (ex-D&A)
Three Months Nine Months
14.5%
13.9% 13.6% 13.9%
10.0%
12.0%
14.0%
16.0%
All Other O&G
Three Months Nine Months
2.8%
3.2% 3.2% 3.5%
0.0%
2.0%
4.0%
6.0%
T&E, Office Supplies & Telecom
Three Months Nine Months
2016 2015
$881
$1,510
$680 $675
$895
$984
$996
$996 $995
$995
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
9/30/2015 12/31/2015 3/31/2016 6/30/2016 9/30/2016
Cash, Cash Equivalents and Short-Term Marketable Securities Available Committed Credit Facility
Available Liquidity
($ in Millions)
Page 31
Cash, Cash Equivalents and Short-Term Marketable Securities
+ Available Committed Credit Facility
Last Twelve Months
Ending September 30, 2016
I. Interest Coverage Ratio (not less than): 5.00x
Actual Interest Coverage Ratio: 18.19x
II. Leverage Ratio (not greater than): 3.50x
Actual Leverage Ratio: 1.52x
Interest Coverage Ratio - Interest Expense Reconciliation
Last Twelve Months
Ending September 30, 2016
Interest Expense: $92.1
- Interest income 21.1
- Other 7.9
Net interest expense : $63.1
EBITDA Reconciliation
Last Twelve Months
Ending September 30, 2016
Operating Income: $909.3
+ Depreciation and amortization 237.8
+ Other non-cash charges 0.5
EBITDA : $1,147.6
Covenants
$1.0 Billion 5-Year Credit F cility Covenants
($ in Millions)
Page 32 (1) Calculated as defined in the Credit Agreement.
(1)
(1)
Cautionary Statement
Page 33
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.