Attached files
| file | filename |
|---|---|
| 8-K - 8-K - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq42016earningsrelease8-k.htm |
| EX-99.1 - EXHIBIT 99.1 - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq42016earningsreleaseex.htm |
FOURTH QUARTER & FULL YEAR 2016
EARNINGS CONFERENCE CALL
February 10, 2017
Overview
Page 2 See reconciliations of organic revenue change on pages 20 and 21, and adjusted diluted EPS on pages 25 and 26.
• Total revenue increased 3.1% in both Q4 and the full year
• Organic revenue growth was 5.3% in Q4 and 5.0% for the full year
• FY-16 operating margin was 12.0%, an improvement of 50 bps
• FY-16 diluted EPS was $1.49, and was $1.37 as adjusted for sales of
businesses and tax items, a 13.2% increase from comparable FY-15
• Repurchased 13 million shares during 2016
• Increased quarterly dividend 20% and authorized new $300 million
share repurchase program
2016 2015
Revenue 2,264.5$ 2,196.2$
Salaries and Related Expenses 1,309.4 1,235.1
Office and General Expenses 470.0 504.7
Operating Income 485.1 456.4
Interest Expense (21.8) (23.3)
Interest Income 4.0 5.0
Other Expense, net (26.2) (10.3)
Income Before Income Taxes 441.1 427.8
Provision for Income Taxes 106.1 145.4
Equity in Net Income of Unconsolidated Affiliates 1.9 0.5
Net Income 336.9 282.9
Net Income Attributable to Noncontrolling Interests (19.3) (22.6)
317.6$ 260.3$
Earnings per Share Available to IPG Common Stockholders:
Basic 0.81$ 0.65$
Diluted 0.78$ 0.63$
Weighted-Average Number of Common Shares Outstanding:
Basic 393.5 403.4
Diluted 405.2 412.3
Dividends Declared per Common Share 0.15$ 0.12$
Three Months Ended December 31,
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 1,865.6$ 1,793.6$ 4.0% 6.7% 6,318.9$ 6,144.9$ 2.8% 5.3%
CMG 398.9$ 402.6$ (0.9%) (0.9%) 1,527.7$ 1,468.9$ 4.0 3.6
Change
Twelve Months Ended
Change
Three Months Ended
December 31, December 31,
$ % Change $ % Change
December 31, 2015 2,196.2$ 7,613.8$
Total change 68.3 3.1% 232.8 3.1%
Foreign currency (43.8) (2.0%) (159.7) (2.1%)
Net acquisitions/(divestitures) (4.5) (0.2%) 15.3 0.2%
Organic 116.6 5.3% 377.2 5.0%
December 31, 2016 2,264.5$ 7,846.6$
Three Months Ended Twelve Months Ended
Revenue
($ in Millions)
Page 4 See reconciliations of segment organic revenue change on pages 20 and 21.
Integrated Agency Networks (“IAN”): McCann Worldgroup, FCB (Foote, Cone & Belding), MullenLowe
Group, IPG Mediabrands, our digital specialist agencies and our domestic integrated agencies
Constituency Management Group (“CMG”): Weber Shandwick, Golin, Jack Morton, FutureBrand,
Octagon and our other marketing service specialists
Total Organic Total Organic
United States 3.1% 3.3% 4.7% 4.4%
International 3.2% 7.8% 0.7% 5.8%
United Kingdom (0.1%) 11.7% 1.2% 8.5%
Continental Europe 4.2% 11.1% 0.4% 5.7%
Asia Pacific 8.8% 7.5% 0.7% 1.7%
Latin America (0.7%) 5.0% (2.8%) 12.2%
All Other Markets (1.4%) 0.9% 3.9% 4.8%
Worldwide 3.1% 5.3% 3.1% 5.0%
Three Months Ended
December 31, 2016
Twelve Months Ended
December 31, 2016
Geographic R venue Change
Page 5
“All Other Markets” includes Canada, Africa and the Middle East.
See reconciliations of organic revenue change on pages 20 and 21.
(0.9%)
0.9%
3.8% 3.7%
(10.8%)
7.0%
6.1%
0.7%
2.8%
5.5%
6.1%
5.0%
(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 22.
Trailing Twelve Months
Salaries & Related
2016 2015 $ Total Organic
Three Months Ended December 31, 1,309.4$ 1,235.1$ 74.3$ 6.0% 8.2%
% of Revenue 57.8% 56.2%
Three months severance 14.0$ 22.1$ (8.1)$ (36.7%)
% of Revenue 0.6% 1.0%
Twelve Months Ended December 31, 5,038.1$ 4,857.7$ 180.4$ 3.7% 5.7%
% of Revenue 64.2% 63.8%
Twelve months severance 70.0$ 71.3$ (1.3)$ (1.8%)
% of Revenue 0.9% 0.9%
Office & General
2016 2015 $ Total Organic
Three Months Ended December 31, 470.0$ 504.7$ (34.7)$ (6.9%) (3.7%)
% of Revenue 20.8% 23.0%
Three months occupancy expense (ex-D&A) 128.1$ 127.2$ 0.9$ 0.7%
% of Revenue 5.7% 5.8%
Twelve Months Ended December 31, 1,870.5$ 1,884.2$ (13.7)$ (0.7%) 2.0%
% of Revenue 23.8% 24.7%
Twelve months occupancy expense (ex-D&A) 507.1$ 481.6$ 25.5$ 5.3%
% of Revenue 6.5% 6.3%
Change
Change
See reconciliations of organic measures on pages 20 and 21.
Operating Expenses
($ in Millions)
Page 7
Operating 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)
(1.7%)
1.7%
5.3%
8.5%
5.7%
8.4%
9.8% 9.8%
8.4%
10.5%
11.5%
12.0%
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 Q4-16
(1) Includes losses on completed dispositions of businesses and the classification of certain assets as held for sale.
(2) In 2016 we early adopted Financial Accounting Standards Board Accounting Standards Update 2016-09.
(3) During Q4 2016, we recognized a benefit related to refunds to be claimed on future amended U.S. federal returns for tax
years 2014 and 2015 primarily related to foreign tax credits and, to a lesser extent, research and development credits
based on the conclusion of multi-year studies.
As
Reported
Net Losses on
Sales of
Businesses
Adoption of
ASU 2016-09
U.S. Federal
Tax Credits
Adjusted
Results
Income Before Income Taxes 441.1$ (25.3)$ 466.4$
Provision for Income Taxes 106.1 2.0 (0.1)$ 37.4$ 145.4
Effective Tax Rate 24.1% 31.2%
Diluted EPS Components:
Net Income Available to IPG Common Stockholders 317.6$ (23.3)$ (0.1)$ 37.4$ 303.6$
Weighted-Average Number of Common Shares Outstanding 405.2 1.0 404.2
Earnings Per Share Available to IPG Common Stockholders 0.78$ (0.06)$ (0.00)$ 0.09$ 0.75$
Three Months Ended December 31, 2016
Adjusted Diluted Earnings Per Share
Page 9
(Amounts in Millions, except per share amounts)
(1) (2)
See full reconciliations of adjusted diluted earnings per share on page 24.
(3)
As
Reported
Net Losses
on Sales of
Businesses
Valuation
Allowance
Reversals
Adoption of
ASU 2016-09
Settlement
of Certain
Tax Positions
U.S. Federal
Tax Credits
Adjusted
Results
Income Before Income Taxes 830.2$ (41.4)$ 871.6$
Provision for Income Taxes 198.0 2.4 12.2$ 10.4$ 23.4$ 44.6$ 291.0
Effective Tax Rate 23.8% 33.4%
Diluted EPS Components:
Net Income Available to IPG Common Stockholders 608.5$ (39.0)$ 12.2$ 10.4$ 23.4$ 44.6$ 556.9$
Weighted-Average Number of Common Shares Outstanding 408.0 1.0 407.0
Earnings Per Share Available to IPG Common Stockholders 1.49$ (0.10)$ 0.03$ 0.03$ 0.06$ 0.11$ 1.37$
Twelve Months Ended December 31, 2016
Adjusted Diluted Earnings Per Share
Page 10
(Amounts in Millions, except per share amounts)
See full reconciliations of adjusted diluted earnings per share on page 25.
(1) Includes losses on completed dispositions of businesses and the classification of certain assets as held for sale.
(2) During Q1 2016, we recorded valuation allowance reversals as a consequence of the disposition of certain businesses in
Continental Europe.
(3) In 2016 we early adopted Financial Accounting Standards Board Accounting Standards Update 2016-09.
(4) During Q2 2016, we released reserves related to the conclusion and settlement of a tax examination of previous tax years.
(5) In 2016 we recognized a benefit related to refunds to be claimed on future amended U.S. federal returns for tax years 2014
and 2015 primarily related to foreign tax credits and, to a lesser extent, research and development credits based on the
conclusion of multi-year studies.
(1) (2) (3) (4) (5)
Balance Sheet – Current Portion
($ in Millions)
Page 11
December 31, December 31,
2016 2015
CURRENT ASSETS:
Cash and cash equivalents 1,097.6$ 1,502.9$
Marketable securities 3.0 6.8
Accounts receivable, net 4,389.7 4,361.0
Expenditures billable to clients 1,518.1 1,594.4
Assets held for sale 203.2 12.1
Other current assets 226.4 215.9
Total current assets 7,438.0$ 7,693.1$
CURRENT LIABILITIES:
Accounts payable 6,303.6$ 6,689.2$
Accrued liabilities 794.0 748.4
Short-term borrowings 85.7 132.9
Current portion of long-term debt 323.9 1.9
Liabilities held for sale 198.8 11.9
Total current liabilities 7,706.0$ 7,584.3$
(1)
(1) Our 2.25% Senior Notes are due November 15, 2017.
Cash Flow
($ in Millions)
Page 12
2016 2015
NET INCOME 633$ 481$
OPERATING ACTIVITIES
Depreciation & amortization 251 233
Deferred taxes 46 49
Non-cash loss on sales of businesses 41 50
Other non-cash items 52 35
Change in working capital, net (414) (99)
Change in other non-current assets & liabilities (96) (60)
Net cash provided by Operating Activities 513 689
INVESTING ACTIVITIES
Capital expenditures (201) (161)
Acquisitions, net of cash acquired (52) (29)
Other investing activities (15) (10)
Net cash used in Investing Activities (268) (200)
FINANCING ACTIVITIES
Repurchase of common stock (303) (285)
Common stock dividends (238) (196)
Net (decrease) increase in short-term bank borrowings (56) 52
Acquisition-related payments (40) (53)
Tax payments for employee shares withheld (23) (18)
Distributions to noncontrolling interests (14) (16)
Excess tax benefit from share-based payment arrangements - 10
Exercise of stock options 10 14
Other financing activities (2) 1
Net cash used in Financing Activities (666) (491)
Currency Effect 12 (156)
Decrease in Cash & S/T Marketable Securities (409)$ (158)$
Twelve Months Ended December 31,
(1) Excludes net purchases, sales and maturities of short-term marketable securities. See reconciliation on page 23.
(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 Q4 2016, as prospective adoption was required.
(1)
(2)
(2)
$2,325
$2,102
$1,908
$1,701 $1,738
$1,623 $1,641
$1,706 $1,745 $1,690
$1,000
$1,500
$2,000
$2,500
$3,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$2,411
Total Debt (1)
($ in Millions)
Page 13
(2)
(1) Includes current portion of long-term debt, short-term borrowings and long-term debt.
(2) Includes our November 2012 debt issuances of $800 aggregate principal amount of Senior Notes, which pre-funded
our plan to redeem a similar amount of debt in 2013.
December 31,
473 466
432 421 419 408 398 392
85
75
49
22
6
8
10 10
300
350
400
450
500
550
600
2010 2011 2012 2013 2014 2015 2016 As of
December
31, 2016
Basic Shares Dilutive Shares
481
443
425
541
558
416
408
402
Total Shares: Basic and Eligible for Dilution (1)
Page 14
(1) Includes basic common shares outstanding, restricted shares and in-the-money stock options, and convertible debt
and preferred stock eligible for dilution.
(2) Equals weighted-average shares outstanding as defined above for the twelve months ending December 31st for the
periods presented.
Weighted-average
(Amounts in Millions)
(2)
• Organic revenue growth at the high-end of our increased
growth target along with strong operating margin expansion
• Continuing traction from key strategic initiatives
Quality of our agency offerings, creative talent, embedded
and specialty digital, and “open architecture” solutions
Strength in high-growth disciplines and largest regions
Effective expense management
• Focus on additional margin improvement
• Financial strength continues to be a source of value creation
Increased dividend
New share repurchase authorization
Summary
Page 15
Appendix
2016 2015
Revenue 7,846.6$ 7,613.8$
Salaries and Related Expenses 5,038.1 4,857.7
Office and General Expenses 1,870.5 1,884.2
Operating Income 938.0 871.9
Interest Expense (90.6) (85.8)
Interest Income 20.1 22.8
Other Expense, net (37.3) (46.7)
Income Before Income Taxes 830.2 762.2
Provision for Income Taxes 198.0 282.8
Equity in Net Income of Unconsolidated Affiliates 0.3 1.1
Net Income 632.5 480.5
Net Income Attributable to Noncontrolling Interests (24.0) (25.9)
608.5$ 454.6$
Earnings per Share Available to IPG Common Stockholders:
Basic 1.53$ 1.11$
Diluted 1.49$ 1.09$
Weighted-Average Number of Common Shares Outstanding:
Basic 397.9 408.1
Diluted 408.0 415.7
Dividends Declared per Common Share 0.60$ 0.48$
Net Income Available to IPG Common Stockholders
Twelve Months Ended December 31,
Operating Performance
(Amounts in Millions, except per share amounts)
Page 17
2016 2015
NET INCOME 337$ 283$
OPERATING ACTIVITIES
Depreciation & amortization 71 63
Deferred taxes 43 83
Non-cash loss on sales of businesses 25 12
Other non-cash items 9 9
Change in working capital, net 78 484
Change in other non-current assets & liabilities (22) (8)
Net cash provided by Operating Activities 541 926
INVESTING ACTIVITIES
Capital expenditures (87) (80)
Acquisitions, net of cash acquired (4) (23)
Other investing activities (6) (9)
Net cash used in Investing Activities (97) (112)
FINANCING ACTIVITIES
Repurchase of common stock (110) (113)
Common stock dividends (59) (49)
Net (decrease) increase in short-term bank borrowings (22) 27
Acquisition-related payments (4) (21)
Distributions to noncontrolling interests (3) (3)
Exercise of stock options - 2
Other financing activities (1) (1)
Net cash used in Financing Activities (199) (158)
Currency Effect (39) (28)
Increase in Cash & S/T Marketable Securities 206$ 628$
Three Months Ended December 31,
Cash Flow
($ in Millions)
Page 18
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
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 19
Three Months
Ended
December 31, 2015
Foreign
Currency
Net Acquisitions /
(Divestitures)
Three Months
Ended
December 31, 2016 Organic Total
Segment Revenue
IAN 1,793.6$ (32.3)$ (15.8)$ 120.1$ 1,865.6$ 6.7% 4.0%
CMG 402.6 (11.5) 11.3 (3.5) 398.9 (0.9%) (0.9%)
Total 2,196.2$ (43.8)$ (4.5)$ 116.6$ 2,264.5$ 5.3% 3.1%
Geographic
United States 1,221.1$ -$ (2.7)$ 40.2$ 1,258.6$ 3.3% 3.1%
International 975.1$ (43.8) (1.8) 76.4 1,005.9 7.8% 3.2%
United Kingdom 200.7 (34.7) 10.9 23.5 200.4 11.7% (0.1%)
Continental Europe 222.4 (4.2) (11.1) 24.6 231.7 11.1% 4.2%
Asia Pacific 280.5 1.5 2.3 21.0 305.3 7.5% 8.8%
Latin America 117.8 (3.0) (3.7) 5.9 117.0 5.0% (0.7%)
All Other Markets 153.7 (3.4) (0.2) 1.4 151.5 0.9% (1.4%)
Worldwide 2,196.2$ (43.8)$ (4.5)$ 116.6$ 2,264.5$ 5.3% 3.1%
Expenses
Salaries & Related 1,235.1$ (23.6)$ (3.2)$ 101.1$ 1,309.4$ 8.2% 6.0%
Office & General 504.7 (10.6) (5.4) (18.7) 470.0 (3.7%) (6.9%)
Total 1,739.8$ (34.2)$ (8.6)$ 82.4$ 1,779.4$ 4.7% 2.3%
Components of Change Change
Organic
Reconciliation of Organic Measures
($ in Millions)
Page 20
Twelve Months
Ended
December 31, 2015
Foreign
Currency
Net Acquisitions /
(Divestitures)
Twelve Months
Ended
December 31, 2016 Organic Total
Segment Revenue
IAN 6,144.9$ (128.8)$ (21.7)$ 324.5$ 6,318.9$ 5.3% 2.8%
CMG 1,468.9 (30.9) 37.0 52.7 1,527.7 3.6% 4.0%
Total 7,613.8$ (159.7)$ 15.3$ 377.2$ 7,846.6$ 5.0% 3.1%
Geographic
United States 4,475.5$ -$ 14.2$ 195.1$ 4,684.8$ 4.4% 4.7%
International 3,138.3 (159.7) 1.1 182.1 3,161.8 5.8% 0.7%
United Kingdom 687.7 (77.8) 27.6 58.2 695.7 8.5% 1.2%
Continental Europe 697.2 (8.1) (29.2) 39.9 699.8 5.7% 0.4%
Asia Pacific 916.9 (13.4) 3.8 15.7 923.0 1.7% 0.7%
Latin America 383.5 (43.5) (14.0) 46.7 372.7 12.2% (2.8%)
All Other Markets 453.0 (16.9) 12.9 21.6 470.6 4.8% 3.9%
Worldwide 7,613.8$ (159.7)$ 15.3$ 377.2$ 7,846.6$ 5.0% 3.1%
Expenses
Salaries & Related 4,857.7$ (99.7)$ 2.2$ 277.9$ 5,038.1$ 5.7% 3.7%
Office & General 1,884.2 (43.6) (8.7) 38.6 1,870.5 2.0% (0.7%)
Total 6,741.9$ (143.3)$ (6.5)$ 316.5$ 6,908.6$ 4.7% 2.5%
Components of Change Change
Organic
Reconciliation of Organic Measures
($ in Millions)
Page 21
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
Components of Change During the Period
Reconciliation of Organic Revenue Growth
($ in Millions)
Page 22
2016 2015
INVESTING ACTIVITIES
Net cash used in Investing Activities per presentation (268)$ (200)$
Net purchases, sales and maturities of short-term marketable securities, net 4 -
Net cash used in Investing Activities as reported (264)$ (200)$
Twelve Months Ended December 31,Reconciliation of Investing Cash Flow
($ in Millions)
Page 23
As
Reported
Net Losses on
Sales of
Businesses
Adoption of
ASU 2016-09
U.S. Federal
Tax Credits
Adjusted
Results
Income Before Income Taxes 441.1$ (25.3)$ 466.4$
Provision for Income Taxes 106.1 2.0 (0.1)$ 37.4$ 145.4
Effective Tax Rate 24.1% 31.2%
Equity in Net Income of Unconsolidated Affiliates 1.9 1.9
Net Income Attributable to Noncontrolling Interests (19.3) (19.3)
317.6$ (23.3)$ (0.1)$ 37.4$ 303.6$
Weighted-Average Number of Common Shares Outstanding - Basic 393.5 393.5
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 11.7 1.0 10.7
Weighted-Average Number of Common Shares Outstanding - Diluted 405.2 1.0 404.2
Earnings Per Share Available to IPG Common Stockholders - Basic 0.81$ (0.06)$ (0.00)$ 0.10$ 0.77$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.78$ (0.06)$ (0.00)$ 0.09$ 0.75$
Three Months Ended December 31, 2016
Net Income 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, the effect of the adoption of ASU 2016-09, and a benefit related to refunds to be claimed on
future amended U.S. federal returns for tax years 2014 and 2015 primarily related to foreign tax credits and, to a
lesser extent, research and development credits based on the conclusion of multi-year studies. Management
believes the resulting comparisons provide useful supplemental data that, while not a substitute for GAAP
measures, allow for greater transparency in the review of our financial and operational performance.
Reconciliation of Adjusted Results (1)
(Amounts in Millions, except per share amounts)
Page 24
(1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the net losses on
sales of businesses, valuation allowance reversals as a result of the disposition of businesses in Continental
Europe, the effect of the adoption of ASU 2016-09, the release of reserves related to the conclusion and settlement
of a tax examination of previous tax years, and a benefit related to refunds to be claimed on future amended U.S.
federal returns for tax years 2014 and 2015 primarily related to foreign tax credits and, to a lesser extent, research
and development credits based on the conclusion of multi-year studies. Management believes the resulting
comparisons provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater
transparency in the review of our financial and operational performance.
Reconciliation of Adjusted Results (1)
(Amounts in Millions, except per share amounts)
Page 25
As
Reported
Net Losses on
Sales of
Businesses
Valuation
Allowance
Reversals
Adoption of
ASU 2016-09
Settlement
of Certain
Tax Positions
U.S.
Federal Tax
Credits
Adjusted
Results
Income Before Income Taxes 830.2$ (41.4)$ 871.6$
Provision for Income Taxes 198.0 2.4 12.2$ 10.4$ 23.4$ 44.6$ 291.0
Effective Tax Rate 23.8% 33.4%
Equity in Net Income of Unconsolidated Affiliates 0.3 0.3
Net Income Attributable to Noncontrolling Interests (24.0) (24.0)
608.5$ (39.0)$ 12.2$ 10.4$ 23.4$ 44.6$ 556.9$
Weighted-Average Number of Common Shares Outstanding - Basic 397.9 397.9
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 10.1 1.0 9.1
Weighted-Average Number of Common Shares Outstanding - Diluted 408.0 1.0 407.0
Earnings Per Share Available to IPG Common Stockholders - Basic 1.53$ (0.10)$ 0.03$ 0.03$ 0.06$ 0.11$ 1.40$
Earnings Per Share Available to IPG Common Stockholders - Diluted 1.49$ (0.10)$ 0.03$ 0.03$ 0.06$ 0.11$ 1.37$
Twelve Months Ended December 31, 2016
Net Income Available to IPG Common Stockholders
Reconciliation of Adjusted Results (1)
(Amounts in Millions, except per share amounts)
Page 26
(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 Latin America and Continental Europe. This amount includes losses
on completed dispositions and the classification of certain assets as held for sale during the third and fourth quarters of
2015. 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
Loss on Sales
of Businesses
Adjusted
Results
As
Reported
Loss on Sales
of Businesses
Adjusted
Results
Income Before Income Taxes 427.8$ (12.0)$ 439.8$ 762.2$ (50.0)$ 812.2$
Provision for Income Taxes 145.4 0.2 145.6 282.8 2.9 285.7
Effective Tax Rate 34.0% 33.1% 37.1% 35.2%
Equity in Net Income of Unconsolidated Affiliates 0.5 0.5 1.1 1.1
Net Income Attributable to Noncontrolling Interests (22.6) (22.6) (25.9) (25.9)
260.3$ (11.8)$ 272.1$ 454.6$ (47.1)$ 501.7$
Weighted-Average Number of Common Shares Outstanding - Basic 403.4 403.4 408.1 408.1
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 8.9 8.9 7.6 7.6
Weighted-Average Number of Common Shares Outstanding - Diluted 412.3 412.3 415.7 415.7
Earnings Per Share Available to IPG Common Stockholders - Basic 0.65$ (0.03)$ 0.67$ 1.11$ (0.12)$ 1.23$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.63$ (0.03)$ 0.66$ 1.09$ (0.12)$ 1.21$
Three Months Ended December 31, 2015 Twelve Months Ended December 31, 2015
Net Income Available to IPG Common Stockholders
$60
$112
$108
$58
$13
$30
$16
$0
$25
$50
$75
$100
$125
2016 2017 2018 2019 2020 2021 2022+
Actual Estimated
Acquisition Payment Obligations (1)
($ in Millions)
Page 27
(1) Amounts represent payments related to our previous acquisitions. Amounts include deferred payments and payments we may be
required to make in connection with our redeemable noncontrolling interests and call options with affiliates. With respect to
redeemable noncontrolling interests and call options with affiliates, these estimated payment amounts are shown as an obligation
in the earliest year in which they are exercisable, though some are eligible for exercise in multiple years. The payment amounts
are based on current estimates of financial performance and are subject to change.
(2) 2016 payments include $19 recorded within Operating Activities in our Statement of Cash Flows.
(2)
Metrics Update
Metrics Update
Page 29
REVENUE By Client Sector
SALARIES & RELATED Twelve Months Ended
(% of revenue) Base, Benefits & Tax
Incentive Expense
Severance Expense
Temporary Help
OFFICE & GENERAL Twelve Months Ended
(% of revenue) Professional Fees
Occupancy Expense (ex-D&A)
T&E, Office Supplies & Telecom
All Other O&G
REAL ESTATE Total Square Feet
FINANCIAL Available Liquidity
$1.0 Billion 5-Year Credit Facility Covenants
Category Metric
Revenue By Client Sector
Page 30
Top 100 Clients for the twelve months ended December 31
Approximately 55% of consolidated revenue
(Unaudited data)
Health Care
20%
Tech & Telecom
20%
Auto &
Transportation
17%
Food &
Beverage
12%
Consumer
Goods
9%
Financial
Services
10%
Retail
6%
Other
6%
2015
Health Care
21%
Tech & Telecom
21%
Auto &
Transportation
16%
Food &
Beverage
13%
Consumer
Goods
8%
Financial Services
9%
Retail
6%
Other
6%
2016
64.0% 63.8%
64.2%
61.0%
63.0%
65.0%
67.0%
2014 2015 2016
% of Revenue
Salaries & Related Expenses
Page 31
Twelve Months Ended December 31
######## 9/30/2008 6/30/2008 3/31/2008
45.2% 45.7%
52.6% 52.7%
40.0%
45.0%
50.0%
55.0%
Base, Benefits & Tax
Three Months Twelve Months
0.6%
1.0% 0.9% 0.9%
0.0%
1.0%
2.0%
3.0%
Severance Expense
Three Months Twelve Months
3.3% 3.2%
3.7% 3.6%
0.0%
2.0%
4.0%
6.0%
Temporary Help
Three Months Twelve Months
4.8%
3.4%
4.0% 3.7%
0.0%
2.0%
4.0%
6.0%
Incentive Expense
Three Months Twelve Months
2016 2015
Salaries & Related Expenses (% of Revenue)
Page 32
Three and Twelve Months Ended December 31
“All Other Salaries & Related,” not shown, was 3.9% and 2.9% for the three months ended December 31, 2016 and 2015,
respectively, and 3.0% and 2.9% for the twelve months ended December 31, 2016 and 2015, respectively.
25.6%
24.7%
23.8%
22.0%
24.0%
26.0%
28.0%
2014 2015 2016
% of Revenue
Office & General Expenses
Page 33
Twelve Months Ended December 31
######## 9/30/2008 6/30/2008 3/31/2008
1.5%
1.7%
1.5% 1.6%
0.0%
1.0%
2.0%
3.0%
Professional Fees
Three Months Twelve Months
5.7% 5.8%
6.5% 6.3%
3.0%
5.0%
7.0%
9.0%
Occupancy Expense (ex-D&A)
Three Months Twelve Months
2.7%
3.1% 3.1%
3.3%
2.0%
3.0%
4.0%
5.0%
T&E, Office Supplies & Telecom
Three Months Twelve Months
10.9%
12.4% 12.7%
13.5%
10.0%
12.0%
14.0%
16.0%
All Other O&G
Three Months Twelve Months
Office & General Expenses (% of Revenue)
Page 34
Three and Twelve Months Ended December 31
2016 2015
“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.
10.5 10.8
10.0 10.1 9.9 10.0 10.1 10.0 10.0 10.1
2.1 1.6
1.9 1.5
1.2 1.1 0.8
0.5 0.4 0.3
8.0
10.0
12.0
14.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Occupied Sublease/Vacant
10.9
11.111.1
11.6
11.9
12.4
10.5 10.4
12.6
10.4
Real Estate
Page 35
(Amounts in Millions)
Total Square Feet as of December 31,
$1,510
$680 $675
$895 $1,101
$996
$996 $995
$995
$995
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
12/31/2015 3/31/2016 6/30/2016 9/30/2016 12/31/2016
Cash, Cash Equivalents and Short-Term Marketable Securities Available Committed Credit Facility
Available Liquidity
($ in Millions)
Page 36
Cash, Cash Equivalents and Short-Term Marketable Securities
+ Available Committed Credit Facility
Twelve Months Ending
December 31, 2016
I. Interest Coverage Ratio (not less than): 5.00x
Actual Interest Coverage Ratio: 18.53x
II. Leverage Ratio (not greater than): 3.50x
Actual Leverage Ratio: 1.43x
Interest Coverage Ratio - Interest Expense Reconciliation
Twelve Months Ending
December 31, 2016
Interest Expense: $90.6
- Interest income 20.1
- Other 6.6
Net interest expense : $63.9
EBITDA Reconciliation
Twelve Months Ending
December 31, 2016
Operating Income: $938.0
+ Depreciation and amortization 245.8
EBITDA : $1,183.8
Covenants
$1.0 Billion 5-Year Credit Facility Covenants
($ in Millions)
Page 37
(1)
(1) Calculated as defined in the Credit Agreement.
(1)
Cautionary Statement
Page 38
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.