Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq22017earningsreleaseex.htm |
| 8-K - 8-K - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq22017earningsrelease8-k.htm |
SECOND QUARTER 2017
EARNINGS CONFERENCE CALL
July 25, 2017
Overview – Second Quarter 2017
Page 2 See reconciliation of organic revenue change on page 18 and adjusted non-GAAP diluted EPS on pages 21 and 22.
• Total revenue change was -1.7%; organic revenue growth was +0.4%,
and was 1.0% excluding the impact of lower pass-through revenue
U.S. organic growth was +0.7%, and was +1.7% excluding lower
pass-through revenue
International organic change was flat
• Operating income was $207 million compared with $224 million
• Operating margin was 11.0% compared with 11.7%, bringing H1
operating margin to 6.5% compared with 6.8% in 2016
• Diluted EPS was $0.24, and was $0.27 as adjusted for below-the-line
business dispositions, compared with $0.38 reported and $0.33
adjusted diluted EPS in Q2-16
2017 2016
Revenue 1,884.9$ 1,917.9$
Salaries and Related Expenses 1,239.3 1,229.5
Office and General Expenses 439.1 464.1
Operating Income 206.5 224.3
Interest Expense (25.7) (24.5)
Interest Income 4.7 5.6
Other (Expense) Income, net (15.4) 0.4
Income Before Income Taxes 170.1 205.8
Provision for Income Taxes 75.4 43.7
Equity in Net Loss of Unconsolidated Affiliates (0.1) (1.9)
Net Income 94.6 160.2
Net Loss (Income) Attributable to Noncontrolling Interests 0.1 (3.3)
94.7$ 156.9$
Earnings per Share Available to IPG Common Stockholders:
Basic 0.24$ 0.39$
Diluted 0.24$ 0.38$
Weighted-Average Number of Common Shares Outstanding:
Basic 392.3 400.1
Diluted 400.3 409.8
Dividends Declared per Common Share 0.18$ 0.15$
Three Months Ended June 30,
Net Income Available to IPG Common Stockholders
Operating Performance
(Amounts in Millions, except per share amounts)
Page 3
(1)
(1)
(1) As part of the adoption of FASB ASU 2017-07, we have reclassified a portion of postretirement costs/(benefits) from
Salaries and Related Expenses to Other (Expense) Income, net. The amounts reclassified were $0.8 and ($0.5) for the
three months ended June 30, 2017 and 2016, respectively.
2017 2016 Total Organic 2017 2016 Total Organic
IAN 1,537.8$ 1,548.5$ (0.7%) 1.0% 2,945.4$ 2,950.1$ (0.2%) 1.6%
CMG 34 .1 369.4 (6.0 ) (2.2%) 693. 709.8 (2.3 ) .0
Change
Six Months Ended
Change
Three Months Ended
June 30, June 30,
$ % Change $ % Change
June 30, 2016 1,917.9$ 3,659.9$
Total change (33.0) (1.7%) (21.1) (0.6%)
Foreign currency (21.3) (1.1%) (38.4) (1.0%)
Net acquisitions/(divestitures) (19.4) (1.0%) (36.6) (1.1%)
Organic 7.7 0.4% 53.9 1.5%
June 30, 2017 1,884.9$ 3,638.8$
Three Months Ended Six Months Ended
Revenue
($ in Millions)
Page 4 See reconciliation of segment organic revenue change on pages 18 and 19.
Integrated Agency Networks (“IAN”): McCann Worldgroup, FCB (Foote, Cone & Belding), MullenLowe
Group, IPG Mediabrands, our digital specialist agencies and our domestic integrated agencies
Constituency Management Group (“CMG”): Weber Shandwick, Golin, Jack Morton, FutureBrand,
Octagon and our other marketing service specialists
Geographic Revenue Change
Page 5
“All Other Markets” includes Canada, Africa and the Middle East.
See reconciliation of organic revenue change on pages 18 and 19.
Total Organic Total Organic
United States (0.7%) 0.7% 0.5% 1.7%
Internatio al (3.3%) 0.0% (2.4%) 1.0%
United Kingdom (5.7%) 1.9% (8.1%) 1.0%
Continental Europe (7.4%) (2.5%) (4.4%) 1.7%
Asia Pacific (1.4%) (1.1%) (1.6%) (1.9%)
Latin America (3.5%) 0.0% 0.1% 1.6%
All Other Markets 2.9% 3.2% 6.4% 5.2%
Worldwide (1.7%) 0.4% (0.6%) 1.5%
Three Months Ended
June 30, 2017
Six Months Ended
June 30, 2017
(0.9%)
0.9%
3.8% 3.7%
(10.8%)
7.0%
6.1%
0.7%
2.8%
5.5%
6.1%
5.0%
3.2%
(12.0%)
(10.0%)
(8.0%)
(6.0%)
(4.0%)
(2.0%)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Q4-05 Q4-06 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Q4-13 Q4-14 Q4-15 Q4-16
Organic Revenue Growth
Page 6 See reconciliation on page 20.
Trailing Twelve Months
Q2-17
Operating Expenses
($ in Millions)
Page 7 See reconciliation of organic measures on pages 18 and 19.
Salaries & Related
2017 2016 $ Total Organic
Three Months Ended June 30, 1,239.3$ 1,229.5$ 9.8$ 0.8% 3.1%
% of Revenue 65.7% 64.1%
Six Months Ended June 30, 2,514.7$ 2,498.3$ 16.4$ 0.7% 3.0%
% of Revenue 69.1% 68.3%
Office & General
2017 2016 $ Total Organic
Three Months Ended June 30, 439.1$ 464.1$ (25.0)$ (5.4%) (2.7%)
% of Revenue 23.3% 24.2%
Six Months Ended June 30, 887.9$ 914.3$ (26.4)$ (2.9%) (0.2%)
% of Revenue 24.4% 25.0%
Change
Change
(1.7%)
1.7%
5.3%
8.5%
5.7%
8.4%
9.8% 9.8%
8.4%
10.5%
11.5%
12.0% 11.9%
9.3%
(3.0%)
(1.0%)
1.0%
3.0%
5.0%
7.0%
9.0%
11.0%
13.0%
Q4-05 Q4-06 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Q4-13 Q4-14 Q4-15 Q4-16Operating Margin
Page 8
Trailing Twelve Months
For the twelve months ended December 31, 2013, reported operating income of $598.3 includes our Q4 2013
restructuring charge of $60.6. Excluding this charge, adjusted operating income was $658.9, and adjusted operating
margin is represented in green.
($ in Millions)
Q2-17
As
Reported
Net Losses on
Sales of
Businesses
Adjusted
Results
Income Before Income Taxes 184.9$ (12.2)$ 197.1$
Provision for Income Taxes 73.3 73.3
Effective Tax Rate 39.6% 37.2%
Diluted EPS Components:
Net Income Available to IPG Common Stockholders 116.2$ (12.2)$ 128.4$
Weighted-Average Number of Common Shares Outstanding 399.6 399.6
Earnings Per Share Available to IPG Common Stockholders 0.29$ (0.03)$ 0.32$
Six Months Ended June 30, 2017
As
Reported
Net Losses on
Sales of
Businesses
Adjusted
Results
Income Before Income Taxes 170.1$ (13.1)$ 183.2$
Provision for Income Taxes 75.4 75.4
Effective Tax Rate 44.3% 41.2%
Diluted EPS Components:
Net Income Available to IPG Common Stockholders 94.7$ (13.1)$ 107.8$
Weighted-Average Number of Common Shares Outstanding 400.3 400.3
Earnings Per Share Available to IPG Common Stockholders 0.24$ (0.03)$ 0.27$
Three Months Ended June 30, 2017
Adjusted Diluted Earnings Per Share
Page 9
(Amounts in Millions, except per share amounts)
(1) During the six months ended June 30, 2017, we recorded net losses on sales of businesses, primarily in our
international markets. See full reconciliation of adjusted non-GAAP diluted earnings per share on page 21.
(1)
(1)
2017 2016
NET INCOME 95$ 160$
OPERATING ACTIVITIES
Depreciation & amortization 59 57
Deferred taxes 16 24
Net losses on sales of businesses 13 4
Other non-cash items 6 7
Change in working capital, net 25 (121)
Change in other non-current assets & liabilities 5 (31)
Net cash provided by Operating Activities 219 100
INVESTING ACTIVITIES
Capital expenditures (44) (36)
Acquisitions, net of cash acquired (10) (7)
Other investing activities (9) 1
Net cash used in Investing Activities (63) (42)
FINANCING ACTIVITIES
Net (decrease) increase in short-term borrowings (71) 75
Common stock dividends (70) (60)
Repurchase of common stock (60) (59)
Acquisition-related payments (36) (29)
Repayment of long-term debt (24) (1)
Distributions to noncontrolling interests (5) (3)
Tax payments for employee shares withheld (1) (3)
Exercise of stock options 4 6
Other financing activities - 1
Net cash used in Financing Activities (263) (73)
Currency Effect (12) 16
(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash (119)$ 1$
Three Months Ended June 30,
Cash Flow
($ in Millions)
Page 10
June 30, December 31, June 30,
2017 2016 2016
CURRENT ASSETS:
Cash and cash equivalents 657.6$ 1,097.6$ 672.6$
Marketable securities 3.2 3.0 2.8
Accounts receivable, net 3,762.2 4,389.7 3,945.0
Expenditures billable to clients 1,720.7 1,518.1 1,710.4
Assets held for sale 19.7 203.2 5.3
Other current assets 323.1 226.4 289.3
Total current assets 6,486.5$ 7,438.0$ 6,625.4$
CURRENT LIABILITIES:
Accounts payable 5,872.0$ 6,303.6$ 5,876.5$
Accrued liabilities 513.1 794.0 583.1
Short-term borrowings 237.7 85.7 192.9
Current portion of long-term debt 301.7 323.9 24.5
Liabilities held for sale 21.7 198.8 5.3
Total current liabilities 6,946.2$ 7,706.0$ 6,682.3$
Balance Sheet – Current Portion
($ in Millions)
Page 11 (1) Our 2.25% Senior Notes are due November 15, 2017.
(1)
Total Debt (1)
($ in Millions)
Page 12
$2,325
$2,102
$1,908
$1,701 $1,738
$1,623 $1,641
$1,706 $1,745 $1,690
$1,823
$1,000
$1,500
$2,000
$2,500
$3,000
12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 6/30/2017
$2,411
(2)
(1) Includes current portion of long-term debt, short-term borrowings and long-term debt.
(2) Includes our November 2012 debt issuances of $800 aggregate principal amount of Senior Notes, which pre-funded
our plan to redeem a similar amount of debt in 2013.
Summary
Page 13
• Foundation for sustained value creation in top talent and key
strategic initiatives
Quality of our agency offerings
Embedded digital & digital specialists
“Open architecture” solutions
• Effective expense management continues
• Focus is on continued growth and margin improvement
• Financial strength continues to be a source of value creation
Appendix
(1) As part of the adoption of FASB ASU 2017-07, we have reclassified $1.6 of postretirement costs from Salaries and
Related Expenses to Other Expense, net in each period presented.
2017 2016
Revenue 3,638.8$ 3,659.9$
Salaries and Related Expenses 2,514.7 2,498.3
Office and General Expenses 887.9 914.3
Operating Income 236.2 247.3
Interest Expense (46.6) (47.1)
Interest Income 9.9 11.4
Other Expense, net (14.6) (18.8)
Income Before Income Taxes 184.9 192.8
Provision for Income Taxes 73.3 28.1
Equity in Net Income (Loss) of Unconsolidated Affiliates 1.1 (1.8)
Net Income 112.7 162.9
Net Loss (Income) Attributable to Noncontrolling Interests 3.5 (0.6)
116.2$ 162.3$
Earnings per Share Available to IPG Common Stockholders:
Basic 0.30$ 0.41$
Diluted 0.29$ 0.40$
Weighted-Average Number of Common Shares Outstanding:
Basic 392.0 400.4
Diluted 399.6 409.4
Dividends Declared per Common Share 0.36$ 0.30$
Net Income Available to IPG Common Stockholders
Six Months Ended June 30,
Operating Performance
(Amounts in Millions, except per share amounts)
Page 15
(1)
(1)
Cash Flow
($ in Millions)
Page 16
2017 2016
NET INCOME 113$ 163$
OPERATING ACTIVITIES
Depreciation & amortization 131 120
Deferred taxes 2 (4)
Net losses on sales of businesses 12 20
Other non-cash items 19 36
Change in working capital, net (414) (816)
Change in other non-current assets & liabilities (16) (73)
Net cash used in Operating Activities (153) (554)
INVESTING ACTIVITIES
Capital expenditures (69) (63)
Acquisitions, net of cash acquired (13) (34)
Other investing activities (14) (5)
Net cash used in Investing Activities (96) (102)
FINANCING ACTIVITIES
Common stock dividends (141) (120)
Repurchase of common stock (115) (113)
Tax payments for employee shares withheld (38) (23)
Acquisition-related payments (36) (29)
Repayment of long-term debt (24) (1)
Distributions to noncontrolling interests (11) (7)
Net increase in short-term borrowings 154 55
Exercise of stock options 12 10
Other financing activities - 1
Net cash used in Financing Activities (199) (227)
Currency Effect 8 53
Decrease in Cash, Cash Equivalents and Restricted Cash (440)$ (830)$
Six Months Ended June 30,
Q1 Q2 Q3 Q4 YTD 2017
Depreciation and amortization of fixed assets and
intangible assets 41.0$ 41.3$ 82.3$
Amortization of restricted stock and other non-cash
compensation 29.7 16.3 46.0
Net amortization of bond discounts and deferred
financing costs 1.4 1.4 2.8
Q1 Q2 Q3 Q4 FY 2016
Depreciation and amortization of fixed assets and
intangible assets 38.0$ 39.8$ 39.7$ 42.7$ 160.2$
Amortization of restricted stock and other non-cash
compensation 23.1 16.8 19.1 26.6 85.6
Net amortization of bond discounts and deferred
financing costs 1.4 1.4 1.4 1.4 5.6
2017
2016
Depreciation and Amortization
($ in Millions)
Page 17
Three Months
Ended
June 30, 2016
Foreign
Currency
Net Acquisitions /
(Divestitures)
Three Months
Ended
June 30, 2017 Organic Total
Segment Revenue
IAN 1,548.5$ (14.8)$ (11.8)$ 15.9$ 1,537.8$ 1.0% (0.7%)
CMG 369.4 (6.5) (7.6) (8.2) 347.1 (2.2%) (6.0%)
Total 1,917.9$ (21.3)$ (19.4)$ 7.7$ 1,884.9$ 0.4% (1.7%)
Geographic
United States 1,169.1$ -$ (16.5)$ 7.9$ 1,160.5$ 0.7% (0.7%)
International 748.8 (21.3) (2.9) (0.2) 724.4 0.0% (3.3%)
United Kingdom 155.7 (17.6) 5.9 2.9 146.9 1.9% (5.7%)
Continental Europe 172.9 (5.4) (3.0) (4.4) 160.1 (2.5%) (7.4%)
Asia Pacific 217.7 (1.8) 1.1 (2.4) 214.6 (1.1%) (1.4%)
Latin America 86.8 4.6 (7.6) (0.0) 83.8 0.0% (3.5%)
All Other Markets 115.7 (1.1) 0.7 3.7 119.0 3.2% 2.9%
Worldwide 1,917.9$ (21.3)$ (19.4)$ 7.7$ 1,884.9$ 0.4% (1.7%)
Expenses
Salaries & Related 1,229.5$ (15.4)$ (12.4)$ 37.6$ 1,239.3$ 3.1% 0.8%
Office & General 464.1 (5.6) (7.1) (12.3) 439.1 (2.7%) (5.4%)
Total 1,693.6$ (21.0)$ (19.5)$ 25.3$ 1,678.4$ 1.5% (0.9%)
Components of Change Change
Organic
Reconciliation of Organic Measures
($ in Millions)
Page 18
(1)
(2)
(1)
(1) Excluding the decrease in worldwide organic pass-through revenue of $11.2, the organic revenue change would have
been $18.9, resulting in worldwide organic growth of 1.0%.
(2) Excluding the decrease in organic pass-through revenue of $11.5 in the U.S., the organic revenue change in the U.S.
would have been $19.4, resulting in U.S. organic growth of 1.7%.
Six Months
Ended
June 30, 2016
Foreign
Currency
Net Acquisitions /
(Divestitures) Organic
Six Months
Ended
June 30, 2017 Organic Total
Segment Revenue
IAN 2,950.1$ (24.6)$ (26.7)$ 46.6$ 2,945.4$ 1.6% (0.2%)
CMG 709.8 (13.8) (9.9) 7.3 693.4 1.0% (2.3%)
Total 3,659.9$ (38.4)$ (36.6)$ 53.9$ 3,638.8$ 1.5% (0.6%)
Geographic
United States 2,260.3$ -$ (27.5)$ 39.5$ 2,272.3$ 1.7% 0.5%
International 1,399.6 (38.4) (9.1) 14.4 1,366.5 1.0% (2.4%)
United Kingdom 321.3 (40.2) 11.1 3.2 295.4 1.0% (8.1%)
Continental Europe 320.5 (10.3) (9.3) 5.5 306.4 1.7% (4.4%)
Asia Pacific 399.8 (1.5) 2.6 (7.4) 393.5 (1.9%) (1.6%)
Latin America 152.1 11.9 (14.2) 2.4 152.2 1.6% 0.1%
All Other Markets 205.9 1.7 0.7 10.7 219.0 5.2% 6.4%
Worldwide 3,659.9$ (38.4)$ (36.6)$ 53.9$ 3,638.8$ 1.5% (0.6%)
Expenses
Salaries & Related 2,498.3$ (29.2)$ (28.4)$ 74.0$ 2,514.7$ 3.0% 0.7%
Office & General 914.3 (10.6) (14.0) (1.8) 887.9 (0.2%) (2.9%)
Total 3,412.6$ (39.8)$ (42.4)$ 72.2$ 3,402.6$ 2.1% (0.3%)
Components of Change Change
Reconciliation of Organic Measures
($ in Millions)
Page 19
(1) Excluding the decrease in worldwide organic pass-through revenue of $8.1, the organic revenue change would have
been $62.0, resulting in worldwide organic growth of 1.7%.
(2) Excluding the decrease in organic pass-through revenue of $1.2 in the U.S., the organic revenue change in the U.S.
would have been $40.7, resulting in U.S. organic growth of 1.8%.
(1)
(2)
(1)
Last Twelve
Months Ending
Beginning of
Period Revenue
Foreign
Currency
Net Acquisitions /
(Divestitures) Organic
End of Period
Revenue
12/31/05 6,387.0$ 40.4$ (107.4)$ (56.2)$ 6,263.8$
3/31/06 6,323.8 (10.9) (132.6) 81.5 6,261.8
6/30/06 6,418.4 (8.8) (157.5) (68.5) 6,183.6
9/30/06 6,335.9 (13.9) (140.4) 15.6 6,197.2
12/31/06 6,263.8 20.7 (165.5) 57.8 6,176.8
3/31/07 6,261.8 78.4 (147.2) 16.0 6,209.0
6/30/07 6,183.6 102.4 (124.7) 166.6 6,327.9
9/30/07 6,197.2 137.3 (110.9) 209.2 6,432.8
12/31/07 6,176.8 197.5 (70.7) 233.1 6,536.7
3/31/08 6,209.0 217.8 (45.9) 280.6 6,661.5
6/30/08 6,327.9 244.8 (12.6) 282.4 6,842.5
9/30/08 6,432.8 237.4 32.8 317.2 7,020.2
12/31/08 6,536.7 71.5 87.6 243.0 6,938.8
3/31/09 6,661.5 (88.3) 114.7 91.9 6,779.8
6/30/09 6,842.5 (286.2) 139.2 (275.3) 6,420.2
9/30/09 7,020.2 (390.1) 115.2 (636.4) 6,108.9
12/31/09 6,938.8 (251.6) 69.1 (748.9) 6,007.4
3/31/10 6,779.8 (88.2) 36.0 (705.4) 6,022.2
6/30/10 6,420.2 59.1 2.0 (316.9) 6,164.4
9/30/10 6,108.9 117.7 9.6 60.1 6,296.3
12/31/10 6,007.4 63.3 17.0 419.6 6,507.3
3/31/11 6,022.2 21.0 18.2 583.7 6,645.1
6/30/11 6,164.4 61.5 12.4 535.8 6,774.1
9/30/11 6,296.3 119.1 (7.7) 539.5 6,947.2
12/31/11 6,507.3 122.2 (8.6) 393.7 7,014.6
3/31/12 6,645.1 92.9 (1.4) 310.0 7,046.6
6/30/12 6,774.1 (14.3) 14.5 247.3 7,021.6
9/30/12 6,947.2 (117.2) 39.7 95.8 6,965.5
12/31/12 7,014.6 (147.6) 41.8 47.4 6,956.2
3/31/13 7,046.6 (143.7) 48.2 41.3 6,992.4
6/30/13 7,021.6 (111.4) 56.9 65.8 7,032.9
9/30/13 6,965.5 (80.3) 49.5 128.2 7,062.9
12/31/13 6,956.2 (80.4) 50.3 196.2 7,122.3
3/31/14 6,992.4 (89.9) 51.2 263.1 7,216.8
6/30/14 7,032.9 (80.6) 51.6 308.1 7,312.0
9/30/14 7,062.9 (53.5) 74.3 369.0 7,452.7
12/31/14 7,122.3 (75.5) 95.3 395.0 7,537.1
3/31/15 7,216.8 (125.7) 98.4 386.1 7,575.6
6/30/15 7,312.0 (223.5) 85.3 426.5 7,600.3
9/30/15 7,452.7 (336.2) 58.3 449.9 7,624.7
12/31/15 7,537.1 (408.5) 23.7 461.5 7,613.8
3/31/16 7,575.6 (388.5) 11.9 480.8 7,679.8
6/30/16 7,600.3 (315.6) 10.8 426.1 7,721.6
9/30/16 7,624.7 (237.5) 16.4 374.7 7,778.3
12/31/16 7,613.8 (159.7) 15.3 377.2 7,846.6
3/31/17 7,679.8 (124.9) (7.4) 311.0 7,858.5
6/30/17 7,721.6 (113.2) (32.9) 250.0 7,825.5
Components of Change During the Period
Reconciliation of Organic Revenue Growth
($ in Millions)
Page 20
Reconciliation of Adjusted Results(1)
Page 21
(Amounts in Millions, except per share amounts)
As
Reported
Net Losses on
Sales of
Businesses
Adjusted
Results
As
Reported
Net Losses on
Sales of
Businesses
Adjusted
Results
Income Before Income Taxes 170.1$ (13.1)$ 183.2$ 184.9$ (12.2)$ 197.1$
Provision for Income Taxes 75.4 75.4 73.3 73.3
Equity in Net (Loss) Income of Unconsolidated Affiliates (0.1) (0.1) 1.1 1.1
Net Loss Attributable to Noncontrolling Interests 0.1 0.1 3.5 3.5
94.7$ (13.1)$ 107.8$ 116.2$ (12.2)$ 128.4$
Weighted-Average Number of Common Shares Outstanding - Basic 392.3 392.3 392.0 392.0
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 8.0 8.0 7.6 7.6
Weighted-Average Number of Common Shares Outstanding - Diluted 400.3 400.3 399.6 399.6
Earnings Per Share Available to IPG Common Stockholders - Basic 0.24$ (0.03)$ 0.27$ 0.30$ (0.03)$ 0.33$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.24$ (0.03)$ 0.27$ 0.29$ (0.03)$ 0.32$
Three Months Ended June 30, 2017 Six Months Ended June 30, 2017
Net lncome Available to IPG Common Stockholders
(1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the net losses on sales
of businesses, primarily in our international markets. This amount includes losses on completed dispositions and the
classification of certain assets as held for sale during 2017. Management believes the resulting comparisons provide
useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of
our financial and operational performance.
Reconciliation of Adjusted Results(1)
Page 22
(Amounts in Millions, except per share amounts)
(1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the losses on sales of
businesses in our international markets, primarily in Continental Europe, and the release of reserves related to the
conclusion and settlement of a tax examination of previous tax years. The losses on sales of businesses amount
includes losses on completed dispositions and the classification of certain assets as held for sale during the second
quarter of 2016. The effect of the adoption of the Financial Accounting Standards Board Accounting Standards Update
2016-09, which was previously included in this table in 2016, has now been removed as the effect of the adoption is
included in both periods presented within this presentation. Management believes the resulting comparisons provide
useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of
our financial and operational performance.
As
Reported
Losses on
Sales of
Businesses
Settlement
of Certain
Tax Positions
Adjusted
Results
Income Before Income Taxes 205.8$ (3.7)$ 209.5$
Provision for Income Taxes 43.7 23.4$ 67.1
Equity in Net Loss of Unconsolidated Affiliates (1.9) (1.9)
Net Income Attributable to Noncontrolling Interests (3.3) (3.3)
156.9$ (3.7)$ 23.4$ 137.2$
Weighted-Average Number of Common Shares Outstanding - Basic 400.1 400.1
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 9.7 9.7
Weighted-Average Number of Common Shares Outstanding - Diluted 409.8 409.8
Earnings Per Share Available to IPG Common Stockholders - Basic 0.39$ (0.01)$ 0.06$ 0.34$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.38$ (0.01)$ 0.06$ 0.33$
Three Months Ended June 30, 2016
Net lncome Available to IPG Common Stockholders
Reconciliation of Adjusted Results(1)
Page 23
(Amounts in Millions, except per share amounts)
(1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the losses on sales of
businesses in our international markets, primarily in Continental Europe, valuation allowance reversals as a result of the
disposition of those businesses in Continental Europe and the release of reserves related to the conclusion and
settlement of a tax examination of previous tax years. The losses on sales of businesses amount includes losses on
completed dispositions and the classification of certain assets as held for sale during the first half of 2016. The effect of
the adoption of the Financial Accounting Standards Board Accounting Standards Update 2016-09, which was previously
included in this table in 2016, has now been removed as the effect of the adoption is included in both periods presented
within this presentation. Management believes the resulting comparisons provide useful supplemental data that, while
not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational
performance.
As
Reported
Losses on
Sales of
Businesses
Valuation
Allowance
Reversals
Settlement
of Certain
Tax Positions
Adjusted
Results
Income Before Income Taxes 192.8$ (20.0)$ 212.8$
Provision for Income Taxes 28.1 0.4 12.2$ 23.4$ 64.1
Equity in Net Loss of Unconsolidated Affiliates (1.8) (1.8)
Net Income Attributable to Noncontrolling Interests (0.6) (0.6)
162.3$ (19.6)$ 12.2$ 23.4$ 146.3$
Weighted-Average Number of Common Shares Outstanding - Basic 400.4 400.4
Add: Effect of Dilutive Securities
Restricted Stock, Stock Options and Other Equity Aw ards 9.0 9.0
Weighted-Average Number of Common Shares Outstanding - Diluted 409.4 409.4
Earnings Per Share Available to IPG Common Stockholders - Basic 0.41$ (0.05)$ 0.03$ 0.06$ 0.37$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.40$ (0.05)$ 0.03$ 0.06$ 0.36$
Six Months Ended June 30, 2016
Net lncome Available to IPG Common Stockholders
Metrics Update
SALARIES & RELATED Trailing Twelve Months
(% of revenue) Base, Benefits & Tax
Incentive Expense
Severance Expense
Temporary Help
OFFICE & GENERAL Trailing Twelve Months
(% of revenue) Professional Fees
Occupancy Expense (ex-D&A)
T&E, Office Supplies & Telecom
All Other O&G
FINANCIAL Available Liquidity
$1.0 Billion 5-Year Credit Facility Covenants
Category Metric
Metrics Update
Page 25
64.0% 64.2%
64.6%
60.0%
62.0%
64.0%
66.0%
6/30/2016 12/31/2016 6/30/2017
% of Revenue, Trailing Twelve Months
Salaries & Related Expenses
Page 26
2017 2016
1.1% 1.0% 1.2% 1.2%
0.0%
1.0%
2.0%
3.0%
Severance Expense
Three Months Six Months
3.9% 3.8% 4.0% 3.9%
0.0%
2.0%
4.0%
6.0%
Temporary Help
Three Months Six Months
2.7% 3.0%
3.7% 3.8%
0.0%
2.0%
4.0%
6.0%
Incentive Expense
Six MonthsThree Months
56.1%
54.1%
58.1%
56.7%
45.0%
50.0%
55.0%
60.0%
Base, Benefits & Tax
Three Months Six Months
Salaries & Related Expenses (% of Revenue)
Page 27
Three and Six Months Ended June 30
“All Other Salaries & Related,” not shown, was 1.9% and 2.2% for the three months ended June 30, 2017 and 2016,
respectively, and 2.1% and 2.7% for the six months ended June 30, 2017 and 2016, respectively.
24.5%
23.8% 23.6%
21.0%
23.0%
25.0%
27.0%
6/30/2016 12/31/2016 6/30/2017
% of Revenue, Trailing Twelve Months
Office & General Expenses
Page 28
1.7%
1.5%
1.7% 1.6%
0.0%
1.0%
2.0%
3.0%
Professional Fees
Three Months Six Months
6.9% 6.6%
7.1% 6.9%
4.0%
6.0%
8.0%
10.0%
Occupancy Expense (ex-D&A)
Three Months Six Months
11.6%
12.7% 12.4%
13.1%
10.0%
12.0%
14.0%
16.0%
All Other O&G
Three Months Six Months
3.1%
3.4%
3.2%
3.4%
2.0%
3.0%
4.0%
5.0%
T&E, Office Supplies & Telecom
Three Months Six Months
Office & General Expenses (% of Revenue)
Page 29
Three and Six Months Ended June 30
“All Other O&G” primarily includes production expenses and, to a lesser extent, depreciation and amortization, bad debt
expense, adjustments to contingent acquisition obligations, foreign currency losses (gains), spending to support new
business activity, net restructuring and other reorganization-related charges (reversals), long-lived asset impairments and
other expenses.
2017 2016
$675
$895 $1,101 $778 $661
$995
$995
$995
$992
$992
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
6/30/2016 9/30/2016 12/31/2016 3/31/2017 6/30/2017
Cash, Cash Equivalents and Short-Term Marketable Securities Available Committed Credit Facility
Available Liquidity
($ in Millions)
Page 30
Cash, Cash Equivalents and Short-Term Marketable Securities
+ Available Committed Credit Facility
Last Twelve Months
Ending June 30, 2017
I. Interest Coverage Ratio (not less than): 5.00x
Actual Interest Coverage Ratio: 18.48x
II. Leverage Ratio (not greater than): 3.50x
Actual Leverage Ratio: 1.54x
Interest Coverage Ratio - Interest Expense Reconciliation
Last Twelve Months
Ending June 30, 2017
Interest Expense: $90.1
- Interest income 18.6
- Other 7.3
Net interest expense : $64.2
EBITDA Reconciliation
Last Twelve Months
Ending June 30, 2017
Operating Income: $929.9
+ Depreciation and amortization 256.4
EBITDA : $1,186.3
Covenants
$1.0 Billion 5-Year Credit Facility Covenants
($ in Millions)
Page 31 (1) Calculated as defined in the Credit Agreement.
(1)
(1)
Cautionary Statement
Page 32
This investor presentation contains forward-looking statements. Statements in this investor presentation that are
not historical facts, including statements about management’s beliefs and expectations, constitute forward-looking
statements. These statements are based on current plans, estimates and projections, and are subject to change
based on a number of factors, including those outlined in our most recent Annual Report on Form 10-K under Item
1A, Risk Factors. Forward-looking statements speak only as of the date they are made, and we undertake no
obligation to update publicly any of them in light of new information or future events.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause
actual results to differ materially from those contained in any forward-looking statement. Such factors include, but
are not limited to, the following:
➔ potential effects of a challenging economy, for example, on the demand for our advertising and
marketing services, on our clients’ financial condition and on our business or financial condition;
➔ our ability to attract new clients and retain existing clients;
➔ our ability to retain and attract key employees;
➔ risks associated with assumptions we make in connection with our critical accounting estimates,
including changes in assumptions associated with any effects of a weakened economy;
➔ potential adverse effects if we are required to recognize impairment charges or other adverse
accounting-related developments;
➔ risks associated with the effects of global, national and regional economic and political conditions,
including counterparty risks and fluctuations in economic growth rates, interest rates and currency
exchange rates; and
➔ developments from changes in the regulatory and legal environment for advertising and marketing
and communications services companies around the world.
Investors should carefully consider these factors and the additional risk factors outlined in more detail in our most
recent Annual Report on Form 10-K under Item 1A, Risk Factors.