Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq32017earningsreleaseex.htm |
| 8-K - 8-K - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq32017earningsrelease8-k.htm |
THIRD QUARTER 2017
EARNINGS CONFERENCE CALL
October 24, 2017
Overview - Third Quarter 2017
Page 2 See reconciliations of organic revenue change on pages 18 and 19 and adjusted non-GAAP diluted EPS on pages 21 and 22.
• Total revenue change was -1.0%; organic revenue growth was +0.5%,
and was +1.5% excluding the impact of lower pass-through revenue
◦ U.S. organic growth was +1.3%, and was +2.0% excluding lower
pass-through revenue
◦ International organic change was -0.7%, and was +0.7% excluding
lower pass-through revenue
• Operating income was $219 million compared with $208 million
• Operating margin was 11.5% compared with 10.8%, an increase of 70
basis points
• Diluted EPS was $0.37, and was $0.31 as adjusted for below-the-line
items, compared with $0.32 reported and $0.31 adjusted diluted EPS in
Q3-16
(Amounts in Millions, except per share amounts)
Page 3
Three Months Ended September 30,
2017 2016
Revenue $ 1,902.6 $ 1,922.2
Salaries and Related Expenses (1) 1,227.6 1,228.0
Office and General Expenses 455.9 486.2
Operating Income 219.1 208.0
Interest Expense (21.0 ) (21.7 )
Interest Income 4.1 4.7
Other (Expense) Income, net (1) (9.9 ) 5.3
Income Before Income Taxes 192.3 196.3
Provision for Income Taxes 42.5 63.8
Equity in Net (Loss) Income of Unconsolidated Affiliates (1.0 ) 0.2
Net Income 148.8 132.7
Net Income Attributable to Noncontrolling Interests (2.6 ) (4.1 )
Net Income Available to IPG Common Stockholders $ 146.2 $ 128.6
Earnings per Share Available to IPG Common Stockholders:
Basic $ 0.38 $ 0.32
Diluted $ 0.37 $ 0.32
Weighted-Average Number of Common Shares Outstanding:
Basic 389.5 397.7
Diluted 397.2 407.9
Dividends Declared per Common Share $ 0.18 $ 0.15
(1) As part of the adoption of FASB ASU 2017-07, we have reclassified a portion of postretirement costs from Salaries and
Related Expenses to Other (Expense) Income, net. The amounts reclassified were $4.8 and $0.8 for the three months
ended September 30, 2017 and 2016, respectively.
Operating Performance
($ in Millions)
Page 4
"ex-PT": excluding the organic change in our pass-through revenues, which are offset in our operating expenses.
See reconciliations of segment organic revenue change on pages 18 and 19.
Three Months Ended Nine Months Ended
$ % Change $ % Change
September 30, 2016 $ 1,922.2 $ 5,582.1
Total change (19.6 ) (1.0 %) (40.7 ) (0.7 %)
Foreign currency 7.7 0.4 % (30.7 ) (0.5 %)
Net acquisitions/(divestitures) (37.2 ) (1.9 %) (73.8 ) (1.3 %)
Organic 9.9 0.5 % 63.8 1.1 %
Change in pass-throughs (19.1 ) (1.0 %) (27.2 ) (0.5 %)
Organic ex change in pass-throughs 29.0 1.5 % 91.0 1.6 %
September 30, 2017 $ 1,902.6 $ 5,541.4
Three Months Ended
September 30,
Nine Months Ended
September 30,
Change Change
2017 2016 Total Organic
Organic
ex-PT 2017 2016 Total Organic
Organic
ex-PT
IAN $ 1,520.2 $ 1,503.2 1.1 % 2.0 % 2.4 % $ 4,465.6 $ 4,453.3 0.3 % 1.7 % 2.0 %
CMG $ 382.4 $ 419.0 (8.7 %) (5.0 %) (1.7 %) $ 1,075.8 $ 1,128.8 (4.7 %) (1.2 %) 0.1 %
Revenue
Page 5
“All Other Markets” includes Canada, Africa and the Middle East.
See reconciliations of organic revenue change on pages 18 and 19.
Three Months Ended
September 30, 2017
Nine Months Ended
September 30, 2017
Total Organic
Organic
ex-PT Total Organic
Organic
ex-PT
United States (0.8 %) 1.3 % 2.0 % 0.1 % 1.6 % 1.9 %
International (1.3 %) (0.7 %) 0.7 % (2.0 %) 0.4 % 1.2 %
United Kingdom 1.4 % 3.0 % 8.1 % (4.7 %) 1.7 % 5.3 %
Continental Europe 2.0 % 0.4 % 1.5 % (2.4 %) 1.3 % 1.8 %
Asia Pacific (1.8 %) (2.1 %) (2.2 %) (1.7 %) (1.9 %) (2.3 %)
Latin America (17.7 %) (9.9 %) (10.3 %) (7.1 %) (3.1 %) (3.3 %)
All Other Markets 6.4 % 3.4 % 4.0 % 6.4 % 4.5 % 4.5 %
Worldwide (1.0 %) 0.5 % 1.5 % (0.7 %) 1.1 % 1.6 %
Geographic Revenue Change
Page 6 See reconciliation on page 20.
Trailing Twelve Months
Organic Revenue Growth
(0.9%)
Q3-17
2.3%
See reconciliations of organic measures on pages 18 and 19.
($ in Millions)
Page 7
Salaries & Related Change
2017 2016 $ Total Organic
Three Months Ended September 30, $ 1,227.6 $ 1,228.0 $ (0.4 ) 0.0 % 1.3 %
% of Revenue 64.5 % 63.9 %
Nine Months Ended September 30, $ 3,742.3 $ 3,726.3 $ 16.0 0.4 % 2.4 %
% of Revenue 67.5 % 66.8 %
Office & General Change
2017 2016 $ Total Organic
Three Months Ended September 30, $ 455.9 $ 486.2 $ (30.3 ) (6.2 %) (3.3 %)
% of Revenue 24.0 % 25.3 %
Nine Months Ended September 30, $ 1,343.8 $ 1,400.5 $ (56.7 ) (4.0 %) (1.3 %)
% of Revenue 24.3 % 25.1 %
Operating Expenses
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)
Operating Margin
(1.7%)
Q3-17
Three Months Ended September 30, 2017
As
Reported
Net Losses on
Sales of
Businesses(1)
U.S. Federal
Tax Credits(2)
Adjusted
Results
Income Before Income Taxes $ 192.3 $ (8.7 ) $ 201.0
Provision for Income Taxes 42.5 1.7 $ 31.2 75.4
Effective Tax Rate 22.1 % 37.5 %
Diluted EPS Components:
Net Income Available to IPG Common Stockholders $ 146.2 $ (7.0 ) $ 31.2 $ 122.0
Weighted-Average Number of Common Shares Outstanding 397.2 397.2
Earnings Per Share Available to IPG Common
Stockholders $ 0.37 $ (0.02 ) $ 0.08 $ 0.31
Nine Months Ended September 30, 2017
As
Reported
Net Losses on
Sales of
Businesses(1)
U.S. Federal
Tax Credits(2)
Adjusted
Results
Income Before Income Taxes $ 377.2 $ (20.9 ) $ 398.1
Provision for Income Taxes 115.8 1.7 $ 31.2 148.7
Effective Tax Rate 30.7 % 37.4 %
Diluted EPS Components:
Net Income Available to IPG Common Stockholders $ 262.4 $ (19.2 ) $ 31.2 $ 250.4
Weighted-Average Number of Common Shares Outstanding 398.6 398.6
Earnings Per Share Available to IPG Common
Stockholders $ 0.66 $ (0.05 ) $ 0.08 $ 0.63
Page 9
(Amounts in Millions, except per share amounts)
Adjusted Diluted Earnings Per Share
(1) During the nine months ended September 30, 2017, we recorded net losses on sales of businesses, primarily in our
international markets.
(2) During the nine months ended September 30, 2017, we recognized a benefit related to foreign tax credits from
distributions of unremitted earnings.
See full reconciliation of adjusted non-GAAP diluted earnings per share on page 21.
($ in Millions)
Page 10
Nine Months Ended September 30,
2017 2016
NET INCOME $ 261.5 $ 295.6
OPERATING ACTIVITIES
Depreciation & amortization 188.5 180.7
Deferred taxes (1.6 ) 2.6
Net losses on sales of businesses 20.9 16.1
Other non-cash items 25.6 43.4
Change in working capital, net (612.5 ) (491.8 )
Other non-current assets & liabilities (21.4 ) (73.5 )
Net cash used in operating activities (139.0 ) (26.9 )
INVESTING ACTIVITIES
Capital expenditures (108.7 ) (114.5 )
Acquisitions, net of cash acquired (22.6 ) (47.9 )
Other investing activities (9.2 ) (5.1 )
Net cash used in investing activities (140.5 ) (167.5 )
FINANCING ACTIVITIES
Repurchases of common stock (216.0 ) (193.3 )
Common stock dividends (211.2 ) (179.6 )
Acquisition-related payments (49.1 ) (36.7 )
Tax payments for employee shares withheld (38.4 ) (22.7 )
Repayments of long-term debt (23.6 ) (1.1 )
Distributions to noncontrolling interests (16.9 ) (10.8 )
Net increase (decrease) in short-term borrowings 429.9 (33.9 )
Exercise of stock options 12.1 10.2
Other financing activities 0.1 1.0
Net cash used in financing activities (113.1 ) (466.9 )
Currency effect 0.4 50.7
Net decrease in cash, cash equivalents and restricted cash $ (392.2 ) $ (610.6 )
Cash Flow
($ in Millions)
Page 11
September 30, 2017 December 31, 2016 September 30, 2016
CURRENT ASSETS:
Cash and cash equivalents $ 704.9 $ 1,097.6 $ 891.6
Accounts receivable, net 3,696.1 4,389.7 3,714.4
Expenditures billable to clients 1,742.3 1,518.1 1,843.7
Assets held for sale 8.3 203.2 0.0
Other current assets 312.2 229.4 283.5
Total current assets $ 6,463.8 $ 7,438.0 $ 6,733.2
CURRENT LIABILITIES:
Accounts payable $ 5,561.1 $ 6,303.6 $ 6,051.1
Accrued liabilities 550.7 794.0 631.7
Short-term borrowings 511.8 85.7 107.8
Current portion of long-term debt (1) 301.9 323.9 24.5
Liabilities held for sale 20.8 198.8 0.0
Total current liabilities $ 6,946.3 $ 7,706.0 $ 6,815.1
Balance Sheet – Current Portion
(1) Our 2.25% Senior Notes are due November 15, 2017.
($ in Millions)
Page 12
(2)
Total Debt (1)
(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.
Page 13
Summary
• Foundation for sustained value creation in top talent and key strategic
initiatives, notwithstanding slower industry growth in ‘17
◦ Quality of our agency offerings
◦ Embedded digital & digital specialists
◦ "Open architecture” solutions
• Effective expense management continues
• Focus is on stronger growth and continued margin improvement
• Financial strength an ongoing source of value creation
Appendix
(Amounts in Millions, except per share amounts)
Page 15
Nine Months Ended September 30,
2017 2016
Revenue $ 5,541.4 $ 5,582.1
Salaries and Related Expenses (1) 3,742.3 3,726.3
Office and General Expenses 1,343.8 1,400.5
Operating Income 455.3 455.3
Interest Expense (67.6 ) (68.8 )
Interest Income 14.0 16.1
Other Expense, net (1) (24.5 ) (13.5 )
Income Before Income Taxes 377.2 389.1
Provision for Income Taxes 115.8 91.9
Equity in Net Income (Loss) of Unconsolidated Affiliates 0.1 (1.6 )
Net Income 261.5 295.6
Net Loss (Income) Attributable to Noncontrolling Interests 0.9 (4.7 )
Net Income Available to IPG Common Stockholders $ 262.4 $ 290.9
Earnings per Share Available to IPG Common Stockholders:
Basic $ 0.67 $ 0.73
Diluted $ 0.66 $ 0.71
Weighted-Average Number of Common Shares Outstanding:
Basic 391.2 399.5
Diluted 398.6 408.8
Dividends Declared per Common Share $ 0.54 $ 0.45
Operating Performance
(1) As part of the adoption of FASB ASU 2017-07, we have reclassified a portion of postretirement costs from Salaries and
Related Expenses to Other Expense, net. The amounts reclassified were $6.4 and $2.4 for the nine months ended
September 30, 2017 and 2016, respectively.
($ in Millions)
Page 16
Three Months Ended September 30,
2017 2016
NET INCOME $ 148.8 $ 132.7
OPERATING ACTIVITIES
Depreciation & amortization 57.4 60.2
Deferred taxes (3.1 ) 6.8
Net losses (gains) on sales of businesses 8.7 (3.9 )
Other non-cash items 6.8 7.1
Change in working capital, net (198.1 ) 324.6
Other non-current assets & liabilities (6.4 ) (0.6 )
Net cash provided by operating activities 14.1 526.9
INVESTING ACTIVITIES
Capital expenditures (39.8 ) (51.5 )
Acquisitions, net of cash acquired (10.0 ) (13.6 )
Other investing activities 5.3 (0.2 )
Net cash used in investing activities (44.5 ) (65.3 )
FINANCING ACTIVITIES
Repurchases of common stock (101.0 ) (80.8 )
Common stock dividends (69.8 ) (59.5 )
Acquisition-related payments (12.8 ) (7.5 )
Distributions to noncontrolling interests (6.0 ) (3.6 )
Tax payments for employee shares withheld (0.6 ) 0.0
Repayments of long-term debt 0.0 (0.1 )
Exercise of stock options 0.3 0.4
Net increase (decrease) in short-term borrowings 276.4 (88.9 )
Other financing activities (0.2 ) 0.1
Net cash provided by (used in) financing activities 86.3 (239.9 )
Currency effect (7.8 ) (1.9 )
Increase in cash, cash equivalents and restricted cash $ 48.1 $ 219.8
Cash Flow
Page 17
2017
Q1 Q2 Q3 Q4 YTD 2017
Depreciation and amortization of fixed assets
and intangible assets $ 41.0 $ 41.3 $ 42.2 $ 124.5
Amortization of restricted stock and other non-
cash compensation 29.7 16.3 13.8 59.8
Net amortization of bond discounts and
deferred financing costs 1.4 1.4 1.4 4.2
2016
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
($ in Millions)
Depreciation and Amortization
Page 18
Components of Change Change
Three Months
Ended
September 30,
2016
Foreign
Currency
Net
Acquisitions /
(Divestitures) Organic
Change in
Pass-
Throughs
Organic
ex-PT
Three Months
Ended
September 30,
2017 Organic
Organic
ex-PT Total
Segment Revenue
IAN $ 1,503.2 $ 8.7 $ (22.4 ) $ 30.7 $ (5.4 ) $ 36.1 $ 1,520.2 2.0 % 2.4 % 1.1 %
CMG 419.0 (1.0 ) (14.8 ) (20.8 ) (13.7 ) (7.1 ) 382.4 (5.0 %) (1.7 %) (8.7 %)
Total $ 1,922.2 $ 7.7 $ (37.2 ) $ 9.9 $ (19.1 ) $ 29.0 $ 1,902.6 0.5 % 1.5 % (1.0 %)
Geographic Revenue
United States $ 1,165.9 $ 0.0 $ (25.0 ) $ 15.1 $ (8.6 ) $ 23.7 $ 1,156.0 1.3 % 2.0 % (0.8 %)
International 756.3 7.7 (12.2 ) (5.2 ) (10.5 ) 5.3 746.6 (0.7 %) 0.7 % (1.3 %)
United Kingdom 174.0 (4.3 ) 1.4 5.3 (8.8 ) 14.1 176.4 3.0 % 8.1 % 1.4 %
Continental Europe 147.6 6.4 (4.0 ) 0.6 (1.6 ) 2.2 150.6 0.4 % 1.5 % 2.0 %
Asia Pacific 217.9 0.8 (0.2 ) (4.6 ) 0.2 (4.8 ) 213.9 (2.1 %) (2.2 %) (1.8 %)
Latin America 103.6 2.4 (10.4 ) (10.3 ) 0.4 (10.7 ) 85.3 (9.9 %) (10.3 %) (17.7 %)
All Other Markets 113.2 2.4 1.0 3.8 (0.7 ) 4.5 120.4 3.4 % 4.0 % 6.4 %
Worldwide $ 1,922.2 $ 7.7 $ (37.2 ) $ 9.9 $ (19.1 ) $ 29.0 $ 1,902.6 0.5 % 1.5 % (1.0 %)
Expenses
Salaries & Related $ 1,228.0 $ 4.6 $ (21.0 ) $ 16.0 $ 1,227.6 1.3 % 0.0 %
Office & General 486.2 (0.2 ) (13.9 ) (16.2 ) 455.9 (3.3 %) (6.2 %)
Total $ 1,714.2 $ 4.4 $ (34.9 ) $ (0.2 ) $ 1,683.5 0.0 % (1.8 %)
($ in Millions)
Reconciliation of Organic Measures
Page 19
Components of Change Change
Nine Months
Ended
September 30,
2016
Foreign
Currency
Net
Acquisitions /
(Divestitures) Organic
Change in
Pass-
Throughs
Organic
ex-PT
Nine Months
Ended
September 30,
2017 Organic
Organic
ex-PT Total
Segment Revenue
IAN $ 4,453.3 $ (15.9 ) $ (49.1 ) $ 77.3 $ (12.5 ) $ 89.8 $ 4,465.6 1.7 % 2.0 % 0.3 %
CMG 1,128.8 (14.8 ) (24.7 ) (13.5 ) (14.7 ) 1.2 1,075.8 (1.2 %) 0.1 % (4.7 %)
Total $ 5,582.1 $ (30.7 ) $ (73.8 ) $ 63.8 $ (27.2 ) $ 91.0 $ 5,541.4 1.1 % 1.6 % (0.7 %)
Geographic Revenue
United States $ 3,426.2 $ 0.0 $ (52.5 ) $ 54.6 $ (9.7 ) $ 64.3 $ 3,428.3 1.6 % 1.9 % 0.1 %
International 2,155.9 (30.7 ) (21.3 ) 9.2 (17.5 ) 26.7 2,113.1 0.4 % 1.2 % (2.0 %)
United Kingdom 495.3 (44.5 ) 12.5 8.5 (17.9 ) 26.4 471.8 1.7 % 5.3 % (4.7 %)
Continental Europe 468.1 (3.9 ) (13.3 ) 6.1 (2.5 ) 8.6 457.0 1.3 % 1.8 % (2.4 %)
Asia Pacific 617.7 (0.7 ) 2.4 (12.0 ) 2.4 (14.4 ) 607.4 (1.9 %) (2.3 %) (1.7 %)
Latin America 255.7 14.3 (24.6 ) (7.9 ) 0.5 (8.4 ) 237.5 (3.1 %) (3.3 %) (7.1 %)
All Other Markets 319.1 4.1 1.7 14.5 0.0 14.5 339.4 4.5 % 4.5 % 6.4 %
Worldwide $ 5,582.1 $ (30.7 ) $ (73.8 ) $ 63.8 $ (27.2 ) $ 91.0 $ 5,541.4 1.1 % 1.6 % (0.7 %)
Expenses
Salaries & Related $ 3,726.3 $ (24.6 ) $ (49.4 ) $ 90.0 $ 3,742.3 2.4 % 0.4 %
Office & General 1,400.5 (10.8 ) (27.9 ) (18.0 ) 1,343.8 (1.3 %) (4.0 %)
Total $ 5,126.8 $ (35.4 ) $ (77.3 ) $ 72.0 $ 5,086.1 1.4 % (0.8 %)
($ in Millions)
Reconciliation of Organic Measures
Reconciliation of Organic Revenue Growth
($ in Millions)
Page 20
Components of Change During the Period
Last Twelve
Months Ending
Beginning of
Period Revenue
Foreign
Currency
Net Acquisitions /
(Divestitures) Organic
Ending 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
9/30/17 7,778.3 (74.5 ) (78.3 ) 180.4 7,805.9
(Amounts in Millions, except per share amounts)
Page 21
Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
As Reported
Net Losses
on Sales of
Businesses
U.S. Federal
Tax Credits
Adjusted
Results As Reported
Net Losses
on Sales of
Businesses
U.S. Federal
Tax Credits
Adjusted
Results
Income Before Income Taxes $ 192.3 $ (8.7 ) $ 201.0 $ 377.2 $ (20.9 ) $ 398.1
Provision for Income Taxes 42.5 1.7 $ 31.2 75.4 115.8 1.7 $ 31.2 148.7
Effective Tax Rate 22.1 % 37.5 % 30.7 % 37.4 %
Equity in Net (Loss) Income of
Unconsolidated Affiliates (1.0 ) (1.0 ) 0.1 0.1
Net (Income) Loss Attributable to
Noncontrolling Interests (2.6 ) (2.6 ) 0.9 0.9
Net Income Available to IPG Common
Stockholders $ 146.2 $ (7.0 ) $ 31.2 $ 122.0 $ 262.4 $ (19.2 ) $ 31.2 $ 250.4
Weighted-Average Number of Common
Shares Outstanding - Basic 389.5 389.5 391.2 391.2
Dilutive Effect of Stock Options and
Restricted Shares 7.7 7.7 7.4 7.4
Weighted-Average Number of Common
Shares Outstanding - Diluted 397.2 397.2 398.6 398.6
Earnings per Share Available to IPG
Common Stockholders:
Basic $ 0.38 $ (0.02 ) $ 0.08 $ 0.31 $ 0.67 $ (0.05 ) $ 0.08 $ 0.64
Diluted $ 0.37 $ (0.02 ) $ 0.08 $ 0.31 $ 0.66 $ (0.05 ) $ 0.08 $ 0.63
Reconciliation of Adjusted Results (1)
(1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the net losses on
sales of businesses and a benefit related to foreign tax credits from distributions of unremitted earnings. 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.
(Amounts in Millions, except per share amounts)
Page 22
Three Months Ended September 30, 2016
As Reported
Gains on
Sales of
Businesses
Adjusted
Results
Income Before Income Taxes $ 196.3 $ 3.9 $ 192.4
Provision for Income Taxes 63.8 63.8
Effective Tax Rate 32.5 % 33.2 %
Equity in Net Income of Unconsolidated Affiliates 0.2 0.2
Net Income Attributable to Noncontrolling Interests (4.1 ) (4.1 )
Net Income Available to IPG Common Stockholders $ 128.6 $ 3.9 $ 124.7
Weighted-Average Number of Common Shares Outstanding - Basic 397.7 397.7
Dilutive Effect of Stock Options and Restricted Shares 10.2 10.2
Weighted-Average Number of Common Shares Outstanding - Diluted 407.9 407.9
Earnings per Share Available to IPG Common Stockholders:
Basic $ 0.32 $ 0.01 $ 0.31
Diluted $ 0.32 $ 0.01 $ 0.31
Reconciliation of Adjusted Results (1)
(1) The following table reconciles our reported results to our adjusted non-GAAP results that exclude the gains on sales of
businesses in our international markets, primarily in Continental Europe. 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.
(Amounts in Millions, except per share amounts)
Page 23
Nine Months Ended September 30, 2016
As Reported
Net Losses
on Sales of
Businesses
Valuation
Allowance
Reversals
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 $ 23.4 127.9
Effective Tax Rate 23.6 % 31.6 %
Equity in Net Loss of Unconsolidated Affiliates (1.6 ) (1.6 )
Net Income Attributable to Noncontrolling Interests (4.7 ) (4.7 )
Net Income Available to IPG Common Stockholders $ 290.9 $ (15.7 ) $ 12.2 $ 23.4 $ 271.0
Weighted-Average Number of Common Shares Outstanding - Basic 399.5 399.5
Dilutive Effect of Stock Options and Restricted Shares 9.3 9.3
Weighted-Average Number of Common Shares Outstanding - Diluted 408.8 408.8
Earnings per Share Available to IPG Common Stockholders:
Basic $ 0.73 $ (0.04 ) $ 0.03 $ 0.06 $ 0.68
Diluted $ 0.71 $ (0.04 ) $ 0.03 $ 0.06 $ 0.66
Reconciliation of Adjusted Results (1)
(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, 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 net losses on sales of businesses amount includes losses on completed
dispositions and the classification of certain assets as held for sale during the nine months ended September 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.
Metrics Update
Page 25
Category Metric
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
$1.0 Billion 5-Year Credit Facility Covenants
Metrics Update
Page 26
Salaries & Related Expenses
Page 27
Three and Nine Months Ended September 30
Salaries & Related Expenses (% of Revenue)
“All Other Salaries & Related,” not shown, was 2.2% and 2.1% for the three months ended September 30, 2017 and
2016, respectively, and 2.2% and 2.5% for the nine months ended September 30, 2017 and 2016, respectively.
2017 2016
Page 28
Office & General Expenses
Page 29
Three and Nine Months Ended September 30
2017 2016
“All Other O&G” primarily includes production expenses and, to a lesser extent, depreciation and amortization, bad debt
expense, adjustments to contingent acquisition obligations, foreign currency losses (gains), spending to support new
business activity, net restructuring and other reorganization-related charges (reversals), long-lived asset impairments and
other expenses.
Office & General Expenses (% of Revenue)
($ in Millions)
Cash, Cash Equivalents and Short-Term Marketable Securities
+ Available Committed Credit Facility
Page 30
Available Liquidity
($ in Millions)
Page 31
Covenants
Last Twelve Months Ended
September 30, 2017
I. Interest Coverage Ratio (not less than): 5.00x
Actual Interest Coverage Ratio: 18.05x
II. Leverage Ratio (not greater than): 3.50x
Actual Leverage Ratio: 1.76x
Interest Expense Reconciliation
Last Twelve Months Ended
September 30, 2017
Interest Expense: $89.4
- Interest income 18.0
- Other 5.2
Net interest expense(1): $66.2
EBITDA Reconciliation
Last Twelve Months Ended
September 30, 2017
Operating Income: $941.0
+ Depreciation and amortization 253.6
EBITDA(1): $1,194.6
$1.0 Billion 5-Year Credit Facility Covenants
(1) Calculated as defined in the Credit Agreement.
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.
Cautionary Statement