Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq42017erexhibit992.htm |
| EX-99.1 - EXHIBIT 99.1 - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq42017erexhibit991.htm |
| 8-K - 8-K - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq42017earningsrelease8-k.htm |
FOURTH QUARTER & FULL YEAR 2017
EARNINGS CONFERENCE CALL
February 14, 2018
Overview
Page 2 See reconciliations of organic revenue change on page 20 and adjusted non-GAAP diluted EPS on page 23.
• Fourth quarter 2017 revenue increased 3.4%, with organic growth of +3.3%
and +2.5% excluding the impact of higher pass-through revenue
◦ U.S. organic growth was +3.7%, and was +2.5% excluding the change in
pass-through revenue
◦ International organic change was +2.9%, and was also +2.5% excluding
the change in pass-through revenue
• FY-17 operating margin was 12.4%, an improvement of 40 basis points
• FY-17 diluted EPS was $1.46, and was $1.41 as adjusted for sales of businesses
and tax items
• FY-17 cash flow from operations was $882 million
• Repurchased 13.7 million shares during 2017
• Increased quarterly dividend 17% and authorized new $300 million share
repurchase program
(Amounts in Millions, except per share amounts)
Page 3
Three Months Ended December 31,
2017 2016
Revenue $ 2,341.0 $ 2,264.5
Salaries and Related Expenses (1) 1,325.8 1,308.8
Office and General Expenses 496.9 470.0
Operating Income 518.3 485.7
Interest Expense (23.2 ) (21.8 )
Interest Income 5.4 4.0
Other Expense, net (1) (1.7 ) (26.8 )
Income Before Income Taxes 498.8 441.1
Provision for Income Taxes 166.1 106.1
Equity in Net Income of Unconsolidated Affiliates 0.8 1.9
Net Income 333.5 336.9
Net Income Attributable to Noncontrolling Interests (16.9 ) (19.3 )
Net Income Available to IPG Common Stockholders $ 316.6 $ 317.6
Earnings per Share Available to IPG Common Stockholders:
Basic $ 0.82 $ 0.81
Diluted $ 0.81 $ 0.78
Weighted-Average Number of Common Shares Outstanding:
Basic 385.1 393.5
Diluted 393.2 405.2
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, net. The amounts reclassified were $3.2 and $0.6 for the three months ended
December 31, 2017 and 2016, respectively.
Operating Performance
($ 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 20 and 21.
Three Months Ended Twelve Months Ended
$ % Change $ % Change
December 31, 2016 $ 2,264.5 $ 7,846.6
Total change 76.5 3.4 % 35.8 0.5 %
Foreign currency 27.9 1.2 % (2.8 ) 0.0 %
Net acquisitions/(divestitures) (26.5 ) (1.1 %) (100.3 ) (1.3 %)
Organic 75.1 3.3 % 138.9 1.8 %
Change in pass-throughs 18.8 0.8 % (8.3 ) (0.1 %)
Organic ex change in pass-throughs 56.3 2.5 % 147.2 1.9 %
December 31, 2017 $ 2,341.0 $ 7,882.4
Three Months Ended
December 31,
Twelve Months Ended
December 31,
Change Change
2017 2016 Total Organic
Organic
ex-PT 2017 2016 Total Organic
Organic
ex-PT
IAN $ 1,931.7 $ 1,866.1 3.5 % 3.3 % 3.4 % $ 6,397.3 $ 6,319.4 1.2 % 2.2 % 2.4 %
CMG $ 409.3 $ 398.4 2.7 % 3.3 % (1.9 %) $ 1,485.1 $ 1,527.2 (2.8 %) 0.0 % (0.4 %)
Revenue
Page 5
“All Other Markets” includes Canada, Africa and the Middle East.
See reconciliations of organic revenue change on pages 20 and 21.
Three Months Ended
December 31, 2017
Twelve Months Ended
December 31, 2017
Total Organic
Organic
ex-PT Total Organic
Organic
ex-PT
United States 2.2 % 3.7 % 2.5 % 0.6 % 2.2 % 2.0 %
International 4.9 % 2.9 % 2.5 % 0.2 % 1.2 % 1.6 %
United Kingdom 4.8 % (0.4 %) 1.0 % (2.0 %) 1.1 % 4.1 %
Continental Europe 11.8 % 7.9 % 6.6 % 2.3 % 3.5 % 3.4 %
Asia Pacific 0.3 % (0.9 %) (2.7 %) (1.0 %) (1.6 %) (2.5 %)
Latin America 1.2 % 6.5 % 6.9 % (4.5 %) (0.1 %) (0.1 %)
All Other Markets 6.5 % 4.5 % 4.9 % 6.4 % 4.5 % 4.6 %
Worldwide 3.4 % 3.3 % 2.5 % 0.5 % 1.8 % 1.9 %
Geographic Revenue Change
Page 6
Trailing Twelve Months
Organic Revenue Growth
(0.9%)
See reconciliations of organic measures on pages 20 and 21.
($ in Millions)
Page 7
Salaries & Related Change
2017 2016 $ Total Organic
Three Months Ended December 31, $ 1,325.8 $ 1,308.8 $ 17.0 1.3 % 0.9 %
% of Revenue 56.6 % 57.8 %
Twelve Months Ended December 31, $ 5,068.1 $ 5,035.1 $ 33.0 0.7 % 2.0 %
% of Revenue 64.3 % 64.2 %
Office & General Change
2017 2016 $ Total Organic
Three Months Ended December 31, $ 496.9 $ 470.0 $ 26.9 5.7 % 5.8 %
% of Revenue 21.2 % 20.8 %
Twelve Months Ended December 31, $ 1,840.7 $ 1,870.5 $ (29.8 ) (1.6 %) 0.5 %
% of Revenue 23.4 % 23.8 %
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%)
Three Months Ended December 31, 2017
As
Reported
Net Losses on
Sales of
Businesses(1)
U.S. Federal
Tax Credits(2)
Net Impact of
U.S. Tax
Reform(3)
Adjusted
Results
Income Before Income Taxes $ 498.8 $ (3.2 ) $ 502.0
Provision for Income Taxes 166.1 5.7 $ (31.2 ) $ 36.0 176.6
Effective Tax Rate 33.3 % 35.2 %
Diluted EPS Components:
Net Income Available to IPG Common
Stockholders $ 316.6 $ 2.5 $ (31.2 ) $ 36.0 $ 309.3
Weighted-Average Number of Common
Shares Outstanding 393.2 393.2
Earnings Per Share Available to IPG
Common Stockholders $ 0.81 $ 0.01 $ (0.08 ) $ 0.09 $ 0.79
Page 9
(Amounts in Millions, except per share amounts)
Adjusted Diluted Earnings Per Share
(1) During the three months ended December 31, 2017, we recorded net losses on sales of businesses, primarily in our
international markets.
(2) During the three months ended December 31, 2017, we reversed the tax benefit recorded during the three months ended
September 30, 2017 related to foreign tax credits as a result of the enactment of the Tax Cuts and Jobs Act.
(3) During the three months ended December 31, 2017, we recorded a net benefit as a result of the enactment of the Tax Cuts
and Jobs Act, primarily consisting of a benefit of $104.7 on the remeasurement of deferred tax assets and liabilities, partially
offset by a charge of $62.3 on the deemed repatriation of unremitted foreign earnings.
See full reconciliations of adjusted non-GAAP diluted earnings per share on page 22.
Twelve Months Ended December 31, 2017
As
Reported
Net Losses on
Sales of
Businesses(1)
Net Impact of
U.S. Tax
Reform(2)
Adjusted
Results
Income Before Income Taxes $ 876.0 $ (24.1 ) $ 900.1
Provision for Income Taxes 281.9 7.4 $ 36.0 325.3
Effective Tax Rate 32.2 % 36.1 %
Diluted EPS Components:
Net Income Available to IPG Common
Stockholders $ 579.0 $ (16.7 ) $ 36.0 $ 559.7
Weighted-Average Number of Common
Shares Outstanding 397.3 397.3
Earnings Per Share Available to IPG
Common Stockholders $ 1.46 $ (0.04 ) $ 0.09 $ 1.41
Page 10
(Amounts in Millions, except per share amounts)
Adjusted Diluted Earnings Per Share
(1) During the twelve months ended December 31, 2017, we recorded net losses on sales of businesses, primarily in our
international markets.
(2) During the three months ended December 31, 2017, we recorded a net benefit as a result of the enactment of the Tax Cuts
and Jobs Act, primarily consisting of a benefit of $104.7 on the remeasurement of deferred tax assets and liabilities,
partially offset by a charge of $62.3 on the deemed repatriation of unremitted foreign earnings.
See full reconciliations of adjusted non-GAAP diluted earnings per share on page 23.
($ in Millions)
Page 11
Twelve Months Ended December 31,
2017 2016
NET INCOME $ 595.0 $ 632.5
OPERATING ACTIVITIES
Depreciation & amortization 244.9 251.4
Deferred taxes 4.6 45.7
Net losses on sales of businesses 24.1 41.4
Other non-cash items 22.2 52.2
Change in working capital, net (28.4 ) (414.9 )
Change in other non-current assets & liabilities 19.4 (95.5 )
Net cash provided by operating activities 881.8 512.8
INVESTING ACTIVITIES
Capital expenditures (155.9 ) (200.7 )
Acquisitions, net of cash acquired (30.6 ) (52.0 )
Other investing activities (9.7 ) (11.2 )
Net cash used in investing activities (196.2 ) (263.9 )
FINANCING ACTIVITIES
Repayments of long-term debt (324.6 ) (1.8 )
Repurchases of common stock (300.1 ) (303.3 )
Common stock dividends (280.3 ) (238.4 )
Acquisition-related payments (53.7 ) (40.8 )
Tax payments for employee shares withheld (38.8 ) (23.1 )
Distributions to noncontrolling interests (20.4 ) (13.7 )
Exercise of stock options 13.1 10.2
Net increase (decrease) in short-term borrowings 3.0 (56.2 )
Other financing activities (3.1 ) 0.7
Net cash used in financing activities (1,004.9 ) (666.4 )
Currency effect 16.8 11.6
Net decrease in cash, cash equivalents and restricted cash $ (302.5 ) $ (405.9 )
Cash Flow
($ 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 $800 aggregate principal amount of Senior Notes, which pre-funded our
plan to redeem a similar amount of debt in 2013.
($ in Millions)
Page 13
December 31, 2017 December 31, 2016
CURRENT ASSETS:
Cash and cash equivalents $ 790.9 $ 1,097.6
Accounts receivable, net 4,585.0 4,389.7
Expenditures billable to clients 1,747.4 1,518.1
Assets held for sale 5.7 203.2
Other current assets 330.1 229.4
Total current assets $ 7,459.1 $ 7,438.0
CURRENT LIABILITIES:
Accounts payable $ 6,907.8 $ 6,303.6
Accrued liabilities 674.7 794.0
Short-term borrowings 84.9 85.7
Current portion of long-term debt (1) 2.0 323.9
Liabilities held for sale 8.8 198.8
Total current liabilities $ 7,678.2 $ 7,706.0
Balance Sheet – Current Portion
(1) Our 2.25% Senior Notes were repaid on November 15, 2017.
(Amounts in Millions)
Page 14
Total Shares: Basic and Eligible for Dilution (1)
(1) Includes basic common shares outstanding, restricted shares, 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 (2)
Page 15
Summary
• 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 stronger growth and continued margin improvement
• Financial strength an ongoing source of value creation
◦ Increased dividend
◦ New share repurchase authorization
Appendix
(Amounts in Millions, except per share amounts)
Page 17
Twelve Months Ended December 31,
2017 2016
Revenue $ 7,882.4 $ 7,846.6
Salaries and Related Expenses (1) 5,068.1 5,035.1
Office and General Expenses 1,840.7 1,870.5
Operating Income 973.6 941.0
Interest Expense (90.8 ) (90.6 )
Interest Income 19.4 20.1
Other Expense, net (1) (26.2 ) (40.3 )
Income Before Income Taxes 876.0 830.2
Provision for Income Taxes 281.9 198.0
Equity in Net Income of Unconsolidated Affiliates 0.9 0.3
Net Income 595.0 632.5
Net Income Attributable to Noncontrolling Interests (16.0 ) (24.0 )
Net Income Available to IPG Common Stockholders $ 579.0 $ 608.5
Earnings per Share Available to IPG Common Stockholders:
Basic $ 1.49 $ 1.53
Diluted $ 1.46 $ 1.49
Weighted-Average Number of Common Shares Outstanding:
Basic 389.6 397.9
Diluted 397.3 408.0
Dividends Declared per Common Share $ 0.72 $ 0.60
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 $9.6 and $3.0 for the twelve months ended
December 31, 2017 and 2016, respectively.
($ in Millions)
Page 18
Three Months Ended December 31,
2017 2016
NET INCOME $ 333.5 $ 336.9
OPERATING ACTIVITIES
Depreciation & amortization 56.4 70.7
Deferred taxes 6.2 43.1
Net losses on sales of businesses 3.2 25.3
Other non-cash items (3.4 ) 8.8
Change in working capital, net 584.1 76.9
Change in other non-current assets & liabilities 40.8 (22.0 )
Net cash provided by operating activities 1,020.8 539.7
INVESTING ACTIVITIES
Capital expenditures (47.2 ) (86.2 )
Acquisitions, net of cash acquired (8.0 ) (4.1 )
Other investing activities (0.5 ) (6.1 )
Net cash used in investing activities (55.7 ) (96.4 )
FINANCING ACTIVITIES
Net decrease in short-term borrowings (426.9 ) (22.3 )
Repayments of long-term debt (301.0 ) (0.7 )
Repurchases of common stock (84.1 ) (110.0 )
Common stock dividends (69.1 ) (58.8 )
Acquisition-related payments (4.6 ) (4.1 )
Distributions to noncontrolling interests (3.5 ) (2.9 )
Tax payments for employee shares withheld (0.4 ) (0.4 )
Exercise of stock options 1.0 0.0
Other financing activities (3.2 ) (0.3 )
Net cash used in financing activities (891.8 ) (199.5 )
Currency effect 16.4 (39.1 )
Net increase in cash, cash equivalents and restricted cash $ 89.7 $ 204.7
Cash Flow
Page 19
2017
Q1 Q2 Q3 Q4 FY 2017
Depreciation and amortization of fixed assets
and intangible assets $ 41.0 $ 41.3 $ 42.2 $ 32.6 $ 157.1
Amortization of restricted stock and other non-
cash compensation 29.7 16.3 13.8 22.2 82.0
Net amortization of bond discounts and
deferred financing costs 1.4 1.4 1.4 1.6 5.8
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 20
Components of Change Change
Three Months
Ended
December 31,
2016
Foreign
Currency
Net
Acquisitions /
(Divestitures) Organic
Change in
Pass-
Throughs
Organic
ex-PT
Three Months
Ended
December 31,
2017 Organic
Organic
ex-PT Total
Segment Revenue
IAN $ 1,866.1 $ 22.4 $ (18.6 ) $ 61.8 $ (2.0 ) $ 63.8 $ 1,931.7 3.3 % 3.4 % 3.5 %
CMG 398.4 5.5 (7.9 ) 13.3 20.8 (7.5 ) 409.3 3.3 % (1.9 %) 2.7 %
Total $ 2,264.5 $ 27.9 $ (26.5 ) $ 75.1 $ 18.8 $ 56.3 $ 2,341.0 3.3 % 2.5 % 3.4 %
Geographic Revenue
United States $ 1,258.6 $ 0.0 $ (18.9 ) $ 46.3 $ 14.7 $ 31.6 $ 1,286.0 3.7 % 2.5 % 2.2 %
International 1,005.9 27.9 (7.6 ) 28.8 4.1 24.7 1,055.0 2.9 % 2.5 % 4.9 %
United Kingdom 200.4 8.1 2.4 (0.9 ) (3.0 ) 2.1 210.0 (0.4 %) 1.0 % 4.8 %
Continental Europe 231.7 13.4 (4.2 ) 18.2 2.8 15.4 259.1 7.9 % 6.6 % 11.8 %
Asia Pacific 305.3 3.7 0.1 (2.9 ) 5.4 (8.3 ) 306.2 (0.9 %) (2.7 %) 0.3 %
Latin America 117.0 0.6 (6.8 ) 7.6 (0.5 ) 8.1 118.4 6.5 % 6.9 % 1.2 %
All Other Markets 151.5 2.1 0.9 6.8 (0.6 ) 7.4 161.3 4.5 % 4.9 % 6.5 %
Worldwide $ 2,264.5 $ 27.9 $ (26.5 ) $ 75.1 $ 18.8 $ 56.3 $ 2,341.0 3.3 % 2.5 % 3.4 %
Expenses
Salaries & Related $ 1,308.8 $ 20.5 $ (15.8 ) $ 12.3 $ 1,325.8 0.9 % 1.3 %
Office & General 470.0 8.3 (8.8 ) 27.4 496.9 5.8 % 5.7 %
Total $ 1,778.8 $ 28.8 $ (24.6 ) $ 39.7 $ 1,822.7 2.2 % 2.5 %
($ in Millions)
Reconciliation of Organic Measures
Page 21
Components of Change Change
Twelve
Months Ended
December 31,
2016
Foreign
Currency
Net
Acquisitions /
(Divestitures) Organic
Change in
Pass-
Throughs
Organic
ex-PT
Twelve
Months Ended
December 31,
2017 Organic
Organic
ex-PT Total
Segment Revenue
IAN $ 6,319.4 $ 6.5 $ (67.7 ) $ 139.1 $ (14.5 ) $ 153.6 $ 6,397.3 2.2 % 2.4 % 1.2 %
CMG 1,527.2 (9.3 ) (32.6 ) (0.2 ) 6.2 (6.4 ) 1,485.1 0.0 % (0.4 %) (2.8 %)
Total $ 7,846.6 $ (2.8 ) $ (100.3 ) $ 138.9 $ (8.3 ) $ 147.2 $ 7,882.4 1.8 % 1.9 % 0.5 %
Geographic Revenue
United States $ 4,684.8 $ 0.0 $ (71.4 ) $ 100.9 $ 4.9 $ 96.0 $ 4,714.3 2.2 % 2.0 % 0.6 %
International 3,161.8 (2.8 ) (28.9 ) 38.0 (13.2 ) 51.2 3,168.1 1.2 % 1.6 % 0.2 %
United Kingdom 695.7 (36.4 ) 14.9 7.6 (21.0 ) 28.6 681.8 1.1 % 4.1 % (2.0 %)
Continental Europe 699.8 9.5 (17.5 ) 24.3 0.3 24.0 716.1 3.5 % 3.4 % 2.3 %
Asia Pacific 923.0 3.0 2.5 (14.9 ) 7.8 (22.7 ) 913.6 (1.6 %) (2.5 %) (1.0 %)
Latin America 372.7 14.9 (31.4 ) (0.3 ) 0.1 (0.4 ) 355.9 (0.1 %) (0.1 %) (4.5 %)
All Other Markets 470.6 6.2 2.6 21.3 (0.4 ) 21.7 500.7 4.5 % 4.6 % 6.4 %
Worldwide $ 7,846.6 $ (2.8 ) $ (100.3 ) $ 138.9 $ (8.3 ) $ 147.2 $ 7,882.4 1.8 % 1.9 % 0.5 %
Expenses
Salaries & Related $ 5,035.1 $ (4.1 ) $ (65.2 ) $ 102.3 $ 5,068.1 2.0 % 0.7 %
Office & General 1,870.5 (2.5 ) (36.7 ) 9.4 1,840.7 0.5 % (1.6 %)
Total $ 6,905.6 $ (6.6 ) $ (101.9 ) $ 111.7 $ 6,908.8 1.6 % 0.0 %
($ in Millions)
Reconciliation of Organic Measures
(Amounts in Millions, except per share amounts)
Page 22
Three Months Ended December 31, 2017
As Reported
Net Losses
on Sales of
Businesses
U.S. Federal
Tax Credits
Net Impact of
U.S. Tax
Reform
Adjusted
Results
Income Before Income Taxes $ 498.8 $ (3.2 ) $ 502.0
Provision for Income Taxes 166.1 5.7 $ (31.2 ) $ 36.0 176.6
Effective Tax Rate 33.3 % 35.2 %
Equity in Net Income of Unconsolidated Affiliates 0.8 0.8
Net Income Attributable to Noncontrolling Interests (16.9 ) (16.9 )
Net Income Available to IPG Common Stockholders $ 316.6 $ 2.5 $ (31.2 ) $ 36.0 $ 309.3
Weighted-Average Number of Common Shares Outstanding - Basic 385.1 385.1
Dilutive Effect of Stock Options and Restricted Shares 8.1 8.1
Weighted-Average Number of Common Shares Outstanding - Diluted 393.2 393.2
Earnings per Share Available to IPG Common Stockholders:
Basic $ 0.82 $ 0.01 $ (0.08 ) $ 0.09 $ 0.80
Diluted $ 0.81 $ 0.01 $ (0.08 ) $ 0.09 $ 0.79
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, the reversal of the Q3 2017 benefit related to foreign tax credits, and the net impact of the Tax
Cuts and Jobs Act. 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
Twelve Months Ended December 31, 2017
As Reported
Net Losses
on Sales of
Businesses
Net Impact of
U.S. Tax
Reform
Adjusted
Results
Income Before Income Taxes $ 876.0 $ (24.1 ) $ 900.1
Provision for Income Taxes 281.9 7.4 $ 36.0 325.3
Effective Tax Rate 32.2 % 36.1 %
Equity in Net Income of Unconsolidated Affiliates 0.9 0.9
Net Income Attributable to Noncontrolling Interests (16.0 ) (16.0 )
Net Income Available to IPG Common Stockholders $ 579.0 $ (16.7 ) $ 36.0 $ 559.7
Weighted-Average Number of Common Shares Outstanding - Basic 389.6 389.6
Dilutive Effect of Stock Options and Restricted Shares 7.7 7.7
Weighted-Average Number of Common Shares Outstanding - Diluted 397.3 397.3
Earnings per Share Available to IPG Common Stockholders:
Basic $ 1.49 $ (0.04 ) $ 0.09 $ 1.44
Diluted $ 1.46 $ (0.04 ) $ 0.09 $ 1.41
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 the net impact of the Tax Cuts and Jobs Act. 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 24
Three Months Ended December 31, 2016
As Reported
Net Losses
on Sales of
Businesses
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 $ 37.4 145.5
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 )
Net Income Available to IPG Common Stockholders $ 317.6 $ (23.3 ) $ 37.4 $ 303.5
Weighted-Average Number of Common Shares Outstanding - Basic 393.5 393.5
Dilutive Effect of Stock Options and Restricted Shares 11.7 11.7
Weighted-Average Number of Common Shares Outstanding - Diluted 405.2 405.2
Earnings per Share Available to IPG Common Stockholders:
Basic $ 0.81 $ (0.06 ) $ 0.10 $ 0.77
Diluted $ 0.78 $ (0.06 ) $ 0.09 $ 0.75
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 refunds to be claimed on future amended U.S. federal returns primarily related to
foreign tax credits. 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 25
Twelve Months Ended December 31, 2016
As Reported
Net Losses
on Sales of
Businesses
Valuation
Allowance
Reversals
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 $ 23.4 $ 44.6 280.6
Effective Tax Rate 23.8 % 32.2 %
Equity in Net Income of Unconsolidated Affiliates 0.3 0.3
Net Income Attributable to Noncontrolling Interests (24.0 ) (24.0 )
Net Income Available to IPG Common Stockholders $ 608.5 $ (39.0 ) $ 12.2 $ 23.4 $ 44.6 $ 567.3
Weighted-Average Number of Common Shares Outstanding - Basic 397.9 397.9
Dilutive Effect of Stock Options and Restricted Shares 10.1 10.1
Weighted-Average Number of Common Shares Outstanding - Diluted 408.0 408.0
Earnings per Share Available to IPG Common Stockholders:
Basic $ 1.53 $ (0.10 ) $ 0.03 $ 0.06 $ 0.11 $ 1.43
Diluted $ 1.49 $ (0.10 ) $ 0.03 $ 0.06 $ 0.11 $ 1.39
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, valuation allowance reversals as a result of the disposition of those businesses, 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 primarily related to foreign tax credits. 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.
($ in Millions)
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Acquisition Payment Obligations (1)
(1) Amounts represent payments related to our previous acquisitions based on current estimates of financial performance
and are subject to change. Amounts include deferred payments, 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, the 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.
(2) 2017 payments included $47 recorded within Operating Activities in our Statement of Cash Flows.
(2)
Metrics Update
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Category Metric
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
$1.5 Billion 5-Year Credit Facility Covenants
Metrics Update
Top 100 Clients for the twelve months ended December 31
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Revenue By Client Sector
Approximately 60% of Consolidated Revenue
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Twelve Months Ended December 31
Salaries & Related Expenses
Page 31
Three and Twelve Months Ended December 31
Salaries & Related Expenses (% of Revenue)
“All Other Salaries & Related,” not shown, was 3.0% and 3.9% for the three months ended December 31, 2017 and
2016, respectively, and 2.5% and 3.0% for the twelve months ended December 31, 2017 and 2016, respectively.
2017 2016
Twelve Months Ended December 31
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Office & General Expenses
Three and Twelve Months Ended December 31
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2017 2016
“All Other O&G” primarily includes production expenses and, to a lesser extent, depreciation and amortization, bad debt
expense, adjustments to contingent acquisition obligations, foreign currency losses (gains), spending to support new
business activity, net restructuring and other reorganization-related charges (reversals), long-lived asset impairments and
other expenses.
Office & General Expenses (% of Revenue)
(Amounts in Millions)
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Real Estate
Total Square Feet as of December 31,
($ in Millions)
Cash, Cash Equivalents and Short-Term Marketable Securities
+ Available Committed Credit Facility
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Available Liquidity
($ in Millions)
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Covenants
Twelve Months Ended
December 31, 2017
I. Interest Coverage Ratio (not less than): 5.00x
Actual Interest Coverage Ratio: 17.99x
II. Leverage Ratio (not greater than): 3.50x
Actual Leverage Ratio: 1.12x
Interest Expense Reconciliation
Twelve Months Ended
December 31, 2017
Interest Expense: $90.8
- Interest income 19.4
- Other 3.3
Net interest expense(1): $68.1
EBITDA Reconciliation
Twelve Months Ended
December 31, 2017
Operating Income: $973.6
+ Depreciation and amortization(1) 251.2
EBITDA(1): $1,224.8
$1.5 Billion 5-Year Credit Facility Covenants
(1) Calculated as defined in the Credit Agreement.
Page 37
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