Attached files
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| 8-K - 8-K - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq22020earningsrelea.htm |
| EX-99.1 - EXHIBIT 99.1 - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq22020earningsrelea991.htm |
SECOND QUARTER 2020 EARNINGS CONFERENCE CALL Interpublic Group July 29, 2020
Overview — Second Quarter 2020 •Net revenue change was -12.8%, and organic change of net revenue was -9.9%, amid COVID-19 macroeconomic disruption ◦ U.S. organic change was -8.0% ◦ International organic change was -13.1% •Net loss as reported was -$45.6 million, with adjusted EBITA of $174.9 million before restructuring charges •Adjusted EBITA margin on net revenue was 9.4% before restructuring charges •Charges of $112.6 million targeted to structurally lower operating expense base by $80-90 million •Diluted loss per share was $0.12, and adjusted diluted EPS was $0.23 excluding restructuring charges and other items •Balance sheet and liquidity remain strong with $3.1 billion of total available liquidity "Organic growth" refers exclusively to the organic change of net revenue. Adjusted EBITA before Restructuring Charges is calculated as net (loss) income available to IPG common stockholders before provision for income taxes, total (expenses) and other income, equity in net loss of unconsolidated affiliates, net (income) loss attributable to noncontrolling interests, amortization of acquired intangibles and restructuring charges from the second quarter of 2020 and first quarter of 2019. Adjusted diluted EPS is adjusted for amortization of acquired intangibles, restructuring charges, net sales of businesses and a discrete tax item. See reconciliation of organic net revenue change on pages 20-21 and non-GAAP reconciliation of adjusted results on pages 22-26. Interpublic Group of Companies, Inc. 2
Operating Performance Three Months Ended June 30, 2020 2019 Net Revenue $ 1,853.4 $ 2,125.9 Billable Expenses 172.3 394.3 Total Revenue 2,025.7 2,520.2 Salaries and Related Expenses 1,306.1 1,381.2 Office and Other Direct Expenses 317.0 387.3 Billable Expenses 172.3 394.3 Cost of Services 1,795.4 2,162.8 Selling, General and Administrative Expenses 4.1 18.1 Depreciation and Amortization 73.1 73.0 Restructuring Charges 112.6 2.1 Operating Income 40.5 264.2 Interest Expense, net (43.9) (43.9) Other Expense, net (21.5) (3.8) (Loss) Income Before Income Taxes (24.9) 216.5 Provision for Income Taxes 19.0 43.6 Equity in Net Loss of Unconsolidated Affiliates 0.0 (0.1) Net (Loss) Income (43.9) 172.8 Net Income Attributable to Noncontrolling Interests (1.7) (3.3) Net (Loss) Income Available to IPG Common Stockholders $ (45.6) $ 169.5 (Loss) Income per Share Available to IPG Common Stockholders - Basic $ (0.12) $ 0.44 (Loss) Income per Share Available to IPG Common Stockholders - Diluted $ (0.12) $ 0.43 Weighted-Average Number of Common Shares Outstanding - Basic 389.4 386.2 Weighted-Average Number of Common Shares Outstanding - Diluted 389.4 391.2 Dividends Declared per Common Share $ 0.255 $ 0.235 ($ in Millions, except per share amounts) Interpublic Group of Companies, Inc. 3
Net Revenue Three Months Ended Six Months Ended $ % Change $ % Change June 30, 2019 $ 2,125.9 $ 4,130.7 Foreign currency (44.8) (2.1%) (65.4) (1.6%) Net acquisitions/(divestitures) (17.8) (0.8%) (35.3) (0.8%) Organic (209.9) (9.9%) (204.5) (5.0%) Total change (272.5) (12.8%) (305.2) (7.4%) June 30, 2020 $ 1,853.4 $ 3,825.5 Three Months Ended June 30, Six Months Ended June 30, Change Change 2020 2019 (1) Organic Total 2020 2019 (1) Organic Total IAN $ 1,585.7 $ 1,801.1 (8.8%) (12.0%) $ 3,250.2 $ 3,507.2 (4.7%) (7.3%) CMG $ 267.7 $ 324.8 (15.6%) (17.6%) $ 575.3 $ 623.5 (6.4%) (7.7%) (1) Results for the three months and six months ended June 30, 2019 have been recast to conform to the current-period presentation. See reconciliation of segment organic net revenue change on pages 20-21. ($ in Millions) Interpublic Group of Companies, Inc. 4
Organic Net Revenue Change by Region Three Months Ended June 30, 2020 -14.5% United Kingdom -8.0% -11.1% United States Continental Europe -14.7% All Other Markets -14.0% -10.4% Asia Pacific Latin America “All Other Markets” includes Canada, Africa and the Middle East. Circle proportions represent consolidated net revenue distribution. See reconciliation of organic net revenue change, including total net -13.1% -9.9% revenue change, on page 20. International Worldwide Interpublic Group of Companies, Inc. 5
Operating Expenses % of Net Revenue Three Months Ended June 30 Salaries & Related Office & Other Direct Selling, General & Administrative 70.5% 18.2% 65.0% 17.1% 0.8% 0.2% 2020 2019 2020 2019 2020 2019 Depreciation & Amortization (1) Amortization of Acquired Intangibles Restructuring Charges 6.1% 2.7% 2.4% 1.2% 1.0% 0.1% 2020 2019 2020 2019 2020 2019 (1) Excludes amortization of acquired intangibles. Interpublic Group of Companies, Inc. 6
2020 Review of Operating Expenses • Extensive review of operating expenses identified structural cost reduction opportunities • Restructuring charges of $113 million in 2Q-20 address salaries and real estate expense ◦ Non-cash component is $68 million • Expected annualized expense savings of $80-$90 million from 2Q actions • Plan additional 2H-2020 restructuring charges in range of $90-$110 million Interpublic Group of Companies, Inc. 7
Adjusted Diluted Earnings Per Share Three Months Ended June 30, 2020 As Reported Amortization of Restructuring Net Losses on Net Impact of Adjusted Acquired Charges Sales of Discrete Tax Results Intangibles Businesses Item (1) (Non-GAAP) Operating Income and Adjusted EBITA before Restructuring $ 40.5 $ (21.8) $ (112.6) $ 174.9 Charges (2) Total (Expenses) and Other Income (3) (65.4) $ (19.9) (45.5) (Loss) Income Before Income Taxes (24.9) (21.8) (112.6) (19.9) 129.4 Provision for Income Taxes 19.0 4.2 25.4 0.0 $ (10.0) 38.6 Equity in Net Loss of Unconsolidated Affiliates 0.0 0.0 Net Income Attributable to Noncontrolling Interests (1.7) (1.7) DILUTED EPS COMPONENTS: Net (Loss) Income Available to IPG Common Stockholders $ (45.6) $ (17.6) $ (87.2) $ (19.9) $ (10.0) $ 89.1 Weighted-Average Number of Common Shares Outstanding 389.4 392.3 (Loss) Earnings per Share Available to IPG Common Stockholders $ (0.12) $ (0.05) $ (0.22) $ (0.05) $ (0.03) $ 0.23 (1) Consists of tax expense related to the estimated costs associated with our change in assertion (APB 23) that we will no longer permanently reinvest undistributed earnings attributable to certain foreign subsidiaries. (2) Refer to non-GAAP reconciliation of Adjusted EBITA before Restructuring Charges on slide 24. (3) Consists of non-operating expenses including net interest expense and other (expense) income. See full non-GAAP reconciliation of adjusted diluted earnings per share on page 22. ($ in Millions, except per share amounts) Interpublic Group of Companies, Inc. 8
Adjusted Diluted Earnings Per Share Six Months Ended June 30, 2020 As Reported Amortization of Restructuring Net Losses on Net Impact of Adjusted Acquired Charges Sales of Discrete Tax Results Intangibles Businesses Item (1) (Non-GAAP) Operating Income and Adjusted EBITA before Restructuring $ 116.4 $ (43.1) $ (112.6) $ 272.1 Charges (2) Total (Expenses) and Other Income (3) (121.3) $ (43.2) (78.1) (Loss) Income Before Income Taxes (4.9) (43.1) (112.6) (43.2) 194.0 Provision for Income Taxes 36.2 8.4 25.4 0.9 $ (10.0) 60.9 Equity in Net Loss of Unconsolidated Affiliates (0.2) (0.2) Net Loss Attributable to Noncontrolling Interests 0.4 0.4 DILUTED EPS COMPONENTS: Net (Loss) Income Available to IPG Common Stockholders $ (40.9) $ (34.7) $ (87.2) $ (42.3) $ (10.0) $ 133.3 Weighted-Average Number of Common Shares Outstanding 388.5 391.8 (Loss) Earnings per Share Available to IPG Common Stockholders $ (0.11) $ (0.09) $ (0.22) $ (0.11) $ (0.03) $ 0.34 (1) Consists of tax expense related to the estimated costs associated with our change in assertion (APB 23) that we will no longer permanently reinvest undistributed earnings attributable to certain foreign subsidiaries. (2) Refer to non-GAAP reconciliation of Adjusted EBITA before Restructuring Charges on slide 24. (3) Consists of non-operating expenses including net interest expense and other (expense) income. See full non-GAAP reconciliation of adjusted diluted earnings per share on page 23. ($ in Millions, except per share amounts) Interpublic Group of Companies, Inc. 9
Cash Flow Three Months Ended June 30, 2020 2019 Net (Loss) Income $ (43.9) $ 172.8 OPERATING ACTIVITIES: Depreciation & amortization 88.7 91.2 Deferred taxes (9.9) 28.0 Net losses on sales of businesses 19.9 3.2 Non-cash restructuring charges 67.6 0.0 Other non-cash items 27.2 (7.8) Change in working capital, net (264.9) 52.7 Change in other non-current assets & liabilities 28.2 (47.6) Net cash (used in) provided by Operating Activities (87.1) 292.5 INVESTING ACTIVITIES: Capital expenditures (27.3) (47.3) Acquisitions, net of cash acquired (1.2) (0.6) Other investing activities (4.0) 0.7 Net cash used in Investing Activities (32.5) (47.2) FINANCING ACTIVITIES: Net decrease in short-term borrowings (245.3) (68.7) Common stock dividends (99.2) (90.8) Acquisition-related payments (13.7) (13.0) Distributions to noncontrolling interests (3.8) (5.6) Tax payments for employee shares withheld (2.7) (0.8) Repayment of long-term debt (0.1) (100.1) Other financing activities (1.9) 0.6 Net cash used in Financing Activities (366.7) (278.4) Currency effect 17.8 16.7 Net decrease in cash, cash equivalents and restricted cash $ (468.5) $ (16.4) ($ in Millions) Interpublic Group of Companies, Inc. 10
Balance Sheet — Current Portion June 30, 2020 December 31, 2019 June 30, 2019 CURRENT ASSETS: Cash and cash equivalents $ 1,085.4 $ 1,192.2 $ 614.0 Accounts receivable, net 3,146.6 5,209.2 4,389.5 Accounts receivable, billable to clients 1,463.7 1,934.1 1,977.6 Assets held for sale 26.6 22.8 26.4 Other current assets 492.0 412.4 467.9 Total current assets $ 6,214.3 $ 8,770.7 $ 7,475.4 CURRENT LIABILITIES: Accounts payable $ 4,328.1 $ 7,205.4 $ 6,022.3 Accrued liabilities 599.3 742.8 626.4 Contract liabilities 557.6 585.6 585.2 Short-term borrowings 51.9 52.4 207.1 Current portion of long-term debt 503.0 502.0 0.3 Current portion of operating leases 258.5 267.2 261.0 Liabilities held for sale 68.1 65.0 29.0 Total current liabilities $ 6,366.5 $ 9,420.4 $ 7,731.3 ($ in Millions) Interpublic Group of Companies, Inc. 11
Debt Maturity Schedule Total Debt = $4.0 billion $650 (2) $555 $537 $55 $500 $500 $500 $500 $500 (1) $250 3.50% 3.75% 4.00% 3.75% 4.20% 4.65% 4.75% 5.40% 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031+ Senior Notes - Current Short-Term Debt Senior Notes (1) Senior Notes due on October 1, 2020. (2) On March 30, 2020, we issued a total of $650 in aggregate principal amount of unsecured senior notes due March 30, 2030. Senior Notes shown at face value on June 30, 2020. ($ in Millions) Interpublic Group of Companies, Inc. 12
Summary •Intense focus on navigating the impact of COVID-19 •Foundation for sustained value creation in top talent, strong agency brands and key strategic initiatives ◦ Quality of our agency offerings ◦ Integrated digital and digital specialists ◦ "Open architecture" solutions ◦ Data management at scale •Continued investment in our leading talent, tools and services •Effective expense management an ongoing priority •Financial strength an ongoing source of value creation Interpublic Group of Companies, Inc. 13
Appendix Interpublic Group of Companies, Inc. 14
Operating Performance Six Months Ended June 30, 2020 2019 Net Revenue $ 3,825.5 $ 4,130.7 Billable Expenses 560.0 750.7 Total Revenue 4,385.5 4,881.4 Salaries and Related Expenses 2,728.9 2,802.3 Office and Other Direct Expenses 695.2 776.5 Billable Expenses 560.0 750.7 Cost of Services 3,984.1 4,329.5 Selling, General and Administrative Expenses 26.5 59.5 Depreciation and Amortization 145.9 144.1 Restructuring Charges (1) 112.6 33.9 Operating Income 116.4 314.4 Interest Expense, net (78.0) (85.9) Other Expense, net (43.3) (10.7) (Loss) Income Before Income Taxes (4.9) 217.8 Provision for Income Taxes 36.2 54.1 Equity in Net Loss of Unconsolidated Affiliates (0.2) (0.4) Net (Loss) Income (41.3) 163.3 Net Loss (Income) Attributable to Noncontrolling Interests 0.4 (1.8) Net (Loss) Income Available to IPG Common Stockholders $ (40.9) $ 161.5 (Loss) Income per Share Available to IPG Common Stockholders - Basic $ (0.11) $ 0.42 (Loss) Income per Share Available to IPG Common Stockholders - Diluted $ (0.11) $ 0.41 Weighted-Average Number of Common Shares Outstanding - Basic 388.5 385.4 Weighted-Average Number of Common Shares Outstanding - Diluted 388.5 390.1 Dividends Declared per Common Share $ 0.510 $ 0.470 ($ in Millions, except per share amounts) Interpublic Group of Companies, Inc. 15
Organic Net Revenue Change by Region Six Months Ended June 30, 2020 -8.3% United Kingdom -3.6% -5.4% United States Continental Europe -9.1% All Other Markets -10.0% -0.6% Asia Pacific Latin America “All Other Markets” includes Canada, Africa and the Middle East. Circle proportions represent consolidated net revenue distribution. See reconciliation of organic net revenue change, including total net -7.3% -5.0% revenue change, on page 21. International Worldwide Interpublic Group of Companies, Inc. 16
Operating Expenses % of Net Revenue Six Months Ended June 30 Salaries & Related Office & Other Direct Selling, General & Administrative 71.3% 18.8% 1.4% 67.8% 18.2% 0.7% 2020 2019 2020 2019 2020 2019 Depreciation & Amortization (1) Amortization of Acquired Intangibles Restructuring Charges 2.7% 2.5% 2.9% 1.1% 1.0% 0.8% 2020 2019 2020 2019 2020 2019 Interpublic Group of Companies, Inc. 17 (1) Excludes amortization of acquired intangibles. .
Cash Flow Six Months Ended June 30, 2020 2019 Net (Loss) Income $ (41.3) $ 163.3 OPERATING ACTIVITIES: Depreciation & amortization 187.0 192.8 Deferred taxes (21.1) (3.0) Net losses on sales of businesses 43.2 11.8 Non-cash restructuring charges 67.6 11.7 Other non-cash items 51.0 5.7 Change in working capital, net (636.5) (113.1) Change in other non-current assets & liabilities (14.1) (70.2) Net cash (used in) provided by Operating Activities (364.2) 199.0 INVESTING ACTIVITIES: Capital expenditures (71.9) (80.1) Acquisitions, net of cash acquired (2.5) (0.6) Other investing activities (18.9) 2.8 Net cash used in Investing Activities (93.3) (77.9) FINANCING ACTIVITIES: Proceeds from long-term debt 646.2 0.0 Net increase in short-term borrowings 2.5 132.3 Exercise of stock options 0.0 0.6 Common stock dividends (199.2) (181.4) Acquisition-related payments (32.3) (13.0) Tax payments for employee shares withheld (21.8) (22.0) Distributions to noncontrolling interests (9.4) (8.1) Repayment of long-term debt (0.1) (100.1) Other financing activities (8.2) 0.0 Net cash provided by (used in) Financing Activities 377.7 (191.7) Currency effect (28.9) 10.3 Net decrease in cash, cash equivalents and restricted cash $ (108.7) $ (60.3) ($ in Millions) Interpublic Group of Companies, Inc. 18
Depreciation and Amortization 2020 Q1 Q2 Q3 Q4 YTD 2020 Depreciation and amortization (1) $ 51.5 $ 51.3 $ 102.8 Amortization of acquired intangibles 21.3 21.8 43.1 Amortization of restricted stock and other non-cash compensation 23.2 12.6 35.8 Net amortization of bond discounts and deferred financing costs 2.3 3.0 5.3 2019 Q1 Q2 Q3 Q4 FY 2019 Depreciation and amortization (1) $ 49.5 $ 51.7 $ 47.3 $ 44.0 $ 192.5 Amortization of acquired intangibles 21.6 21.3 21.7 21.4 86.0 Amortization of restricted stock and other non-cash compensation 28.2 15.9 14.2 21.9 80.2 Net amortization of bond discounts and deferred financing costs 2.3 2.3 2.4 2.3 9.3 (1) Excludes amortization of acquired intangibles. ($ in Millions) Interpublic Group of Companies, Inc. 19
Reconciliation of Organic Net Revenue Components of Change Change Three Months Net Three Months Ended Foreign Acquisitions / Organic Ended Organic Total June 30, 2019 Currency (Divestitures) June 30, 2020 SEGMENT: IAN (1) $ 1,801.1 $ (40.0) $ (16.2) $ (159.2) $ 1,585.7 (8.8%) (12.0%) CMG (1) 324.8 (4.8) (1.6) (50.7) 267.7 (15.6%) (17.6%) Total $ 2,125.9 $ (44.8) $ (17.8) $ (209.9) $ 1,853.4 (9.9%) (12.8%) GEOGRAPHIC: United States $ 1,337.7 $ 0.0 $ (4.1) $ (106.4) $ 1,227.2 (8.0%) (8.3%) International 788.2 (44.8) (13.7) (103.5) 626.2 (13.1%) (20.6%) United Kingdom 180.4 (7.5) 0.5 (26.2) 147.2 (14.5%) (18.4%) Continental Europe 183.3 (5.6) (7.7) (20.3) 149.7 (11.1%) (18.3%) Asia Pacific 205.1 (8.0) (5.8) (28.7) 162.6 (14.0%) (20.7%) Latin America 92.1 (19.5) (0.7) (9.6) 62.3 (10.4%) (32.4%) All Other Markets 127.3 (4.2) 0.0 (18.7) 104.4 (14.7%) (18.0%) Worldwide $ 2,125.9 $ (44.8) $ (17.8) $ (209.9) $ 1,853.4 (9.9%) (12.8%) (1) Results for the three months ended June 30, 2019 have been recast to conform to the current-period presentation. ($ in Millions) Interpublic Group of Companies, Inc. 20
Reconciliation of Organic Net Revenue Components of Change Change Six Months Net Six Months Ended Foreign Acquisitions / Organic Ended Organic Total June 30, 2019 Currency (Divestitures) June 30, 2020 SEGMENT: IAN (1) $ 3,507.2 $ (58.6) $ (33.6) $ (164.8) $ 3,250.2 (4.7%) (7.3%) CMG (1) 623.5 (6.8) (1.7) (39.7) 575.3 (6.4%) (7.7%) Total $ 4,130.7 $ (65.4) $ (35.3) $ (204.5) $ 3,825.5 (5.0%) (7.4%) GEOGRAPHIC: United States $ 2,651.8 $ 0.0 $ (8.1) $ (96.5) $ 2,547.2 (3.6%) (3.9%) International 1,478.9 (65.4) (27.2) (108.0) 1,278.3 (7.3%) (13.6%) United Kingdom 350.7 (9.1) 0.5 (29.2) 312.9 (8.3%) (10.8%) Continental Europe 340.1 (10.7) (15.3) (18.4) 295.7 (5.4%) (13.1%) Asia Pacific 383.1 (12.0) (11.5) (38.2) 321.4 (10.0%) (16.1%) Latin America 172.4 (29.1) (0.7) (1.0) 141.6 (0.6%) (17.9%) All Other Markets 232.6 (4.5) (0.2) (21.2) 206.7 (9.1%) (11.1%) Worldwide $ 4,130.7 $ (65.4) $ (35.3) $ (204.5) $ 3,825.5 (5.0%) (7.4%) (1) Results for the six months ended June 30, 2019 have been recast to conform to the current-period presentation. ($ in Millions) Interpublic Group of Companies, Inc. 21
Reconciliation of Adjusted Results (1) Three Months Ended June 30, 2020 As Reported Amortization of Restructuring Net Losses on Net Impact of Adjusted Acquired Charges Sales of Discrete Tax Results Intangibles Businesses Item (2) (Non-GAAP) Operating Income and Adjusted EBITA before Restructuring Charges (3) $ 40.5 $ (21.8) $ (112.6) $ 174.9 Total (Expenses) and Other Income (4) (65.4) $ (19.9) (45.5) (Loss) Income Before Income Taxes (24.9) (21.8) (112.6) (19.9) 129.4 Provision for Income Taxes 19.0 4.2 25.4 0.0 $ (10.0) 38.6 Equity in Net Loss of Unconsolidated Affiliates 0.0 0.0 Net Income Attributable to Noncontrolling Interests (1.7) (1.7) Net (Loss) Income Available to IPG Common Stockholders $ (45.6) $ (17.6) $ (87.2) $ (19.9) $ (10.0) $ 89.1 Weighted-Average Number of Common Shares Outstanding - Basic 389.4 389.4 Dilutive effect of stock options and restricted shares N/A 2.9 Weighted-Average Number of Common Shares Outstanding - Diluted 389.4 392.3 (Loss) Earnings per Share Available to IPG Common Stockholders: Basic $ (0.12) $ (0.05) $ (0.22) $ (0.05) $ (0.03) $ 0.23 Diluted $ (0.12) $ (0.05) $ (0.22) $ (0.05) $ (0.03) $ 0.23 (1) The table reconciles our reported results to our adjusted non-GAAP results. 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. (2) Consists of tax expense related to the estimated costs associated with our change in assertion (APB 23) that we will no longer permanently reinvest undistributed earnings attributable to certain foreign subsidiaries. (3) Refer to non-GAAP reconciliation of Adjusted EBITA before Restructuring Charges on slide 24. (4) Consists of non-operating expenses including net interest expense and other (expense) income. ($ in Millions, except per share amounts) Interpublic Group of Companies, Inc. 22
Reconciliation of Adjusted Results (1) Six Months Ended June 30, 2020 As Reported Amortization of Restructuring Net Losses on Net Impact of Adjusted Acquired Charges Sales of Discrete Tax Results Intangibles Businesses Item (2) (Non-GAAP) Operating Income and Adjusted EBITA before Restructuring Charges (3) $ 116.4 $ (43.1) $ (112.6) $ 272.1 Total (Expenses) and Other Income (4) (121.3) $ (43.2) (78.1) (Loss) Income Before Income Taxes (4.9) (43.1) (112.6) (43.2) 194.0 Provision for Income Taxes 36.2 8.4 25.4 0.9 $ (10.0) 60.9 Equity in Net Loss of Unconsolidated Affiliates (0.2) (0.2) Net Loss Attributable to Noncontrolling Interests 0.4 0.4 Net (Loss) Income Available to IPG Common Stockholders $ (40.9) $ (34.7) $ (87.2) $ (42.3) $ (10.0) $ 133.3 Weighted-Average Number of Common Shares Outstanding - Basic 388.5 388.5 Dilutive effect of stock options and restricted shares N/A 3.3 Weighted-Average Number of Common Shares Outstanding - Diluted 388.5 391.8 (Loss) Earnings per Share Available to IPG Common Stockholders: Basic $ (0.11) $ (0.09) $ (0.22) $ (0.11) $ (0.03) $ 0.34 Diluted $ (0.11) $ (0.09) $ (0.22) $ (0.11) $ (0.03) $ 0.34 (1) The table reconciles our reported results to our adjusted non-GAAP results. 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. (2) Consists of tax expense related to the estimated costs associated with our change in assertion (APB 23) that we will no longer permanently reinvest undistributed earnings attributable to certain foreign subsidiaries. (3) Refer to non-GAAP reconciliation of Adjusted EBITA before Restructuring Charges on slide 24. (4) Consists of non-operating expenses including net interest expense and other (expense) income. ($ in Millions, except per share amounts) Interpublic Group of Companies, Inc. 23
Reconciliation of Adjusted EBITA(1) Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Net Revenue $ 1,853.4 $ 2,125.9 $ 3,825.5 $ 4,130.7 Non-GAAP Reconciliation: Net (Loss) Income Available to IPG Common Stockholders $ (45.6) $ 169.5 $ (40.9) $ 161.5 Add Back: Provision for Income Taxes 19.0 43.6 36.2 54.1 Subtract: Total (Expenses) and Other Income (65.4) (47.7) (121.3) (96.6) Equity in Net Loss of Unconsolidated Affiliates 0.0 (0.1) (0.2) (0.4) Net (Income) Loss Attributable to Noncontrolling Interests (1.7) (3.3) 0.4 (1.8) Operating Income $ 40.5 $ 264.2 $ 116.4 $ 314.4 Add Back: Amortization of Acquired Intangibles 21.8 21.3 43.1 42.9 Adjusted EBITA $ 62.3 $ 285.5 $ 159.5 $ 357.3 Adjusted EBITA Margin on Net Revenue % 3.4% 13.4% 4.2% 8.6% Restructuring Charges (2) $ 112.6 N/A $ 112.6 $ 31.8 Adjusted EBITA before Restructuring Charges $ 174.9 N/A $ 272.1 $ 389.1 Adjusted EBITA before Restructuring Charges Margin on Net Revenue % 9.4% N/A 7.1% 9.4% (1) The table reconciles our reported results to our adjusted non-GAAP results. 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. (2) In the second quarter of 2020, the Company took restructuring actions to lower our operating expenses structurally and permanently relative to revenue and to accelerate the transformation of our business. The adjustment of $31.8 for restructuring charges for the six months ended June 30, 2019 only includes restructuring charges from the the first quarter of 2019, which relate to a cost initiative to better align our cost structure with our revenue due to client losses occurred in 2018. ($ in Millions) Interpublic Group of Companies, Inc. 24
Reconciliation of Adjusted Results (1) Three Months Ended June 30, 2019 Amortization Net Losses on Settlement of Adjusted As Reported of Acquired Sales of Certain Tax Results Intangibles Businesses Positions (Non-GAAP) Operating Income and Adjusted EBITA (2) $ 264.2 $ (21.3) $ 285.5 Total (Expenses) and Other Income (3) (47.7) $ (6.1) (41.6) Income Before Income Taxes 216.5 (21.3) (6.1) 243.9 Provision for Income Taxes 43.6 4.2 0.0 $ 13.9 61.7 Equity in Net Loss of Unconsolidated Affiliates (0.1) (0.1) Net Income Attributable to Noncontrolling Interests (3.3) (3.3) Net Income Available to IPG Common Stockholders $ 169.5 $ (17.1) $ (6.1) $ 13.9 $ 178.8 Weighted-Average Number of Common Shares Outstanding - Basic 386.2 386.2 Dilutive effect of stock options and restricted shares 5.0 5.0 Weighted-Average Number of Common Shares Outstanding - Diluted 391.2 391.2 Earnings per Share Available to IPG Common Stockholders (4): Basic $ 0.44 $ (0.04) $ (0.02) $ 0.04 $ 0.46 Diluted $ 0.43 $ (0.04) $ (0.02) $ 0.04 $ 0.46 (1) The table reconciles our reported results to our adjusted non-GAAP results. 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. (2) Refer to non-GAAP reconciliation of Adjusted EBITA on slide 24. (3) Consists of non-operating expenses including net interest expense and other (expense) income. (4) Earnings per share may not add due to rounding. ($ in Millions, except per share amounts) Interpublic Group of Companies, Inc. 25
Reconciliation of Adjusted Results (1) Six Months Ended June 30, 2019 Amortization Q1 2019 Net Losses on Settlement of Adjusted As Reported of Acquired Restructuring Sales of Certain Tax Results Intangibles Charges Businesses Positions (Non-GAAP) Operating Income and Adjusted EBITA before Restructuring Charges (2) $ 314.4 $ (42.9) $ (31.8) $ 389.1 Total (Expenses) and Other Income (3) (96.6) $ (14.7) (81.9) Income Before Income Taxes 217.8 (42.9) (31.8) (14.7) 307.2 Provision for Income Taxes 54.1 8.4 7.6 $ 13.9 84.0 Equity in Net Loss of Unconsolidated Affiliates (0.4) (0.4) Net Income Attributable to Noncontrolling Interests (1.8) (1.8) Net Income Available to IPG Common Stockholders $ 161.5 $ (34.5) $ (24.2) $ (14.7) $ 13.9 $ 221.0 Weighted-Average Number of Common Shares Outstanding - Basic 385.4 385.4 Dilutive effect of stock options and restricted shares 4.7 4.7 Weighted-Average Number of Common Shares Outstanding - Diluted 390.1 390.1 Earnings per Share Available to IPG Common Stockholders (4): Basic $ 0.42 $ (0.09) $ (0.06) $ (0.04) $ 0.04 $ 0.57 Diluted $ 0.41 $ (0.09) $ (0.06) $ (0.04) $ 0.04 $ 0.57 (1) The table reconciles our reported results to our adjusted non-GAAP results. 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. (2) Refer to non-GAAP reconciliation of Adjusted EBITA before Restructuring Charges on slide 24. (3) Consists of non-operating expenses including net interest expense and other (expense) income. (4) Earnings per share may not add due to rounding. ($ in Millions, except per share amounts) Interpublic Group of Companies, Inc. 26
Metrics Update Interpublic Group of Companies, Inc. 27
Metrics Update CATEGORY: SALARIES & RELATED OFFICE & OTHER DIRECT FINANCIAL (% of net revenue) (% of net revenue) METRIC: Trailing Twelve Months Trailing Twelve Months Available Liquidity Base, Benefits & Tax Occupancy Expense Credit Facilities Covenant Incentive Expense All Other Office and Other Direct Expenses Severance Expense Temporary Help Interpublic Group of Companies, Inc. 28
Salaries & Related Expenses % of Net Revenue, Trailing Twelve Months 66.1% 64.6% 6/30/2020 12/31/2019 Interpublic Group of Companies, Inc. 29
Salaries & Related Expenses (% of Net Revenue) Three and Six Months Ended June 30 Base, Benefits & Tax (1) Incentive Expense Severance Expense Temporary Help 60.4% 4.5% 59.2% 4.1% 4.2% 3.0% 4.1% 4.1% 3.9% 3.8% 57.1% 2.1% 3.1% 54.9% 0.7% 0.5% Three Months Six Months Three Months Six Months Three Months Six Months Three Months Six Months 2020 2019 (1) Base, Benefits & Tax for the three and six months ended June 30, 2020 decreased compared to the same periods in 2019. “All Other Salaries & Related,” not shown, was 1.1% and 1.3% for the three months ended June 30, 2020 and 2019, respectively, and 1.1% and 1.4% for the six months ended June 30, 2020 and 2019, respectively. Certain information for the prior period has been recast to conform to the current-period presentation. Interpublic Group of Companies, Inc. 30
Office & Other Direct Expenses % of Net Revenue, Trailing Twelve Months 18.1% 17.8% 6/30/2020 12/31/2019 Interpublic Group of Companies, Inc. 31
Office & Other Direct Expenses (% of Net Revenue) Three and Six Months Ended June 30 Occupancy Expense (1) All Other 12.3% 6.6% 6.6% 11.7% 11.6% 6.5% 6.5% 10.5% Three Months Six Months Three Months Six Months 2020 2019 (1) Occupancy expense for the three and six months ended June 30, 2020 decreased compared to the same periods in 2019. “All Other” primarily includes client service costs, non-pass through production expenses, travel and entertainment, professional fees, spending to support new business activity, telecommunications, office supplies, bad debt expense, adjustments to contingent acquisition obligations, foreign currency losses (gains) and other expenses. Interpublic Group of Companies, Inc. 32
Available Liquidity Cash, Cash Equivalents + Available Committed Credit Facilities (1) $500 (1) $500 $1,492 $1,492 $1,492 $1,491 $1,491 (2) $1,554 $1,192 $1,085 $614 $521 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 Cash and Cash Equivalents Available Committed Credit Facility 364-Day Credit Facility (1) In March 2020, we entered into an agreement for a 364-day revolving credit facility. (2) Includes net proceeds from our March 2020 debt issuance of $650 aggregate principal amount of Senior Notes. ($ in Millions) Interpublic Group of Companies, Inc. 33
Credit Facilities Covenant (1) Last Twelve Months Ended Covenants June 30, 2020 I. Leverage Ratio (not greater than) (2) (3) 3.75x Actual Leverage Ratio 3.01x Last Twelve Months Ended CREDIT AGREEMENT EBITDA RECONCILIATION: June 30, 2020 Net Income Available to IPG Common Stockholders $ 453.6 + Non-Operating Adjustments (4) 434.4 Operating Income $ 888.0 + Depreciation and Amortization 376.3 + Other Non-cash Charges Reducing Operating Income 53.9 Credit Agreement EBITDA (2): $ 1,318.2 (1) The leverage ratio financial covenant applies to both our committed corporate credit facility, amended and restated as of November 1, 2019, ( the "Credit Agreement") and our 364-day credit facility entered into on March 27, 2020 (the "364-Day Credit Facility"). (2) The leverage ratio is defined as debt as of the last day of such fiscal quarter to EBITDA (as defined in the Credit Agreement and the 364-Day Credit Facility) for the four quarters then ended. (3) On July 28, 2020, we entered into Amendment No. 1 to the Credit Agreement and Amendment No. 1 to the 364-Day Credit Facility (together, the “Amendments”). The Amendments increased the maximum leverage ratio covenant to 4.25x in the case of the 364-Day Credit Facility and, in the case of the Credit Agreement, to (i) 4.25x through the quarter ended June 30, 2021, and (ii) 3.50x thereafter. (4) Includes adjustments of the following items from our consolidated statement of operations: provision for income taxes, total (expenses) and other income, equity in net loss of unconsolidated affiliates, and net loss attributable to noncontrolling interests ($ in Millions) Interpublic Group of Companies, Inc. 34
Cautionary Statement 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 under item 1A, Risk Factors, in our most recent Annual Report on Form 10-K and our quarterly reports on Form 10-Q and our other filings with the Securities and Exchange Commission ("SEC"). 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: ▪ the effects of a challenging economy on the demand for our advertising and marketing services, on our clients’ financial condition and on our business or financial condition; ▪ the outbreak of the novel coronavirus (COVID-19), including the measures to contain its spread, and the impact on the economy and demand for our services, which may precipitate or exacerbate other risks and uncertainties; ▪ 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; ▪ developments from changes in the regulatory and legal environment for advertising and marketing and communications services companies around the world; and ▪ failure to realize the anticipated benefits on the acquisition of the Acxiom business Investors should carefully consider these factors and the additional risk factors outlined in more detail under Item 1A, Risk Factors, in our most recent Annual Report on Form 10-K and our quarterly reports on Form 10-Q and our other SEC filings. Interpublic Group of Companies, Inc. 35