Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq22016earningsreleaseex.htm |
| 8-K - 8-K - INTERPUBLIC GROUP OF COMPANIES, INC. | ipgq22016earningsrelease8-k.htm |
SECOND QUARTER 2016
EARNINGS CONFERENCE CALL
July 21, 2016
Overview – Second Quarter 2016
Page 2 See reconciliation of organic revenue change on pages on 18 and 19 and diluted EPS on page 22.
• Total revenue increase was 2.2% in Q2 and 3.0% in H1
• Organic revenue growth was 3.7% in Q2 and 5.1% in H1
• Operating margin +20 bps in Q2 and +40 bps in H1
• Diluted EPS was $0.38 in Q2, and was $0.33 as adjusted for
below-the-line items, an increase of 14%
• Repurchased 2.5 million shares in Q2, using $59 million
2016 2015
Revenue 1,917.9$ 1,876.1$
Salaries and Related Expenses 1,229.0 1,205.2
Off ice and General Expenses 464.1 455.1
Operating Income 224.8 215.8
Interest Expense (24.5) (20.3)
Interest Income 5.6 5.0
Other (Expense) Income, net (0.1) 0.5
Income Before Income Taxes 205.8 201.0
Provision for Income Taxes 43.7 77.7
Equity in Net (Loss) Income of Unconsolidated Aff iliates (1.9) 0.5
Net Income 160.2 123.8
Net Income Attributable to Noncontrolling Interests (3.3) (2.6)
156.9$ 121.2$
Earnings per Share Available to IPG Common Stockholders:
Basic 0.39$ 0.30$
Diluted 0.38$ 0.29$
Weighted-Average Number of Common Shares Outstanding:
Basic 400.1 410.5
Diluted 409.8 417.6
Dividends Declared per Common Share 0.15$ 0.12$
Three Months Ended June 30,
Net Income Available to IPG Common Stockholders
Operating Performance
(Amounts in Millions, except per share amounts)
Page 3
2016 2015 Total Organic 2016 2015 Total Organic
IAN 1,548.5$ 1,522.1$ 1.7% 3.9% 2,950.1$ 2,867.2$ 2.9% 5.6%
CMG 369.4$ 354.0$ 4.4% 2.8% 709.8$ 684.9$ 3.6% 3.0%
Change
Six Months Ended
Change
Three Months Ended
June 30, June 30,
$ % Change $ % Change
June 30, 2015 1,876.1$ 3,552.1$
Total change 41.8 2.2% 107.8 3.0%
Foreign currency (33.0) (1.8%) (84.9) (2.4%)
Net acquisitions/(divestitures) 6.1 0.3% 11.6 0.3%
Organic 68.7 3.7% 181.1 5.1%
June 30, 2016 1,917.9$ 3,659.9$
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
Total Organic Total Organic
United States 5.1% 4.6% 6.8% 6.4%
International (2.0%) 2.3% (2.5%) 3.2%
United Kingdom (0.6%) 1.2% (0.1%) 2.4%
Continental Europe (2.5%) 0.5% (3.6%) 1.1%
Asia Pacific (6.0%) (3.2%) (4.7%) (0.5%)
Latin America (4.1%) 15.9% (9.5%) 13.9%
All Other Markets 7.4% 7.3% 5.8% 7.3%
Worldwide 2.2% 3.7% 3.0% 5.1%
Three Months Ended
June 30, 2016
Six Months Ended
June 30, 2016
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.
(0.9%)
0.9%
3.8% 3.7%
(10.8%)
7.0%
6.1%
0.7%
2.8%
5.5%
6.1%
(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
Organic Revenue Growth
Page 6 See reconciliation on page 20.
Trailing Twelve Months
Q2-16
5.6%
Salaries & Related
2016 2015 $ Total Organic
Three Months Ended June 30, 1,229.0$ 1,205.2$ 23.8$ 2.0% 3.5%
% of Revenue 64.1% 64.2%
Three months severance 19.2$ 16.9$ 2.3$ 13.6%
% of Revenue 1.0% 0.9%
Six Months Ended June 30, 2,499.9$ 2,420.4$ 79.5$ 3.3% 5.6%
% of Revenue 68.3% 68.1%
Six months severance 43.0$ 34.2$ 8.8$ 25.7%
% of Revenue 1.2% 1.0%
Office & General
2016 2015 $ Total Organic
Three Months Ended June 30, 464.1$ 455.1$ 9.0$ 2.0% 4.1%
% of Revenue 24.2% 24.3%
Three months occupancy expense (ex-D&A) 125.9$ 110.3$ 15.6$ 14.1%
% of Revenue 6.6% 5.9%
Six Months Ended June 30, 914.3$ 908.1$ 6.2$ 0.7% 3.4%
% of Revenue 25.0% 25.6%
Six months occupancy expense (ex-D&A) 252.0$ 232.0$ 20.0$ 8.6%
% of Revenue 6.9% 6.5%
Change
Change
Operating Expenses
($ in Millions)
Page 7 See reconciliation of organic measures on pages 18 and 19.
(1.7%)
1.7%
5.3%
8.5%
5.7%
8.4%
9.8% 9.8%
8.4%
10.5%
11.5% 11.6%
9.3%
(4.0%)
(2.0%)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Q4-05 Q4-06 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Q4-13 Q4-14 Q4-15
Operating Margin
Page 8
Trailing Twelve Months
Q2-16
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)
As
Reported
Losses on
Sales of
Businesses
Valuation
Allowance
Reversals
Adoption of
ASU 2016-09
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$ 10.2$ 23.4$ 74.3
Effective Tax Rate 14.6% 34.9%
Diluted EPS Components:
Net Income Available to IPG Common Stockholders 162.3$ (19.6)$ 12.2$ 10.2$ 23.4$ 136.1$
Weighted-Average Number of Common Shares Outstanding 409.4 1.5 407.9
Earnings Per Share Available to IPG Common Stockholders 0.40$ (0.05)$ 0.03$ 0.03$ 0.06$ 0.33$
Six Months Ended June 30, 2016
As
Reported
Losses on
Sales of
Businesses
Adoption of
ASU 2016-09
Settlement of
Certain Tax
Positions
Adjusted
Results
Income Before Income Taxes 205.8$ (3.7)$ 209.5$
Provision for Income Taxes 43.7 2.7$ 23.4$ 69.8
Effective Tax Rate 21.2% 33.3%
Diluted EPS Components:
Net Income Available to IPG Common Stockholders 156.9$ (3.7)$ 2.7$ 23.4$ 134.5$
Weighted-Average Number of Common Shares Outstanding 409.8 1.8 408.0
Earnings Per Share Available to IPG Common Stockholders 0.38$ (0.01)$ 0.01$ 0.06$ 0.33$
Three Months Ended June 30, 2016
Adjusted Diluted Earnings Per Share
(1) During the six months ended June 30, 2016, we recorded losses on sales of businesses in our international markets, primarily in Continental Europe.
(2) During Q1 2016, we recorded valuation allowance reversals as a consequence of the disposition of certain businesses in Continental Europe.
(3) During the six months ended June 30, 2016, we early adopted Financial Accounting Standards Board Accounting Standards Update 2016-09.
See full reconciliation of adjusted diluted earnings per share on pages 22 and 23.
Page 9
(Amounts in Millions, except per share amounts)
(1) (2) (3)
(3) (1)
(4) During Q2 2016, we released reserves related to the conclusion and settlement of a tax examination of previous tax years.
(4)
(4)
June 30, December 31, June 30,
2016 2015 2015
CURRENT ASSETS:
Cash and cash equivalents 672.6$ 1,502.9$ 848.9$
Marketable securities 2.8 6.8 6.7
Accounts receivable, net 3,945.0 4,361.0 3,976.7
Expenditures billable to clients 1,710.4 1,594.4 1,452.4
Other current assets 294.6 228.0 352.7
Total current assets 6,625.4$ 7,693.1$ 6,637.4$
CURRENT LIABILITIES:
Accounts payable 5,857.7$ 6,672.0$ 5,669.8$
Accrued liabilities 588.4 760.3 603.8
Short-term borrowings 211.7 150.1 158.0
Current portion of long-term debt 24.5 1.9 2.0
Total current liabilities 6,682.3$ 7,584.3$ 6,433.6$
Balance Sheet – Current Portion
($ in Millions)
Page 10
2016 2015
NET INCOME 160$ 124$
OPERATING ACTIVITIES
Depreciation & amortization 57 57
Deferred taxes 24 32
Non-cash loss on sales of businesses 4 -
Other non-cash items 7 5
Change in working capital, net (128) 42
Change in other non-current assets & liabilities (30) 1
Net cash provided by Operating Activities 94 261
INVESTING ACTIVITIES
Capital expenditures (36) (30)
Acquisitions, net of cash acquired (7) -
Other investing activities (5) -
Net cash used in Investing Activities (48) (30)
FINANCING ACTIVITIES
Common stock dividends (60) (50)
Repurchase of common stock (59) (51)
Acquisition-related payments (29) (26)
Tax payments for employee shares withheld (4) (1)
Distributions to noncontrolling interests (3) (7)
Exercise of stock options 6 2
Net increase in short-term bank borrowings 82 21
Other financing activities - 2
Net cash used in Financing Activities (67) (110)
Currency Effect 16 (7)
(Decrease) Increase in Cash & S/T Marketable Securities (5)$ 114$
Three Months Ended June 30,
Cash Flow
($ in Millions)
Page 11
(1)
(1) Excludes net purchases, sales and maturities of short-term marketable securities. See reconciliation on page 21.
(2) As part of the adoption of FASB ASU 2016-09, we have reclassified the tax payments for employee shares withheld balance into
Financing Activities in both periods presented. This amount was previously included in Change in working capital, net in Operating
Activities. Additionally, the excess tax benefit from share-based payment arrangements amount is now reflected within Net Income
for Q2 2016, as prospective adoption was required.
(2)
$2,325
$2,102
$1,923
$1,719 $1,756
$1,644 $1,654
$1,722 $1,762
$1,820
$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 6/30/2016
$2,431
Total Debt (1)
($ in Millions)
Page 12
(2)
(1) Includes current portion of long-term debt, short-term borrowings and long-term debt.
(2) Includes our November 2012 debt issuances of $800 aggregate principal amount of Senior Notes, which pre-funded
our plan to redeem a similar amount of debt in 2013.
Summary
Page 13
• Solid performance against FY-16 financial objectives
• Sustained traction from key strategic initiatives
Quality of our agency offerings, creative talent, embedded digital,
and “open architecture” solutions
Performance in high-growth disciplines
Effective expense management
• Focus is on continued growth and margin improvement
• Financial strength continues to be a source of value creation
Appendix
2016 2015
Revenue 3,659.9$ 3,552.1$
Salaries and Related Expenses 2,499.9 2,420.4
Off ice and General Expenses 914.3 908.1
Operating Income 245.7 223.6
Interest Expense (47.1) (41.2)
Interest Income 11.4 12.2
Other (Expense) Income, net (17.2) 0.8
Income Before Income Taxes 192.8 195.4
Provision for Income Taxes 28.1 76.3
Equity in Net (Loss) Income of Unconsolidated Aff iliates (1.8) 0.5
Net Income 162.9 119.6
Net Income Attributable to Noncontrolling Interests (0.6) (0.2)
162.3$ 119.4$
Earnings per Share Available to IPG Common Stockholders:
Basic 0.41$ 0.29$
Diluted 0.40$ 0.29$
Weighted-Average Number of Common Shares Outstanding:
Basic 400.4 410.8
Diluted 409.4 417.6
Dividends Declared per Common Share 0.30$ 0.24$
Net Income Available to IPG Common Stockholders
Six Months Ended June 30,
Operating Performance
(Amounts in Millions, except per share amounts)
Page 15
(1) Excludes net purchases, sales and maturities of short-term marketable securities. See reconciliation on page 21.
(2) As part of the adoption of FASB ASU 2016-09, we have reclassified the tax payments for employee shares withheld balance into
Financing Activities in both periods presented. This amount was previously included in Change in working capital, net in Operating
Activities. Additionally, the excess tax benefit from share-based payment arrangements amount is now reflected within Net Income
for Q2 2016, as prospective adoption was required.
2016 2015
NET INCOME 163$ 120$
OPERATING ACTIVITIES
Depreciation & amortization 120 114
Deferred taxes (4) -
Non-cash loss on sales of businesses 20 -
Other non-cash items 35 18
Change in working capital, net (818) (743)
Change in other non-current assets & liabilities (71) (29)
Net cash used in Operating Activities (555) (520)
INVESTING ACTIVITIES
Capital expenditures (63) (50)
Acquisitions, net of cash acquired (34) -
Other investing activities (10) -
Net cash used in Investing Activities (107) (50)
FINANCING ACTIVITIES
Common stock dividends (120) (99)
Repurchase of common stock (113) (102)
Acquisition-related payments (29) (28)
Tax payments for employee shares withheld (23) (17)
Distributions to noncontrolling interests (7) (8)
Excess tax benefit from share-based payment arrangements - 9
Exercise of stock options 10 11
Net increase in short-term bank borrowings 57 55
Other financing activities - 2
Net cash used in Financing Activities (225) (177)
Currency Effect 53 (65)
Decrease in Cash & S/T Marketable Securities (834)$ (812)$
Six Months Ended June 30,
Cash Flow
($ in Millions)
Page 16
(1)
(2)
(2)
Q1 Q2 Q3 Q4 YTD 2016
Depreciation and amortization of fixed assets and
intangible assets 38.0$ 39.8$ 77.8$
Amortization of restricted stock and other non-cash
compensation 23.1 16.8 39.9
Net amortization of bond discounts and deferred
financing costs 1.4 1.4 2.8
Q1 Q2 Q3 Q4 FY 2015
Depreciation and amortization of fixed assets and
intangible assets 38.7$ 39.5$ 38.1$ 40.7$ 157.0$
Amortization of restricted stock and other non-cash
compensation 16.8 16.4 16.5 20.6 70.3
Net amortization of bond discounts and deferred
financing costs 1.4 1.4 1.4 1.6 5.8
2016
2015
Depreciation and Amortization
($ in Millions)
Page 17
Three Months
Ended
June 30, 2015
Foreign
Currency
Net Acquisitions /
(Divestitures)
Three Months
Ended
June 30, 2016 Organic Total
Segment Revenue
IAN 1,522.1$ (28.8)$ (3.5)$ 58.7$ 1,548.5$ 3.9% 1.7%
CMG 354.0 (4.2) 9.6 10.0 369.4 2.8% 4.4%
Total 1,876.1$ (33.0)$ 6.1$ 68.7$ 1,917.9$ 3.7% 2.2%
Geographic
United States 1,112.1$ -$ 6.1$ 50.9$ 1,169.1$ 4.6% 5.1%
International 764.0 (33.0) - 17.8 748.8 2.3% (2.0%)
United Kingdom 156.7 (8.9) 6.0 1.9 155.7 1.2% (0.6%)
Continental Europe 177.4 2.4 (7.8) 0.9 172.9 0.5% (2.5%)
Asia Pacific 231.7 (6.9) 0.2 (7.3) 217.7 (3.2%) (6.0%)
Latin America 90.5 (14.7) (3.4) 14.4 86.8 15.9% (4.1%)
All Other Markets 107.7 (4.9) 5.0 7.9 115.7 7.3% 7.4%
Worldwide 1,876.1$ (33.0)$ 6.1$ 68.7$ 1,917.9$ 3.7% 2.2%
Expenses
Salaries & Related 1,205.2$ (19.8)$ 1.3$ 42.3$ 1,229.0$ 3.5% 2.0%
Office & General 455.1 (9.6) 0.1 18.5 464.1 4.1% 2.0%
Total 1,660.3$ (29.4)$ 1.4$ 60.8$ 1,693.1$ 3.7% 2.0%
Components of Change Change
Organic
Reconciliation of Organic Measures
($ in Millions)
Page 18
Six Months
Ended
June 30, 2015
Foreign
Currency
Net Acquisitions /
(Divestitures) Organic
Six Months
Ended
June 30, 2016 Organic Total
Segment Revenue
IAN 2,867.2$ (73.0)$ (4.7)$ 160.6$ 2,950.1$ 5.6% 2.9%
CMG 684.9 (11.9) 16.3 20.5 709.8 3.0% 3.6%
Total 3,552.1$ (84.9)$ 11.6$ 181.1$ 3,659.9$ 5.1% 3.0%
Geographic
United States 2,115.9$ -$ 9.8$ 134.6$ 2,260.3$ 6.4% 6.8%
International 1,436.2 (84.9) 1.8 46.5 1,399.6 3.2% (2.5%)
United Kingdom 321.6 (18.2) 10.3 7.6 321.3 2.4% (0.1%)
Continental Europe 332.5 (3.8) (11.7) 3.5 320.5 1.1% (3.6%)
Asia Pacific 419.5 (17.8) 0.4 (2.3) 399.8 (0.5%) (4.7%)
Latin America 168.0 (33.4) (5.9) 23.4 152.1 13.9% (9.5%)
All Other Markets 194.6 (11.7) 8.7 14.3 205.9 7.3% 5.8%
Worldwide 3,552.1$ (84.9)$ 11.6$ 181.1$ 3,659.9$ 5.1% 3.0%
Expenses
Salaries & Related 2,420.4$ (57.9)$ 2.8$ 134.6$ 2,499.9$ 5.6% 3.3%
Office & General 908.1 (25.2) 0.5 30.9 914.3 3.4% 0.7%
Total 3,328.5$ (83.1)$ 3.3$ 165.5$ 3,414.2$ 5.0% 2.6%
Components of Change Change
Reconciliation of Organic Measures
($ in Millions)
Page 19
Reconciliation of Organic Revenue Growth
($ in Millions)
Page 20
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
Components of Change During the Period
2016 2015 2016 2015
INVESTING ACTIVITIES
Net cash used in Investing Activities per presentation (48)$ (30)$ (107)$ (50)$
Net purchase, sales and maturities of short-term marketable securities 4 - 4 -
Net cash used in Investing Activities as reported (44)$ (30)$ (103)$ (50)$
Three Months Ended June 30, Six Months Ended June 30,
Reconciliation of Investing Cash Flow
($ in Millions)
Page 21
As
Reported
Losses on
Sales of
Businesses
Adoption of
ASU 2016-09
Settlement
of Certain
Tax Positions
Adjusted
Results
Income Before Income Taxes 205.8$ (3.7)$ 209.5$
Provision for Income Taxes 43.7 2.7$ 23.4$ 69.8
Effective Tax Rate 21.2% 33.3%
Equity in Net Loss of Unconsolidated Aff iliates (1.9) (1.9)
Net Income Attributable to Noncontrolling Interests (3.3) (3.3)
156.9$ (3.7)$ 2.7$ 23.4$ 134.5$
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 1.8 7.9
Weighted-Average Number of Common Shares Outstanding - Diluted 409.8 1.8 408.0
Earnings Per Share Available to IPG Common Stockholders - Basic 0.39$ (0.01)$ 0.01$ 0.06$ 0.34$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.38$ (0.01)$ 0.01$ 0.06$ 0.33$
Three Months Ended June 30, 2016
Net lncome Available to IPG Common Stockholders - Basic and Diluted
Reconciliation Adjusted Results - QTD (1)
Page 22
(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, the effect of the adoption of ASU
2016-09 and the release of reserves related to the conclusion and settlement of a tax examination of previous tax
years. 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)
As
Reported
Losses on
Sales of
Businesses
Valuation
Allowance
Reversals
Adoption of
ASU 2016-09
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$ 10.2$ 23.4$ 74.3
Effective Tax Rate 14.6% 34.9%
Equity in Net Loss of Unconsolidated Aff iliates (1.8) (1.8)
Net Income Attributable to Noncontrolling Interests (0.6) (0.6)
162.3$ (19.6)$ 12.2$ 10.2$ 23.4$ 136.1$
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 1.5 7.5
Weighted-Average Number of Common Shares Outstanding - Diluted 409.4 1.5 407.9
Earnings Per Share Available to IPG Common Stockholders - Basic 0.41$ (0.05)$ 0.03$ 0.03$ 0.06$ 0.34$
Earnings Per Share Available to IPG Common Stockholders - Diluted 0.40$ (0.05)$ 0.03$ 0.03$ 0.06$ 0.33$
Six Months Ended June 30, 2016
Net lncome Available to IPG Common Stockholders - Basic and Diluted
Reconciliation Adjusted Results - YTD (1)
Page 23
(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, the effect of the adoption of ASU 2016-09 and
the release of reserves related to the conclusion and settlement of a tax examination of previous tax years.
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)
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
64.2%
63.8% 63.9%
60.0%
62.0%
64.0%
66.0%
6/30/2015 12/31/2015 6/30/2016
% of Revenue, Trailing Twelve Months
Salaries & Related Expenses
Page 26
1.0% 0.9%
1.2%
1.0%
0.0%
1.0%
2.0%
3.0%
Severance Expense
Three Months Six Months
3.8% 3.8% 3.9% 3.8%
0.0%
2.0%
4.0%
6.0%
Temporary Help
Three Months Six Months
3.0%
3.7% 3.8% 3.8%
0.0%
2.0%
4.0%
6.0%
Incentive Expense
Six MonthsThree Months
54.1% 53.2%
56.7% 56.6%
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 2.2% and 2.6% for the three months ended June 30, 2016 and 2015,
respectively, and 2.7% and 2.9% for the six months ended June 30, 2016 and 2015, respectively.
2016 2015
24.9% 24.7% 24.5%
21.0%
23.0%
25.0%
27.0%
6/30/2015 12/31/2015 6/30/2016
% of Revenue, Trailing Twelve Months
Office & General Expenses
Page 28
1.5% 1.5% 1.6% 1.6%
0.0%
1.0%
2.0%
3.0%
Professional Fees
Three Months Six Months
6.6%
5.9%
6.9%
6.5%
4.0%
6.0%
8.0%
10.0%
Occupancy Expense (ex-D&A)
Three Months Six Months
12.7%
13.4% 13.1%
13.9%
10.0%
12.0%
14.0%
16.0%
All Other O&G
Three Months Six Months
3.4% 3.5% 3.4%
3.6%
2.0%
3.0%
4.0%
5.0%
T&E, Office Supplies & Telecom
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.
2016 2015
$856 $881
$1,510
$680 $675
$983 $984
$996
$996 $995
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
6/30/2015 9/30/2015 12/31/2015 3/31/2016 6/30/2016
Cash, Cash Equivalents and Short-Term Marketable Securities Available Committed Credit Facility
Available Liquidity
($ in Millions)
Page 30
Cash, Cash Equivalents and Short-Term Marketable Securities
+ Available Committed Credit Facility
Last Twelve Months
Ending June 30, 2016
I. Interest Coverage Ratio (not less than): 5.00x
Actual Interest Coverage Ratio: 18.40x
II. Leverage Ratio (not greater than): 3.50x
Actual Leverage Ratio: 1.61x
Interest Coverage Ratio - Interest Expense Reconciliation
Last Twelve Months
Ending June 30, 2016
Interest Expense: $91.7
- Interest income 22.0
- Other 8.4
Net interest expense : $61.3
EBITDA Reconciliation
Last Twelve Months
Ending June 30, 2016
Operating Income: $894.0
+ Depreciation and amortization 233.6
+ Other non-cash charges 0.5
EBITDA : $1,128.1
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.