INTERPUBLIC GROUP OF COMPANIES, INC. - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-6686

THE INTERPUBLIC GROUP OF COMPANIES, INC.

(Exact name of registrant as specified in its charter)


Delaware						13-1024020
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

909 Third Avenue, New York, New York 10022

(Address of principal executive offices) (Zip Code)

(212)704-1200

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	IPG	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

The number of shares of the registrant’s common stock outstanding as of July 18, 2022 was 391,028,246.

INDEX


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021	3
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2022 and 2021	4
	Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	6
	Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45
Item 4.	Controls and Procedures	45
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 6.	Exhibits	46
INDEX TO EXHIBITS		47
SIGNATURES		48

INFORMATION REGARDING FORWARD-LOOKING DISCLOSURE

This quarterly report on Form 10-Q contains forward-looking statements. Statements in this report that are not historical facts, including statements about management’s beliefs and expectations, constitute forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or comparable terminology are intended to identify 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. 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 impacts of the COVID-19 pandemic, including unanticipated developments like the emergence of new coronavirus variants or any shortfalls in vaccination efforts, and associated mitigation measures such as social distancing efforts and restrictions on businesses, social activities and travel on the economy, our clients 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 challenging 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 interest rates, inflation rates and currency exchange rates;

•developments from changes in the regulatory and legal environment for advertising and marketing services companies around the world, including laws and regulations related to data protection and consumer privacy;

•the impact on our operations of general or directed cybersecurity events; and

•failure to fully realize the anticipated benefits of our 2020 restructuring actions and other cost-savings initiatives.

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.

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PART I – FINANCIAL INFORMATION


Item 1.			Financial Statements (Unaudited)

THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
REVENUE:
Net revenue	$	2,375.5	$	2,269.6	$	4,602.7	$	4,297.3
Billable expenses	360.2		240.0		701.5		469.3
Total revenue	2,735.7		2,509.6		5,304.2		4,766.6

OPERATING EXPENSES:
Salaries and related expenses	1,590.2		1,484.9		3,154.6		2,878.0
Office and other direct expenses	349.8		301.0		673.2		593.9
Billable expenses	360.2		240.0		701.5		469.3
Cost of services	2,300.2		2,025.9		4,529.3		3,941.2
Selling, general and administrative expenses	19.4		29.4		38.7		57.6
Depreciation and amortization	67.1		70.1		134.9		139.3
Restructuring charges	(0.1)		(0.2)		6.5		1.1
Total operating expenses	2,386.6		2,125.2		4,709.4		4,139.2

OPERATING INCOME	349.1		384.4		594.8		627.4

EXPENSES AND OTHER INCOME:
Interest expense	(41.0)		(42.6)		(80.4)		(92.2)
Interest income	11.2		7.6		21.0		14.5
Other (expense) income, net	(4.5)		4.7		(10.7)		(79.2)
Total (expenses) and other income	(34.3)		(30.3)		(70.1)		(156.9)

INCOME BEFORE INCOME TAXES	314.8		354.1		524.7		470.5
Provision for income taxes	83.7		86.7		132.8		110.5
INCOME OF CONSOLIDATED COMPANIES	231.1		267.4		391.9		360.0
Equity in net income of unconsolidated affiliates	0.7		0.4		0.8		0.2
NET INCOME	231.8		267.8		392.7		360.2
Net income attributable to non-controlling interests	(2.2)		(4.5)		(3.7)		(5.2)
NET INCOME AVAILABLE TO IPG COMMON STOCKHOLDERS	$	229.6	$	263.3	$	389.0	$	355.0

Earnings per share available to IPG common stockholders:
Basic	$	0.58	$	0.67	$	0.99	$	0.90
Diluted	$	0.58	$	0.66	$	0.98	$	0.89

Weighted-average number of common shares outstanding:
Basic	393.1		393.3		393.8		392.4
Diluted	396.8		399.0		397.5		397.6

The accompanying notes are an integral part of these unaudited financial statements.

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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in Millions)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
NET INCOME	$	231.8	$	267.8	$	392.7	$	360.2

OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation:
Foreign currency translation adjustments	(108.9)		16.6		(112.5)		(24.4)
Reclassification adjustments recognized in net income	1.8		(2.2)		1.8		(1.5)
	(107.1)		14.4		(110.7)		(25.9)
Derivative instruments:
Changes in fair value of derivative instruments	6.7		(6.4)		12.6		14.9
Recognition of previously unrealized net (gain) loss in net income	(0.4)		(0.3)		(0.7)		4.9
Income tax effect	(1.6)		1.6		(3.0)		(2.6)
	4.7		(5.1)		8.9		17.2
Defined benefit pension and other postretirement plans:
Net actuarial gains (losses) for the period	4.0		(1.2)		3.4		(1.2)
Amortization of unrecognized losses, transition obligation and prior service cost included in net income	1.6		2.5		3.3		4.8

Other	0.1		0.1		0.0		0.0
Income tax effect	(1.2)		(0.6)		(0.6)		(1.0)
	4.5		0.8		6.1		2.6
Other comprehensive (loss) income, net of tax	(97.9)		10.1		(95.7)		(6.1)
TOTAL COMPREHENSIVE INCOME	133.9		277.9		297.0		354.1
Less: comprehensive income attributable to non-controlling interests	0.9		4.6		2.7		5.2
COMPREHENSIVE INCOME ATTRIBUTABLE TO IPG	$	133.0	$	273.3	$	294.3	$	348.9

The accompanying notes are an integral part of these unaudited financial statements.

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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in Millions)

(Unaudited)


	June 30, 2022		December 31, 2021
ASSETS:
Cash and cash equivalents	$	1,983.4	$	3,270.0
Accounts receivable, net of allowance of $58.8 and $68.5, respectively	4,014.9		5,177.7
Accounts receivable, billable to clients	2,233.0		2,347.2
Assets held for sale	17.7		8.2
Other current assets	511.8		428.7
Total current assets	8,760.8		11,231.8
Property and equipment, net of accumulated depreciation and amortization of $1,240.1 and $1,201.6, respectively	641.6		675.8
Deferred income taxes	300.6		301.4
Goodwill	4,855.2		4,908.7
Other intangible assets	799.8		847.5
Operating lease right-of-use assets	1,446.4		1,544.4
Other non-current assets	444.8		399.6
TOTAL ASSETS	$	17,249.2	$	19,909.2

LIABILITIES:
Accounts payable	$	6,861.3	$	8,960.0
Accrued liabilities	623.5		918.1
Contract liabilities	664.4		688.5
Short-term borrowings	45.7		47.5
Current portion of long-term debt	0.6		0.7
Current portion of operating leases	255.0		265.8
Liabilities held for sale	12.2		9.4
Total current liabilities	8,462.7		10,890.0
Long-term debt	2,906.1		2,908.6
Non-current operating leases	1,468.7		1,576.0
Deferred compensation	288.2		329.1
Other non-current liabilities	625.1		600.7
TOTAL LIABILITIES	13,750.8		16,304.4

Redeemable non-controlling interests (see Note 5)	9.4		15.6

STOCKHOLDERS’ EQUITY:
Common stock	39.6		39.3
Additional paid-in capital	1,222.1		1,226.6
Retained earnings	3,311.8		3,154.3
Accumulated other comprehensive loss, net of tax	(988.9)		(894.2)


	3,584.6		3,526.0
Less: Treasury stock	(147.9)		—
Total IPG stockholders’ equity	3,436.7		3,526.0
Non-controlling interests	52.3		63.2
TOTAL STOCKHOLDERS’ EQUITY	3,489.0		3,589.2
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	17,249.2	$	19,909.2

The accompanying notes are an integral part of these unaudited financial statements.

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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Millions)

(Unaudited)


	Six months ended June 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	392.7	$	360.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	134.9		139.3
Amortization of restricted stock and other non-cash compensation	25.3		42.2
Net losses on sales of businesses	7.1		14.2
Net amortization of bond discounts and deferred financing costs	1.4		3.8
Loss on early extinguishment of debt	—		74.0
Deferred income tax	(0.1)		46.6
Provision for uncollectible receivables	(6.0)		(3.2)

Other	19.3		5.9
Changes in assets and liabilities, net of acquisitions and divestitures, provided (using) cash:
Accounts receivable	970.4		714.9
Accounts receivable, billable to clients	35.4		(235.2)
Other current assets	(112.9)		(97.1)
Accounts payable	(1,838.2)		(615.4)
Accrued liabilities	(302.3)		(184.5)
Contract liabilities	0.1		22.0
Other non-current assets and liabilities	(51.5)		(69.3)
Net cash (used in) provided by operating activities	(724.4)		218.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(72.3)		(62.1)
Deconsolidation of a subsidiary	(20.4)		—

Net proceeds from investments	2.6		28.8
Other investing activities	0.3		(9.8)
Net cash used in investing activities	(89.8)		(43.1)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock dividends	(232.1)		(215.2)
Repurchases of common stock	(147.9)		—
Tax payments for employee shares withheld	(39.6)		(24.0)
Net (decrease) increase in short-term borrowings	(12.1)		15.8
Acquisition-related payments	(6.0)		(12.3)
Distributions to non-controlling interests	(5.2)		(6.9)
Proceeds from long-term debt	0.0		998.1
Exercise of stock options	0.0		8.0
Early extinguishment of long-term debt	—		(1,066.8)
Other financing activities	(0.2)		(11.2)
Net cash used in financing activities	(443.1)		(314.5)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	(28.8)		(27.9)
Net decrease in cash, cash equivalents and restricted cash	(1,286.1)		(167.1)
Cash, cash equivalents and restricted cash at beginning of period	3,272.2		2,511.5
Cash, cash equivalents and restricted cash at end of period	$	1,986.1	$	2,344.4

The accompanying notes are an integral part of these unaudited financial statements.

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THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in Millions)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss, Net of Tax		Treasury Stock		Total IPG Stockholders’ Equity		Non-controlling Interests		Total Stockholders’ Equity
	Shares	Amount
Balance at March 31, 2022	396.1	$	39.7	$	1,206.0	$	3,196.7	$	(892.3)	$	(63.1)	$	3,487.0	$	61.8	$	3,548.8
Net income						229.6						229.6		2.2		231.8
Other comprehensive loss								(96.6)				(96.6)		(1.3)		(97.9)
Reclassifications related to redeemable non-controlling interests				(1.9)								(1.9)		0.9		(1.0)
Distributions to non-controlling interests												0.0		(2.1)		(2.1)
Change in redemption value of redeemable non-controlling interests						0.1						0.1				0.1
Repurchase of common stock										(84.8)		(84.8)				(84.8)
Common stock dividends ($0.290 per share)						(114.6)						(114.6)				(114.6)
Stock-based compensation	0.3	(0.1)		18.7								18.6				18.6
Shares withheld for taxes	0.0	0.0		(1.2)								(1.2)				(1.2)
Other				0.5								0.5		(9.2)		(8.7)
Balance at June 30, 2022	396.4	$	39.6	$	1,222.1	$	3,311.8	$	(988.9)	$	(147.9)	$	3,436.7	$	52.3	$	3,489.0


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss, Net of Tax		Treasury Stock		Total IPG Stockholders’ Equity		Non-controlling Interests		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2021	394.3	$	39.3	$	1,226.6	$	3,154.3	$	(894.2)	$	0.0	$	3,526.0	$	63.2	$	3,589.2
Net income						389.0						389.0		3.7		392.7
Other comprehensive loss								(94.7)				(94.7)		(1.0)		(95.7)
Reclassifications related to redeemable non-controlling interests				(3.1)								(3.1)		0.8		(2.3)
Distributions to non-controlling interests														(5.2)		(5.2)
Change in redemption value of redeemable non-controlling interests						(1.3)						(1.3)				(1.3)
Repurchase of common stock										(147.9)		(147.9)				(147.9)
Common stock dividends ($0.580 per share)						(230.2)						(230.2)				(230.2)
Stock-based compensation	3.1	0.4		36.2								36.6				36.6
Shares withheld for taxes	(1.0)	(0.1)		(38.1)								(38.2)				(38.2)
Other				0.5								0.5		(9.2)		(8.7)
Balance at June 30, 2022	396.4	$	39.6	$	1,222.1	$	3,311.8	$	(988.9)	$	(147.9)	$	3,436.7	$	52.3	$	3,489.0

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	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss, Net of Tax		Total IPG Stockholders’ Equity		Non-controlling Interests		Total Stockholders’ Equity
	Shares	Amount
Balance at March 31, 2021	393.2	$	39.3	$	1,107.9	$	2,623.1	$	(896.3)	$	2,874.0	$	47.6	$	2,921.6
Net income						263.3				263.3		4.5		267.8
Other comprehensive income								10.0		10.0		0.1		10.1
Reclassifications related to redeemable non-controlling interests												(0.4)		(0.4)
Distributions to non-controlling interests												(3.5)		(3.5)
Change in redemption value of redeemable non-controlling interests						(1.7)				(1.7)				(1.7)

Common stock dividends ($0.270 per share)						(107.2)				(107.2)				(107.2)
Stock-based compensation	0.3	0.0		25.7						25.7				25.7
Exercise of stock options	0.0	0.0		0.1						0.1				0.1
Shares withheld for taxes	0.0	0.0		(1.3)						(1.3)				(1.3)
Other												0.1		0.1
Balance at June 30, 2021	393.5	$	39.3	$	1,132.4	$	2,777.5	$	(886.3)	$	3,062.9	$	48.4	$	3,111.3


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss, Net of Tax		Total IPG Stockholders’ Equity		Non-controlling Interests		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2020	390.9	$	39.0	$	1,099.3	$	2,636.9	$	(880.2)	$	2,895.0	$	48.9	$	2,943.9
Net income						355.0				355.0		5.2		360.2
Other comprehensive loss								(6.1)		(6.1)		0.0		(6.1)
Reclassifications related to redeemable non-controlling interests												0.6		0.6
Distributions to non-controlling interests												(6.8)		(6.8)
Change in redemption value of redeemable non-controlling interests						(0.7)				(0.7)				(0.7)

Common stock dividends ($0.540 per share)						(213.7)				(213.7)				(213.7)
Stock-based compensation	2.9	0.3		49.1						49.4				49.4
Exercise of stock options	0.6	0.1		8.3						8.4				8.4
Shares withheld for taxes	(0.9)	(0.1)		(24.3)						(24.4)				(24.4)
Other												0.5		0.5
Balance at June 30, 2021	393.5	$	39.3	$	1,132.4	$	2,777.5	$	(886.3)	$	3,062.9	$	48.4	$	3,111.3

The accompanying notes are an integral part of these unaudited financial statements.

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Notes to Consolidated Financial Statements

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

Note 1: Basis of Presentation

The unaudited Consolidated Financial Statements have been prepared by The Interpublic Group of Companies, Inc. and its subsidiaries (the “Company,” “IPG,” “we,” “us” or “our”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting interim financial information on Form 10-Q. Accordingly, they do not include certain information and disclosures required for complete financial statements. The effects of the coronavirus ("COVID-19") pandemic have impacted and will likely continue to impact our results of operations, cash flows and financial position. The Company’s Consolidated Financial Statements presented herein reflect the latest estimates and assumptions made by management that affect the reported amounts of assets and liabilities and related disclosures as of the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. The Company believes it has used reasonable estimates and assumptions to assess the fair values of goodwill, long-lived assets and indefinite-lived intangible assets; assessment of the annual effective tax rate; valuation of deferred income taxes and allowance for expected credit losses on future uncollectible accounts receivable.

Actual results could differ from these estimates and assumptions. The consolidated results for interim periods are not necessarily indicative of results for the full year and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”).

Effective January 1, 2022, the Company completed a managerial and operational review, which resulted in organizational realignments to our financial reporting segment structure. As a result, the Company determined we conduct our business across three reportable segments described in Note 11. The three reportable segments are: Media, Data & Engagement Solutions ("MD&E"), Integrated Advertising & Creativity Led Solutions ("IA&C"), and Specialized Communications & Experiential Solutions ("SC&E"). In conjunction with the new reporting structure, the Company has recast certain prior period amounts, wherever applicable, to reflect our revised organizational alignment. This change does not impact the unaudited consolidated statements of operations and comprehensive income, consolidated balance sheets, consolidated statement of cash flows and consolidated statements of stockholders' equity for any of the previously reported periods.

Cost of services is comprised of the expenses of our revenue-producing reportable segments, MD&E, IA&C, and SC&E, including salaries and related expenses, office and other direct expenses and billable expenses, and includes an allocation of the centrally managed expenses from our "Corporate and Other" group. Office and other direct expenses include rent expense, professional fees, certain expenses incurred by our staff in servicing our clients and other costs directly attributable to client engagements.

Selling, general and administrative expenses are primarily the unallocated expenses from Corporate and Other, excluding depreciation and amortization.

Depreciation and amortization of fixed assets and intangible assets of the Company is disclosed as a separate operating expense.

Restructuring charges in 2022 consist of adjustments to the Company's restructuring actions taken during 2020 to lower our operating expenses structurally and permanently relative to revenue and to accelerate the transformation of our business, as discussed further in Note 7. Restructuring charges mainly include severance and termination costs and lease impairment costs.

In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments, consisting only of normal and recurring adjustments necessary for a fair statement of the information for each period contained therein. Certain reclassifications have been made to prior-period financial statements to conform to the current-period presentation.

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Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

Note 2: Revenue

Disaggregation of Revenue

We have three reportable segments as of June 30, 2022: MD&E, IA&C and SC&E, as further discussed in Note 11. MD&E principally generates revenue from providing global media and communications services, digital services and products, advertising and marketing technology, e‐commerce services, data management and analytics, strategic consulting, and digital brand experience. IA&C principally generates revenue from providing advertising, corporate and brand identity services, and strategic consulting. SC&E generates revenue from providing best-in-class global public relations and communications services, events, sports and entertainment marketing, and strategic consulting.

Our agencies are located in over 100 countries, including every significant world market. Our geographic revenue breakdown is listed below.


	Three months ended June 30,				Six months ended June 30,
Total revenue:	2022		2021		2022		2021
United States	$	1,777.1	$	1,557.9	$	3,427.5	$	2,983.7
International:
United Kingdom	219.2		209.6		451.3		413.1
Continental Europe	221.1		229.8		425.8		425.4
Asia Pacific	217.8		233.2		433.1		444.1
Latin America	110.0		104.4		204.4		188.0
Other	190.5		174.7		362.1		312.3
Total International	958.6		951.7		1,876.7		1,782.9
Total Consolidated	$	2,735.7	$	2,509.6	$	5,304.2	$	4,766.6


	Three months ended June 30,				Six months ended June 30,
Net revenue:	2022		2021		2022		2021
United States	$	1,554.9	$	1,435.5	$	3,025.0	$	2,745.3
International:
United Kingdom	184.8		194.6		367.2		378.6
Continental Europe	199.8		205.5		379.1		381.3
Asia Pacific	187.8		192.5		362.4		361.6
Latin America	101.9		96.9		189.6		172.3
Other	146.3		144.6		279.4		258.2
Total International	820.6		834.1		1,577.7		1,552.0
Total Consolidated	$	2,375.5	$	2,269.6	$	4,602.7	$	4,297.3

Table of Contents

Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)


MD&E	Three months ended June 30,				Six months ended June 30,
Total revenue:	2022		2021		2022		2021
United States	$	629.0	$	603.5	$	1,228.2	$	1,138.1
International	411.8		399.5		768.4		736.4
Total MD&E	$	1,040.8	$	1,003.0	$	1,996.6	$	1,874.5

Net revenue:
United States	$	617.6	$	598.7	$	1,205.4	$	1,126.4
International	400.2		386.6		744.5		708.7
Total MD&E	$	1,017.8	$	985.3	$	1,949.9	$	1,835.1


IA&C	Three months ended June 30,				Six months ended June 30,
Total revenue:	2022		2021		2022		2021
United States	$	717.9	$	639.9	$	1,391.8	$	1,239.8
International	386.1		409.0		765.8		762.3
Total IA&C	$	1,104.0	$	1,048.9	$	2,157.6	$	2,002.1

Net revenue:
United States	$	690.6	$	615.9	$	1,337.0	$	1,190.3
International	318.7		347.3		630.8		648.2
Total IA&C	$	1,009.3	$	963.2	$	1,967.8	$	1,838.5


SC&E	Three months ended June 30,				Six months ended June 30,
Total revenue:	2022		2021		2022		2021
United States	$	430.2	$	314.5	$	807.5	$	605.8
International	160.7		143.2		342.5		284.2
Total SC&E	$	590.9	$	457.7	$	1,150.0	$	890.0

Net revenue:
United States	$	246.7	$	220.9	$	482.6	$	428.6
International	101.7		100.2		202.4		195.1
Total SC&E	$	348.4	$	321.1	$	685.0	$	623.7

Contract Balances

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.


	June 30, 2022		December 31, 2021
Accounts receivable, net of allowance of $58.8 and $68.5, respectively	$	4,014.9	$	5,177.7
Accounts receivable, billable to clients	2,233.0		2,347.2
Contract assets	47.5		62.3
Contract liabilities (deferred revenue)	664.4		688.5

Contract assets are primarily comprised of contract incentives that are generally satisfied annually under the terms of our contracts and are transferred to accounts receivable when the right to payment becomes unconditional. Contract liabilities relate

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Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

to advance consideration received from customers under the terms of our contracts primarily related to reimbursements of third-party expenses, whether we act as principal or agent, and to a lesser extent, periodic retainer fees, both of which are generally recognized shortly after billing.

The majority of our contracts are for periods of one year or less with the exception of our data management contracts. For those contracts with a term of more than one year, we had approximately $565.9 of unsatisfied performance obligations as of June 30, 2022, which will be recognized as services are performed over the remaining contractual terms through 2027.

Note 3: Debt and Credit Arrangements

Long-Term Debt

A summary of the carrying amounts of our long-term debt is listed below.


	Effective Interest Rate	June 30, 2022		December 31, 2021

4.200% Senior Notes due 2024 (less unamortized discount and issuance costs of $0.1 and $0.4, respectively)	4.240%	$	249.5	$	249.4
4.650% Senior Notes due 2028 (less unamortized discount and issuance costs of $1.1 and $2.8, respectively)	4.780%	496.1		495.8
4.750% Senior Notes due 2030 (less unamortized discount and issuance costs of $3.0 and $4.8, respectively)	4.920%	642.2		641.7
2.400% Senior Notes due 2031 (less unamortized discount and issuance costs of $0.8 and $4.0, respectively)	2.512%	495.2		495.0
3.375% Senior Notes due 2041 (less unamortized discount and issuance costs of $1.0 and $5.4, respectively)	3.448%	493.6		493.4
5.400% Senior Notes due 2048 (less unamortized discount and issuance costs of $2.6 and $4.9, respectively)	5.480%	492.5		492.3
Other notes payable and capitalized leases		37.6		41.7
Total long-term debt		2,906.7		2,909.3
Less: current portion		0.6		0.7
Long-term debt, excluding current portion		$	2,906.1	$	2,908.6

As of June 30, 2022 and December 31, 2021, the estimated fair value of the Company's long-term debt was $2,696.0 and $3,337.4, respectively. Refer to Note 12 for details.

Credit Agreement

We maintain a committed corporate credit facility, originally dated as of July 18, 2008, which has been amended and restated from time to time (the "Credit Agreement"). We use our Credit Agreement to increase our financial flexibility, to provide letters of credit primarily to support obligations of our subsidiaries and to support our commercial paper program. On November 1, 2021, we amended and restated the Credit Agreement. As amended, among other things, the maturity date of the Credit Agreement was extended to November 1, 2026 and the cost structure of the Credit Agreement was changed. The Credit Agreement continues to include a required leverage ratio of not more than 3.50 to 1.00, among other customary covenants, including limitations on our liens and the liens of our consolidated subsidiaries and limitations on the incurrence of subsidiary debt. At the election of the Company, the leverage ratio may be changed to not more than 4.00 to 1.00 for four consecutive quarters, beginning with the fiscal quarter in which there is an occurrence of one or more acquisitions with an aggregate purchase price of at least $200.0.

Table of Contents

Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

The Credit Agreement is a revolving facility, under which amounts borrowed by us or any of our subsidiaries designated under the Credit Agreement may be repaid and reborrowed, subject to an aggregate lending limit of $1,500.0, or the equivalent in other currencies. The Company has the ability to increase the commitments under the Credit Agreement from time to time by an additional amount of up to $250.0, provided the Company receives commitments for such increases and satisfies certain other conditions. The aggregate available amount of letters of credit outstanding may decrease or increase, subject to a sublimit of $50.0, or the equivalent in other currencies. Our obligations under the Credit Agreement are unsecured. As of June 30, 2022, there were no borrowings under the Credit Agreement; however, we had $10.6 of letters of credit under the Credit Agreement, which reduced our total availability to $1,489.4. We were in compliance with all of our covenants in the Credit Agreement as of June 30, 2022.

Uncommitted Lines of Credit

We also have uncommitted lines of credit with various banks that permit borrowings at variable interest rates and that are primarily used to fund working capital needs. We have guaranteed the repayment of some of these borrowings made by certain subsidiaries. If we lose access to these credit lines, we would have to provide funding directly to some of our operations. As of June 30, 2022, the Company had uncommitted lines of credit in an aggregate amount of $955.1, under which we had outstanding borrowings of $45.7 classified as short-term borrowings on our Consolidated Balance Sheet. The average amount outstanding during the second quarter of 2022 was $62.9 with a weighted-average interest rate of approximately 4.7%.

Commercial Paper

The Company is authorized to issue unsecured commercial paper up to a maximum aggregate amount outstanding at any time of $1,500.0. Borrowings under the program are supported by the Credit Agreement described above. Proceeds of the commercial paper are used for working capital and general corporate purposes, including the repayment of maturing indebtedness and other short-term liquidity needs. The maturities of the commercial paper vary but may not exceed 397 days from the date of issue. During the second quarter of 2022, there was no commercial paper activity and, as of June 30, 2022, there was no commercial paper outstanding.

Table of Contents

Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

Note 4: Earnings Per Share

The following sets forth basic and diluted earnings per common share available to IPG common stockholders.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income available to IPG common stockholders	$	229.6	$	263.3	$	389.0	$	355.0

Weighted-average number of common shares outstanding - basic	393.1		393.3		393.8		392.4
Dilutive effect of stock options and restricted shares	3.7		5.7		3.7		5.2
Weighted-average number of common shares outstanding - diluted	396.8		399.0		397.5		397.6

Earnings per share available to IPG common stockholders:
Basic	$	0.58	$	0.67	$	0.99	$	0.90
Diluted	$	0.58	$	0.66	$	0.98	$	0.89

Note 5: Supplementary Data

Accrued Liabilities

The following table presents the components of accrued liabilities.


	June 30, 2022		December 31, 2021
Salaries, benefits and related expenses	$	422.8	$	685.4
Interest	39.9		39.0
Income taxes payable	36.8		42.8
Office and related expenses	28.1		30.5
Acquisition obligations	17.4		15.4
Restructuring charges	3.2		8.1
Other	75.3		96.9
Total accrued liabilities	$	623.5	$	918.1

Other (Expense) Income, Net

Results of operations for the three and six months ended June 30, 2022 and 2021 include certain items that are not directly associated with our revenue-producing operations.


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net losses on sales of businesses	$	(0.7)	$	(1.7)	$	(7.1)	$	(14.2)
Loss on early extinguishment of debt	—		—		—		(74.0)
Other	(3.8)		6.4		(3.6)		9.0
Other (expense) income, net	$	(4.5)	$	4.7	$	(10.7)	$	(79.2)

Net losses on sales of businesses – During the three and six months ended June 30, 2022 and 2021, the amounts recognized were related to sales of businesses and the classification of certain assets and liabilities, consisting primarily of cash, as held for sale within our MD&E, IA&C, and SC&E reportable segments. The businesses sold and held for sale primarily represent unprofitable, non-strategic agencies which are expected to be sold within the next twelve months.

Table of Contents

Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

Loss on early extinguishment of debt – During the six months ended June 30, 2021, we recorded a loss of $74.0 related to the early extinguishment of all $250.0 aggregate principal amount of our 4.000% unsecured senior notes due 2022, all $500.0 aggregate principal amount of our 3.750% unsecured senior notes due 2023, and $250.0 of the $500.0 aggregate principal amount of our 4.200% unsecured senior notes due 2024.

Other - During the three and six months ended June 30, 2022, the amounts recognized were primarily related to a non-cash loss related to the deconsolidation of a previously consolidated entity in which we maintain an equity interest.

Share Repurchase Program

In February 2022, our Board of Directors (the "Board") reauthorized a program to repurchase, from time to time, up to $400.0 of our common stock.

We may effect such repurchases through open market purchases, trading plans established in accordance with U.S. Securities and Exchange Commission ("SEC") rules, derivative transactions or other means. The timing and amount of repurchases in future periods will depend on market conditions and other funding requirements.

The following table presents our share repurchase activity under our share repurchase programs for the six months ended June 30, 2022 and 2021.


	Six months ended June 30,
	2022		2021
Number of shares repurchased	4.5		—
Aggregate cost, including fees	$	147.9	$	—
Average price per share, including fees	$	32.84	$	—

As of June 30, 2022, $252.2, excluding fees, remains available for repurchase under the share repurchase program reauthorized in 2022, which has no expiration date.

Redeemable Non-controlling Interests

Many of our acquisitions include provisions under which the non-controlling equity owners may require us to purchase additional interests in a subsidiary at their discretion. Redeemable non-controlling interests are adjusted quarterly, if necessary, to their estimated redemption value, but not less than their initial fair value. Any adjustments to the redemption value impact retained earnings or additional paid in capital, except for foreign currency translation adjustments.

The following table presents changes in our redeemable non-controlling interests.


	Six months ended June 30,
	2022		2021
Balance at beginning of period	$	15.6	$	93.1
Change in related non-controlling interests balance	(0.8)		0.6
Changes in redemption value of redeemable non-controlling interests:

Additions	3.1		0.0
Redemptions	(9.4)		(21.1)
Redemption value adjustments	0.9		(0.4)
Balance at end of period	$	9.4	$	72.2

Goodwill

The Company transitioned to the new segment reporting structure effective January 1, 2022 which resulted in certain changes to our operating segments and reporting units. We have allocated goodwill to our reporting units using a relative fair value approach. In addition, we completed an assessment of any potential goodwill impairment for all reporting units immediately prior and subsequent to the reallocation and determined that no impairment existed.

Goodwill is the excess purchase price remaining from an acquisition after an allocation of purchase price has been made to identifiable assets acquired and liabilities assumed based on estimated fair values.

Table of Contents

Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

The following table sets forth details of changes in goodwill by reportable segment of the Company:


	IAN		DXTRA		MD&E		IA&C		SC&E		Total
Balance at January 1, 2021	$	4,264.5	$	681.0	$	—	$	—	$	—	$	4,945.5
Dispositions	(0.2)		0.0		—		—		—		(0.2)
Foreign Currency and Other	(32.7)		(3.9)		—		—		—		(36.6)
Balance at December 31, 2021	$	4,231.6	$	677.1	$	—	$	—	$	—	$	4,908.7
Goodwill Reallocation	(4,231.6)		(677.1)		2,293.0		1,920.2		695.5		—
Balance at January 1, 2022	—		—		2,293.0		1,920.2		695.5		4,908.7
Dispositions	—		—		—		(4.3)		—		(4.3)
Foreign Currency and Other	—		—		(14.5)		(25.6)		(9.1)		(49.2)
Balance at June 30, 2022	$	—	$	—	$	2,278.5	$	1,890.3	$	686.4	$	4,855.2

Note 6: Income Taxes

For the three and six months ended June 30, 2022, our income tax expense was positively impacted by excess tax benefits on employee share-based payments, the majority of which were recognized in the first quarter due to the timing of the vesting of awards, partially offset by net losses on sales of businesses and the classification of certain assets as held for sale for which we received minimal tax benefit.

We have various tax years under examination by tax authorities in various countries, and in various states, in which we have significant business operations. It is not yet known whether these examinations will, in the aggregate, result in our paying additional taxes. We believe our tax reserves are adequate in relation to the potential for additional assessments in each of the jurisdictions in which we are subject to taxation. We regularly assess the likelihood of additional tax assessments in those jurisdictions and, if necessary, adjust our reserves as additional information or events require.

With respect to all tax years open to examination by U.S. federal, various state and local, and non-U.S. tax authorities, we currently anticipate that total unrecognized tax benefits will decrease by an amount between $35.0 and $45.0 in the next twelve months, a portion of which will affect our effective income tax rate, primarily as a result of the settlement of tax examinations and the lapsing of statutes of limitations.

We are effectively settled with respect to U.S. federal income tax audits through 2016. With limited exceptions, we are no longer subject to state and local income tax audits for years prior to 2013 or non-U.S. income tax audits for years prior to 2010.

Table of Contents

Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

Note 7: Restructuring Charges

Beginning in the second quarter of 2020, the Company took restructuring actions to lower its operating expenses structurally and permanently relative to revenue and to accelerate the transformation of our business (the “2020 Restructuring Plan”). These actions continued through the fourth quarter of 2020, and most were based on our experience and learning in the COVID-19 pandemic and a resulting review of our operations to address certain operating expenses such as occupancy expense and salaries and related expenses.

Lease impairment costs, which relate to the office spaces that were vacated as part of the 2020 Restructuring Plan, included impairments of operating lease right-of-use assets and associated leasehold improvements, furniture and asset retirement obligations in addition to losses and gains related to early lease terminations. Lease impairments were calculated based on estimated fair values using market participant assumptions including forecasted net discounted cash flows related to the operating lease right-of-use assets.

All restructuring actions were identified and initiated in 2020, with all actions completed by the end of the fourth quarter of 2020. The amounts for the three and six months ended June 30, 2022 are adjustments to the actions taken in 2020.

The components of the restructuring charges related to the 2020 Restructuring Plan are listed below.


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Severance and termination costs	$	0.0	$	0.6	$	0.3	$	2.1
Lease impairment costs	0.0		(0.9)		5.3		(1.1)
Other restructuring costs	(0.1)		0.1		0.9		0.1
Total restructuring charges	$	(0.1)	$	(0.2)	$	6.5	$	1.1

Net restructuring charges were comprised of $(0.1) at IA&C for the three months ended June 30, 2022.

Net restructuring charges were comprised of $6.0 at IA&C and $0.4 at SC&E for the six months ended June 30, 2022, which include non-cash lease impairment costs of $5.1 at IA&C and $0.2 at SC&E.

Net restructuring charges were comprised of $0.2 at MD&E, $(0.4) at IA&C and (0.1) at SC&E for the three months ended June 30, 2021.

Net restructuring charges were comprised of $0.2 at MD&E and $0.8 at SC&E for the six months ended June 30, 2021.

A summary of the restructuring activities taken in the first half of 2022 related to the 2020 Restructuring Plan is as follows:


	2020 Restructuring Plan
	Liability at December 31, 2021		Restructuring Expense		Non-Cash Items		Cash Payments		Liability at June 30, 2022
Severance and termination costs	$	9.4	$	0.3	$	0.0	$	6.2	$	3.5
Lease impairment costs	0.0		5.3		5.3		0.0		0.0
Other restructuring costs	0.0		0.9		0.9		0.0		0.0
Total	$	9.4	$	6.5	$	6.2	$	6.2	$	3.5

Note 8: Incentive Compensation Plans

We issue stock-based compensation and cash awards to our employees under various plans established by the Compensation and Leadership Talent Committee of the Board of Directors (the "Compensation Committee") and approved by our stockholders. We issued the following stock-based awards under the 2019 Performance Incentive Plan (the "2019 PIP") during the six months ended June 30, 2022.


	Awards	Weighted-average grant-date fair value (per award)
Restricted stock (units)	1.3	$	36.43
Performance-based stock (shares)	1.6	$	29.99

Total stock-based compensation awards	2.9

Table of Contents

Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

During the six months ended June 30, 2022, the Compensation Committee granted performance cash awards under the 2019 PIP and restricted cash awards under the 2020 Restricted Cash Plan with a total annual target value of $45.7 and $14.8, respectively. Cash awards are expensed over the vesting period, which is typically three years for performance cash awards and two years or three years for restricted cash awards.

Note 9: Accumulated Other Comprehensive Loss, Net of Tax

The following tables present the changes in accumulated other comprehensive loss, net of tax, by component.


	Foreign Currency Translation Adjustments		Derivative Instruments		Defined Benefit Pension and Other Postretirement Plans		Total
Balance as of December 31, 2021	$	(723.2)	$	22.9	$	(193.9)	$	(894.2)
Other comprehensive (loss) income before reclassifications	(111.5)		9.4		3.5		(98.6)
Amount reclassified from accumulated other comprehensive loss, net of tax	1.8		(0.5)		2.6		3.9
Balance as of June 30, 2022	$	(832.9)	$	31.8	$	(187.8)	$	(988.9)


	Foreign Currency Translation Adjustments		Derivative Instruments		Defined Benefit Pension and Other Postretirement Plans		Total
Balance as of December 31, 2020	$	(637.6)	$	6.8	$	(249.4)	$	(880.2)
Other comprehensive (loss) income before reclassifications	(24.4)		13.6		(1.2)		(12.0)
Amount reclassified from accumulated other comprehensive loss, net of tax	(1.5)		3.6		3.8		5.9
Balance as of June 30, 2021	$	(663.5)	$	24.0	$	(246.8)	$	(886.3)

Amounts reclassified from accumulated other comprehensive loss, net of tax, for the three and six months ended June 30, 2022 and 2021 are as follows:


	Three months ended June 30,				Six months ended June 30,				Affected Line Item in the Consolidated Statements of Operations
	2022		2021		2022		2021
Foreign currency translation adjustments	$	1.8	$	(2.2)	$	1.8	$	(1.5)	Other (expense) income, net
Net (gain) loss on derivative instruments	(0.4)		(0.3)		(0.7)		4.9		Other (expense) income, net, Interest expense
Amortization of defined benefit pension and postretirement plan items	1.6		2.5		3.3		4.8		Other (expense) income, net
Tax effect	(0.2)		(0.5)		(0.5)		(2.3)		Provision for income taxes
Total amount reclassified from accumulated other comprehensive loss, net of tax	$	2.8	$	(0.5)	$	3.9	$	5.9

Table of Contents

Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

Note 10: Employee Benefits

We have a defined benefit pension plan that covers certain U.S. employees (the “Domestic Pension Plan”). We also have numerous funded and unfunded plans outside the U.S. The Interpublic Limited Pension Plan in the U.K. is a defined benefit plan and is our most material foreign pension plan in terms of the benefit obligation and plan assets. Some of our domestic and foreign subsidiaries provide postretirement health benefits and life insurance to eligible employees and, in certain cases, their dependents. The domestic postretirement benefit plan is our most material postretirement benefit plan in terms of the benefit obligation. Certain immaterial foreign pension and postretirement benefit plans have been excluded from the table below.

The components of net periodic cost for the Domestic Pension Plan, the significant foreign pension plans and the domestic postretirement benefit plan are listed below.


	Domestic Pension Plan				Foreign Pension Plans				Domestic Postretirement Benefit Plan
Three Months Ended June 30,	2022		2021		2022		2021		2022		2021
Service cost	$	0.0	$	0.0	$	1.2	$	1.1	$	0.0	$	0.0
Interest cost	0.7		0.8		2.3		2.0		0.1		0.1
Expected return on plan assets	(1.1)		(1.4)		(5.2)		(5.3)		0.0		0.0

Amortization of:
Prior service cost	0.0		0.0		0.1		0.1		0.0		0.0
Unrecognized actuarial losses	0.3		0.3		1.1		1.7		0.1		0.4
Net periodic cost	$	(0.1)	$	(0.3)	$	(0.5)	$	(0.4)	$	0.2	$	0.5


	Domestic Pension Plan				Foreign Pension Plans				Domestic Postretirement Benefit Plan
Six Months Ended June 30,	2022		2021		2022		2021		2022		2021
Service cost	$	0.0	$	0.0	$	2.3	$	2.2	$	0.0	$	0.0
Interest cost	1.4		1.5		4.7		4.0		0.3		0.3
Expected return on plan assets	(2.3)		(2.8)		(10.5)		(10.5)		0.0		0.0

Amortization of:
Prior service cost	0.0		0.0		0.1		0.1		0.0		0.0
Unrecognized actuarial losses	0.7		0.8		2.3		3.4		0.2		0.5
Net periodic cost	$	(0.2)	$	(0.5)	$	(1.1)	$	(0.8)	$	0.5	$	0.8

The components of net periodic cost other than the service cost component are included in the line item “Other (expense) income, net” in the Consolidated Statements of Operations.

During the six months ended June 30, 2022, we contributed $0.0 and $9.0 of cash to our domestic and foreign pension plans, respectively. For the remainder of 2022, we expect to contribute approximately $0.0 and $7.0 of cash to our domestic and foreign pension plans, respectively.

Table of Contents

Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

Note 11: Segment Information

As of June 30, 2022, we operate our results across three reportable segments: MD&E, IA&C, and SC&E.

MD&E primarily provides, and is distinguished by innovative capabilities and scale in, global media and communications services, digital services and products, advertising and marketing technology, e‐commerce services, data management and analytics, strategic consulting, and digital brand experience. MD&E is comprised of IPG Mediabrands, Acxiom, and Kinesso, as well as our digital and commerce specialist agencies, which include MRM, R/GA, and Huge.

IA&C primarily provides advertising, corporate and brand identity services, and strategic consulting. IA&C is distinguished by the leading role of complex integrations of ideation and the execution of advertising and creative campaigns across all communications channels that are foundational to client brand identities. IA&C is comprised of leading global networks and agencies that provide a broad range of services, including McCann Worldgroup, IPG Health, MullenLowe Group, Foote, Cone & Belding ("FCB"), and our domestic integrated agencies.

SC&E primarily provides best-in-class global public relations and other specialized communications services, events, sports and entertainment marketing, and strategic consulting. SC&E is comprised of agencies that provide a range of marketing services expertise, including IPG DXTRA and DXTRA Health, Weber Shandwick, Golin, and our sports, entertainment, and experiential agencies.

We also report results for the Corporate and Other group.

In conjunction with the new reporting structure, prior period segment disclosures have been recast to reflect our new reportable segments, as well as the way performance is internally managed and monitored.

We continue to evaluate our financial reporting structure, and the profitability measure, employed by our chief operating decision maker for allocating resources to operating divisions and assessing operating division performance, is segment EBITA. Summarized financial information concerning our reportable segments is shown in the following table.

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Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Total revenue:
MD&E	$	1,040.8	$	1,003.0	$	1,996.6	$	1,874.5
IA&C	1,104.0		1,048.9		2,157.6		2,002.1
SC&E	590.9		457.7		1,150.0		890.0
Total	$	2,735.7	$	2,509.6	$	5,304.2	$	4,766.6

Net revenue:
MD&E	$	1,017.8	$	985.3	$	1,949.9	$	1,835.1
IA&C	1,009.3		963.2		1,967.8		1,838.5
SC&E	348.4		321.1		685.0		623.7
Total	$	2,375.5	$	2,269.6	$	4,602.7	$	4,297.3

Segment EBITA 1:
MD&E	$	154.6	$	201.6	$	256.0	$	337.4
IA&C	177.2		183.0		307.6		301.0
SC&E	59.4		53.0		115.5		93.9
Corporate and Other	(21.0)		(31.6)		(41.9)		(61.7)
Total	$	370.2	$	406.0	$	637.2	$	670.6

Amortization of acquired intangibles:
MD&E	$	17.8	$	18.1	$	35.7	$	36.1
IA&C	2.3		2.6		4.7		5.2
SC&E	1.0		0.9		2.0		1.9
Corporate and Other	0.0		0.0		0.0		0.0
Total	$	21.1	$	21.6	$	42.4	$	43.2

Depreciation and amortization 2:
MD&E	$	25.6	$	24.7	$	51.8	$	49.3
IA&C	14.5		17.0		29.2		33.5
SC&E	4.3		4.7		8.4		9.3
Corporate and Other	1.6		2.1		3.1		4.0
Total	$	46.0	$	48.5	$	92.5	$	96.1

Capital expenditures:
MD&E	$	21.5	$	17.2	$	37.5	$	30.2
IA&C	11.0		10.4		17.0		19.1
SC&E	2.5		1.6		3.3		2.3
Corporate and Other	6.6		4.6		14.5		10.5
Total	$	41.6	$	33.8	$	72.3	$	62.1

1 Adjusted EBITA is calculated as net income available to IPG common stockholders before provision for income taxes, total (expenses) and other income, equity in net income of unconsolidated affiliates, net income attributable to non-controlling interests and amortization of acquired intangibles.

2 Excludes amortization of acquired intangibles.

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Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)


	June 30, 2022		December 31, 2021
Total assets:
MD&E	$	8,522.3	$	9,580.6
IA&C	5,518.4		6,001.1
SC&E	1,710.6		1,594.0
Corporate and Other	1,497.9		2,733.5
Total	$	17,249.2	$	19,909.2

The following table presents the reconciliation of segment EBITA to Income before income taxes.


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
MD&E EBITA	$	154.6	$	201.6	$	256.0	$	337.4
IA&C EBITA	177.2		183.0		307.6		301.0
SC&E EBITA	59.4		53.0		115.5		93.9
Corporate and Other EBITA	(21.0)		(31.6)		(41.9)		(61.7)
Less: consolidated amortization of acquired intangibles	21.1		21.6		42.4		43.2
Operating income	349.1		384.4		594.8		627.4
Total (expenses) and other income	(34.3)		(30.3)		(70.1)		(156.9)
Income before income taxes	$	314.8	$	354.1	$	524.7	$	470.5

Note 12: Fair Value Measurements

Authoritative guidance for fair value measurements establishes a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:


Level 1						Unadjusted quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2						Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3						Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Financial Instruments that are Measured at Fair Value on a Recurring Basis

We primarily apply the market approach to determine the fair value of financial instruments that are measured at fair value on a recurring basis. There were no changes to our valuation techniques used to determine the fair value of financial instruments during the six months ended June 30, 2022. The following tables present information about our financial instruments measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.

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Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)


	June 30, 2022								Balance Sheet Classification
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	1,188.8	$	0.0	$	0.0	$	1,188.8	Cash and cash equivalents
Liabilities
Contingent acquisition obligations 1	$	0.0	$	0.0	$	24.6	$	24.6	Accrued liabilities and Other non-current liabilities

	December 31, 2021								Balance Sheet Classification
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	2,391.8	$	0.0	$	0.0	$	2,391.8	Cash and cash equivalents
Liabilities
Contingent acquisition obligations 1	$	0.0	$	0.0	$	33.5	$	33.5	Accrued liabilities and Other non-current liabilities

1Contingent acquisition obligations includes deferred acquisition payments and unconditional obligations to purchase additional non-controlling equity shares of consolidated subsidiaries. Fair value measurement of the obligations is based upon actual and projected operating performance targets as specified in the related agreements. The decrease in this balance of $8.9 from December 31, 2021 to June 30, 2022 is primarily due to valuation adjustments and payments related to our deferred acquisitions payments from prior-year acquisitions. The amounts payable within the next twelve months are classified in accrued liabilities; any amounts payable thereafter are classified in other non-current liabilities.

Financial Instruments that are not Measured at Fair Value on a Recurring Basis

The following table presents information about our financial instruments that are not measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.


	June 30, 2022								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Total long-term debt	$	0.0	$	2,658.4	$	37.6	$	2,696.0	$	0.0	$	3,295.6	$	41.8	$	3,337.4

Our long-term debt is comprised of senior notes and other notes payable. The fair value of our senior notes, which are traded over-the-counter, is based on quoted prices in markets that are not active. Therefore, these senior notes are classified as Level 2. Our other notes payable are not actively traded, and their fair value is not solely derived from readily observable inputs. The fair value of our other notes payable is determined based on a discounted cash flow model and other proprietary valuation methods, and therefore is classified as Level 3. See Note 3 for further information on our long-term debt.

The discount rates used as significant unobservable inputs in the Level 3 fair value measurements of our contingent acquisition obligations and long-term debt as of June 30, 2022 ranged from 2.0% to 5.0% and 0.4% to 3.4%, respectively.

Non-financial Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Certain non-financial assets and liabilities are measured at fair value on a nonrecurring basis, primarily goodwill (Level 3), intangible assets, and property and equipment. Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment.

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Notes to Consolidated Financial Statements – (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

Note 13: Commitments and Contingencies

Guarantees

As discussed in our 2021 Annual Report, we have guaranteed certain obligations of our subsidiaries relating principally to operating leases, uncommitted lines of credit and cash pooling arrangements. As of June 30, 2022 and December 31, 2021, the amount of parent company guarantees on lease obligations was $608.6 and $667.5, respectively, the amount of parent company guarantees relating to uncommitted lines of credit was $302.2 and $306.5, respectively, and the amount of parent company guarantees related to daylight overdrafts, primarily utilized to manage intra-day overdrafts due to timing of transactions under cash pooling arrangements without resulting in incremental borrowings, was $99.3 and $104.4, respectively. In the event of non-payment by the applicable subsidiary of the obligations covered by a guarantee, we would be obligated to pay the amounts covered by that guarantee. As of June 30, 2022, there were no material assets pledged as security for such parent company guarantees.

Legal Matters

We are involved in various legal proceedings, and subject to investigations, inspections, audits, inquiries and similar actions by governmental authorities, arising in the normal course of business. The types of allegations that arise in connection with such legal proceedings vary in nature, but can include claims related to contract, employment, tax and intellectual property matters. We evaluate all cases each reporting period and record liabilities for losses from legal proceedings when we determine that it is probable that the outcome in a legal proceeding will be unfavorable and the amount, or potential range, of loss can be reasonably estimated. In certain cases, we cannot reasonably estimate the potential loss because, for example, the litigation is in its early stages. While any outcome related to litigation or such governmental proceedings in which we are involved cannot be predicted with certainty, management believes that the outcome of these matters, individually and in the aggregate, will not have a material adverse effect on our financial condition, results of operations or cash flows.

Note 14: Recent Accounting Standards

Accounting pronouncements not listed below were assessed and determined to be not applicable or are expected to have minimal impact on our Consolidated Financial Statements.

Derivatives and Hedging

In March 2022, the Financial Accounting Standards Board (the "FASB") issued amended guidance on hedge accounting which allows nonprepayable financial assets to be included in a closed portfolio hedge using the portfolio layer method, allowing for more consistent accounting over prepayable and nonprepayable hedges. The new guidance also allows multiple hedged layers to be designated for a single closed portfolio, further aligning hedge accounting with risk management strategies. This amended guidance is effective beginning January 1, 2023, with early adoption permitted. We are currently assessing the impact the adoption of the amended guidance will have on our Consolidated Financial Statements.

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)


Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand The Interpublic Group of Companies, Inc. and its subsidiaries (the “Company,” “IPG,” “we,” “us” or “our”). MD&A should be read in conjunction with our unaudited Consolidated Financial Statements and the accompanying notes included in this report and our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”), as well as our other reports and filings with the Securities and Exchange Commission (the “SEC”). Our 2021 Annual Report includes additional information about our significant accounting policies and practices as well as details about the most significant risks and uncertainties associated with our financial and operating results. Our MD&A includes the following sections:

EXECUTIVE SUMMARY provides a discussion about our strategic outlook, factors influencing our business and an overview of our results of operations.

RESULTS OF OPERATIONS provides an analysis of the consolidated and segment results of operations for the periods presented.

LIQUIDITY AND CAPITAL RESOURCES provides an overview of our cash flows, funding requirements, financing and sources of funds, and debt credit ratings.

CRITICAL ACCOUNTING ESTIMATES provides an update to the discussion in our 2021 Annual Report of our accounting policies that require critical judgment, assumptions and estimates.

RECENT ACCOUNTING STANDARDS, by reference to Note 14 to the unaudited Consolidated Financial Statements, provides a discussion of certain accounting standards that have been recently adopted or that have not yet been required to be implemented and may be applicable to our future operations.

NON-GAAP FINANCIAL MEASURE, provides a reconciliation of non-GAAP financial measure with the most directly comparable generally accepted accounting principles in the United States (“U.S. GAAP”) financial measures and sets forth the reasons we believe that presentation of the non-GAAP financial measure contained therein provides useful information to investors regarding our results of operations and financial condition.

EXECUTIVE SUMMARY

Our Business

We are one of the world’s premier global advertising and marketing services companies. With approximately 57,600 employees and operations in all major world markets, we help our clients’ businesses and brands thrive in a consumer economy increasingly defined by digital media, data and continuous change. At IPG, we combine the power of creativity with the benefits of technology, fueling our offerings with a deep understanding of audiences at the individual level, driven by ethical business practices. We have exceptionally talented people, across a balanced portfolio of strong agency brands, who together have set a standard for growth in our industry in recent years.

Our companies specialize in consumer advertising, digital marketing, communications planning and media buying, public relations, specialized communications disciplines and data science. Our networks create customized marketing solutions for clients that range in scale from large global marketers to regional and local clients. Comprehensive global services are critical to effectively serve our multinational and local clients in markets throughout the world as they seek to build brands, increase sales of their products and services, and gain market share.

We operate in a marketing and media landscape that continues to evolve at a rapid pace. Media channels continue to fragment, and clients face an increasingly complex consumer environment. To stay ahead of these challenges and to achieve our objectives, we have made and continue to make investments in creative, strategic and technology talent in areas including fast-growth digital marketing channels, high-growth geographic regions and strategic world markets. We consistently invest in opportunities within our Company to enhance the professional skills of our employees and encourage intra-company collaboration. As appropriate, we also make acquisitions, enter into strategic alliances, and develop relationships with technology and media companies that are building leading-edge marketing tools that complement our agencies’ skill sets and capabilities.

Our financial goals include competitive organic net revenue growth and expansion of Adjusted EBITA margin, as defined and discussed within the Non-GAAP Financial Measure section of this MD&A, which we expect will further strengthen our balance sheet and total liquidity and increase value to our stakeholders. Accordingly, we remain focused on meeting the evolving needs of our clients while concurrently managing our cost structure. We continually seek greater efficiency in the

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

delivery of our services, focusing on more effective resource utilization, including the productivity of our employees, real estate, information technology and shared services, such as finance, human resources and legal. The improvements we have made and continue to make in our financial reporting and business information systems in recent years allow us more timely and actionable insights from our global operations. Our disciplined approach to our balance sheet and liquidity provides us with a solid financial foundation and financial flexibility to manage and grow our business. We believe that our strategy and execution position us to meet our financial goals and to deliver long-term value to all of our stakeholders.

Current Market Conditions

In the second quarter of 2022, we experienced growth, driven in our domestic market by growth across all disciplines, most notably in our advertising and media businesses, as well as our experiential businesses, and in our international markets, by organic growth in all geographic regions, bolstered by strong performance at our media businesses in addition to our experiential businesses and public relations agencies. The continued rapid spread of new COVID-19 variants did not have a significant negative impact on our growth in the quarter. Prospects for continuing general economic recovery and improved financial performance as the year progresses could be affected by the course of the pandemic and the efficacy of vaccination and other public health efforts both domestically and globally. Other macroeconomic risks to our performance for the remainder of 2022 include the impact of any general economic slowdown or contraction, the extent of inflation of labor costs and potential for labor shortages, inflationary pressures on our clients and their customers, the economic impacts of geopolitical conflict and uncertainty, and the impact of continuing and unpredictable supply chain disruptions across the global economy. See Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2021.

Our Financial Information

When we analyze period-to-period changes in our operating performance, we determine the portion of the change that is attributable to changes in foreign currency rates and the net effect of acquisitions and divestitures, and the remainder we call organic change, which indicates how our underlying business performed. We exclude the impact of billable expenses in analyzing our operating performance as the fluctuations from period to period are not indicative of the performance of our underlying businesses and have no impact on our operating income or net income.

The change in our operating performance attributable to changes in foreign currency rates is determined by converting the prior-period reported results using the current-period exchange rates and comparing these prior-period adjusted amounts to the prior-period reported results. Although the U.S. Dollar is our reporting currency, a substantial portion of our revenues and expenses are generated in foreign currencies. Therefore, our reported results are affected by fluctuations in the currencies in which we conduct our international businesses. Our exposure is mitigated as the majority of our revenues and expenses in any given market are generally denominated in the same currency. Both positive and negative currency fluctuations against the U.S. Dollar affect our consolidated results of operations, and the magnitude of the foreign currency impact to our operations related to each geographic region depends on the significance and operating performance of the region. Our results during the first half of 2022 were most adversely impacted by the British Pound Sterling, Euro and Japanese Yen.

For purposes of analyzing changes in our operating performance attributable to the net effect of acquisitions and divestitures, transactions are treated as if they occurred on the first day of the quarter during which the transaction occurred. During the past few years, we have acquired companies that we believe will enhance our offerings and disposed of businesses that are not consistent with our strategic plan.

As discussed in Note 11 in Item 1, Financial Statements (Unaudited), in January 2022, the Company completed a managerial and operational review, which resulted in organizational realignments to our financial reporting segment structure. As a result, we have determined we operate across three reportable segments. The three reportable segments are: Media, Data & Engagement Solutions ("MD&E"), Integrated Advertising & Creativity Led Solutions ("IA&C"), and Specialized Communications & Experiential Solutions ("SC&E"). The historical results, discussion and presentation of our business segments as set forth in this MD&A reflect the impact of these changes for all periods presented in order to present segment information on a comparable basis and does not impact the Company's unaudited consolidated statements of operations and comprehensive income, consolidated balance sheets, consolidated statement of cash flows and consolidated statements of stockholders' equity for any of the previously reported periods.

The metrics that we use to evaluate our financial performance include organic change in net revenue as well as the change in certain operating expenses, and the components thereof, expressed as a percentage of consolidated net revenue, as well as Adjusted EBITA. These metrics are also used by management to assess the financial performance of our reportable segments, MD&E, IA&C, and SC&E. In certain of our discussions, we analyze net revenue by geographic region and by business sector,

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

in which we focus on our top 500 clients, which typically constitute approximately 85% of our annual consolidated net revenues.

Results for the three and six months ended June 30, 2022, may not be indicative of the results that may be expected for the fiscal year ending December 31, 2022. The Consolidated Financial Statements and MD&A presented herein reflect the latest estimates and assumptions made by us that affect the reported amounts of assets and liabilities and related disclosures as of the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. We believe we have used reasonable estimates and assumptions to assess the fair values of goodwill, long-lived assets and indefinite-lived intangible assets; assessment of the annual effective tax rate; valuation of deferred income taxes and allowance for expected credit losses on future uncollectible accounts receivable. If actual market conditions vary significantly from those currently projected, these estimates and assumptions could materially change resulting in adjustments to the carrying values of our assets and liabilities.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

The following table presents a summary of our financial performance for the three and six months ended June 30, 2022 and 2021.


	Three months ended June 30,								Six months ended June 30,
Statement of Operations Data	2022			2021			% Increase/ (Decrease)		2022			2021			% Increase/ (Decrease)
REVENUE:
Net revenue	$	2,375.5		$	2,269.6		4.7	%	$	4,602.7		$	4,297.3		7.1	%
Billable expenses	360.2			240.0			50.1	%	701.5			469.3			49.5	%
Total revenue	$	2,735.7		$	2,509.6		9.0	%	$	5,304.2		$	4,766.6		11.3	%

OPERATING INCOME	$	349.1		$	384.4		(9.2)	%	$	594.8		$	627.4		(5.2)	%

Adjusted EBITA 1	$	370.2		$	406.0		(8.8)	%	$	637.2		$	670.6		(5.0)	%

NET INCOME AVAILABLE TO IPG COMMON STOCKHOLDERS	$	229.6		$	263.3				$	389.0		$	355.0

Earnings per share available to IPG common stockholders:
Basic	$	0.58		$	0.67				$	0.99		$	0.90
Diluted	$	0.58		$	0.66				$	0.98		$	0.89

Operating Ratios
Organic change in net revenue	7.9		%	19.8		%			9.6		%	10.6		%

Operating margin on net revenue	14.7		%	16.9		%			12.9		%	14.6		%
Operating margin on total revenue	12.8		%	15.3		%			11.2		%	13.2		%

Adjusted EBITA margin on net revenue 1	15.6		%	17.9		%			13.8		%	15.6		%

Expenses as a % of net revenue:
Salaries and related expenses	66.9		%	65.4		%			68.5		%	67.0		%
Office and other direct expenses	14.7		%	13.3		%			14.6		%	13.8		%
Selling, general and administrative expenses	0.8		%	1.3		%			0.8		%	1.3		%
Depreciation and amortization	2.8		%	3.1		%			2.9		%	3.2		%
Restructuring charges 2	0.0		%	0.0		%			0.1		%	0.0		%

1 Adjusted EBITA is a financial measure that is not defined by U.S. GAAP. Adjusted EBITA is calculated as net income available to IPG common stockholders before provision for (benefit of) income taxes, total (expenses) and other income, equity in net income (loss) of unconsolidated affiliates, net (income) loss attributable to non-controlling interests and amortization of acquired intangibles. Refer to the “Non-GAAP Financial Measure” section of this MD&A for additional information and for a reconciliation to U.S. GAAP measures.

2 For the three and six months ended June 30, 2022, results include net restructuring charges of $(0.1) and $6.5, respectively. For the three and six months ended June 30, 2021, results include net restructuring charges of $(0.2) and $1.1, respectively. See “Restructuring Charges” in this MD&A and Note 7 to the unaudited Consolidated Financial Statements for further information.

Our organic net revenue increase of 7.9% for the second quarter of 2022 was driven by net higher spending from existing clients across most sectors, notably in the health care, financial services and other sectors, which also each increased from net client wins. During the second quarter of 2022, our Adjusted EBITA margin decreased to 15.6% from 17.9% in the prior-year

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

period as the increase in net revenue, discussed below in the “Results of Operations” section, was outpaced by the overall increase in our operating expenses, excluding billable expenses and amortization of acquired intangibles.

Our organic net revenue increase of 9.6% for the first half of 2022 was driven by higher spending from existing clients across most sectors, most notably in the healthcare, other, financial services and technology & telecom sectors. During the first half of 2022, our Adjusted EBITA margin decreased to 13.8% from 15.6% in the prior-year period as the increase in net revenue, discussed below in the “Results of Operations” section, was outpaced by the overall increase in our operating expenses, excluding billable expenses and amortization of acquired intangibles.

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

RESULTS OF OPERATIONS

Consolidated Results of Operations – Three and Six Months Ended June 30, 2022 Compared to Three and Six Months Ended June 30, 2021

Net Revenue

Our net revenue is directly impacted by the retention and spending levels of existing clients and by our ability to win new clients. Most of our expenses are recognized ratably throughout the year and are therefore less seasonal than revenue. Our net revenue is typically lowest in the first quarter and highest in the fourth quarter, reflecting the seasonal spending of our clients.


			Components of Change								Change
	Three months ended June 30, 2021		Foreign Currency		Net Acquisitions/ (Divestitures)		Organic		Three months ended June 30, 2022		Organic		Total
Consolidated	$	2,269.6	$	(58.0)	$	(14.8)	$	178.7	$	2,375.5	7.9	%	4.7	%
Domestic	1,435.5		—		0.0		119.4		1,554.9		8.3	%	8.3	%
International	834.1		(58.0)		(14.8)		59.3		820.6		7.1	%	(1.6)	%
United Kingdom	194.6		(18.4)		0.0		8.6		184.8		4.4	%	(5.0)	%
Continental Europe	205.5		(22.7)		0.0		17.0		199.8		8.3	%	(2.8)	%
Asia Pacific	192.5		(11.6)		(2.4)		9.3		187.8		4.8	%	(2.4)	%
Latin America	96.9		(1.9)		(1.6)		8.5		101.9		8.8	%	5.2	%
Other	144.6		(3.4)		(10.8)		15.9		146.3		11.0	%	1.2	%

The 8.3% organic increase during the second quarter of 2022 in our domestic market was driven by growth across nearly all disciplines, most notably in our advertising, media and experiential businesses. In our international markets, the 7.1% organic increase was driven by organic growth from all geographic regions, bolstered by strong performance at our media business, in addition to growth at our advertising and experiential businesses and public relations agencies.


			Components of Change								Change
	Six months ended June 30, 2021		Foreign Currency		Net Acquisitions/ (Divestitures)		Organic		Six months ended June 30, 2022		Organic		Total
Consolidated	$	4,297.3	$	(85.6)	$	(21.5)	$	412.5	$	4,602.7	9.6	%	7.1	%
Domestic	2,745.3		—		0.0		279.7		3,025.0		10.2	%	10.2	%
International	1,552.0		(85.6)		(21.5)		132.8		1,577.7		8.6	%	1.7	%
United Kingdom	378.6		(22.7)		0.0		11.3		367.2		3.0	%	(3.0)	%
Continental Europe	381.3		(35.7)		0.0		33.5		379.1		8.8	%	(0.6)	%
Asia Pacific	361.6		(18.3)		(5.7)		24.8		362.4		6.9	%	0.2	%
Latin America	172.3		(5.7)		(1.7)		24.7		189.6		14.3	%	10.0	%
Other	258.2		(3.2)		(14.1)		38.5		279.4		14.9	%	8.2	%

The 10.2% organic increase during the first half of 2022 in our domestic market was driven by growth across all disciplines, most notably in our advertising, media and experiential businesses. In our international markets, the 8.6% organic increase was driven by organic growth from all geographic regions, bolstered by strong performance at our media and advertising businesses in addition to our experiential businesses and public relations agencies.

Refer to the segment discussion later in this MD&A for information on changes in net revenue by segment.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

Salaries and Related Expenses


	Three months ended June 30,								Six months ended June 30,
	2022			2021			% Increase/ (Decrease)		2022			2021			% Increase/ (Decrease)
Salaries and related expenses	$	1,590.2		$	1,484.9		7.1	%	$	3,154.6		$	2,878.0		9.6	%

As a % of net revenue:
Salaries and related expenses	66.9		%	65.4		%			68.5		%	67.0		%
Base salaries, benefits and tax	56.5		%	53.0		%			58.1		%	55.4		%
Incentive expense	4.5		%	6.4		%			4.2		%	5.4		%
Severance expense	0.5		%	0.4		%			0.5		%	0.4		%
Temporary help	4.4		%	4.5		%			4.6		%	4.5		%
All other salaries and related expenses	1.0		%	1.1		%			1.1		%	1.3		%

Net revenue growth of 4.7% was outpaced by the increase in salaries and related expenses of 7.1% during the second quarter of 2022 as compared to the prior-year period, primarily driven by an increase in base salaries, benefits and payroll tax, which was driven by hiring to support revenue growth, partially offset by a decrease in performance-based employee compensation expense.

Net revenue growth of 7.1% was outpaced by the increase in salaries and related expenses of 9.6% during the first half of 2022 as compared to the prior-year period, primarily driven by factors similar to those noted above for the second quarter of 2022.

Office and Other Direct Expenses


	Three months ended June 30,								Six months ended June 30,
	2022			2021			% Increase/ (Decrease)		2022			2021			% Increase/ (Decrease)
Office and other direct expenses	$	349.8		$	301.0		16.2	%	$	673.2		$	593.9		13.4	%

As a % of net revenue:
Office and other direct expenses	14.7		%	13.3		%			14.6		%	13.8		%
Occupancy expense	4.8		%	5.0		%			4.9		%	5.3		%
All other office and other direct expenses 1	9.9		%	8.3		%			9.7		%	8.5		%

1Includes 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.

Office and other direct expenses increased by 16.2% compared to the net revenue increase of 4.7% during the second quarter of 2022 as compared to the prior-year period. The increase in office and other direct expenses was mainly due to increases in travel and entertainment expenses, professional consulting fees and client services costs, as well as increases in expenses related to company meetings and conferences, partially offset by savings on occupancy expense as a result of real estate restructuring actions taken in 2020.

Office and other direct expenses increased by 13.4% compared to the net revenue increase of 7.1% during the first half of 2022 as compared to the prior-year period. The increase in office and other direct expenses was mainly due to factors similar to those noted above for the second quarter of 2022.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) are primarily the unallocated expenses of our "Corporate and Other" group, as detailed further in the segment discussion later in this MD&A, excluding depreciation and amortization. For the three months ended June 30, 2022, SG&A as a percentage of net revenue decreased as compared to the prior-year period,

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

primarily due to decreases in performance-based incentive compensation expense, partially offset by an increase in professional consulting fees. For the first half of 2022, SG&A as a percentage of net revenue decreased as compared to the prior-year period, primarily due to decreases in performance-based incentive compensation expense, partially offset by increases in base salaries, benefits and tax and an increase in professional consulting fees.

Depreciation and Amortization

During the second quarter and first half of 2022, depreciation and amortization expenses decreased compared to the prior-year periods.

Restructuring Charges

The components of the restructuring charges related to the 2020 Restructuring Plan are listed below.


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Severance and termination costs	$	0.0	$	0.6	$	0.3	$	2.1
Lease impairment costs	0.0		(0.9)		5.3		(1.1)
Other restructuring costs	(0.1)		0.1		0.9		0.1
Total restructuring charges	$	(0.1)	$	(0.2)	$	6.5	$	1.1

Net restructuring charges were comprised of $(0.1) at IA&C for the three months ended June 30, 2022.

Net restructuring charges were comprised of $6.0 at IA&C and $0.4 at SC&E for the six months ended June 30, 2022, which include non-cash lease impairment costs of $5.1 at IA&C and $0.2 at SC&E.

Net restructuring charges were comprised of $0.2 at MD&E, $(0.4) at IA&C and (0.1) at SC&E for the three months ended June 30, 2021.

Net restructuring charges were comprised of $0.2 at MD&E and $0.8 at SC&E for the six months ended June 30, 2021.

A summary of the restructuring activities taken in the first half of 2022 related to the 2020 Restructuring Plan is as follows:


	2020 Restructuring Plan
	Liability at December 31, 2021		Restructuring Expense		Non-Cash Items		Cash Payments		Liability at June 30, 2022
Severance and termination costs	$	9.4	$	0.3	$	0.0	$	6.2	$	3.5
Lease impairment costs	0.0		5.3		5.3		0.0		0.0
Other restructuring costs	0.0		0.9		0.9		0.0		0.0
Total	$	9.4	$	6.5	$	6.2	$	6.2	$	3.5

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

EXPENSES AND OTHER INCOME


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Cash interest on debt obligations	$	(40.2)	$	(41.7)	$	(78.8)	$	(88.8)
Non-cash interest	(0.8)		(0.9)		(1.6)		(3.4)
Interest expense	(41.0)		(42.6)		(80.4)		(92.2)
Interest income	11.2		7.6		21.0		14.5
Net interest expense	(29.8)		(35.0)		(59.4)		(77.7)
Other (expense) income, net	(4.5)		4.7		(10.7)		(79.2)
Total (expenses) and other income	$	(34.3)	$	(30.3)	$	(70.1)	$	(156.9)

Net interest expense decreased by $5.2 and $18.3 for the three and six months ended June 30, 2022, respectively, compared to a year ago, primarily attributable to decreased cash interest expense as a result of the maturity of our $500.0 in aggregate principal amount 3.750% unsecured senior notes in the third quarter of 2021.

Other (Expense) Income, Net

Results of operations for the three and six months ended June 30, 2022 and 2021 include certain items that are not directly associated with our revenue-producing operations.


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net losses on sales of businesses	$	(0.7)	$	(1.7)	$	(7.1)	$	(14.2)
Loss on early extinguishment of debt	—		—		—		(74.0)
Other	(3.8)		6.4		(3.6)		9.0
Other (expense) income, net	$	(4.5)	$	4.7	$	(10.7)	$	(79.2)

INCOME TAXES


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
INCOME BEFORE INCOME TAXES	$	314.8	$	354.1	$	524.7	$	470.5
Provision for income taxes	$	83.7	$	86.7	$	132.8	$	110.5

Our tax rates are affected by many factors, including our worldwide earnings from various countries, changes in legislation and tax characteristics of our income. For the three and six months ended June 30, 2022, our income tax expense was positively impacted by excess tax benefits on employee share-based payments, the majority of which were recognized in the first quarter due to the timing of the vesting of awards, partially offset by net losses on sales of businesses and the classification of certain assets as held for sale for which we received minimal tax benefit.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

For the three and six months ended June 30, 2021, our income tax expense was positively impacted by excess tax benefits on employee share-based payments, the majority of which were recognized in the first quarter due to the timing of the vesting of awards, and the revaluation of deferred tax balances resulting from the enactment of tax law changes. This was partially offset by net losses on sales of businesses and the classification of certain assets as held for sale for which we received minimal tax benefit, as well as by losses in certain foreign jurisdictions where we receive no tax benefit due to 100% valuation allowances.

EARNINGS PER SHARE

Basic earnings per share available to IPG common stockholders for the three and six months ended June 30, 2022 were $0.58 and $0.99, respectively, compared to basic earnings per share of $0.67 and $0.90 for the three and six months ended June 30, 2021, respectively. Diluted earnings per share available to IPG common stockholders for the three and six months ended June 30, 2022 were $0.58 and $0.98, respectively, compared to diluted earnings per share of $0.66 and $0.89 for the three and six months ended June 30, 2021, respectively.

Basic and diluted earnings per share for the three months ended June 30, 2022 included negative impacts of $0.04 from the amortization of acquired intangibles and $0.01 from the deconsolidation of a previously consolidated entity.

Basic and diluted earnings per share for the six months ended June 30, 2022 included negative impacts of $0.09 from the amortization of acquired intangibles, $0.01 from restructuring charges, $0.01 from the deconsolidation of a previously consolidated entity and $0.02 from net losses on sales of businesses and the classification of certain assets as held for sale.

Basic and diluted earnings per share for the three months ended June 30, 2021 included a negative impact of $0.04 from the amortization of acquired intangibles.

Basic and diluted earnings per share for the six months ended June 30, 2021 included a negative impact of $0.09 from the amortization of acquired intangibles, a negative impact of $0.03 from net losses on sales of businesses and the classification of certain assets as held for sale and a negative impact of $0.14 from the loss on early extinguishment of debt.

Segment Results of Operations – Three and Six Months Ended June 30, 2022 Compared to Three and Six Months Ended June 30, 2021

As discussed in Note 11 to the unaudited Consolidated Financial Statements, we have three reportable segments as of June 30, 2022: MD&E, IA&C and SC&E. We also report results for the “Corporate and Other” group.

Media, Data & Engagement Solutions

Net Revenue


			Components of Change								Change
	Three months ended June 30, 2021		Foreign Currency		Net Acquisitions/ (Divestitures)		Organic		Three months ended June 30, 2022		Organic		Total
Consolidated	$	985.3	$	(28.8)	$	(0.1)	$	61.4	$	1,017.8	6.2	%	3.3	%
Domestic	598.7		—		0.0		18.9		617.6		3.2	%	3.2	%
International	386.6		(28.8)		(0.1)		42.5		400.2		11.0	%	3.5	%

The organic increase during the second quarter of 2022 was mainly attributable to net higher spending from existing clients in financial services, other and health care sectors. The organic increase of 3.2% during the second quarter of 2022 in our domestic market was driven by revenue increases at our media businesses and data management and analytics. In our international markets, the 11.0% organic increase was primarily driven by increases at our media businesses and data management and analytics, and was most notable in the Continental Europe and Asia Pacific regions.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)


			Components of Change								Change
	Six months ended June 30, 2021		Foreign Currency		Net Acquisitions/ (Divestitures)		Organic		Six months ended June 30, 2022		Organic		Total
Consolidated	$	1,835.1	$	(43.9)	$	(0.2)	$	158.9	$	1,949.9	8.7	%	6.3	%
Domestic	1,126.4		—		0.0		79.0		1,205.4		7.0	%	7.0	%
International	708.7		(43.9)		(0.2)		79.9		744.5		11.3	%	5.1	%

The organic increase during the first half of 2022 was mainly attributable to net higher spending from existing clients in financial services, other, retail and technology & telecom sectors. The organic increase during the first half of 2022 in our domestic market was driven by revenue increases across all disciplines, most notably at our media businesses and data management and analytics. In our international markets, the organic increase was driven by growth across all disciplines, and was most notable in the Continental Europe and Asia Pacific regions.

Segment EBITA


	Three months ended June 30,								Six months ended June 30,
	2022			2021			Change		2022			2021			Change
Segment EBITA	$	154.6		$	201.6		(23.3)	%	$	256.0		$	337.4		(24.1)	%
Segment EBITA margin on net revenue	15.2		%	20.5		%			13.1		%	18.4		%

Segment EBITA margin decreased during the second quarter of 2022 compared to the prior-year period, as the increase in net revenue, as discussed above, was outpaced by the increase in our operating expenses, excluding billable expenses and amortization of acquired intangibles. Net revenue growth of 3.3% was outpaced by the increase in salaries and related expenses as compared to the prior-year period, primarily driven by increases in base salaries, benefits and tax, which was driven by hiring to support revenue growth, partially offset by decreases in performance-based incentive compensation expense. Office and other direct expense increased mainly due to increases in travel and entertainment expenses, client service costs, professional consulting fees and expenses related to company meetings and conferences.

Segment EBITA margin decreased during the first half of 2022 when compared to the prior-year period, as the increase in net revenue, was outpaced by the increase in our operating expenses, excluding billable expenses and amortization of acquired intangibles. Net revenue growth of 6.3% was outpaced by the increase in salaries and related expenses as compared to the prior year period, primarily driven by increases in base salaries, benefits and tax, which was driven by hiring to support revenue growth. Office and other direct expenses increased mainly due to factors similar to those noted above for the second quarter of 2022 in addition to increases in employee recruitment costs.

Depreciation and amortization, excluding amortization of acquired intangibles, as a percentage of net revenue was 2.5% during the second quarter of 2022 and 2.7% in the first half of 2022, which decreased slightly as compared to the prior-year periods.

Integrated Advertising & Creativity Led Solutions

Net Revenue


			Components of Change								Change
	Three months ended June 30, 2021		Foreign Currency		Net Acquisitions/ (Divestitures)		Organic		Three months ended June 30, 2022		Organic		Total
Consolidated	$	963.2	$	(21.3)	$	(14.1)	$	81.5	$	1,009.3	8.5	%	4.8	%
Domestic	615.9		—		0.0		74.7		690.6		12.1	%	12.1	%
International	347.3		(21.3)		(14.1)		6.8		318.7		2.0	%	(8.2)	%

The organic increase during the second quarter of 2022 was driven by net higher spending from existing clients across nearly all sectors, most notably in the health care, financial services, other and food & beverage sectors. The 12.1% organic increase during the second quarter of 2022 in our domestic market was driven by growth in our advertising businesses. In our

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)

(Amounts in Millions, Except Per Share Amounts)

(Unaudited)

international markets, the 2.0% organic increase was driven by growth in our advertising businesses, and was most notable in the Other region led by the Middle East and Canada.


			Components of Change								Change
	Six months ended June 30, 2022		Foreign Currency		Net Acquisitions/ (Divestitures)		Organic		Six months ended June 30, 2022		Organic		Total
Consolidated	$	1,838.5	$	(30.8)	$	(19.9)	$	180.0	$	1,967.8	9.8	%	7.0	%
Domestic	1,190.3		—		0.0		146.7		1,337.0		12.3	%	12.3	%
International	648.2		(30.8)		(19.9)		33.3		630.8		5.1	%