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 income taxes, total (expenses) and other income, equity in net loss of unconsolidated affiliates, net income attributable to non-controlling interests, amortization of acquired intangibles and impairment of goodwill. 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 nine months ended September 30, 2024, results include net restructuring charges of $0.5 and $1.4, respectively. For the three and nine months ended September 30, 2023, results include net restructuring charges of $(0.6) and $(0.7), respectively.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued)
(Amounts in Millions, Except Per Share Amounts)
(Unaudited)
Total revenue, which includes billable expenses, decreased (1.9)% during the third quarter of 2024. Our organic revenue before billable expenses was flat during the third quarter of 2024, compared to an organic decrease of (0.4)% during the third quarter of 2023. This was a result of net client wins and increased spending from existing clients in our food & beverage and consumer goods sectors being offset by net client losses and lower spending from existing clients in our auto & transportation and technology & telecom sectors. During the third quarter of 2024, our Adjusted EBITA margin on revenue before billable expenses was unchanged at 17.2% from the prior-year period as revenue before billable expenses and operating expenses, excluding billable expenses, amortization of acquired intangibles and impairment of goodwill, decreased. See further discussion below in the “Results of Operations” section.
Total revenue, which includes billable expenses, decreased (0.4)% during the first nine months of 2024. Our organic increase of revenue before billable expenses was 1.0% during the first nine months of 2024, compared to an organic decrease of (0.8)% during the first nine months of 2023. The increase was due to net client wins and increased spending from existing clients in our healthcare and food & beverage sectors, partially offset by net client losses and lower spending from existing clients in our auto & transportation and technology & telecom sectors. During the first nine months of 2024, our Adjusted EBITA margin on revenue before billable expenses was unchanged at 13.8% from the prior-year period as revenue before billable expenses and operating expenses, excluding billable expenses, amortization of acquired intangibles and impairment of goodwill, decreased. See further discussion below in the “Results of Operations” section.
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 Nine Months Ended September 30, 2024 Compared to Three and Nine Months Ended September 30, 2023
Revenue before billable expenses
Our revenue before billable expenses 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 revenue before billable expenses 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
September 30, 2023 | Foreign
Currency | | Net
Acquisitions/
(Divestitures) | | Organic | | Three months ended
September 30, 2024 | Organic | | Total |
| Consolidated | $ | 2,309.0 | | | $ | (10.4) | | | $ | (56.1) | | | $ | 0.2 | | | $ | 2,242.7 | | | 0.0 | % | | (2.9) | % |
| Domestic | 1,509.9 | | | — | | | (42.3) | | | 0.2 | | | 1,467.8 | | | 0.0 | % | | (2.8) | % |
| International | 799.1 | | | (10.4) | | | (13.8) | | | 0.0 | | | 774.9 | | | 0.0 | % | | (3.0) | % |
| United Kingdom | 193.0 | | | 4.1 | | | (2.0) | | | (1.3) | | | 193.8 | | | (0.7) | % | | 0.4 | % |
| Continental Europe | 178.3 | | | 0.5 | | | (2.3) | | | 1.0 | | | 177.5 | | | 0.6 | % | | (0.4) | % |
| Asia Pacific | 175.3 | | | (0.2) | | | (5.3) | | | (12.9) | | | 156.9 | | | (7.4) | % | | (10.5) | % |
| Latin America | 114.8 | | | (12.8) | | | (1.3) | | | 11.2 | | | 111.9 | | | 9.8 | % | | (2.5) | % |
| Other | 137.7 | | | (2.0) | | | (2.9) | | | 2.0 | | | 134.8 | | | 1.5 | % | | (2.1) | % |
The organic change of revenue before billable expenses was 0.0% during the third quarter of 2024. The organic change in our domestic market was primarily due to revenue increases at our media businesses, sports marketing business, public relations agencies and data management and analytics, offset by revenue decreases at our advertising businesses and digital project-based offerings. In our international markets, the organic change was driven by revenue increases at our advertising businesses primarily in our Continental Europe and Latin America regions and revenue increases at our media businesses in our Latin America and United Kingdom regions, offset by revenue decreases at our media businesses primarily in our Asia Pacific and Continental Europe regions.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Components of Change | | | | Change |
| | Nine months ended
September 30, 2023 | Foreign
Currency | | Net
Acquisitions/
(Divestitures) | | Organic | | Nine months ended
September 30, 2024 | Organic | | Total |
| Consolidated | $ | 6,814.4 | | | $ | (21.5) | | | $ | (108.4) | | | $ | 68.2 | | | $ | 6,752.7 | | | 1.0 | % | | (0.9) | % |
| Domestic | 4,512.3 | | | — | | | (94.1) | | | 51.4 | | | 4,469.6 | | | 1.1 | % | | (0.9) | % |
| International | 2,302.1 | | | (21.5) | | | (14.3) | | | 16.8 | | | 2,283.1 | | | 0.7 | % | | (0.8) | % |
| United Kingdom | 548.1 | | | 14.0 | | | (2.0) | | | 5.4 | | | 565.5 | | | 1.0 | % | | 3.2 | % |
| Continental Europe | 534.5 | | | (0.8) | | | (5.3) | | | 27.8 | | | 556.2 | | | 5.2 | % | | 4.1 | % |
| Asia Pacific | 511.8 | | | (12.0) | | | (2.8) | | | (30.0) | | | 467.0 | | | (5.9) | % | | (8.8) | % |
| Latin America | 301.9 | | | (17.3) | | | (1.3) | | | 17.9 | | | 301.2 | | | 5.9 | % | | (0.2) | % |
| Other | 405.8 | | | (5.4) | | | (2.9) | | | (4.3) | | | 393.2 | | | (1.1) | % | | (3.1) | % |
The organic increase of revenue before billable expenses was 1.0% during the first nine months of 2024. The organic increase in our domestic market was primarily due to revenue increases at our media businesses, public relations agencies and advertising businesses, partially offset by revenue decreases at our digital project-based offerings. In our international markets, the 0.7% organic increase was driven by revenue increases at our advertising businesses in our Continental Europe and United Kingdom regions and at our media businesses in our Latin America region, partially offset by revenue decreases at our digital project-based offerings across nearly all regions and revenue decreases across most disciplines in our Asia Pacific region.
Refer to the segment discussion later in this MD&A for information on changes in revenue before billable expenses by segment.
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
September 30, | | | | Nine months ended
September 30, | | |
| 2024 | | 2023 | | % Increase/
(Decrease) | | 2024 | | 2023 | | % Increase/
(Decrease) |
| Salaries and related expenses | $ | 1,464.0 | | $ | 1,531.1 | | (4.4) | % | | $ | 4,594.4 | | $ | 4,707.0 | | (2.4) | % |
| | | | | | | | | | | |
|
|
|
|
|
|
|
|
| As a % of revenue before billable expenses: | | | | | | | | | | | |
| Salaries and related expenses | 65.3 | % | | 66.3 | % | | | | 68.0 | % | | 69.1 | % | | |
| Base salaries, benefits and tax | 58.0 | % | | 58.4 | % | | | | 59.5 | % | | 60.6 | % | | |
| Incentive expense | 2.2 | % | | 2.6 | % | | | | 2.8 | % | | 2.8 | % | | |
| Severance expense | 1.1 | % | | 1.0 | % | | | | 1.6 | % | | 1.4 | % | | |
| Temporary help | 3.0 | % | | 3.4 | % | | | | 3.1 | % | | 3.3 | % | | |
| All other salaries and related expenses | 1.0 | % | | 0.9 | % | | | | 1.0 | % | | 1.0 | % | | |
Total salaries and related expenses decreased (4.4)% during the third quarter of 2024 as compared to the prior-year period, primarily driven by decreased base salaries, benefits and tax, performance-based employee compensation expense and temporary help expense.
Total salaries and related expenses decreased (2.4)% during the first nine months of 2024 as compared to the prior-year period, primarily driven by factors similar to those noted above for the third quarter of 2024, partially offset by increased severance expense.
Office and Other Direct Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended
September 30, | | | | Nine months ended
September 30, | | |
| 2024 | | 2023 | | % Increase/
(Decrease) | | 2024 | | 2023 | | % Increase/
(Decrease) |
| Office and other direct expenses | $ | 327.1 | | $ | 318.8 | | 2.6 | % | | $ | 1,007.6 | | $ | 989.6 | | 1.8 | % |
| | | | | | | | | | | |
|
|
|
|
|
|
| Three months ended
September 30, | | Nine months ended
September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Revenue before billable expenses | $ | 2,242.7 | | | $ | 2,309.0 | | | $ | 6,752.7 | | | $ | 6,814.4 | |
| | | | | | | |
| Adjusted EBITA Reconciliation: | | | | | | | |
Net Income Available to IPG Common Stockholders 1 | $ | 20.1 | | | $ | 243.7 | | | $ | 345.0 | | | $ | 635.2 | |
| | | | | | | |
| Add Back: | | | | | | | |
| Provision for income taxes | 85.3 | | | 91.5 | | | 208.2 | | | 135.9 | |
| Subtract: | | | | | | | |
| Total (expenses) and other income | (23.4) | | | (37.3) | | | (69.5) | | | (91.7) | |
Equity in net loss of unconsolidated affiliates | 0.0 | | | (2.3) | | | (0.2) | | | (1.7) | |
| Net income attributable to non-controlling interests | (4.1) | | | (2.0) | | | (12.4) | | | (11.3) | |
Operating Income 1 | 132.9 | | | 376.8 | | | 635.3 | | | 875.8 | |
| Add Back: | | | | | | | |
| Amortization of acquired intangibles | 20.3 | | | 21.0 | | | 61.4 | | | 63.1 | |
Impairment of goodwill | 232.1 | | | — | | | 232.1 | | | — | |
Adjusted EBITA 1 | $ | 385.3 | | | $ | 397.8 | | | $ | 928.8 | | | $ | 938.9 | |
Adjusted EBITA Margin on Revenue before billable expenses | 17.2 | % | | 17.2 | % | | 13.8 | % | | 13.8 | % |
1 Calculations include restructuring charges of $0.5 and $1.4 for the three and nine months ended September 30, 2024 and $(0.6) and $(0.7) for the three and nine months ended September 30, 2023, respectively.
| | | | | |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
In the normal course of business, we are exposed to market risks related to interest rates, foreign currency rates and certain balance sheet items. From time to time, we use derivative instruments, pursuant to established guidelines and policies, to manage some portion of these risks. Derivative instruments utilized in our hedging activities are viewed as risk management tools and are not used for trading or speculative purposes. There has been no significant change in our exposure to market risk during the third quarter of 2024. Our exposure to market risk for changes in interest rates primarily relates to the fair market value and cash flows of our debt obligations. As of both September 30, 2024 and December 31, 2023, approximately 99% of our debt obligations bore interest rates at fixed rates. For further discussion of our exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our 2023 Annual Report.
| | | | | |
| Item 4. | Controls and Procedures |
Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2024, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Changes in Internal Control Over Financial Reporting
There has been no change in internal control over financial reporting in the quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Information about our legal proceedings is set forth in Note 12 to the unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A, Risk Factors, in our 2023 Annual Report on Form 10-K (the “2023 Annual Report”), which could materially affect our business, financial condition or future results. In the third quarter of 2024, there have been no material changes in the risk factors we have previously disclosed in Item 1A, Risk Factors, in our 2023 Annual Report. The risks described in our 2023 Annual Report are not the only risks we face, and additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect the Company’s business, financial condition or operating results.
| | | | | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
(c)The following table provides information regarding our purchases of our equity securities during the period from July 1, 2024, to September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Number of Shares (or Units) Purchased 1 | | Average Price Paid per Share (or Unit) 2 | | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs 3 | | Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs 3 |
| July 1 - 31 | 1,283,483 | | | $ | 30.89 | | | 1,282,462 | | | $ | 230,455,100 | |
| August 1 - 31 | 2,055 | | | $ | 32.49 | | | — | | | $ | 230,455,100 | |
| September 1 - 30 | 1,951,680 | | | $ | 30.96 | | | 1,950,640 | | | $ | 170,066,504 | |
| Total | 3,237,218 | | | $ | 30.93 | | | 3,233,102 | | | |
1The total number of shares of our common stock purchased includes shares withheld under the terms of grants under employee stock-based compensation plans to offset tax withholding obligations that arose upon vesting and release of restricted shares (the “Withheld Shares”). We repurchased 1,021 Withheld Shares in July 2024; 2,055 Withheld Shares in August 2024; and 1,040 Withheld Shares in September 2024, for a total of 4,116 Withheld Shares during the three-month period.
2The average price per share for each of the months in the fiscal quarter and for the three-month period was calculated by dividing (a) the sum for the applicable period of the aggregate value of the tax withholding obligations and the aggregate amount we paid for shares acquired under our share repurchase program, described in Note 5 to the unaudited Consolidated Financial Statements, by (b) the sum of the number of Withheld Shares and the number of shares acquired in our share repurchase program.
3On February 7, 2024, the Company's Board of Directors authorized a share repurchase program to repurchase from time to time up to $ million, excluding fees, of our common stock. There is no expiration date associated with the share repurchase program.
| | | | | |
| Item 3. | Defaults Upon Senior Securities |
None.
| | | | | |
| Item 4. | Mine Safety Disclosures |
Not applicable.
None.
All exhibits required pursuant to Item 601 of Regulation S-K to be filed as part of this report or incorporated herein by reference to other documents are listed in the Index to Exhibits below.
INDEX TO EXHIBITS
| | | | | | | | | | | |
| Exhibit No. | | Description | |
| | | |
| | Employment Agreement, dated October 2, 2024, between Interpublic and Christopher Carroll is incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on October 4, 2024. | |
| | | |
| | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. | |
| | | |
| | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended. | |
| | | |
| | Certification of the Chief Executive Officer and the Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350 and Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. | |
| | | |
| 101 | | Interactive Data File for the period ended September 30, 2024. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |
| | | |
| 104 | | Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document and are included in Exhibit 101. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| | |
| THE INTERPUBLIC GROUP OF COMPANIES, INC. |
| | |
| By | /s/ Philippe Krakowsky |
| | Philippe Krakowsky Chief Executive Officer |
Date: October 23, 2024
| | | | | | | | |
| | |
| | |
| By | /s/ Christopher F. Carroll |
| | Christopher F. Carroll Executive Vice President, Controller and Chief Accounting and Business Transformation Officer (Principal Accounting Officer) |
Date: October 23, 2024
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