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) income of unconsolidated affiliates, net income 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, 2024, results include net restructuring charges of $0.3 and $0.9, respectively. For the three and six months ended June 30, 2023, results include net restructuring charges of $(1.7) and $(0.1), 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, increased 1.6% during the second quarter of 2024. Our organic increase of revenue before billable expenses was 1.7% during the second quarter of 2024, compared to an organic decrease of (1.7)% during the second quarter of 2023. The increase was due to net client wins in our healthcare sector and net client wins and increased spending from existing clients in our food & beverage sector, partially offset by net client losses and lower spending from existing clients in our auto & transportation and technology & telecom sectors. During the second quarter of 2024, our Adjusted EBITA margin on revenue before billable expenses increased to 14.6% from 14.3% in the prior-year period as the decrease in revenue before billable expenses was outpaced by the overall decrease in our operating expenses, excluding billable expenses and amortization of acquired intangibles. See further discussion below in the “Results of Operations” section.
Total revenue, which includes billable expenses, increased 0.4% during the first half of 2024. Our organic increase of revenue before billable expenses was 1.5% during the first half of 2024, compared to an organic decrease of (0.9)% during the first half 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 technology & telecom and auto & transportation sectors. During the first half of 2024, our Adjusted EBITA margin on revenue before billable expenses slightly increased to 12.1% from 12.0% in the prior-year period as the increase in revenue before billable expenses outpaced the overall increase in our operating expenses, excluding billable expenses and amortization of acquired intangibles. 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 Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 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
June 30, 2023 | Foreign
Currency | | Net
Acquisitions/
(Divestitures) | | Organic | | Three months ended
June 30, 2024 | Organic | | Total |
| Consolidated | $ | 2,328.5 | | | $ | (12.7) | | | $ | (28.9) | | | $ | 40.2 | | | $ | 2,327.1 | | | 1.7 | % | | (0.1) | % |
| Domestic | 1,531.8 | | | — | | | (25.9) | | | 19.6 | | | 1,525.5 | | | 1.3 | % | | (0.4) | % |
| International | 796.7 | | | (12.7) | | | (3.0) | | | 20.6 | | | 801.6 | | | 2.6 | % | | 0.6 | % |
| United Kingdom | 184.9 | | | 2.5 | | | — | | | 6.3 | | | 193.7 | | | 3.4 | % | | 4.8 | % |
| Continental Europe | 192.5 | | | (2.5) | | | (3.0) | | | 12.2 | | | 199.2 | | | 6.3 | % | | 3.5 | % |
| Asia Pacific | 177.3 | | | (5.8) | | | — | | | (4.2) | | | 167.3 | | | (2.4) | % | | (5.6) | % |
| Latin America | 102.4 | | | (4.4) | | | — | | | 4.2 | | | 102.2 | | | 4.1 | % | | (0.2) | % |
| Other | 139.6 | | | (2.5) | | | — | | | 2.1 | | | 139.2 | | | 1.5 | % | | (0.3) | % |
The organic increase of revenue before billable expenses was 1.7% during the second quarter of 2024. The organic increase in our domestic market was primarily due to revenue increases at our media and advertising businesses, as well as our public relations agencies, partially offset by revenue decreases at our digital project-based offerings. In our international markets, the 2.6% organic increase was driven by revenue increases at our media businesses primarily in our Latin America region and advertising businesses primarily in our Continental Europe region, partially offset by revenue decreases at our digital project-based offerings across most regions.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Components of Change | | | | Change |
| | Six months ended
June 30, 2023 | Foreign
Currency | | Net
Acquisitions/
(Divestitures) | | Organic | | Six months ended
June 30, 2024 | Organic | | Total |
| Consolidated | $ | 4,505.4 | | | $ | (11.1) | | | $ | (52.3) | | | $ | 68.0 | | | $ | 4,510.0 | | | 1.5 | % | | 0.1 | % |
| Domestic | 3,002.4 | | | — | | | (51.8) | | | 51.2 | | | 3,001.8 | | | 1.7 | % | | — | % |
| International | 1,503.0 | | | (11.1) | | | (0.5) | | | 16.8 | | | 1,508.2 | | | 1.1 | % | | 0.3 | % |
| United Kingdom | 355.1 | | | 9.9 | | | — | | | 6.7 | | | 371.7 | | | 1.9 | % | | 4.7 | % |
| Continental Europe | 356.2 | | | (1.3) | | | (3.0) | | | 26.8 | | | 378.7 | | | 7.5 | % | | 6.3 | % |
| Asia Pacific | 336.5 | | | (11.8) | | | 2.5 | | | (17.1) | | | 310.1 | | | (5.1) | % | | (7.8) | % |
| Latin America | 187.1 | | | (4.5) | | | — | | | 6.7 | | | 189.3 | | | 3.6 | % | | 1.2 | % |
| Other | 268.1 | | | (3.4) | | | — | | | (6.3) | | | 258.4 | | | (2.3) | % | | (3.6) | % |
The organic increase of revenue before billable expenses was 1.5% during the first half of 2024. The organic increase in our domestic market was primarily due to revenue increases at our media and advertising businesses, as well as our public relations agencies, partially offset by revenue decreases at our digital project-based offerings. In our international markets, the 1.1% organic increase was driven by revenue increases at our media businesses in our Latin America and Continental Europe and regions and increases at our advertising businesses in our Continental Europe and United Kingdom regions, partially offset by revenue decreases at our digital project-based offerings across most regions and revenue decreases at our media businesses 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
June 30, | | | | Six months ended
June 30, | | |
| 2024 | | 2023 | | % Increase/
(Decrease) | | 2024 | | 2023 | | % Increase/
(Decrease) |
| Salaries and related expenses | $ | 1,557.6 | | $ | 1,598.6 | | (2.6) | % | | $ | 3,130.4 | | $ | 3,175.9 | | (1.4) | % |
| | | | | | | | | | | |
|
|
|
|
|
|
|
|
| As a % of revenue before billable expenses: | | | | | | | | | | | |
| Salaries and related expenses | 66.9 | % | | 68.7 | % | | | | 69.4 | % | | 70.5 | % | | |
| Base salaries, benefits and tax | 57.8 | % | | 59.4 | % | | | | 60.3 | % | | 61.6 | % | | |
| Incentive expense | 3.5 | % | | 3.4 | % | | | | 3.1 | % | | 3.0 | % | | |
| Severance expense | 1.5 | % | | 1.7 | % | | | | 1.8 | % | | 1.6 | % | | |
| Temporary help | 3.0 | % | | 3.2 | % | | | | 3.2 | % | | 3.3 | % | | |
| All other salaries and related expenses | 1.1 | % | | 1.0 | % | | | | 1.0 | % | | 1.0 | % | | |
Total salaries and related expenses decreased (2.6)% during the second quarter of 2024 as compared to the prior-year period, primarily driven by decreased base salaries, benefits and tax.
Total salaries and related expenses decreased (1.4)% during the first half of 2024 as compared to the prior-year period, primarily driven by factors similar to those noted above for the second quarter of 2024, partially offset by increased severance expense.
Office and Other Direct Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended
June 30, | | | | Six months ended
June 30, | | |
| 2024 | | 2023 | | % Increase/
(Decrease) | | 2024 | | 2023 | | % Increase/
(Decrease) |
| Office and other direct expenses | $ | 358.4 | | $ | 340.5 | | 5.3 | % | | $ | 680.5 | | $ | 670.8 | | 1.4 | % |
| | | | | | | | | | | |
|
|
|
|
|
|
| Three months ended
June 30, | | Six months ended
June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Revenue before billable expenses | $ | 2,327.1 | | | $ | 2,328.5 | | | $ | 4,510.0 | | | $ | 4,505.4 | |
| | | | | | | |
| Adjusted EBITA Reconciliation: | | | | | | | |
Net Income Available to IPG Common Stockholders 1 | $ | 214.5 | | | $ | 265.5 | | | $ | 324.9 | | | $ | 391.5 | |
| | | | | | | |
| Add Back: | | | | | | | |
| Provision for income taxes | 75.6 | | | 10.6 | | | 122.9 | | | 44.4 | |
| Subtract: | | | | | | | |
| Total (expenses) and other income | (22.5) | | | (32.1) | | | (46.1) | | | (54.4) | |
Equity in net (loss) income of unconsolidated affiliates | (0.5) | | | 0.7 | | | (0.2) | | | 0.6 | |
| Net income attributable to non-controlling interests | (5.1) | | | (3.2) | | | (8.3) | | | (9.3) | |
Operating Income 1 | 318.2 | | | 310.7 | | | 502.4 | | | 499.0 | |
| Add Back: | | | | | | | |
| Amortization of acquired intangibles | 20.4 | | | 21.2 | | | 41.1 | | | 42.1 | |
Adjusted EBITA 1 | $ | 338.6 | | | $ | 331.9 | | | $ | 543.5 | | | $ | 541.1 | |
Adjusted EBITA Margin on Revenue before billable expenses | 14.6 | % | | 14.3 | % | | 12.1 | % | | 12.0 | % |
1 Calculations include restructuring charges of $0.3 and $0.9 for the three and six months ended June 30, 2024 and $(1.7) and $(0.1) for the three and six months ended June 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 second 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 June 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 June 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 June 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 second 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 April 1, 2024, to June 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 |
| April 1 - 30 | 168,167 | | | $ | 32.16 | | | 165,000 | | | $ | 332,349,910 | |
| May 1 - 31 | 1,430,467 | | | $ | 31.29 | | | 1,430,000 | | | $ | 287,605,626 | |
| June 1 - 30 | 574,783 | | | $ | 30.60 | | | 573,000 | | | $ | 270,066,504 | |
| Total | 2,173,417 | | | $ | 31.18 | | | 2,168,000 | | | |
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 3,167 Withheld Shares in April 2024; 467 Withheld Shares in May 2024; and 1,783 Withheld Shares in June 2024, for a total of 5,417 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 8, 2023, the Company's Board of Directors reauthorized a program to repurchase, from time to time, up to $ million, excluding fees, of our common stock. On February 7, 2024, the Board authorized a share repurchase program to repurchase from time to time up to $, excluding fees, of our common stock, which was in addition to any amounts remaining under the 2023 share repurchase program. There are no expiration dates associated with these share repurchase programs.
| | | | | |
| 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 | |
| | | |
| | Amended and Restated Credit Agreement, dated as of May 29, 2024, among The Interpublic Group of Companies, Inc., the lenders named therein and Citibank, N.A., as administrative agent, is incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 30, 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 June 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: July 24, 2024
| | | | | | | | |
| | |
| | |
| By | /s/ Christopher F. Carroll |
| | Christopher F. Carroll
Senior Vice President, Controller and
Chief Accounting Officer
(Principal Accounting Officer) |
Date: July 24, 2024
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