New York, April 28, 2021 (GLOBE NEWSWIRE) --
Philippe Krakowsky, CEO of IPG:
“We are pleased with results this quarter. Our strong start to the year reflects the quality of our talent, across the organization, and underscores the successful evolution of our offerings at a time of accelerating, transformational change. Our ability to create marketing and media solutions that bring together outstanding creativity with the benefits of technology, and an ethical approach to data management, positions us to address higher-order business opportunities. This combination was a key driver of growth during Q1. Further, our return to growth coupled with the benefits of strategic restructuring actions taken last year, and certain variable expenses that remain at very low levels, led to outstanding margin performance this quarter.”
“Supporting clients is a constant for us. We therefore remain focused on meeting their needs for integrated and collaborative teams that bring a range of expertise to bear to build brands and deliver business outcomes. Given that the pandemic is still with us, across the world, another top priority remains ensuring the health and well-being of our people. This includes a focus on equity and inclusion, as well as a long-term commitment across the ESG spectrum, including responsible data stewardship, digital media and brand safety practices.”
“Building on a strong start to the year, and predicated on the assumption that there will continue to be a reasonably steady course of global economic recovery, we believe that we can deliver organic growth for the full year in the range of 5% to 6%. With that level of performance, we would expect to achieve 2021 adjusted EBITA margin of approximately 15.5%. As such, we look forward to creating further value and opportunity for all of our stakeholders.”
Summary
Revenue
Operating Results
Net Results
Operating Results
RevenueNet revenue of $2.03 billion in the first quarter of 2021 increased 2.8% compared with the same period in 2020. During the quarter, the effect of foreign currency translation was positive 1.5%, the impact of net dispositions was negative 0.6%, and the resulting organic net revenue increase was 1.9%. Total revenue, which includes billable expenses, was $2.26 billion in the first quarter of 2021, compared to $2.36 billion in 2020.
Operating ExpensesFor the first quarter of 2021, total operating expenses, excluding billable expenses, decreased by 5.9%, compared to the net revenue increase of 2.8% for the same period.
Staff cost ratio, which is total salaries and related expenses as a percentage of net revenue, decreased to 68.7% in the first quarter of 2021 from 72.1% in the same period in 2020. Salaries and related expenses decreased 2.1% to $1.39 billion during the first quarter of 2021, compared to $1.42 billion for the same period in 2020. The decrease was primarily driven by reductions in base salaries, benefits and tax and severance expense, resulting from multiple initiatives taken in 2020 to align our expenses with changes in net revenue in response to the effects of the COVID-19 pandemic on economic conditions. The decreases were partially offset by increased incentive expense, primarily related to better-than-projected performance, and increased temporary help expenses.
Office and other direct expenses decreased as a percentage of net revenue to 14.4% during the first quarter of 2021, compared to 19.2% a year ago. In the first quarter of 2021, office and other direct expenses were $292.9 million, a decrease of 22.6% compared to the same period in 2020, mainly driven by lower travel and entertainment expenses, bad debt expense, and new business and promotion expenses. The decrease in office and other direct expenses was also largely due to savings on occupancy expense as a result of our real estate restructuring actions taken in 2020.
Selling, general and administrative expenses slightly increased as a percentage of net revenue to 1.4% during the first quarter of 2021, compared to 1.1% during the same period in 2020. In the first quarter of 2021, selling, general and administrative expenses were $28.2 million, an increase of 25.9% compared to the same period in 2020, primarily attributable to increases in professional fees and incentive expense, partially offset by decreased travel and entertainment expenses.
Depreciation and amortization as a percentage of net revenue decreased to 3.4% during the first quarter of 2021, compared to 3.7% a year ago. During the first quarter of 2021, depreciation and amortization was $69.2 million, a decrease of 4.9% compared to the same period in 2020.
Restructuring charges in the first quarter of 2021 were $1.3 million related to adjustments to our restructuring actions taken in 2020, which were designed to reduce our operating expenses structurally and permanently relative to revenue and to accelerate the transformation of our business.
Non-Operating Results and TaxNet interest expense increased by $8.6 million to $42.7 million in the first quarter of 2021 from a year ago, primarily attributable to increased cash interest expense from the issuance of $650 million in aggregate principal amount of 4.750% unsecured senior notes due 2030 in March 2020 as well as a decrease in interest income.
Other expense, net was $83.9 million in the first quarter of 2021, which included a pre-tax loss of $74.0 million related to the early extinguishment of debt.
The income tax provision in the first quarter of 2021 was $23.8 million on income before income taxes of $116.4 million. This compares to an income tax provision of $17.2 million for the first quarter of 2020 on income before income taxes of $20.0 million.
Balance SheetAt March 31, 2021, cash and cash equivalents totaled $2.02 billion, compared to $2.51 billion at December 31, 2020 and $1.55 billion on March 31, 2020. Total debt was $3.45 billion at March 31, 2021, compared to $3.47 billion at December 31, 2020. On February 25, 2021, the Company issued $500.0 million aggregate principal amount of 2.400% unsecured senior notes due 2031 and $500.0 million aggregate principal amount of 3.375% unsecured senior notes due 2041. The net proceeds were used towards the early extinguishment of our 4.000% unsecured senior notes due 2022, 3.750% unsecured senior notes due 2023 and half of our 4.200% unsecured senior notes due 2024.
Common Stock DividendDuring the first quarter of 2021, the Company declared and paid a common stock cash dividend of $0.270 per share, for a total of $109.1 million.
For further information regarding the Company's financial results as well as certain non-GAAP measures including organic net revenue change, adjusted EBITA, adjusted EBITA before restructuring charges and adjusted earnings per diluted share, and the reconciliations thereof, please refer to pages 8 to 10 and our Investor Presentation filed on Form 8-K herewith and available on our website, www.interpublic.com.
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About InterpublicInterpublic is values-based, data-fueled, and creatively-driven. Major global brands include Acxiom, Craft, FCB (Foote, Cone & Belding), FutureBrand, Golin, Huge, Initiative, Jack Morton, Kinesso, MAGNA, Matterkind, McCann, Mediahub, Momentum, MRM, MullenLowe Group, Octagon, R/GA, UM and Weber Shandwick. Other leading brands include Avrett Free Ginsberg, Campbell Ewald, Carmichael Lynch, Deutsch, Hill Holliday, ID Media and The Martin Agency. For more information, please visit www.interpublic.com.
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Contact InformationTom Cunningham (Press) (212) 704-1326
Jerry Leshne (Analysts, Investors) (212) 704-1439
Cautionary Statement
This release contains forward-looking statements. Statements in this release that are not historical facts, including statements about management’s beliefs and expectations, constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined under item 1A, Risk Factors, in our most recent Annual Report on Form 10-K and our quarterly reports on Form 10-Q and our other filings with the Securities and Exchange Commission ("SEC"). Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, the following:
Investors should carefully consider these factors and the additional risk factors outlined in more detail under Item 1A, Risk Factors, in our most recent Annual Report on Form 10-K and our quarterly reports on Form 10-Q and our other SEC filings.
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIESCONSOLIDATED SUMMARY OF EARNINGSFIRST QUARTER REPORT 2021 AND 2020(Amounts in Millions except Per Share Data)(UNAUDITED) | |||||||||||
Three Months Ended March 31, | |||||||||||
2021 | 2020 | Fav. (Unfav.)% Variance | |||||||||
Revenue: | |||||||||||
Net Revenue | $ | 2,027.7 | $ | 1,972.1 | 2.8 | % | |||||
Billable Expenses | 229.3 | 387.7 | (40.9) | % | |||||||
Total Revenue | 2,257.0 | 2,359.8 | (4.4) | % | |||||||
Operating Expenses: | |||||||||||
Salaries and Related Expenses | 1,393.1 | 1,422.8 | 2.1 | % | |||||||
Office and Other Direct Expenses | 292.9 | 378.2 | 22.6 | % | |||||||
Billable Expenses | 229.3 | 387.7 | 40.9 | % | |||||||
Cost of Services | 1,915.3 | 2,188.7 | 12.5 | % | |||||||
Selling, General and Administrative Expenses | 28.2 | 22.4 | (25.9) | % | |||||||
Depreciation and Amortization | 69.2 | 72.8 | 4.9 | % | |||||||
Restructuring Charges | 1.3 | 0.0 | >(100)% | ||||||||
Total Operating Expenses | 2,014.0 | 2,283.9 | 11.8 | % | |||||||
Operating Income | 243.0 | 75.9 | >100% | ||||||||
Expenses and Other Income: | |||||||||||
Interest Expense | (49.6) | (44.8) | |||||||||
Interest Income | 6.9 | 10.7 | |||||||||
Other Expense, Net | (83.9) | (21.8) | |||||||||
Total (Expenses) and Other Income | (126.6) | (55.9) | |||||||||
Income Before Income Taxes | 116.4 | 20.0 | |||||||||
Provision for Income Taxes | 23.8 | 17.2 | |||||||||
Income of Consolidated Companies | 92.6 | 2.8 | |||||||||
Equity in Net Loss of Unconsolidated Affiliates | (0.2) | (0.2) | |||||||||
Net Income | 92.4 | 2.6 | |||||||||
Net (Income) Loss Attributable to Noncontrolling Interests | (0.7) | 2.1 | |||||||||
Net Income Available to IPG Common Stockholders | $ | 91.7 | $ | 4.7 | |||||||
Earnings Per Share Available to IPG Common Stockholders: | |||||||||||
Basic | $ | 0.23 | $ | 0.01 | |||||||
Diluted | $ | 0.23 | $ | 0.01 | |||||||
Weighted-Average Number of Common Shares Outstanding: | |||||||||||
Basic | 391.5 | 387.7 | |||||||||
Diluted | 396.0 | 391.7 | |||||||||
Dividends Declared Per Common Share | $ | 0.270 | $ | 0.255 |
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIESU.S. GAAP RECONCILIATION OF NON-GAAP ADJUSTED RESULTS(Amounts in Millions except Per Share Data)(UNAUDITED) | |||||||||||||||||||||||
Three Months Ended March 31, 2021 | |||||||||||||||||||||||
As Reported | Amortization of Acquired Intangibles | Restructuring Charges1 | Net Losses on Sales of Businesses2 | Loss on Early Extinguishment of Debt3 | Adjusted Results (Non-GAAP) | ||||||||||||||||||
Operating Income and Adjusted EBITA before Restructuring Charges4 | $ | 243.0 | $ | (21.6) | $ | (1.3) | $ | 265.9 | |||||||||||||||
Total (Expenses) and Other Income5 | (126.6) | $ | (12.5) | $ | (74.0) | (40.1) | |||||||||||||||||
Income Before Income Taxes | 116.4 | (21.6) | (1.3) | (12.5) | (74.0) | 225.8 | |||||||||||||||||
Provision for Income Taxes | 23.8 | 4.2 | 0.3 | 0.7 | 18.5 | 47.5 | |||||||||||||||||
Equity in Net Loss of Unconsolidated Affiliates | (0.2) | (0.2) | |||||||||||||||||||||
Net Income Attributable to Noncontrolling Interests | (0.7) | (0.7) | |||||||||||||||||||||
Net Income Available to IPG Common Stockholders | $ | 91.7 | $ | (17.4) | $ | (1.0) | $ | (11.8) | $ | (55.5) | $ | 177.4 | |||||||||||
Weighted-Average Number of Common Shares Outstanding - Basic | 391.5 | 391.5 | |||||||||||||||||||||
Dilutive effect of stock options and restricted shares | 4.5 | 4.5 | |||||||||||||||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 396.0 | 396.0 | |||||||||||||||||||||
Earnings per Share Available to IPG Common Stockholders6: | |||||||||||||||||||||||
Basic | $ | 0.23 | $ | (0.04) | $ | 0.00 | $ | (0.03) | $ | (0.14) | $ | 0.45 | |||||||||||
Diluted | $ | 0.23 | $ | (0.04) | $ | 0.00 | $ | (0.03) | $ | (0.14) | $ | 0.45 | |||||||||||
1 Restructuring charges of $1.3 million in the first quarter of 2021 were related to adjustments to our restructuring actions taken in 2020, which were designed to reduce our operating expenses structurally and permanently relative to revenue and to accelerate the transformation of our business. | |||||||||||||||||||||||
2 Includes losses on complete dispositions of businesses and the classification of certain assets as held for sale. | |||||||||||||||||||||||
3 Consists of a loss related to the early extinguishment of our 4.000% unsecured senior notes due 2022, 3.750% unsecured senior notes due 2023 and half of our 4.200% unsecured senior notes due 2024. | |||||||||||||||||||||||
4 Refer to non-GAAP reconciliation of Adjusted EBITA before Restructuring Charges on page 9. | |||||||||||||||||||||||
5 Consists of non-operating expenses including interest expense, net and other expense, net. | |||||||||||||||||||||||
6 Earnings per share may not add due to rounding. | |||||||||||||||||||||||
Note: Management believes the resulting comparisons provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance. |
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIES U.S. GAAP RECONCILIATION OF NON-GAAP ADJUSTED RESULTS (Amounts in Millions) (UNAUDITED) | |||||||
Three Months Ended March 31, | |||||||
2021 | 2020 | ||||||
Net Revenue | $ | 2,027.7 | $ | 1,972.1 | |||
Non-GAAP Reconciliation: | |||||||
Net Income Available to IPG Common Stockholders | $ | 91.7 | $ | 4.7 | |||
Add Back: | |||||||
Provision for Income Taxes | 23.8 | 17.2 | |||||
Subtract: | |||||||
Total (Expenses) and Other Income | (126.6) | (55.9) | |||||
Equity in Net Loss of Unconsolidated Affiliates | (0.2) | (0.2) | |||||
Net (Income) Loss Attributable to Noncontrolling Interests | (0.7) | 2.1 | |||||
Operating Income | 243.0 | 75.9 | |||||
Add Back: | |||||||
Amortization of Acquired Intangibles | 21.6 | 21.3 | |||||
Adjusted EBITA | $ | 264.6 | $ | 97.2 | |||
Adjusted EBITA Margin on Net Revenue % | 13.0 | % | 4.9 | % | |||
Restructuring Charges1 | 1.3 | N/A | |||||
Adjusted EBITA before Restructuring Charges | $ | 265.9 | N/A | ||||
Adjusted EBITA before Restructuring Charges Margin on Net Revenue % | 13.1 | % | N/A | ||||
1 Restructuring charges of $1.3 in the first quarter of 2021 were related to adjustments to our restructuring actions taken in 2020, which were designed to reduce our operating expenses structurally and permanently relative to revenue and to accelerate the transformation of our business. | |||||||
Note: Management believes the resulting comparisons provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance. |
THE INTERPUBLIC GROUP OF COMPANIES, INC. AND SUBSIDIARIESU.S. GAAP RECONCILIATION OF NON-GAAP ADJUSTED RESULTS(Amounts in Millions except Per Share Data) (UNAUDITED) | |||||||||||||||
Three Months Ended March 31, 2020 | |||||||||||||||
As Reported | Amortization of Acquired Intangibles | Net Losses on Sales of Businesses1 | Adjusted Results (Non-GAAP) | ||||||||||||
Operating Income and Adjusted EBITA2 | $ | 75.9 | $ | (21.3) | $ | 97.2 | |||||||||
Total (Expenses) and Other Income3 | (55.9) | $ | (23.3) | (32.6) | |||||||||||
Income Before Income Taxes | 20.0 | (21.3) | (23.3) | 64.6 | |||||||||||
Provision for Income Taxes | 17.2 | 4.2 | 0.9 | 22.3 | |||||||||||
Equity in Net Loss of Unconsolidated Affiliates | (0.2) | (0.2) | |||||||||||||
Net Loss Attributable to Noncontrolling Interests | 2.1 | 2.1 | |||||||||||||
Net Income Available to IPG Common Stockholders | $ | 4.7 | $ | (17.1) | $ | (22.4) | $ | 44.2 | |||||||
Weighted-Average Number of Common Shares Outstanding - Basic | 387.7 | 387.7 | |||||||||||||
Dilutive effect of stock options and restricted shares | 4.0 | 4.0 | |||||||||||||
Weighted-Average Number of Common Shares Outstanding - Diluted | 391.7 | 391.7 | |||||||||||||
Earnings per Share Available to IPG Common Stockholders4: | |||||||||||||||
Basic | $ | 0.01 | $ | (0.04) | $ | (0.06) | $ | 0.11 | |||||||
Diluted | $ | 0.01 | $ | (0.04) | $ | (0.06) | $ | 0.11 | |||||||
1 Includes losses on complete dispositions of businesses and the classification of certain assets as held for sale. | |||||||||||||||
2 Refer to non-GAAP reconciliation of Adjusted EBITA on page 9. | |||||||||||||||
3 Consists of non-operating expenses including interest expense, net and other expense, net. | |||||||||||||||
4 Earnings per share may not add due to rounding. | |||||||||||||||
Note: Management believes the resulting comparisons provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance. |