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IPG posts 6.7% organic growth in Q1, FY16

25-April-2016
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IPG posts 6.7% organic growth in Q1, FY16

The Interpublic Group (IPG) recently announced its Q1 2016 results. As per the results, there was a strong organic revenue increase of 6.7% and reported revenue increase of 3.9%.  The first quarter operating income was $20.9 million, compared to income of $7.8 million. The company has stated that it is well-positioned to achieve high end of 2016 organic revenue growth target of 3% - 4% and to expand full-year operating margin by 50 bps or better.   

 Commenting on the Q1 results, Michael I. Roth, Interpublic’s Chairman and CEO, said,  “ While the first quarter is seasonally small for us, our results position us to deliver on the high end of our 2016 target of 3% - 4% organic revenue growth and to expand full-year operating margin by 50 basis points or better. The caliber of our people and our offerings, coupled with strong operating discipline, is a winning combination that will ensure we continue to deliver for clients and further enhance shareholder value.” 

Operating Results 

Revenue

Revenue of $1.74 billion in the first quarter of 2016 increased 3.9% compared with the same period in 2015.        During the quarter, the effect of foreign currency translation was negative 3.1%, the impact of net acquisitions was positive 0.3% and the resulting organic revenue increase was 6.7%. 

Operating Expenses

 Total operating expenses increased 3.2% in the first quarter of 2016 from a year ago, compared with revenue growth of 3.9%. 

Salaries and related expenses were $1.27 billion in the first quarter of 2016, an increase of 4.6% compared to the same period in 2015. 

Staff cost ratio, which is total salaries and related expenses as a percentage of total revenue, was 73.0% in the first quarter of 2016 compared to 72.5% in the same period in 2015, in the seasonally small first quarter, due to higher expenses for long-term performance-based compensation and severance. 

During the first quarter of 2016, office and general expenses were $450.2 million, a decrease of 0.6% compared to the same period in 2015, due to the impact of changes in foreign currency translation and decreased pass-through expenses. Office and general expenses were 25.8% of revenue in the first quarter of 2016 compared with 27.0% a year ago. 

Non-Operating Results and Tax

Net interest expense of $16.8 million increased by $3.1 million in the first quarter of 2016 compared to the same period in 2015. 

The income tax benefit in the first quarter of 2016 was $15.6 million on loss before income taxes of $13.0 million, compared to a benefit of $1.4 million on loss before income taxes of $5.6 million in the same period in 2015. The income tax benefit in the first quarter of 2016 was primarily driven by valuation allowance reversals of $12.2 million, as a consequence of the classification of certain assets as held for sale, in addition to a benefit of $7.5 million on the early adoption of the Financial Accounting Standards Board Accounting Standards Update 2016- 09, which requires all excess tax benefits and tax deficiencies on employee share-based payment accounting to be recognized in earnings instead of as additional paid-in capital, on a prospective basis. 

Balance Sheet

At March 31, 2016, cash, cash equivalents and marketable securities totalled $680.3 million, compared to $1.51 billion at December 31, 2015 and $741.2 million at March 31, 2015. Total debt was $1.74 billion at March 31, 2016, compared to $1.76 billion at December 31, 2015. 

Share Repurchase Program and Common Stock Dividend

During the first quarter of 2016, the company repurchased 2.5 million shares of its common stock at an aggregate cost of $53.7 million and an average price of $21.67 per share, including fees.  

During the first quarter of 2016, the company declared and paid a common stock cash dividend of $0.15 per share, for a total of $59.9 million

Tags IPG Michael Routh Financial

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