IPG Reports Increases in Revenue and Net Income in Second Quarter

CEO Roth: Holding Company Can Deliver High End of Organic Growth Target

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Interpublic Group of Cos. on Thursday reported earnings for its second quarter of 2016 that beat analyst expectations, as well as an increase in revenue and net income.

Interpublic CEO Michael Roth
Interpublic CEO Michael Roth  Credit: Patrick Butler

Net income rose 29% to $160.2 million from $123.8 million during the same period last year. Earnings increased 30% to $0.39, beating analyst expectations of $0.33, according to data from MarketWatch.

Total revenue in the quarter increased 2.2% to $1.92 billion, compared to $1.88 billion in the second quarter of 2015. Organic revenue, which strips out the impact of acquisitions and foreign currency, increased 3.7% compared to the prior-year period. The increase was comprised of an organic increase of 4.6% in the U.S. and 2.3% internationally.

"Despite increased macro uncertainty, the tone of the business remains sound," said Michael Roth, IPG Chairman and CEO, in a statement. "We therefore continue to believe that we will deliver at the high end of our original 3% to 4% organic growth target for the full year, as well as expand operating margin by 50 basis points or better."

Mr. Roth addressed the K2 report that the ANA commissioned to investigate agencies' media buying behavior. "We continue to encourage dialogue on these matters and we stand behind our record of transparency, in our contracts, as well as our dealings with clients and media vendors," he said. "IPG's performance in this regard has been consistently validated by a range of third party experts employed by our clients."

Clients will ask questions, he said, but there's not been "a big upheaval or reviews." He did, however, reference one company -- not an IPG client -- that "brought in outside auditors to look at this kind of stuff." "We haven't seen any of that," he said.

The company is "net new business positive," and later in the year will start to see some of the revenue from wins achieved early in the year, the company said. It's preparing to defend its long-standing Army account, which reviews its agency accounts every five years, next year. The contract has been extended through September 2017, he said. Other agencies are defending Seat and TD Bank.

With regard to Brexit, he said, "While it seems that the situation in the U.K. will lead to slower decision-making and may affect certain client sectors, to date our teams on the ground report limited impact from the referendum."

"Certainly, there is a high degree of volatility due to Brexit and the geopolitical tensions we are seeing play out in places such as Europe and the Middle East," he added. "Brazil is also experiencing some turmoil, due to both the political situation and public health concerns. Globally, we are keeping a close eye on our event and other project businesses, which are often the first to see cancellations."

IPG owns creative agency networks McCann Worldgroup, FCB, MullenLowe Group, as well as media agency network IPG Mediabrands and PR and event shops Weber Shandwick, Golin and Jack Morton.

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