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YoY shift: Bullish
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.53pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+1.09pp
Big +
Net-tone change vs last year's 10-K.
MD&A
-0.03pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+11
loss+9
adverse+6
failure+6
negative+5
Positive rising
satisfied+5
able+4
opportunities+4
successfully+4
successful+3
Risk Factors (Item 1A)
8,361 words
Item 1A.
Risk Factors
We are subject to a variety of possible risks that could adversely impact our revenues, results of operations or financial condition. Some of these risks relate to general economic and financial conditions, while others are more specific to us and the industry in which we operate. In addition, we face risks related to our proposed transaction with Omnicom, including as a result of any failure to complete, or delays in completing, the proposed transaction, as well as risks that the proposed merger may adversely affect relationships with our clients, partners, suppliers, and employees, whether or not the transaction is completed,
The following factors set out potential risks we have identified that could adversely affect us. The risks described below may not be the only risks we face. Additional risks that we do not yet know of, or that we currently think are immaterial, could also have a negative impact on our business operations or financial condition. See also Statement Regarding Forward-Looking Disclosure .
Risks Related to the Global Market and the Economy
• Our results of operations are highly to or uncertain economic conditions.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
impairment+24
losses+5
closing+5
impaired+4
bad+2
Positive rising
benefit+1
effective+1
positive+1
enhance+1
profitability+1
MD&A (Item 7)
17,837 words
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help you understand The Interpublic Group of Companies, Inc. and its subsidiaries (the "Company," "IPG," "we," "us" or "our"). MD&A should be read in conjunction with our Consolidated Financial Statements and the accompanying notes included in this report. Our MD&A includes the following sections:
EXECUTIVE SUMMARY provides a discussion about our strategic outlook, factors influencing our business and an overview of our results of operations and liquidity.
RESULTS OF OPERATIONS provides an analysis of the consolidated and segment results of operations for 2024 compared to 2023 and 2023 compared to 2022.
LIQUIDITY AND CAPITAL RESOURCES provides an overview of our cash flows, funding requirements, contractual obligations, financing and sources of funds, and debt credit ratings.
CRITICAL ACCOUNTING ESTIMATES provides a discussion of our accounting policies that require critical judgment, assumptions and estimates.
RECENT ACCOUNTING STANDARDS, by reference to Note 18 to the Consolidated Financial Statements, provides a discussion of certain accounting standards that have been adopted during 2024 or that have not yet been required to be implemented and may be applicable to our future operations.
NON-GAAP FINANCIAL MEASURE provides a reconciliation of non-GAAP financial measure with the most directly comparable generally accepted accounting principles in the United States ("U.S. GAAP") financial measures and sets forth the reasons we believe that presentation of the non-GAAP financial measure contained therein provides useful information to investors regarding our results of operations and financial condition.
We are exposed to risks associated with weak or uncertain regional or global economic conditions and disruption in the financial markets. Market conditions can be and have been adversely affected by natural and human disruptions, such as natural disasters, public health crises, severe weather events, political upheaval, military conflict or civil unrest. Economic downturns or uncertainty about the strength of the global economy generally, or adverse economic conditions in certain regions or market sectors and resulting caution with respect to spending on the part of marketers, can have and has had a negative effect on the demand for advertising and marketing communication services. The global economy continues to be challenging, including as a result of the adverse effects of the continuing impact of supply chain and labor disruptions, inflationary pressures, conflict in Ukraine and the Middle East and uncertainty generated by political developments in key markets. Any prolongeddisruption to business or financial markets in the United States, which accounted for approximately 65% of our consolidated total revenue in 2024, as a result of disruptive changes in government economic, social or trade policies, could have an adverse impact on our clients and our business.
Our industry has in the past been affected more severely than other sectors by an economic downturn and recovered more slowly than the economy in general. Previously in response to negative economic and financial conditions, including in connection with the outbreak of the COVID-19 pandemic in 2020, some clients responded by reducing their marketing budgets, which include discretionary components that are easier to reduce in the short term than other operating expenses. Our 2024 results for example, were negatively impacted by significant reductions in spending by clients in the technology & telecom sector. This pattern may recur in the future.
Furthermore, unexpected revenue shortfalls can result in misalignments of costs and revenues, resulting in a negative impact to our operating margins. If our business is significantly adversely affected by unfavorable economic conditions or other market disruptions that adversely affect client spending, the negative impact on our revenue could pose a challenge to our operating income and cash generation from operations.
Risks Related to Our Industry and Operations
• We operate in a highly competitive industry.
The advertising and marketing communications business is highly competitive and constantly changing. Our agencies and media services compete with other agencies and other providers of creative, marketing or media services to maintain existing client relationships and to win new business. Our competitors include not only other large multinational advertising and marketing communications companies, but also smaller entities that operate in local or regional markets as well as new forms of market participants.
Competitive challenges also arise from rapidly evolving and new technologies in the marketing and advertising space, creating opportunities for new and existing competitors and a need for continued significant investment in tools, technologies and process improvements. As data-driven marketing solutions become increasingly core to the success of our brands, and with the development of new and emerging technologies like generative AI, any failure to keep up with rapidly changing technologies and standards in this space could harm our competitive position. These technologies also present risks related to ethical considerations, intellectual property protection and privacy and data protection.
The client’s perception of the quality of our agencies’ creative work, its confidence in our ability to protect the confidentiality of their and their customers’ data and its relationships with key personnel at the Company or our agencies are important factors that affect our competitive position. An agency’s ability to serve clients, particularly large international clients, on a broad geographic basis and across a range of services and technologies may also be an important competitive consideration. On the other hand, because an agency’s principal asset is its people and freedom of entry into the industry is almost unlimited, our relationships with clients can be affected by the departure of key personnel and a small agency is, on occasion, able to take all or some portion of a client’s account from a much larger competitor.
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• Clients may terminate or reduce their relationships with us on short notice.
Many companies put their advertising and marketing communications business up for competitive review from time to time, and we have lost client accounts in the past as a result of such periodic competitions. Our clients may choose to terminate their contracts, or reduce their relationships with us, on a relatively short time frame and for any reason. A relatively small number of clients contribute a significant portion of our revenue. In the aggregate, our top ten clients based on revenue before billable expenses accounted for approximately 20% of revenue before billable expenses in 2024. A substantial decline in a large client’s advertising and marketing spending, or the loss of a significant part of its business, could have a material adverse effect upon our business and results of operations.
Our ability to attract new clients and to retain existing clients may also, in some cases, be limited by clients’ policies or perceptions about conflicts of interest, or our own exclusivity arrangements with certain clients. We could lose business and revenue as a result of real or perceived conflicts engendered by our proposed combination with Omnicom. These client policies can, in some cases, prevent one agency, or even different agencies under our ownership, from performing similar services for competing products or companies.
• We may lose or fail to attract and retain key employees and management personnel.
Our employees, including creative, digital, research, media and account specialists, and their skills and relationships with clients, are among our most valuable assets. An important aspect of our competitiveness is our ability to identify and develop the appropriate talent and to attract and retain key employees and management personnel. Our ability to do so is influenced by a variety of factors, including the compensation we award and factors which may be beyond our control. The advertising and marketing services industry can be particularly sensitive to shifts in labor markets, as it is characterized by a high degree of employee mobility and significant use of third-party or temporary workers to staff new, growing or temporary assignments. The impact of the COVID-19 pandemic contributed in recent years to an increase in labor costs, shortages, disruptions and turnover. In addition, changes to U.S. or other immigration policies or travel restrictions imposed as a result of public health, political or security concerns that restrain the flow of professional talent also may inhibit our ability to staff our offices or projects. We could also lose key employees as a result of any uncertainty about the operations of the combined company following the proposed merger transaction with Omnicom. If we were to fail to attract key personnel or lose them to competitors or clients, or fail to manage our workforce effectively, our business and results of operations could be adversely affected.
• We are subject to industry regulations and other legal or reputational risks that could restrict our activities or negatively impact our performance or financial condition.
Our industry is subject to government regulation and other governmental action, both domestic and foreign. Advertisers and consumer groups may challenge advertising through legislation, regulation, judicial actions or otherwise, for example on the grounds that the advertising is false and deceptive or injurious to public welfare. Our business is also subject to specific rules, prohibitions, media restrictions, labeling disclosures and warning requirements applicable to advertising for certain products.
Existing and proposed laws and regulations, in particular in the European Union, the United Kingdom and the United States, concerning user privacy, use and protection of personal information and whether and how we can transfer, process or receive certain data that we use in our operations, including the General Data Protection Regulation (the “GDPR”) in the European Economic Area and as retained in the United Kingdom, the California Consumer Privacy Act (the “CCPA”), and other U.S. state comprehensive privacy laws, could affect the efficacy and profitability of internet-based, digital and targeted marketing. For instance, the GDPR imposes strict requirements on transfers of personal data to third countries, including the United States, whose protection of that data is not deemed to be adequate. Changes in the interpretation of existing consumer protection laws, including if our ability to transfer data between countries and regions in which we operate is restricted, may increase the costs of compliance, harm our business or result in significant penalties or legal liability.
Regulators and legislators in the European Union, United Kingdom, and United States are increasingly focused on the use of online tracking technologies and the sharing of personal data with third parties for targeted or behavioral advertising. This has resulted in the promulgation or consideration of new or updated regulations under the GDPR, the CCPA, and other U.S. state privacy laws. Our digital business could be adversely affected if such laws or regulations are adopted, interpreted or implemented in a manner that is inconsistent with, or that requires changes to, our current business practices. Restrictions on digital or targeted advertising practices, the enactment or future enforcement of state privacy laws, or the unanticipated application of such laws and regulations, could affect the manner in which we provide our services or adversely affect our financial results. Furthermore, if we are prohibited from sharing data among our products and services, or if regulators enforce strict limitations on the use of tracking technologies for targeted or behavioral advertising, this could lead to substantial costs, limit the effectiveness of our services, and subject us to additional liabilities. The imposition of restrictions on these technologies by private market participants in response to privacy concerns could also have a negative impact on our digital business.
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Legislators, agencies and other governmental units may also continue to initiate proposals to ban the advertising of specific products, such as alcohol, tobacco or marijuana products, and to impose taxes on or deny deductions for advertising, which, if successful, may hinder our ability to accomplish our clients’ goals and have an adverse effect on advertising expenditures and, consequently, on our revenues or results. Governmental action, including judicial rulings, on the relative responsibilities of clients and their marketing agencies for the content of their marketing can also impact our operations. Furthermore, we could suffer reputational risk as a result of governmental or legal action or from undertaking work that may be challenged by consumer groups or considered controversial, in poor taste or not conforming to contemporary social standards.
• We rely extensively on information technology systems and face cybersecurity risks.
As discussed under Item 1C, Cybersecurity , we rely extensively and increasingly on information technologies and infrastructure to manage our business, develop new business opportunities and digital products, and process business transactions, and our business operations depend on the availability, integrity and secure processing, storage, and transmission of confidential and sensitive information digitally and through interconnected systems, including those of our vendors, service providers and other third parties. The incidence of malicious technology-related events, such as cyberattacks, computer hacking, computer viruses or other destructive or disruptive software, phishing attacks and other attempts to gain access to confidential or personal data, denial of service or ransomware attacks or other malicious activities, is on the rise worldwide and highlights the need for continual and effective cybersecurity awareness and education. We, our clients and our vendors are increasingly the target of hackers and other threat actors, denial of service attacks and malicious code, which can result in the unauthorized access, misuse, loss, or destruction of data (including confidential and sensitive data), unavailability of services and supply chain disruptions, or other adverse events.
Our business, which increasingly involves the collection, use and transmission of customer data, including personal information, makes us and our agencies attractive targets for malicious third-party attempts to access this data. Power outages, equipment failure, natural disasters (including extreme weather), terrorist activities or human error also affect our systems and can result in disruption of our services or loss or improper disclosure of personal data, business information, including intellectual property, or other confidential information. We utilize in-house and third-party services, including third-party “cloud” computing services, to perform key operational functions, including the storage, transfer or processing of data. System failures or network disruptions or breaches in such in-house or third-party systems could adversely affect our business operations, financial condition and reputation or expose us to increased risk of litigation or regulatory enforcement action.
The threat landscape is constantly evolving. Cybersecurity incidents or data breaches affecting the confidentiality, integrity, or availability of the information we process, our data systems, or those operated on our behalf by third-party service providers adversely affect our ability to manage our risk exposure and could significantly harm our business. We operate in many respects on a decentralized basis, with a large number of agencies and legal entities, and the resulting size, diversity and disparity of our technology systems and complications in implementing standardized technologies and procedures increases our vulnerability to such breakdowns, malicious intrusions or attacks.
Data privacy or cybersecurity breaches, or any failure to maintain the confidentiality of sensitive information, by employees and others poses the risk that sensitive data, such as personal information, strategic plans and trade secrets, could be exposed to third parties or to the general public. Breaches or breakdowns that result in a loss of our or our clients’ or vendors’ proprietary information expose us to legal liability and can be expensive to remedy. We consider the ethical treatment of data to be a business strength, and so the damage to our reputation and business from any such breach could be significant and costly. Efforts to develop, implement and maintain security measures are costly, may not be successful in preventing these events from occurring and require ongoing monitoring and updating as technologies and cyberattack techniques change frequently, or are not recognized until successful and efforts to overcome security measures become more sophisticated. We operate worldwide, and the legal rules governing data transfers are often complex, conflicting, unclear or ever-changing. Increased privacy and cybersecurity requirements increase our operating and compliance costs and can negatively impact our business or financial condition.
Furthermore, as part of our response to the challenges of the COVID-19 pandemic, modified processes, procedures and controls were required to respond to the changes in our business environment as a significant number of our employees have continued to work from home for at least a portion of the work week. The increase in remote working of our employees exacerbates risks related to the increased demand for information technology resources, malicious technology-related events, including cyberattacks and phishing attacks, and improper dissemination of personal, proprietary or confidential information.
• International business risks could adversely affect our operations.
We are a global business, with agencies operating in over 100 countries. Operations outside the United States represent a significant portion of our revenue before billable expenses, approximately 35% in 2024. These operations are exposed to risks that include local legislation, currency variation, exchange control restrictions, local labor and employment laws that hinder workforce flexibility, large-scale local or regional public health crises, and other difficult social, political or economic conditions.
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We also must comply with applicable U.S., local and other international anti-corruption laws, including the FCPA and the U.K. Anti-Bribery Act (2010), which can be comprehensive, complex and stringent, in all jurisdictions where we operate, certain of which present heightened compliance challenges. Export controls and economic sanctions, such as those maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, can impose limitations on our ability to operate in certain geographic regions or to seek or service certain potential clients, including in Russia and, increasingly, China. These restrictions can place us at a competitive disadvantage with respect to those competitors who may not be subject to comparable restrictions. Failure to comply or to implement business practices that sufficiently prevent corruption or violation of sanctions laws could result in significant remediation expense and expose us to significant civil and criminalpenalties and reputational harm.
In addition, in developing countries or regions, we may face further risks, such as slower receipt of payments, nationalization, social and economic instability, currency repatriation restrictions and undeveloped or inconsistently enforced commercial laws. These risks may limit our ability to grow our business and effectively manage our operations in those countries.
• The costs of compliance with sustainability or other environmental, social responsibility or governance (ESG) laws, regulations or policies, including investor and client-driven policies and standards, could adversely affect our business.
We are increasingly impacted by the effects of climate change and laws and regulations related to climate and other ESG concerns. We could also incur related costs indirectly through our clients or investors. Increasingly our clients request that we comply with their own social responsibility, sustainability or other business policies or standards, which may be more restrictive than current laws and regulations, before they commence, or continue, doing business with us, and ESG issues are increasingly a focus of the investor community. If large shareholders were to reduce their ownership stakes in our Company as a result of dissatisfaction with our policies or efforts in this area, there could be negative impact on our stock price, and we could also suffer reputational harm. Further, if clients’ costs are adversely affected by climate change or related laws and regulations, this could negatively impact their spending on our advertising and marketing services. We could also face increased prices from our own suppliers that face climate change-related and other ESG costs and seek to pass on their increased costs to their customers.
In 2021, we committed to certain science-based emissions targets, the sourcing of 100% of our electricity needs from renewable sources by 2030 and the realization of net-zero carbon emissions by 2040. Some clients and investors may request that we commit to emissions targets and timeframes that may be more aggressive than the commitments we have already undertaken. Any setbacks in the feasibility or timing of the achievement of our commitments could result in reputational harm or damaged relationships with clients or consumers. We expect the financial and operational costs of complying with ESG laws and regulations or achieving our ESG goals and related certification requirements will grow significantly in future years.
• If our clients experience financial distress, it could negatively affect our own financial position and results.
We have a large and diverse client base, and at any given time, one or more of our clients may experience financial difficulty, file for bankruptcy protection or go out of business. Unfavorable economic and financial conditions, including those resulting from regional or global economic downturns, and military conflicts or other geopolitical risks could result in an increase in client financial difficulties that negatively affect us. The direct impact on us could include reduced revenues and write-offs of accounts receivable and expenditures billable to clients, and if these effects were severe, the indirect impact could include impairments of intangible assets, credit facility covenant violations and reduced liquidity.
• If our clients seek to change or delay payment terms, it could negatively affect our own financial position and results.
In most of our businesses, our agencies enter into commitments to pay production and media costs on behalf of clients. The amounts involved substantially exceed our revenues and primarily affect the level of accounts receivable, expenditures billable to clients, accounts payable and accrued liabilities. To the extent possible, we pay production and media charges only after we have received funds from our clients. However, if clients are unable to pay for commitments that we have entered into on their behalf, or if clients seek to significantly delay or otherwise alter payment terms, there could be an adverse effect on our working capital, which would negatively impact our operating cash flow.
• We face risks associated with our acquisitions and other investments.
We regularly undertake acquisitions and other investments that we believe will enhance our service offerings to our clients, such as our acquisitions of Acxiom in 2018 and RafterOne in 2022. These transactions can involve significant challenges and risks, including that the transaction does not advance our business strategy or fails to produce a satisfactory return on our investment. Our customary business, legal and financial due diligence with the goal of identifying and evaluating the material risks involved may be unsuccessful in ascertaining or evaluating all such risks. Though we typically structure our acquisitions to provide for future contingent purchase payments that are based on the future performance of the acquired entity, our forecasts of the investment’s future performance also factor into the initial consideration. When actual financial results differ, our returns on the investment could be adversely affected.
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We may also experience difficulty integrating new employees, businesses, assets or systems into our organization, including with respect to our internal policies and required controls. We may face reputational and legal risks in situations where we have a significant minority investment but limited control over the investment's operations. Furthermore, it may take longer than anticipated to realize the expected benefits from these transactions, or those benefits may ultimately be smaller than anticipated or may not be realized at all. Talent is among our most valuable assets, and we also may not realize the intended benefits of a transaction if we fail to retain targeted personnel. Acquisition and integration activity may also divert management’s attention and other corporate resources from other business needs. If we fail to realize the intended advantages of any given investment or acquisition, or if we do not identify or correctly measure the associated risks and liabilities, our results of operations and financial position could be adversely affected.
Risks Related to Our Financial Condition and Results
• Our financial condition could be adversely affected if our available liquidity is insufficient.
Agency operating cash flows have a significant impact on our liquidity, and we maintain a commercial paper program, a committed corporate credit facility and uncommitted lines of credit to increase flexibility in support of our operating needs. If any of these sources were unavailable or insufficient, our liquidity and ability to adequately fund our operations could be adversely affected, and we could be required to refinance, restructure or otherwise amend some or all of our obligations, sell assets or raise additional cash in the capital markets, and there could be a negative impact on our credit ratings. Increases in interest rates raise our borrowing costs. We cannot assure you that we would be able to access any new sources of liquidity, including in the capital markets, on commercially reasonable terms or at all or, if accomplished, that we would raise sufficient funds to meet our needs.
We maintain a $1.5 billion committed corporate credit facility (the “Credit Agreement”) as a backstop source of liquidity. The Credit Agreement also supports our ability to borrow under our commercial paper program. Under our commercial paper program, we are authorized to issue short-term debt up to an aggregate amount outstanding at any time of $1.5 billion, which we may use for working capital and general corporate purposes. If credit under the Credit Agreement or our ability to access the commercial paper market were unavailable or insufficient, our liquidity could be adversely affected.
The Credit Agreement contains a leverage ratio and other, non-financial, covenants, and events like a material economic downturn could adversely affect our ability to comply with them. For example, compliance with the financial covenant would be more difficult to achieve if we were to experience increased indebtedness or substantially lower revenues, including as a result of economic downturns, client losses or a substantial increase in client defaults. If we were unable to comply with any of the covenants contained in the Credit Agreement, we could be required to seek an amendment or waiver from our lenders, and our costs under these agreements would likely increase. If we were unable to obtain a necessary amendment or waiver, the Credit Agreement could be terminated, any outstanding amounts could be subject to acceleration, and we could lose access to certain uncommitted financing arrangements and commercial paper.
For further discussion of our liquidity profile and outlook, see Liquidity and Capital Resources in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations .
• Downgrades of our credit ratings could adversely affect us.
Because ratings are an important factor influencing our ability to access capital and the terms of any new indebtedness, including covenants and interest rates, we could be adversely affected if our credit ratings were downgraded or if they were significantly weaker than those of our competitors. Our access to the commercial paper market is contingent on our maintenance of sufficient short-term debt ratings, and any downgrades to those ratings could increase our borrowing costs and reduce the market capacity for, or our ability to issue, commercial paper. Our clients and vendors may also consider our credit profile when negotiating contract terms, and if they were to change the terms on which they deal with us, it could have an adverse effect on our liquidity.
• Our earnings would be adversely affected if we were required to recognize asset impairment charges or increase our deferred tax valuation allowances.
We evaluate all of our long-lived assets (including goodwill, other intangible assets, fixed assets and operating lease right-of-use assets), investments and deferred tax assets for possible impairment or realizability annually or whenever there is an indication that they are impaired or not realizable. If certain criteria are met, we are required to record an impairment charge or valuation allowance. During the third quarter of 2024, we concluded that declines in the forecasted performance of one of our reporting units included within our MD&E segment, combined with the classification of R/GA and Huge, which comprised a significant portion of the reporting unit, as held for sale was a triggering event which required a goodwill impairment assessment, and we recorded non-cash goodwill impairment charges of $232.1 million.
As of December 31, 2024, we had substantial amounts of long-lived assets, deferred tax assets and investments on our Consolidated Balance Sheet, including approximately $4.7 billion of goodwill. Future events, including our financial performance, market valuation of us or market multiples of comparable companies, loss of a significant client’s business or
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strategic decisions, could cause us to conclude that impairment indicators exist and that the asset values associated with long-lived assets, deferred tax assets and investments may have become impaired. Any significant impairmentloss would have an adverse impact on our reported earnings in the period in which the charge is recognized. For further discussion of goodwill and other intangible assets, as well as our sensitivity analysis of our valuation of these assets, see Critical Accounting Estimates in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations .
• Our financial results are exposed to exchange rate risk.
Because a significant portion of our business is denominated in currencies other than the U.S. Dollar, such as the British Pound Sterling, the Euro, the Japanese Yen and Australian Dollar, fluctuations in exchange rates between the U.S. Dollar and such currencies may adversely affect our financial results.
• We may not be able to meet our performance targets and milestones.
From time to time, we communicate to the public certain targets and milestones for our financial and operating performance that are intended to provide metrics against which to evaluate our performance. They should not be understood as predictions or guidance about our expected performance. Our ability to meet any target or milestone is subject to inherent risks and uncertainties, and we caution investors against placing undue reliance on them. See Statement Regarding Forward-Looking Disclosure .
Risks Relating to the Proposed Merger with Omnicom
• Because the exchange ratio is fixed and because the market prices of shares of Omnicom common stock and IPG common stock will fluctuate, IPG stockholders cannot be certain of the market value of the merger consideration they will receive in the merger or the difference between the market value of the merger consideration they will receive in the merger and the market value of their shares of IPG common stock immediately prior to the merger.
At the time the merger is completed, each issued and outstanding share of IPG common stock will be converted into the right to receive the merger consideration of 0.344 shares of Omnicom common stock, together with cash paid in lieu of the issuance of any fractional shares of Omnicom common stock. The exchange ratio for the merger consideration is fixed, and there will be no adjustment to the merger consideration, regardless of whether the market price of Omnicom common stock or IPG common stock changes prior to the completion of the merger. The market prices of Omnicom common stock and IPG common stock have fluctuated since the date on which Omnicom and IPG announced they entered into the Merger Agreement and will continue to fluctuate to the date on which IPG stockholders actually receive the merger consideration. The market prices of Omnicom common stock and IPG common stock will fluctuate during these periods as a result of a variety of factors, including general market and economic conditions, changes in Omnicom’s and IPG’s respective businesses, operations and prospects, market assessments of Omnicom’s and IPG’s businesses, operations and prospects and of the likelihood that the merger will be completed and regulatory considerations. Such factors are difficult to predict and in many cases are beyond the control of Omnicom and IPG. Consequently, at the time IPG stockholders must decide whether to approve the transaction, they will not know the market value of the merger consideration they will receive, which will depend on the market value of the shares of Omnicom common stock as of the effective time of merger.
• IPG stockholders will have reduced ownership in the combined company and less influence over management.
Immediately after the completion of the merger, it is expected that Omnicom stockholders will own approximately 60.6% and IPG stockholders will own approximately 39.4% of the issued and outstanding shares of Omnicom common stock (As a result, current IPG stockholders will have less influence on the management and policies of the combined company than they currently have on the management and policies of IPG.
• The merger may not be completed, and the Merger Agreement may be terminated in accordance with its terms.
The merger is subject to a number of conditions that must be satisfied or waived prior to the completion of the merger. These conditions to the completion of the merger may not be satisfied or waived in a timely manner or at all, and, accordingly, the merger may be delayed or may not be completed.
In addition, if the merger is not completed by December 8, 2025 (which date may be extended to June 8, 2026 in certain circumstances), either Omnicom or IPG may choose not to proceed with the merger by terminating the Merger Agreement, and the parties can mutually decide to terminate the Merger Agreement at any time, before or after stockholder approval. In addition, Omnicom and IPG may elect to terminate the Merger Agreement in certain other circumstances.
• The Merger Agreement limits our ability to pursue alternatives to the merger, may discourage other companies from trying to acquire a significant interest in IPG common stock or assets and, in specified circumstances, could require us to pay Omnicom a termination fee.
The Merger Agreement contains provisions that may discourage a third party from submitting a proposal for a competing transaction, including the acquisition of a significant interest in our common stock or assets. These provisions include a general
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prohibition on IPG from soliciting or entering into discussions with any third party regarding any such competing proposal. Furthermore, the Merger Agreement provides that if Omnicom terminates the Merger Agreement because IPG breaches certain of its obligations under the agreement, IPG will be required to pay Omnicom $439 million. In addition, if the Merger Agreement is terminated due to our failure to obtain IPG stockholder approval, and at such time, Omnicom has obtained stockholder approval, IPG, may be required to reimburse the other party for its expenses incurred in connection with the transaction in an amount not to exceed $25 million.
• Failure to complete the merger could negatively impact the price of shares of our common stock, as well as our business and financial results.
The Merger Agreement contains a number of conditions that must be satisfied or waived prior to the completion of the merger. There can be no assurance that all of the conditions to the completion of the merger will be satisfied or waived. If these conditions are not satisfied or waived, Omnicom and IPG will be unable to complete the merger.
If the merger is not completed for any reason, including the failure to receive the required approvals of the Omnicom stockholders or the IPG stockholders, Omnicom’s and IPG’s respective businesses and financial results may be adversely affected and, without realizing any of the benefits of having completed the merger, we would be subject to a number of risks, including:
• we may experience negative reactions from the financial markets, including negative impacts on the market price of IPG common stock;
• we may experience negative reactions from our clients, vendors, landlords, joint venture participants and other third parties with whom we do business, which in turn could affect our business operations or our ability to compete for new business or obtain renewals in the marketplace more broadly;
• we may experience negative reactions from employees;
• we would will still be required to pay certain significant costs relating to the merger, including legal, accounting, financial advisor and printing fees; and
• our senior management team will have expended time and resources that could otherwise have been spent on our existing businesses and the pursuit of other opportunities that could have been beneficial to the Company, and our ongoing business and financial results may be adversely affected.
In addition to the above risks, if the Merger Agreement is terminated and our directors seek an alternative transaction, the holders of IPG’s common stock cannot be certain that the Company will be able to find a party willing to engage in a transaction on more attractive terms than the merger.
• Uncertainties associated with the merger may cause a loss of management personnel and other key employees, which could adversely affect the business and operations of the combined company following the merger.
Each of Omnicom and IPG depends on the experience and industry knowledge of its officers and other key employees to execute its business plans. The success of the combined company after the merger will depend, in part, on its ability to retain key management personnel and other key employees. Current and prospective employees of Omnicom and IPG may experience uncertainty about their roles within the combined company following the merger or other concerns regarding the timing and completion of the merger or the operations of the combined company following the merger, any of which may have an adverse effect on Omnicom’s and IPG’s ability to retain or attract key management and other key personnel. If Omnicom or IPG are unable to retain personnel, including Omnicom’s or IPG’s key management, who are critical to the future operations of the companies, Omnicom and IPG could face disruptions in their operations, loss of existing clients, loss of key information, expertise or know-how and unanticipated additional recruitment and training costs. In addition, the loss of Omnicom’s and IPG’s key personnel could diminish the anticipated benefits of the merger. No assurance can be given that the combined company, following the merger, will be able to retain or attract Omnicom’s and IPG’s key management personnel and other key employees to the same extent that Omnicom and IPG have previously been able to retain or attract personnel.
• Our and Omnicom’s business relationships may be subject to disruption due to uncertainty associated with the merger, which could have a material effect on our business, financial condition, cash flows and results of operations or those of the combined company following the merger.
Parties with which we or Omnicom do business may experience uncertainty associated with the merger, including with respect to current or future business relationships with us or Omnicom or the combined company following the merger. Omnicom’s and IPG’s business relationships may be subject to disruption as clients, vendors, landlords, joint venture participants and other third parties with whom they do business may attempt to delay or defer entering into new business relationships, negotiate changes in existing business relationships or consider entering into business relationships with parties other than Omnicom or IPG. These disruptions could have a material and adverse effect on our and Omnicom’s business,
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financial condition, cash flows and results of operations, regardless of whether the merger is completed, as well as a material and adverse effect on the combined company’s ability to realize the expected cost savings, operating synergies and other benefits of the merger. The risk, and adverse effects, of any disruption could be exacerbated by a delay in completion of the merger or termination of the Merger Agreement.
• Completion of the merger may trigger change-in-control or other provisions in certain agreements to which we are a party.
The completion of the merger may trigger change-in-control or other provisions in certain agreements, including certain of our debt arrangements, to which we are a party. If we are unable to negotiate amendments to or waivers of those provisions, the counterparties may exercise their rights and remedies under the applicable agreements, including in some instances potentially terminating the agreements or seeking monetary damages. Even if we are able to negotiate amendments or waivers, the counterparties may require a fee for such amendments or waivers or seek to renegotiate the agreements on terms less favorable to us or the combined company.
• The Merger Agreement subjects us to restrictions on our business activities prior to the effective time of the merger.
The Merger Agreement restricts us from entering into certain corporate transactions and taking other specified actions without the consent of Omnicom, and generally requires us to continue our operations in the ordinary course through the completion of the merger. These restrictions could be in place for an extended period of time if completion of the merger is delayed and could prevent us from pursuing attractive business opportunities that may arise prior to the completion of the merger.
• We are expected to incur significant costs in connection with the merger and integration of the two companies, which may be in excess of those currently anticipated.
We have incurred and expect to continue to incur a number of non-recurring costs associated with negotiating and completing the merger and combining our operations with those of Omnicom. These costs have been, and will continue to be, substantial. The substantial majority of non-recurring costs will consist of transaction costs related to the merger and include, among others, fees paid to financial, legal and accounting advisors, filing fees, employee retention and other employment-related costs, and debt restructuring costs. We will bear many of these costs even if the merger is not completed.
We will also incur transaction costs related to formulating and implementing integration plans, including facilities, systems and service contract consolidation costs and employment-related costs. We may incur additional unanticipated costs in connection with the merger and the integration of our businesses with those of Omnicom. Although we expect that the elimination of duplicative costs, as well as the realization of other synergies related to the integration of the businesses, should allow the combined company to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all. For additional information, see the risk factor entitled “— The failure to integrate IPG's and Omnicom’s businesses and operations successfully in the expected time frame may adversely affect the combined company’s business and results of operations ” below. The costs described above, as well as other unanticipated costs and expenses, could adversely affect the financial condition, cash flows and results of operations of the combined company following the completion of the merger.
• Litigation relating to the merger, if any, could result in an injunctionpreventing the completion of the merger and/or substantial costs to IPG.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other business combination agreements like the Merger Agreement. Even if such a lawsuit is without merit, defendingagainst these claims can result in substantial costs and require management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition. Lawsuits that may be brought against us, Omnicom, or our respective directors could also seek, among other things, injunctive relief or other equitable relief, including a request to rescind parts of the Merger Agreement already implemented and to otherwise enjoin the parties from consummating the merger. One of the conditions to the closing of the merger is that no Law or Order (each as defined in the Merger Agreement) is promulgated, entered, enforced, enacted or issued by any governmental entity of competent jurisdiction in which either Omnicom and its subsidiaries (taken as a whole) or IPG and its subsidiaries (taken as a whole) have material assets or material business operations, which prohibits, restrains or makes illegal the consummation of the merger. Consequently, if a plaintiff is successful in obtaining an injunction prohibiting completion of the merger, that injunction may delay or prevent the merger from being completed within the expected timeframe or at all, which may adversely affect our or Omnicom’s respective businesses, financial condition, cash flows and results of operations. In addition, either Omnicom or IPG may terminate the Merger Agreement if any Law or Order has been promulgated, entered, enforced, enacted or issued by any governmental entity of competent jurisdiction in which either Omnicom and its subsidiaries (taken as a whole) or IPG and its subsidiaries (taken as a whole) have material assets or material business operations, which is in effect and permanently prohibits, restrains, enjoins or makes illegal the consummation of the merger, so long as a material breach by a party to the Merger Agreement of any of its obligations under the agreement has not been the primary cause of, or resulted in, the enactment or issuance of such Law or Order.
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There can be no assurance that any of the defendants would be successful in the outcome of any potential future lawsuits. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may adversely affect the combined company’s business, financial condition, cash flows and results of operations.
• The failure to integrate IPG's and Omnicom’s businesses and operations successfully in the expected time frame may adversely affect the combined company’s business and results of operations.
IPG and Omnicom have operated and, until the completion of the merger, will continue to operate independently. Following the completion of the merger, our companies’ businesses may not be integrated successfully. It is possible that the integration process could result in the loss of key employees, the loss of clients, service providers, vendors or other business counterparties, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, potential unknown liabilities and unforeseen expenses, delays, or regulatory conditions associated with and following completion of the merger; or higher-than-expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, the following challenges, among others, must be addressed in integrating IPG’s and Omnicom’s operations in order to realize the anticipated benefits of the merger:
• combining the companies’ operations and corporate functions and the resulting difficulties associated with managing a larger, more complex, diversified business;
• combining the companies’ businesses in a manner that permits the combined company to achieve the cost savings and operating synergies anticipated to result from the merger;
• avoiding delays in connection with the completion of the merger or the integration process;
• integrating personnel from the two companies and minimizing the loss of key employees;
• identifying and eliminating redundant functions and assets;
• harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes and successfully implementing the foregoing;
• maintaining existing agreements with clients, service providers, vendors and other business counterparties and avoiding delays in entering into new agreements with prospective clients, service providers, vendors and other business counterparties;
• addressing possible differences in business backgrounds, corporate cultures and management philosophies; and
• consolidating the companies’ operating, administrative and information technology infrastructure and financial systems
In addition, at times the attention of certain members of either company’s or both companies’ management and resources may be focused on completion of the merger and the integration of the businesses of the two companies and may reduce their availability for day-to-day business operations or other opportunities that may be beneficial, which may disrupt each company’s ongoing operations and the operations of the combined company. Furthermore, following the merger, the board of directors and executive leadership of the combined company will consist of former directors from each of Omnicom and IPG and former executive officers from each of Omnicom and IPG. Combining the boards of directors and management teams of each company into a single board and a single management team could require the reconciliation of differing priorities and philosophies.
• The merger may result in a loss of clients, service providers, vendors, joint venture participants and other business counterparties, and may result in the termination of existing contracts.
Following the merger, some of Omnicom’s and IPG’s clients, service providers, vendors, joint venture participants and other business counterparties may terminate or scale back their current or prospective business relationships with the combined company. In addition, Omnicom and IPG have contracts with clients, service providers, vendors, joint venture participants and other business counterparties that may require Omnicom or IPG to obtain consents from these other parties in connection with the merger, which may not be obtained on favorable terms or at all. If relationships with clients, service providers, vendors, joint venture participants and other business counterparties are adversely affected by the merger, or if the combined company, following the merger, loses the benefits of the contracts of Omnicom or IPG, the business, financial condition, cash flows and results of operations of the combined company could be adversely affected.
• The combined company may fail to realize all of the anticipated benefits of the merger.
The success of the merger will depend, in part, on Omnicom’s ability to realize the cost savings, operating synergies and other benefits from combining Omnicom’s and IPG’s businesses. The anticipated cost savings, operating synergies and other benefits of the merger may not be realized fully or at all, may take longer to realize than expected, or may result in other adverse effects that Omnicom does not currently foresee, in which case, among other things, the merger may not be accretive to adjusted earnings per share for both Omnicom and IPG and may not generate significant cash to return to stockholders via dividends, share repurchases or other means. Some of the assumptions that we and Omnicom have made, such as the
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achievement of the anticipated benefits related to combining complementary assets to create a portfolio of services and products that expand client opportunities, and advances in both companies’ ability to innovate and develop new products and services, may not be realized. The integration process may, for each of Omnicom and IPG, result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies. In addition, there could be potential unknown liabilities and unforeseen expenses associated with the merger that could adversely impact the combined company.
• The future results of the combined company following the merger will suffer if the combined company does not effectively manage its expanded operations.
Following the merger, the size and complexity of the combined company will increase significantly compared to the business of each of Omnicom and IPG. The combined company’s future success will depend, in part, upon its ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management of a larger number of operations and geographies and associated increased costs and complexity. The combined company may also face increased scrutiny from, and/or additional regulatory requirements of, governmental authorities as a result of the significant increase in the size and complexity of its business. There can be no assurances that the combined company will be successful or that it will realize the expected operating synergies, cost savings or other benefits currently anticipated from the merger.
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EXECUTIVE SUMMARY
Our Business
We provide marketing, communications and business transformation services that help marketers and brands succeed in today's digital economy. Combining the power of creativity and technology, our approximately 53,300 employees and operations span all major world markets. Our companies specialize in insights, data, media, creative and production, digital commerce, healthcare marketing and communications, producing marketing solutions for clients that range in scale from large global marketers to regional and local clients. Our comprehensive global services help marketers build brands, increase sales of their products and services, and gain market share.
Our capabilities span ideation to execution: growth, product and experience design; technology and experience platforms; creative, media and marketing strategy; and campaign, content and channel orchestration. The work we produce for our clients is specific to their unique needs. Our solutions vary from project-based activity to long-term, fully integrated campaigns. Our operations support the strategic position that marketers have access to the best and most appropriate resources within IPG to drive business success, and may access these capabilities from across the IPG network in an agile model called Open Architecture®. With operations in over 100 countries, we can operate in a single region or deliver global integrated programs.
We operate in a media, consumer and technology ecosystem that continues to evolve at a rapid pace. To help our clients win in a data-led and digital-first world, we have made and continue to make investments in strategic areas including digital commerce, retail media, artificial intelligence, audience resolution and production across world markets. In addition, we consistently review opportunities within our Company to enhance our operations through acquisitions and strategic alliances and internal programs that encourage client-centric collaboration. As appropriate, we also develop relationships with technology and emerging media companies that are building leading-edge marketing tools that complement our agencies' skill sets and capabilities.
Home to some of the world’s best-known and most innovative communications specialists, IPG global brands include Acxiom, Craft, FCB, FutureBrand, Golin, Huge, Initiative, IPG Health, IPG Mediabrands, Jack Morton, KINESSO, MAGNA, McCann, Mediahub, Momentum, MRM, MullenLowe Global, Octagon, UM, Weber Shandwick and more.
Our financial goals include competitive organic growth of revenue before billable expenses and expansion of Adjusted EBITA margin, as defined and discussed within the Non-GAAP Financial Measure section of this MD&A, which we expect will further strengthen our balance sheet and total liquidity and increase value to our stakeholders. Accordingly, we remain focused on meeting the evolving needs of our clients while concurrently managing our cost structure. We continually seek greaterefficiency in the delivery of our services, focusing on more effective resource utilization, including the productivity of our employees, real estate, information technology and shared services, such as finance, human resources and legal. The improvements we have made and continue to make in our financial reporting and business information systems in recent years
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
allow us more timely and actionable insights from our global operations. Our disciplined approach to our balance sheet and liquidity provides us with a solid financial foundation and financial flexibility to manage and grow our business. We believe that our strategy and execution position us to meet our financial goals and to deliver long-term value to all of our stakeholders.
Proposed Omnicom Transaction
On December 8, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Omnicom Group Inc. (“Omnicom”), pursuant to which an Omnicom merger subsidiary will merge with and into IPG, with IPG surviving the merger as a direct wholly owned subsidiary of Omnicom.
As a result of the merger, each share of IPG common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive 0.344 shares of Omnicom common stock. The exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to closing the merger.
If the transaction is completed, following the closing Omnicom shareholders will own 60.6% of the combined company and IPG shareholders will own 39.4%, on a fully diluted basis. As a result of the merger, we will cease to be a publicly traded company.
We believe the combined company will bring together the industry’s deepest bench of marketing talent, and the broadest and most innovative services and products, driven by the most advanced sales and marketing platform. Together, the companies will expand their capacity to create comprehensive full-funnel solutions that deliver better outcomes for the world’s most sophisticated clients. We anticipate the combined company will have over 100,000 expert practitioners, delivering end-to-end services across media, precision marketing, CRM, data, digital commerce, advertising, healthcare, public relations and branding.
We also face risks related to our proposed transaction with Omnicom, including as a result of any failure to complete, or delays in completing, the proposed transaction. The closing of the merger is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by IPG stockholders and Omnicom stockholders. Furthermore, uncertainty about the mergers may adversely affect relationships with our clients, partners, suppliers, and employees, whether or not the merger transactions are completed, and if the transaction is completed, the combined company may not perform as we currently expect. See Item 1A, Risk Factors , in this Annual Report on Form 10-K.
Current Market Conditions
The global macroeconomic backdrop continues to be characterized by complex business, economic and geopolitical crosscurrents, which include the persistence of conflicts in Ukraine and the Middle East and shifting economic developments domestically and among the largest global economic actors. These uncertainties have served to introduce a measure of relative caution to the global economy. Nonetheless, media markets continue their robust and varied growth, most notably in digital addressable channels. Along with proliferating media complexity, consumers continue to evolve at pace in the ways they interact with brands. These latter trends offer abiding support to investment by large marketers in the advanced services in which we specialize.
The principal macroeconomic risks to our performance include the impact of any general or regional economic slowdown or contraction, the extent of inflation of labor costs and potential for labor shortages, continuing inflationary pressures on our clients and their customers, and the economic impacts of geopolitical conflict and resulting potential for uncertainty and restrictions on spending on the part of some clients and consumers. See Item 1A, Risk Factors , in this Annual Report on Form 10-K.
Our Financial Information
When we analyze period-to-period changes in our operating performance, we determine the portion of the change that is attributable to changes in foreign currency rates and the net effect of acquisitions and divestitures, and the remainder we call organic change, which indicates how our underlying business performed. We exclude the impact of billable expenses in analyzing our operating performance as the fluctuations from period to period are not indicative of the performance of our underlying businesses and have no impact on our operating income or net income.
The change in our operating performance attributable to changes in foreign currency rates is determined by converting the prior-period reported results using the current-period exchange rates and comparing these prior-period adjusted amounts to the prior-period reported results. Although the U.S. Dollar is our reporting currency, a substantial portion of our revenues and expenses are generated in foreign currencies. Therefore, our reported results are affected by fluctuations in the currencies in which we conduct our international businesses. Our exposure is mitigated as the majority of our revenues and expenses in any given market are generally denominated in the same currency. Both positive and negative currency fluctuations against the U.S. Dollar affect our consolidated results of operations, and the magnitude of the foreign currency impact to our operations related to each geographic region depends on the significance and operating performance of the region. The foreign currencies that most adversely impacted our results during the year ended December 31, 2024 were the Argentine Peso, the Brazilian Real, the
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
Japanese Yen and the Chilean Peso. The foreign currencies that most favorably impacted our results during the year ended December 31, 2024 were the British Pound Sterling, the Colombian Peso and the Euro.
For purposes of analyzing changes in our operating performance attributable to the net effect of acquisitions and divestitures, transactions are treated as if they occurred on the first day of the quarter during which the transaction occurred. We continually evaluate our portfolio of businesses and over the past several years, we have acquired companies that we believe will enhance our offerings and disposed of businesses that are not consistent with our strategic plan.
The metrics that we use to evaluate our financial performance include organic change in revenue before billable expenses as well as the change in certain operating expenses, and the components thereof, expressed as a percentage of consolidated revenue before billable expenses, as well as Adjusted EBITA. These metrics are also used by management to assess the financial performance of our reportable segments, MD&E, IA&C, and SC&E. In certain of our discussions, we analyze revenue before billable expenses by geographic region and by business sector, in which we focus on our top 500 clients, which typically constitute approximately 85% of our annual consolidated revenue before billable expenses.
The Consolidated Financial Statements and MD&A presented herein reflect the latest estimates and assumptions made by us that affect the reported amounts of assets and liabilities and related disclosures as of the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. We believe we have used reasonable estimates and assumptions to assess the fair values of the Company’s goodwill, long-lived assets and indefinite-lived intangible assets; assessment of the annual effective tax rate; valuation of deferred income taxes and the allowance for expected credit losses on future uncollectible accounts receivable. If actual market conditions vary significantly from those currently projected, these estimates and assumptions could materially change resulting in adjustments to the carrying values of our assets and liabilities.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
The following table presents a summary of our financial performance for the years ended December 31, 2024, 2023 and 2022.
Years ended December 31,
Change
Statement of Operations Data
% Increase/
(Decrease)
% Increase/
(Decrease)
REVENUE:
Revenue before billable expenses
Billable expenses
Total revenue
OPERATING INCOME 1
Adjusted EBITA 1, 2
NET INCOME AVAILABLE TO IPG COMMON STOCKHOLDERS
Earnings per share available to IPG common stockholders:
Basic 1
Diluted 1
Operating Ratios
Organic change in revenue before billable expenses
Operating margin on revenue before billable expenses 1
Operating margin on total revenue 1
Adjusted EBITA margin on revenue before billable expenses 1, 2
Expenses as a % of revenue before billable expenses:
Salaries and related expenses
Office and other direct expenses
Selling, general and administrative expenses
Depreciation and amortization
Restructuring charges 1
1 For the years ended December 31, 2024, 2023 and 2022, results include restructuring charges of $(5.0) , $0.1 an d $102.4, respectively. See "Restructuring Charges" in MD&A and Note 12 of Item 8, Financial Statements and Supplementary Data for further information.
2 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 stockholder before provision for incomes taxes, total (expenses) and other income, equity in net income of unconsolidated affiliates, net income attributable to noncontrolling 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.
Total revenue, which includes billable expenses, decreased (1.8)% during the year ended December 31, 2024. Our organic increase of revenue before billable expenses was 0.2% during the year ended December 31, 2024. The increase was due to net client wins in our healthcare and food and beverage sectors, largely offset by net client losses and lower spending from existing clients in the auto and transportation and technology & telecom sectors. During the year ended December 31, 2024, our Adjusted EBITA margin on revenue before billable expenses decreased to 16.5% from 16.7% in the prior-year period as the decrease in revenue before billable expenses, discussed below in the “Results of Operations” section, outpaced the overall decrease in our operating expenses, excluding billable expenses, amortization of acquired intangibles and impairment of goodwill.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
Total revenue, which includes billable expenses, decreased (0.4)% during the year ended December 31, 2023. Our organic change of revenue before billable expenses of (0.1)% for the year ended December 31, 2023 was due to net client losses and lower spending from existing clients in the technology & telecom sector and net client losses in the retail sector, partially offset by net client wins in our healthcare and financial services sectors. During the year ended December 31, 2023, our Adjusted EBITA margin on revenue before billable expenses increased to 16.7% from 15.5% in the prior-year period as the decrease in revenue before billable expenses, discussed below in the “Results of Operations” section, was outpaced by the overall decrease in our operating expenses, exclud ing billable expenses and amortization of acquired intangibles.
RESULTS OF OPERATIONS
Consolidated Results of Operations
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.
Year ended December 31, 2023
Components of Change
Year ended December 31, 2024
Change
Foreign
Currency
Net
Acquisitions/
(Divestitures)
Organic
Organic
Total
Consolidated
Domestic
International
United Kingdom
Continental Europe
Asia Pacific
Latin America
Other
The organic change in our domestic market was relatively flat and primarily due to revenue increases at our media businesses and public relations agencies as well as data management and analytics, partially offset by revenue decreases at our digital project-based offerings and advertising businesses. In our international markets, the 0.6% organic increase was driven by revenue increases at our advertising and media businesses, most notably in our Continental Europe and Latin America regions, respectively, partially offset by revenue decreases across most disciplines in our Asia Pacific region and at our digital project-based offerings across nearly all regions.
Year ended December 31, 2022
Components of Change
Year ended December 31, 2023
Change
Foreign
Currency
Net
Acquisitions/
(Divestitures)
Organic
Organic
Total
Consolidated
Domestic
International
United Kingdom
Continental Europe
Asia Pacific
Latin America
Other
The (1.1)% organic decrease in our domestic market was primarily due to revenue decreases at our digital project-based offerings and advertising businesses, partially offset by revenue increases at our media businesses. In our international markets, the 1.8% organic increase was driven by revenue increases at our media businesses, public relations agencies and experiential businesses and was most notable in our Latin America and Continental Europe regions, partially offset by revenue decreases at our digital project-based offerings across all regions.
Refer to the segment discussion later in this MD&A for information on changes in revenue by segment.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
Salaries and Related Expenses
Years ended December 31,
Change
% Increase/ (Decrease)
% Increase/ (Decrease)
Salaries and related expenses
As a % of revenue before billable expenses:
Salaries and related expenses
Base salaries, benefits and tax
Incentive expense
Severance expense
Temporary help
All other salaries and related expenses
Revenue before billable expenses decrease of (2.3)% was outpaced by the overall decrease in salaries and related expenses of (3.5)% during the year ended December 31, 2024 as compared to the prior-year period. The decrease in salaries and related expenses was primarily driven by decreases in base salaries, benefits and tax and temporary help expense, partially offset by increases in severance expense.
Revenue before billable expenses decrease of (0.5)% outpaced the overall decrease in salaries and related expenses of (0.2)% during the year ended December 31, 2023 as compared to the prior-year period. The decrease in salaries and related expenses was primarily driven by decreases in performance-based employee incentive compensation and temporary help expense, partially offset by increases in base salaries, benefits and tax and severance expense.
Office and Other Direct Expenses
Years ended December 31,
Change
% Increase/ (Decrease)
% Increase/ (Decrease)
Office and other direct expenses
As a % of revenue before billable expenses:
Office and other direct expenses
Occupancy expense
All other office and other direct expenses 1
1 Includes production expenses, travel and entertainment, professional fees, spending to support new business activity, telecommunications, office supplies, bad debt expense, adjustments to contingent acquisition obligations, foreign currency losses (gains) and other expenses.
Office and oth er direct expenses remained relatively flat during the year ended December 31, 2024 as compared to the prior-year period. Increased client service costs were largely offset by decreases in occupancy expense, lower foreign currency losses and decreases in bad debt expense, as well as decreases in discretionary expenses including travel and entertainment.
Office and other direct expenses decreased (0.3)% during the year ended December 31, 2023 as compared to the prior-year period. The decrease in office and other direct expenses was driven by decreases in employment costs, occupancy expense and client service costs, partially offset by increases in bad debt expense, travel and entertainment expenses and software and cloud-based expenses, as well as foreign currency losses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") are primarily the unallocated expenses of our Corporate and other group, as detailed further in the segment discussion later in this MD&A, excludin g depreciation and amortization.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
SG&A increa sed by by $63.3 to $130.5 durin g the year ended December 31, 2024 as compared to 2023, primarily due to $9.3 of deal costs incurred during the fourth quarter of 2024 related to the planned acquisition of IPG by Omnicom, as well as an increase in software and cloud-based expenses.
SG&A decreased in 2023 as compared to the prior-year period, prim arily driven by decre ases in performance-based incentive compensation expense, partially offset by increases in software and cloud-based expe nses.
Depreciation and Amortization
For the years ended December 31, 2024, 2023 and 2022, depreciation and amortization was $177.1, $180.3 and $189.3, respectively. For the years ended December 31, 2024, 2023 and 2022, amortization of acquired intangibles was $81.8, $84.0 and $84.7, respectively.
Impairment of Goodwill
During the year ended December 31, 2024, we recorded impairment of goodwill of $232.1.
Restructuring Charges
During the fourth quarter and year ended December 31, 2024 , restructuring charges represent adjustments to our restructuring actions taken in 2020 and 2022, and primarily relate to the early termination of certain property leases. During the fourth quarter and year ended December 31, 2023 , restructuring charges represent adjustments to our restructuring actions taken in 2020 and 2022.
Beginning in the first quarter of 2025, management began initiating restructuring actions designed to transform our business, enhance our offerings and drive significant structural expense savings. Management is currently evaluating the actions to be included in the plan, some of which will be non-cash, and are subject to change upon finalization. Actions are expected to be completed by the end of 2025.
EXPENSES AND OTHER INCOME
Years ended December 31,
Cash interest on debt obligations
Non-cash interest
Interest expense
Interest income
Net interest expense
Other (expense) income, net
Total (expenses) and other income
Net Interest Expense
Net interest expense decreased by $6.6 in 2024 compared to a year ago, primarily attributable to more favorable interest rates on net deposits and higher average international cash balances. Net interest expense decreased by $26.5 in 2023 as compared to 2022, primarily attributable to higher interest rates on net deposits, partially offset by lower net cash balances.
Other (Expense) Income, Net
Results of operations include certain items that are not directly associated with our revenue-producing operations.
Years ended December 31,
Net gains/(losses) on sales of businesses
Other
Total other (expense) income, net
Net gains/(losses) on sales of businesse s – During 2024, 2023 and 2022, the amounts recognized were related to sales of businesses and the classification of certain assets and liabilities, consisting primarily of goodwill, accounts receivable and accounts payable, as held for sale within our MD&E, IA&C, and SC&E reportable segments. The businesses held for sale as of
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
year-end primarily represent unprofitable, non-strategic agencies which are expected to be sold within the next twelve months. During 2024, the amounts recognized were primarily related to two digital specialist agencies within our MD&E segment classified as held for sale during the third quarter of 2024. The sale of one of these businesses closed in the fourth quarter of 2024 and the sale of the other is expected to close in the first half of 2025. The sales of businesses and the classification of certain assets and liabilities as held for sale included cash, net of proceeds, of $7.9, $58.7 and $(22.4) for the years ended 2024, 2023 and 2022, respectively, which is classified within the Proceeds from sale of businesses, net of cash sold line in our Consolidated Statements of Cash Flows in Item 8, Financial Statements and Supplementary Data .
Other – During 2024, the majority of the amounts recognized were primarily related to pension and postretirement costs. During 2023, the majority of the amounts recognized were primarily related to pension and postretirement costs. During 2022, the majority of the amounts recognized were primarily related to a cash gain from the sale of an equity investment, partially offset by a non-cash loss related to the deconsolidation of a previously consolidated entity in which we maintain an equity interest.
INCOME TAXES
Years ended December 31,
Income before income taxes
Provision for income taxes
Effective income tax rate
Effective Tax Rate
Our tax rates are affected by many factors, including our worldwide earnings from various countries, changes in legislation and tax characteristics of our income.
In 2024, our effective income tax rate of 31.8% was negatively impacted by the net tax expense on entities classified as held for sale, a reduced tax benefit on impairment of goodwill, and by losses in certain foreign jurisdictions where we receive no tax benefit due to 100% valuation allowances. Our income tax expense was positively impacted by the reversal of reserves resulting from the lapse of statute for the 2020 federal tax year and the settlement of the 2017 through 2019 New York State income tax audit.
In 2023, our effective income tax rate of 20.7% was positively impacted by a benefit of $64.2 related to the settlement of the 2017 and 2018 U.S. Federal income tax audit. The effective rate also benefited from the net release of previously recorded reserves for various other tax contingencies, and the excess tax benefits on employee share-based payments, the majority of which were recognized in the first quarter due to the timing of the vesting of awards.
In 2022, our effective income tax rate of 25.1% was adversely impacted by the establishment of net valuation allowances primarily in Continental Europe, and by net losses on sales of businesses and the classification of certain assets as held for sale for which we received minimal tax benefit. This was partially offset by excess tax benefits on employee share-based payments, the majority of which were recognized in the first quarter due to the timing of the vesting of awards and by the release of previously recorded reserves for tax contingencies.
In August 2022, the U.S. enacted the Inflation Reduction Act of 2022 (“IRA”), which creates a new book minimum tax of at least 15% of consolidated GAAP pre-tax income for corporations with average book income in excess of $1 billion. The book minimum tax will first apply to our 2023 year. We do not expect an increase in our tax liability from this new book minimum tax in 2023. The IRA also creates an excise tax of 1% of the value of any stock repurchased by IPG after December 31, 2022. We expect to be subject to this new excise tax, but the amount will vary depending on various factors, including the amount and frequency of any stock issuances and repurchases. As a result of the IRA, tax associated with share repurchases will be included as part of the cost basis of the shares repurchased and recorded as an adjustment to treasury stock.
See Note 10 in Item 8, Financial Statements and Supplementary Data for further information.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
EARNINGS PER SHARE
Basic earnings per share available to IPG common stockholders for the years ended December 31, 2024, 2023 and 2022 were $1.84, $2.86 and $2.40 per share, respectively. Diluted earnings per share available to IPG common stockholders for the years ended December 31, 2024, 2023 and 2022 were $1.83, $2.85 and $2.37 per share, respectively.
Basic and diluted earnings per share for the year ended December 31, 2024 included negative impacts of $0.56 from impairment of goodwill, $0.20 from net losses on sales of businesses and the classification of certain assets as held for sale, $0.17 from the amortization of acquired intangibles, and $0.02 related to deal costs related to the planned acquisition of IPG by Omnicom , partially offset by a positive impact of $0.01 related to the reversal of restructuring charges.
Basic and diluted earnings per share for the year ended December 31, 2023 included positive impacts of $0.17 related to the settlement of U.S. Federal Income Tax Audits for the years 2017-2018 and $0.03 from a net gain on a completed disposition and the classification of certain assets, as held for sale as well as a loss related to the sale of an equity investment, partially offset by a negative impact of $0.17 from the amortization of acquired intangibles.
Basic and diluted earnings per share for the year ended December 31, 2022 included a negative impact of $0.17 from the amortization of acquired intangibles, negative impacts of $0.20 and $0.19, respectively, from restructuring charges, a negative impact of $0.03 from net losses on sales of businesses and the classification of certain assets as held for sale, a negative impact of $0.01 from the deconsolidation of a previously consolidated entity and a negative impact of $0.02 related to the net set-up of income tax valuation allowances, partially offset by a positive impact of $0.03 from the sale of an equity investment.
Segment Results of Operations
As discussed in Note 16 in Item 8, Financial Statements and Supplementary Data , we have three reportable segments as of December 31, 2024: MD&E, IA&C and SC&E. We also report results for the "Corporate and other" group. Segment information for the prior period has been recast to conform to the current-period presentation.
Media, Data & Engagement Solutions
Revenue before billable expenses
Year ended December 31, 2023
Components of Change
Year ended December 31, 2024
Change
Foreign
Currency
Net
Acquisitions/
(Divestitures)
Organic
Organic
Total
Consolidated
Domestic
International
The organic increase was mainly attributable to increased spending from existing clients and net client wins in our healthcare, food and beverage and retail sectors, largely offset by net client losses and lower spending from existing clients in our auto and transportation sector . The 1.0% organic increase in our domestic market was due to revenue increases at our media businesses and data management and analytics partially offset by revenue decreases at our digital project-based offerings. In our international markets, the (1.1)% organic decrease was driven by revenue decreases at our digital project-based offerings across most regions and revenue decreases across all disciplines in our Asia Pacific region, partially offset by revenue increases at our media businesses primarily in the Latin America region.
Year ended December 31, 2022
Components of Change
Year ended December 31, 2023
Change
Foreign
Currency
Net
Acquisitions/
(Divestitures)
Organic
Organic
Total
Consolidated
Domestic
International
The organic change was relatively flat and mainly attributable to net client losses and lower spending from existing clients in our technology & telecom sector, partially offset by net client wins in our healthcare and financial services sectors. The (1.1)% organic decrease in our domestic market was due to revenue decreases at our digital project-based offerings as well as data management and analytics, partially offset by revenue increases at our media businesses. In our international markets, the 1.8% organic increase was driven by revenue increases at our media businesses primarily in the Latin America and Continental Europe regions, partially offset by decreases at our digital project-based offerings across all regions.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
Segment EBITA
Years ended December 31,
Change
Segment EBITA 1
Segment EBITA margin on revenue before billable expenses 1
1 Segment EBITA and Segment EBITA margin on revenue before billable expenses include $0.8, $(1.3) and $69.1 of restructuring charges in the year ended December 31, 2024, 2023 and 2022 respectively. See "Restructuring Charges" in MD&A and Note 12 of Item 8, Financial Statements and Supplementary Data for further information.
Segment EBITA margin increased during 2024 when compared to 2023, as the decrease in revenue before billable expenses, was outpaced by the overall decrease in our operating expenses, excluding billable expenses, amortization of acquired intangibles and impairment of goodwill. Salaries and related expenses decreased as compared to the prior-year period, primarily driven by decreases in base salaries, benefits and tax and temporary help expense, partially offset by an increase in severance expense. Office and other direct expense increased driven by increases c lient service costs and professional consulting fees, partially offset by lower foreign currency losses. Depreciation and amortization, excluding amortization of acquired intangibles, as a percentage of segment revenue before billable expenses increased slightly to 2.5% in 2024 from the prior-year period.
Segment EBITA margin increased during 2023 when compared to 2022, as the increase in revenue before billable expenses, outpaced the overall decrease in our operating expenses, excluding billable expenses, amortization of acquired intangibles and impairment of goodwill. Revenue before billable expenses growth of 0.8% was outpaced by the increase in salaries and related expenses as compare d to the prior-year period, primarily due to increases in base salaries, benefits and tax and severance expense, partially offset by decreases in temporary help expense and performance-based incentive compensation. Office and other direct expense decreased driven by decreases in occupancy expense and client service costs, partially offset by increases in professional consulting fees and foreign currency losses . Depreciation and amortization, excluding amortization of acquired intangibles, as a percentage of segment revenue before billable expenses decreased slightly to 2.4% in 2023 from the prior-year period.
Integrated Advertising & Creativity Led Solutions
Revenue before billable expenses
Year ended December 31, 2023
Components of Change
Year ended December 31, 2024
Change
Foreign
Currency
Net
Acquisitions/
(Divestitures)
Organic
Organic
Total
Consolidated
Domestic
International
The organic decrease was due t o net client losses and lower spending from existing clients in our technology & telecom, auto and transportation and retail sectors, largely offset by net client wins and increased spending from existing clients in our other and consumer goods sectors. The (2.0)% organic decrease in our domestic market was due to revenue decreases in our advertising businesses. In our international markets, the 3.3% organic increase was driven by revenue increases in our advertising businesses primarily in the Continental Europe region and Other Region, led by the Middle East.
Year ended December 31, 2022
Components of Change
Year ended December 31, 2023
Change
Foreign
Currency
Net
Acquisitions/
(Divestitures)
Organic
Organic
Total
Consolidated
Domestic
International
The organic decrease was due to lower spending from existing clients and net client losses in our technology & telecom and retail sectors as well as lower spending from existing clients in our financial services sector, partially offset by net client wins in the healthcare and auto & transportation sectors. The (2.8)% organic decrease in our domestic market was due to revenue decreases in our advertising businesses. In our international markets, the 0.3% organic increase was driven by revenue
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
increases in our advertising businesses primarily in the Other Region, led by the Middle East, and Latin America regions, partially offset by revenue decreases in the Asia Pacific region.
Segment EBITA
Years ended December 31,
Change
Segment EBITA 1
Segment EBITA margin on revenue before billable expenses 1
1 Segment EBITA and Segment EBITA margin on revenue before billable expenses include $(2.3), $0.2 and $28.7 of restructuring charges in the year ended December 31, 2024, 2023 and 2022 respectively. See "Restructuring Charges" in MD&A and Note 12 of Item 8, Financial Statements and Supplementary Data for further information.
Segment EBITA margin increased during 2024 when compared to 2023, 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 intangibl es. The decrease in salaries and related expenses, as compared to the prior-year period, was primarily driven by decreases in base salaries, benefits and tax and temporary help expense, partially offset by increases in severance expense and performance-based incentive compensation expense. The decrease in office and other direct expense, as compared to the prior year period, was mainly driven by decreases in occupancy expense, professional consulting fees and bad debt expense, partially offset by increases in client service costs. Depreciation and amortization, excluding amortization of acquired intangibles, as a percentage of segment revenue before billable expenses decreased slightly to 1.4% in 2024 from the prior-year period.
Segment EBITA margin decreased during 2023 when compared to 2022, as the decrease in revenue before billable expenses, exceeded the overall decrease in our operating expenses, excluding billable expenses and amortization of acquired intangibles. The decrease in salaries and related expenses, as compared to the prior-year period, was primarily driven by decreases in temporary help expense and performance-based incentive compensation, partially offset by increases in severance expense and base salaries, benefits and tax. The decrease in office and other direct expense, as compared to the prior year period, was mainly driven by decreases in employment costs and occupancy expense, partially offset by increases in bad debt expense and foreign currency losses. Depreciation and amortization, excluding amortization of acquired intangibles, as a percentage of segment revenue before billable expenses decreased slightly to 1.5% in 2023 from the prior-year period.
The organic increase was mainly attributa ble to increased spending from existing clients and net client wins in our food & beverage and consumer goods sectors, partially offset by lower spending from existing clients in our auto and transportation and technology & telecom sectors. The 2.2% organic increase in our domestic market was driven by revenue increases at our public relations agencies, partially offset by revenue decreases at our experiential businesses. In our international market, the (0.8)% organic decreases was driven by revenue decreases at our public relations agencies, most notably in our Asia Pacific region.
Year ended December 31, 2022
Components of Change
Year ended December 31, 2023
Change
Foreign
Currency
Net
Acquisitions/
(Divestitures)
Organic
Organic
Total
Consolidated
Domestic
International
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
The organic increase was mainly attributable to net client wins and increased spending from existing clients in our healthcare, other, food & beverage and auto & transportation sectors, partially offset by lower spending from existing clients and net client losses in our technology & telecom sector. The 3.3% organic increase in our domestic market was driven by revenue increases at our public relations agencies and experiential businesses. In our international market, the 6.2% organic increase was driven by growth at both our public relations agencies and experiential businesses across all regions.
Segment EBITA
Years ended December 31,
Change
Segment EBITA 1
Segment EBITA margin on revenue before billable expenses 1
1 Segment EBITA and Segment EBITA margin on revenue before billable expenses include $0.3, $1.1 and $3.8 of restructuring charges in the year ended December 31, 2024, 2023 and 2022 respectively. See "Restructuring Charges" in MD&A and Note 12 of Item 8, Financial Statements and Supplementary Data for further information.
Segment EBITA margin decreased during 2024 when compared to 2023, as the decrease in revenue before billable expenses, outpaced the overall decrease in our operating expenses, excluding billable expenses and amortization of acquired intangibl es. The d ecrease in salaries and related expenses, as compared to the prior-year period, was primarily due to decreases in performance-based employee compensation expense and temporary help expense, partially offset by increases in base salaries, benefits and tax. Office and other direct expense increased mainly due to increases in client service costs as well as new business development, the year-over-year change in contingent acquisition obligations as well as increases in professional consulting fees and company meetings and conferences, partially offset by decreases in occupancy expense. Depreciation and amortization, excluding amortization of acquired intangibles, as a percentage of segment revenue before billable expenses decreased slightly to 1.0% in 2024 from the prior-year period.
Segment EBITA margin increased during 2023 when compared to 2022, as the increase in revenue before billable expenses, outpaced the overall increase in our operating expenses, excluding billable expenses and amortization of acquired intangibles. The increase in salaries and related expenses, as compared to the prior-year period, was primarily due to an increase in base salaries, benefits and tax and severance expense. Office and other direct expense increased mainly due to foreign currency losse s and increases in travel and entertainment expenses, the year-over-year change in contingent acquisition obligations and client service costs, partially offset by decreases in occupancy expense. Deprecia tion and amortization, excluding amortization of acquired intangibles, as a percentage of segment revenue before billable expenses decreased slightly to 1.1% in 2023 from the prior-year period.
CORPORATE AND OTHER
Corporate and other is primarily comprised of selling, general and administrative expenses, discussed in the Results of Operations section, including corporate office expenses as well as shared service center and certain other centrally managed expenses that are not fully allocated to operating divisions; salaries, long-term incentives, annual bonuses and other miscellaneous benefits for corporate office employees; professional fees related to internal control compliance, financial statement audits and legal, information technology and other consulting services that are engaged and managed through the corporate office; and rental expense for properties occupied by corporate office employees. A portion of centrally managed expenses is allocated to operating divisions based on a formula that uses the planned revenues of each of the operating units. Amounts allocated also include specific charges for information technology-related projects, which are allocated based on utilization.
Corporate and other expenses increased by $60.5 to $132.8 during the year ended December 31, 2024 as compared to 2023, primarily due to $9.3 of deal costs incurred during the fourth quarter of 2024 related to the planned acquisition of IPG by Omnicom, as well as increases in selling, general and administrative expenses.
Corporate and other expenses in 2023 decreased by $22.2 to $72.3 compared to 2022, primarily attributable to decreases in selling, general and administrative expenses, partially offset by an increase in restructuring charges.
During the years ended December 31, 2024, 2023 and 2022 corporate and other expense includes $3.8, $0.1 and $0.8 of restructuring charges, respectively. See "Restructuring Charges" in MD&A and Note 12 of Item 8, Financial Statements and Supplementary Data for further information.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW OVERVIEW
The following tables summarize key financial data relating to our liquidity, capital resources and uses of capital.
Years ended December 31,
Cash Flow Data
Net income
Adjustments to reconcile to net cash provided by operating activities 1
Net cash used in working capital 2
Changes in other non-current assets and liabilities
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
1 Consists primarily of depreciation and amortization of fixed assets and intangible assets, impairment of goodwill, amortization of restricted stock and other non-cash compensation, and net losses (gains) on sales of businesses.
2 Reflects changes in accounts receivable, other current assets, accounts payable, accrued liabilities and contract liabilities.
Operating Activities
The presentation of the three components of net cash provided by operating activities above reflects the manner in which management views and analyzes this information. Management believes this presentation is useful as it presents cash provided by operating activities separately from the impact of changes in working capital, which is seasonal in nature and is impacted by the timing of media buying on behalf of our clients. Additionally, we view changes in other non-current assets and liabilities separately, as these items are not impacted by the factors described below.
Due to the seasonality of our business, we typically use cash from working capital in the first nine months of a year, with the largest impact in the first quarter, and generate cash from working capital in the fourth quarter, driven by the seasonally strong media spending by our clients. Quarterly and annual working capital results are impacted by the fluctuating annual media spending budgets of our clients as well as their changing media spending patterns throughout each year across various countries.
The timing of media buying on behalf of our clients across various countries affects our working capital and operating cash flow and can be volatile. In most of our businesses, our agencies enter into commitments to pay production and media costs on behalf of clients. To the extent possible, we pay production and media charges after we have received funds from our clients. The amounts involved, which substantially exceed our revenues, primarily affect the level of accounts receivable, accounts payable, accrued liabilities and contract liabilities. Our assets include both cash received and accounts receivable from clients for these pass-through arrangements, while our liabilities include amounts owed on behalf of clients to media and production suppliers. Our accrued liabilities are also affected by the timing of certain other payments. For example, while annual cash incentive awards are accrued throughout the year, they are generally paid during the first quarter of the subsequent year.
Net cash provided by operating activities during 2024 was $1,055.2, which was an increase of $500.5 as compared to 2023. This increase was primarily due to the decrease in working capital usage of $510.6. Working capital usage in 2024 was primarily impacted by higher pre-paid expenses and lower accrued cash incentives.
Net cash provided by operating activities during 2023 was $554.7, which was a decrease of $87.4 as compared to 2022. The decrease was primarily driven by an increase in pension contributions and decreases in non-current liabilities, partially offset by an increase in net income of $162.0. Working capital usage in 2023 was primarily impacted by client spending and timing of collections and payments.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
Investing Activities
Net cash used in investing activities during 2024 consisted primarily of payments for capital expenditures of $141.8, which were related mostly to computer software and hardware, and the purchase of investments of $25.2. This was partially offset by the proceeds from the sale of businesses, net of cash sold of $7.9.
Net cash used in investing activities during 2023 consisted primarily of payments for capital expenditures of $179.3 which were related mostly to computer software and hardware, and the purchase of short-term marketable securities of $97.6. This was partially offset by the maturity of short-term marketable securities of $100.7 and proceeds from the sale of businesses, net of cash sold of $58.7.
Financing Activities
Net cash used in financing activities during 2024 was $1,019.9, primarily driven by the payment of common stock dividends of $496.5, repayment of long-term debt of $250.1 and common stock repurchases of $230.1.
Net cash used in financing activities during 2023 was driven primarily by payments for common stock dividends of $479.1 and common stock repurchases of $350.2, partially offset by net proceeds of $296.3 from the issuance of our $300.0 aggregate amount of 5.375% unsecured senior notes due 2033.
Foreign Exchange Rate Changes
The effect of foreign exchange rate changes on cash, cash equivalents and restricted cash included in the Consolidated Statements of Cash Flows resulted in a net decrease of $82.9 in 2024. This decrease was primarily a result of the U.S. dollar being stronger than several foreign currencies, including the Euro, the Canadian Dollar and the Australian Dollar.
The effect of foreign exchange rate changes on cash, cash equivalents and restricted cash included in the Consolidated Statements of Cash Flows resulted in a net increase of $7.0 in 2023.
LIQUIDITY OUTLOOK
We expect our cash flow from operations and existing cash and cash equivalents to be sufficient to meet our anticipated operating requirements at a minimum for the next twelve months. We also have a commercial paper program, a committed corporate credit facility, and uncommitted lines of credit to support our operating needs. Borrowings under our commercial paper program are supported by our committed corporate credit agreement. We continue to maintain a disciplined approach to managing liquidity, with flexibility over significant uses of cash, including our capital expenditures, cash used for new acquisitions, our common stock repurchase program and our common stock dividends.
From time to time, we evaluate market conditions and financing alternatives for opportunities to raise additional funds or otherwise improve our liquidity profile, enhance our financial flexibility and manage market risk. Our ability to access the capital markets depends on a number of factors, which include those specific to us, such as our credit ratings, and those related to the financial markets, such as the amount or terms of available credit. There can be no guarantee that we would be able to access new sources of liquidity, or continue to access existing sources of liquidity, on commercially reasonable terms, or at all.
Funding Requirements
Our most significant funding requirements include our operations, non-cancelable operating lease obligations, capital expenditures, acquisitions, common stock dividends, taxes and debt service. Additionally, we may be required to make payments to minority shareholders in certain subsidiaries if they exercise their options to sell us their equity interests.
Notable funding requirements include:
• Debt service – Our 4.200% Senior Notes in aggregate principal amount of $250.0 matured on April 15, 2024. We used available cash to fund the principal repayment. As of December 31, 2024, we had outstanding short-term borrowings of $40.5 from our uncommitted lines of credit used primarily to fund short-term working capital needs. The remainder of our debt is primarily long-term, with maturities scheduled from 2028 through 2048.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
• Acquisitions – W e paid deferred payments of $9.3 for prior-year acquisitions as well as ownership increases in our consolidated subsidiaries. In addition to potential cash expenditures for new acquisitions, we expect to pay approximately $5.0 over the next twelve months related to all previously completed acquisitions as of December 31, 2024. We may also be required to pay approximately $11.0 related to redeemable non-controlling interest held by minority shareholders if exercised, over the next twelve months. On December 3, 2024, we entered into a definitive purchase agreement to acquire the outstanding shares of an e-commerce intelligence platform, the transaction is expected to close in the first quarter of 2025 for a cash payment of $50.4, subject to customary closing adjustments. We will continue to evaluate strategic opportunities to grow and continue to strengthen our market position, particularly in our digital and marketing services offerings, and to expand our presence in high-growth and key strategic world markets.
• Dividends – During 2024, we paid four quarterly cash dividends of $0.330 per share on our common stock, which corresponded to aggregate dividend payments of $496.5. On February 12, 2025, we announced that our Board of Directors (the "Board") had declared a common stock cash dividend of $0.330 per share, payable on March 17, 2025 to holders of record as of the close of business on March 3, 2025. Assuming we pay a quarterly dividend of $0.330 per share and there is no significant change in the number of outstanding shares as of December 31, 2024, we would expect to pay approximately $492.0 over the next twelve months. Whether to declare and the amount of any such future dividend is at the discretion of our Board and will depend upon factors such as our earnings, financial position and cash requirements.
• U.K. Pension Plan - In December 2023, the Interpublic Limited Pension Plan in the U.K., (the "U.K. Pension Plan") the Company's U.K. defined benefit pension plan, entered into an agreement with an insurance company to purchase a group annuity, or "buy-in", that matches the plans future projected benefit obligations to covered participants. As part of the annuity purchase contract, the U.K. Pension Plan has the option to complete a "buy-out", which would transfer all liabilities of the plan to the insurer, which the Company anticipates to be completed in 2026. The non-cash settlement charge, net of tax, associated with the transaction is currently estimated to be approximately $180.0 to $200.0 and is subject to finalization of terms and changes in the British Pound Sterling.
The following summarizes our estimated contractual cash obligations and commitments as of December 31, 2024 and their effect on our liquidity and cash flow in future periods.
Years ended December 31,
Thereafter
Total
Long-term debt 1
Interest payments on long-term debt 1
Non-cancelable operating lease obligations 2
Contingent acquisition payments 3
Uncertain tax positions 4
Total
1 Amounts represent maturity at book value and interest payments based on contractual obligations. We may at our option and at any time redeem all or some of any outstanding series of our senior notes reflected in this table at the redemption prices set forth in the applicable supplemental indentures under which such senior notes were issued. See Note 5 in Item 8, Financial Statements and Supplementary Data for further information.
2 Non-cancellable operating lease obligations are presented net of future receipts on contractual sublease arrangements. See Note 4 in Item 8, Financial Statements and Supplementary Data for further information.
3 We have structured certain acquisitions with additional contingent purchase price obligations based on factors including future performance of the acquired entity. See Note 7 and Note 17 in Item 8, Financial Statements and Supplementary Data for further information.
4 The amounts presented are estimates due to inherent uncertainty of tax settlements, including the ability to offset liabilities with tax loss carryforwards.
Share Repurchase Programs
On February 10, 2022, our Board of Directors (the "Board") reauthorized a program to repurchase, from time to time, up to $400.0 of our common stock.
On February 8, 2023, the Board authorized a share repurchase program to repurchase from time to time up to $350.0, excluding fees, of our common stock, which was in addition to any amounts remaining under the 2022 share repurchase program.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
On February 7, 2024, the Board authorized a share repurchase program to repurchase from time to time up to $320.0, excluding fees, of our common stock, which was in addition to any amounts remaining under the 2023 share repurchase program.
On February 11, 2025, the Board authorized a share repurchase program to repurchase from time to time up to $155.0, excluding fees, of our common stock, which was in addition to any amounts remaining under the 2024 share repurchase program.
We may effect such repurchases through open market purchases, trading plans established in accordance with U.S. Securities and Exchange Commission ("SEC") rules, derivative transactions or other means. The timing and amount of repurchases in future periods will depend on market conditions and other funding requirements. There are no expiration dates associated with the share repurchase programs.
FINANCING AND SOURCES OF FUNDS
Substantially all of our operating cash flow is generated by our agencies. Our cash balances are held in numerous jurisdictions throughout the world, including at the holding company level. Below is a summary of our sources of liquidity.
At December 31, 2024, we held $725.9 of cash, cash equivalents and marketable securities in foreign subsidiaries. The Company has historically asserted that its unremitted foreign earnings are permanently reinvested, and therefore has not recorded any deferred taxes on such amounts. However, as of December 31, 2024, $102.9 of undistributed foreign earnings from certain international entities were not subject to the permanent reinvestment assertion, therefore, the Company has recorded deferred taxes on this amount.
Credit Arrangements
We maintain a committed corporate credit facility, originally dated as of July 18, 2008, which has been amended and restated from time to time (the "Credit Agreement"). We use our Credit Agreement to increase our financial flexibility, to provide letters of credit primarily to support obligations of our subsidiaries and to support our commercial paper program. On May 29, 2024, we amended and restated the Credit Agreement. As amended, among other things, the maturity date of the Credit Agreement was extended to May 29, 2029 and the cost structure of the Credit Agreement was changed. The Credit Agreement continues to include a required leverage ratio of not more than 3.50 to 1.00, among other customary covenants, including limitations on our liens and the liens of our consolidated subsidiaries and limitations on the incurrence of subsidiary debt. At the election of the Company, the leverage ratio may be changed to not more than 4.00 to 1.00 for four consecutive quarters, beginning with the fiscal quarter in which there is an occurrence of one or more acquisitions with an aggregate purchase price of at least $200.0.
The Credit Agreement is a revolving facility under which amounts borrowed by us or any of our subsidiaries designated under the Credit Agreement may be repaid and reborrowed, subject to an aggregate lending limit of $1,500.0, or the equivalent in other currencies. The Company has the ability to increase the commitments under the Credit Agreement from time to time by an additional amount of up to $250.0, provided the Company receives commitments for such increases and satisfies certain other conditions. The aggregate available amount of letters of credit outstanding may decrease or increase, subject to a sublimit of $50.0, or the equivalent in other currencies. Our obligations under the Credit Agreement are unsecured. As of December 31, 2024, there were no borrowings under the Credit Agreement; however, we had $9.3 of letters of credit under the Credit Agreement, which reduced our total availability to $1,490.7.
We were in compliance with all of our covenants in the Credit Agreement as of December 31, 2024. The financial covenant in the Credit Agreement requires that we maintain, as of the end of each fiscal quarter, a certain leverage ratio for the four quarters then ended. Management utilizes Credit Agreement EBITDA, which is a non-GAAP financial measure, as well as the amounts shown in the table below, calculated as required by the Credit Agreement, in order to assess our compliance with such covenants.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
The table below sets forth the financial covenant in effect as of December 31, 2024.
Four Quarters Ended
Four Quarters Ended
Financial Covenant
December 31, 2024
Credit Agreement EBITDA Reconciliation 1
December 31, 2024
Leverage ratio (not greater than) 1
Net income available to IPG common stockholders
Actual leverage ratio
Non-operating adjustments 2
Operating income
Add:
Depreciation and amortization
Other non-cash charges reducing operating income
Credit Agreement EBITDA 1
1 The leverage ratio is defined as debt as of the last day of such fiscal quarter to EBITDA (as defined in the Credit Agreement) for the four quarters then ended.
2 Includes adjustments of the following items from our Consolidated Statement of Operations in Item 8, Financial Statements and Supplementary Data : provision for income taxes, total (expenses) and other income, equity in net income of unconsolidated affiliates, and net income attributable to noncontrolling interests .
Uncommitted Lines of Credit
We also have uncommitted lines of credit with various banks that permit borrowings at variable interest rates and that are primarily used to fund working capital needs. We have guaranteed the repayment of some of these borrowings made by certain subsidiaries. If we lose access to these credit lines, we would have to provide funding directly to some of our operations. As of December 31, 2024, the Company had uncommitted lines of credit in an aggregate amount of $769.1, under which we had outstanding borrowings of $40.5 classified as short-term borrowings on our Consolidated Balance Sheet. The average amount outstanding during 2024 was $44.0, with a weighted-average interest rate of approximately 7.6%.
Commercial Paper
The Company is authorized to issue unsecured commercial paper up to a maximum aggregate amount outstanding at any time of $1,500.0. Borrowings under the commercial paper program are supported by the Credit Agreement described above. Proceeds of the commercial paper are used for working capital and general corporate purposes, including the repayment of maturing indebtedness and other short-term liquidity needs. The maturities of the commercial paper vary but may not exceed 397 days from the date of issue. There was no commercial paper activity during 2024 and as of December 31, 2024, there was no commercial paper outstanding.
Cash Pooling
We aggregate our domestic cash position on a daily basis. Outside the United States, we use cash pooling arrangements with banks to help manage our liquidity requirements. In these pooling arrangements, several IPG agencies agree with a single bank that the cash balances of any of the agencies with the bank will be subject to a full right of set-off against amounts other agencies owe the bank, and the bank provides for overdrafts as long as the net balance for all agencies does not exceed an agreed-upon level. Typically, each agency pays interest on outstanding overdrafts and receives interest on cash balances. Our Consolidated Balance Sheets reflect cash, net of bank overdrafts, under all of our pooling arrangements, and as of December 31, 2024 and 2023 the amounts netted were $2,132.7 and $2,718.0, respectively.
DEBT CREDIT RATINGS
Our debt credit ratings as of February 14, 2025 are listed below.
Moody’s Investors Service
S&P Global Ratings
Fitch Ratings
Short-term rating
Long-term rating
Baa2+
BBB+
BBB+
Outlook
Positive
Positive
Stable
A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning credit rating agency. The rating of each credit rating agency should be evaluated independently of any other rating. Credit ratings could have an impact on liquidity, either adverse or favorable, because, among other things, they
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
could affect funding costs in the capital markets or otherwise. For example, our Credit Agreement fees and borrowing rates are based on a credit ratings grid, and our access to the commercial paper market is contingent on our maintenance of sufficient short-term debt ratings.
CRITICAL ACCOUNTING ESTIMATES
Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of the Consolidated Financial Statements and related disclosures requires us to make judgments, assumptions and estimates that affect the amounts reported and disclosed in the accompanying financial statements and footnotes. Our significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements. We believe that of our significant accounting policies, the following critical accounting estimates involve management’s most difficult, subjective or complex judgments. We consider these accounting estimates to be critical because changes in the underlying assumptions or estimates have the potential to materially impact our Consolidated Financial Statements. Management has discussed with our Audit Committee the development, selection, application and disclosure of these critical accounting estimates. We regularly evaluate our judgments, assumptions and estimates based on historical experience and various other factors that we believe to be relevant under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. A further decline in macroeconomic conditions or increasing interest rates could have a negative impact on these estimates, including the fair value of certain assets.
Revenue Recognition
Our revenues are primarily derived from the planning and execution of multi-channel advertising and communications, marketing services, including public relations, meeting and event production, sports and entertainment marketing, corporate and brand identity, strategic marketing consulting, and providing marketing data and technology services around the world.
Most of our client contracts are individually negotiated and, accordingly, the terms of client engagements and the basis on which we earn fees and commissions vary significantly. Our contracts generally provide for termination by either party on relatively short notice, usually 30 to 90 days, although our data management contracts typically have non-cancelable terms of more than one year. Our payment terms vary by client, and the time between invoicing date and due date is typically not significant. We generally have the legally enforceable right to payment for all services provided through the end of the contract or termination date.
We recognize revenue when we determine our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue as or when we satisfy the performance obligation. We only apply the five-step model to contracts when it is probable that IPG will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, we assess the goods or services promised within each contract and determine those that are distinct performance obligations. We then assess whether we act as an agent or a principal for each identified performance obligation and include revenue within the transaction price for third-party costs when we determine that we act as principal.
Revenue before billable expenses, primarily consisting of fees, commissions and performance incentives, represents the amount of our gross billings excluding billable expenses charged to a client. Generally, our compensation is based on a negotiated fixed price, rate per hour, a retainer, commission or volume. The majority of our fees are recognized over time as services are performed, either utilizing a function of hours incurred and rates per hour, as compared to periodically updated estimates to complete, or ratably over the term of the contract. For certain less-frequent commission-based contracts which contain clauses allowing our clients to terminate the arrangement at any time for no compensation, revenue is recognized at a point in time, typically the date of broadcast or publication.
Contractual arrangements with clients may also include performance incentive provisions designed to link a portion of our revenue to our performance relative to mutually agreed-upon qualitative and/or quantitative metrics. Performance incentives are treated as variable consideration which is estimated at contract inception and included in revenue based on the most likely amount earned out of a range of potential outcomes. Our estimates are based on a combination of historical award experience, anticipated performance and our best judgment. These estimates are updated on a periodic basis and are not expected to result in a reversal of a significant amount of the cumulative revenue recognized.
The predominant component of billable expenses are third-party vendor costs incurred for performance obligations where we have determined that we are acting as principal. These third-party expenses are generally billed back to our clients. Billable expenses also includes incidental costs incurred in the performance of our services including airfare, mileage, hotel stays, out-
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
of-town meals and telecommunication charges. We record these billable expenses within total revenue with a corresponding offset to operating expenses.
In international markets, we may receive rebates or credits from vendors based on transactions entered into on behalf of clients. Rebates and credits are remitted back to our clients in accordance with our contractual requirements or may be retained by us based on the terms of a particular client contract and local law. Amounts owed back to clients are recorded as a liability and amounts retained by us are recorded as revenue when earned.
In certain international markets, our media contracts may allow clients to terminate our arrangement at any time for no compensation to the extent that media has not yet run. For those contracts, we do not recognize revenue until the media runs which is the point in time at which we have a legally enforceable right to compensation.
In the normal course of business, certain agencies may enter into agreements with media suppliers to purchase an agreed value of media within a fixed timeframe. By entering into these agreements, the agency is taking a risk and may be required to pay a portion or all of the agreed value ahead of media being run. In order to participate in these arrangements and receive an agreed additional benefit from the agency, clients are required to contractually opt in.
Performance Obligations
Our client contracts may include various goods and services that are capable of being distinct, are distinct within the context of the contract and are therefore accounted for as separate performance obligations. We allocate revenue to each performance obligation in the contract at inception based on its relative standalone selling price.
Our advertising businesses include a wide range of services that involve the creation of an advertising idea, concept, campaign, or marketing strategy in order to promote the client’s brand ("creative services"), and to act as an agent to facilitate the production of advertisements by third-party suppliers ("production services”). Our clients can contract us to perform one or both of these services, as they can derive stand-alone benefits from each. Production services can include formatting creative material for different media and communication mediums including digital, large-scale reproduction such as printing and adaptation services, talent engagement and acquisition, television and radio production, and outdoor billboard production. Our contracts that include both services are typically explicit in the description of which activities constitute the creative advertising services and those that constitute the production services. Both the creative and production services are sold separately, the client can derive utility from each service on its own, we do not provide a significant service of integrating these activities into a bundle, the services do not significantly modify one another, and the services are not highly interrelated or interdependent. As such, we typically identify two performance obligations in the assessment of our advertising contracts.
Our media businesses include services to formulate strategic media plans ("media planning services") and to act as an agent to purchase media (e.g., television and radio spots, outdoor advertising, digital banners, etc.) from vendors on our clients' behalf ("media buying services"). Our contracts that include both services are typically explicit in the description of which activities constitute the planning services and those that constitute the buying services. Both the planning and buying services are sold separately, the client can derive utility from each service on its own, we do not provide a significant service of integrating these activities into a bundle, the services do not significantly modify one another, and the services are not highly interrelated or interdependent. As such, we typically identify two performance obligations in the assessment of our media contracts.
Our events businesses include creative services related to the conception and planning of custom marketing events as well as activation services which entail the carrying out of the event, including, but not limited to, set-up, design and staffing. Additionally, our public relations businesses include a broad range of services, such as strategic planning, social media strategy and the monitoring and development of communication strategies, among others. While our contracts in these businesses may include some or all of these services, we typically identify only one performance obligation in the assessment of our events and public relations contracts as we provide a significant service of integrating the individual services into a combined service for which the customer has contracted.
Our data and technology services businesses include data management, data and data strategy, identity resolution, and measurement and analytics products and services. While our contracts in these businesses may include some or all of these services, we typically identify each product and service as an individual performance obligation.
Principal vs. Agent
When a third-party is involved in the delivery of our services to the client, we assess whether or not we are acting as a principal or an agent in the arrangement. The assessment is based on whether we control the specified services at any time before they are transferred to the customer. We have determined that in our events and public relations businesses, we generally act as a principal as our agencies provide a significant service of integrating goods or services provided by third parties into the specified deliverable to our clients. In addition, we have determined that we are responsible for the performance of the third-party suppliers, which are combined with our own services, before transferring those services to the customer. We have also
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
determined that we act as principal when providing creative services and media planning services, as we perform a significant integration service in these transactions. For performance obligations in which we act as principal, we record the gross amount billed to the customer within total revenue and the related incremental direct costs incurred as billable expenses.
In the vast majority of our business, when a third-party is involved in the production of an advertising campaign and for media buying services, we have determined that we act as the agent and are solely arranging for the third-party suppliers to provide services to the customer. Specifically, we do not control the specified services before transferring those services to the customer, we are not primarily responsible for the performance of the third-party services, nor can we redirect those services to fulfill any other contracts. We do not have inventory risk or discretion in establishing pricing in our contracts with customers. For performance obligations for which we act as the agent, we record our revenue as the net amount of our gross billings less amounts remitted to third parties.
Income Taxes
The provision for income taxes includes U.S. federal, state, local and foreign taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be reversed. Changes to enacted tax rates would result in either increases or decreases in the provision for income taxes in the period of change.
We are required to evaluate the realizability of our deferred tax assets, which is primarily dependent on future earnings. A valuation allowance shall be recognized when, based on available evidence, it is “more likely than not” that all or a portion of the deferred tax assets will not be realized. The factors used in assessing valuation allowances include all available evidence, such as past operating results, estimates of future taxable income and the feasibility of tax planning strategies. In circumstances where there is negative evidence, establishment of a valuation allowance must be considered. We believe that cumulative losses in the most recent three-year period represent significant negative evidence when evaluating a decision to establish a valuation allowance. Conversely, a pattern of sustained profitability represents significant positive evidence when evaluating a decision to reverse a valuation allowance. Further, in those cases where a pattern of sustained profitability exists, projected future taxable income may also represent positive evidence, to the extent that such projections are determined to be reliable given the current economic environment. Accordingly, the increase and decrease of valuation allowances has had and could have a significant negative or positive impact on our current and future earnings.
The authoritative guidance for uncertainty in income taxes prescribes a recognition threshold and measurement criteria for the financial statement reporting of a tax position that an entity takes or expects to take in a tax return. Additionally, guidance is provided for de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The assessment of recognition and measurement requires critical estimates and the use of complex judgments. We evaluate our tax positions using the “more likely than not” recognition threshold and then apply a measurement assessment to those positions that meet the recognition threshold. We have established tax reserves that we believe to be adequate in relation to the potential for additional assessments in each of the jurisdictions in which we are subject to taxation. We regularly assess the likelihood of additional tax assessments in those jurisdictions and adjust our reserves as additional information or events require.
Goodwill and Other Intangible Assets
We account for our business combinations using the acquisition accounting method, which requires us to determine the fair value of net assets acquired and the related goodwill and other intangible assets. Determining the fair value of assets acquired and liabilities assumed requires management's judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates, asset lives and market multiples. Considering the characteristics of advertising, specialized marketing and communication services companies, our acquisitions usually do not have significant amounts of tangible assets, as the principal asset we typically acquire is creative talent. As a result, a substantial portion of the purchase price is allocated to goodwill and other intangible assets.
The Company transferred certain agencies between operating segments as of January 1, 2024 which resulted in certain changes to our reporting units and reportable segments. In addition, we completed an assessment of any potential goodwill impairment for all reporting units immediately prior and subsequent to the reallocation and determined that no impairment existed.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
Q3 2024 Interim Goodwill Test
During the third quarter of 2024, we concluded that declines in the forecasted performance of one of our reporting units included within our MD&E segment, combined with the classification of R/GA and Huge, which comprised a significant portion of the reporting unit, as held for sale was a triggering event which required a goodwill impairment assessment. As of August 31, 2024, we performed a pre-classification goodwill impairment test and determined that the carrying value of the reporting unit exceeded its fair value, and therefore, goodwill of the reporting unit was impaired. The Company completed an analysis to allocate goodwill to the remaining reporting unit, R/GA and Huge using a relative fair value approach. Additionally, we performed a post-classification goodwill impairment test on R/GA and Huge, as well as an impairment test of the businesses remaining within the reporting unit. We determined that the carrying value of one disposal group exceeded its fair value and goodwill was impaired. As a result of both the pre-classification and post-classification impairment tests, the Company recorded non-cash goodwill impairment charges of $232.1. We concluded that the fair value of the remaining reporting unit exceeded its carrying value and the remaining reporting unit was not impaired.
The fair value of both the reporting unit pre-classification and the fair values of the disposal groups and the remaining reporting unit that is in our ongoing operations for which we performed the quantitative interim impairment tests were estimated using a combination of the income approach, which incorporates the use of the discounted cash flow method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. We generally apply an equal weighting to the income and market approaches for our quantitative impairment test analysis, although higher weighting was given to the market approach for determining the fair value of disposal groups. For the income approach, we used projections, which require the use of significant estimates and assumptions specific to the reporting unit as well as those based on general economic conditions. Factors specific to the reporting unit and disposal groups include revenue growth, profit margins, terminal value growth rates, capital expenditures projections, assumed tax rates, discount rates and other assumptions deemed reasonable by management. For the market approach, we used judgment in identifying the relevant comparable-company market multiples. Additionally, our determination of the market approach for the disposal groups also considered ranges of initial offers received as part of the sale process.
The discount rate used for the reporting unit and disposal groups is influenced by general market conditions as well as factors specific to the reporting unit. For the interim impairment tests of goodwill, the discount rates used ranged from 14.5% to 22.0%, and the terminal value growth rates were 2.5% and 3.0%. The terminal value growth rates represent the expected long-term growth rates. The revenue growth rates utilized in the interim impairment tests were between (2.0%) and 6.0%. Factors influencing the revenue growth rates include the nature of the services the reporting unit and disposal groups provide for its clients, the geographic locations in which the reporting unit and disposal groups conduct business and the maturity of the reporting units and disposal groups. We believe that the estimates and assumptions we made are reasonable, but they are susceptible to change from period to period. Actual results of operations, cash flows and other factors will likely differ from the estimates used in our valuation, and it is possible that differences and changes could be material. A deterioration in profitability, adverse market conditions, significant client losses, changes in spending levels of our existing clients or a different economic outlook than currently estimated by management could have a significant impact on the estimated fair value of our reporting unit and could result in an impairment charge in the future.
We also performed a sensitivity analysis to detail the impact that changes in assumptions may have on the outcome of the first step of the impairment test. Our sensitivity analysis provides a range of fair value for the reporting unit and disposal unit, where the low end of the range increases discount rates by 0.5%, and the high end of the range decreases discount rates by 0.5%. We use the average of our fair values for purposes of our comparison between carrying value and fair value for the quantitative impairment test.
The table below displays the midpoint of the fair value range for the remaining reporting unit tested in the interim impairment test, indicating that the fair value exceeded the carrying value for the reporting unit.
2024 Interim Impairment Test
Reporting Unit
Goodwill
Fair value exceeds carrying value by:
Based on the analysis described above, we determined the goodwill of the remaining reporting unit was not impaired as of September 30, 2024, because the fair value of the reporting unit was in excess of its carrying value.
We also considered the potential for goodwill impairment of our other reporting units. Our review of our other reporting units did not indicate an impairment triggering event as of September 30, 2024.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
Annual Goodwill Test
We review goodwill and other intangible assets with indefinite lives not subject to amortization as of October 1 st each year and whenever events or significant changes in circumstances indicate that the carrying value may not be recoverable. We evaluate the recoverability of goodwill at a reporting unit level. We have 10 reporting units that were subject to the 2024 annual impairment testing. Our annual impairment review as of October 1, 2024 did not result in an impairment charge at any of our reporting units.
In performing our annual impairment review, we first assess qualitative factors to determine whether it is “more likely than not” that the goodwill or indefinite-lived intangible assets are impaired. Qualitative factors to consider may include macroeconomic conditions, industry and market considerations, cost factors that may have a negative effect on earnings, financial performance, and other relevant entity-specific events such as changes in management, key personnel, strategy or clients, as well as pending litigation. If, after assessing the totality of events or circumstances such as those described above, an entity determines that it is "more likely than not" that the goodwill or indefinite-lived intangible asset is impaired, then the entity is required to determine the fair value and perform the quantitative impairment test by comparing the fair value with the carrying value. Otherwise, no additional testing is required.
For reporting units not included in the qualitative assessment, or for any reporting units identified in the qualitative assessment as "more likely than not" that the fair value is less than its carrying value, a quantitative impairment test is performed. For our annual impairment test, we compare the respective fair value of our reporting units' equity to the carrying value of their net assets. The sum of the fair values of all our reporting units is reconciled to our current market capitalization plus an estimated control premium. Goodwill allocated to a reporting unit whose fair value is equal to or greater than its carrying value is not impaired, and no further testing is required. Should the carrying amount for a reporting unit exceed its fair value, then the quantitative impairment test is failed, and impaired goodwill is written down to its fair value with a charge to expense in the period the impairment is identified.
For the 2024 and 2023 annual impairment tests, we performed a qualitative impairment assessment for eight and seven reporting units, respectively, and performed the quantitative impairment test for two and three reporting units, respectively. For the qualitative analysis we took into consideration all the relevant events and circumstances, including financial performance, macroeconomic conditions and entity-specific factors such as client wins and losses. Based on this assessment, we have concluded that for each of our reporting units subject to the qualitative assessment, it is not “more likely than not” that its fair value was less than its carrying value; therefore, no additional testing was required.
The 2024 and 2023 fair values of reporting units for which we performed quantitative impairment tests were estimated using a combination of the income approach, which incorporates the use of the discounted cash flow method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. We generally applied an equal weighting to the income and market approaches for our analysis. For the income approach, we used projections, which require the use of significant estimates and assumptions specific to the reporting unit as well as those based on general economic conditions. Factors specific to each reporting unit include revenue growth, profit margins, terminal value growth rates, capital expenditures projections, assumed tax rates, discount rates and other assumptions deemed reasonable by management. For the market approach, we used judgment in identifying the relevant comparable-company market multiples.
These estimates and assumptions may vary between each reporting unit depending on the facts and circumstances specific to that reporting unit. The discount rate for each reporting unit is influenced by general market conditions as well as factors specific to the reporting unit. For the 2024 test, the discount rate we used for our reporting units tested ranged between 11.5% and 13.5%, and the terminal value growth rate was 3.0%. The terminal value growth rate represents the expected long-term growth rate for our industry, which incorporates the type of services each reporting unit provides as well as the global economy. For the 2024 test, the revenue growth rates for our reporting units used in our analysis were generally between (5.0%) and 7.0%. Factors influencing the revenue growth rates include the nature of the services the reporting unit provides for its clients, the geographic locations in which the reporting unit conducts business and the maturity of the reporting unit. We believe that the estimates and assumptions we made are reasonable, but they are susceptible to change from period to period. Actual results of operations, cash flows and other factors will likely differ from the estimates used in our valuation, and it is possible that differences and changes could be material. A deterioration in profitability, adverse market conditions, significant client losses, changes in spending levels of our existing clients or a different economic outlook than currently estimated by management could have a significant impact on the estimated fair value of our reporting units and could result in an impairment charge in the future.
We also perform a sensitivity analysis to detail the impact that changes in assumptions may have on the outcome of the first step of the impairment test. Our sensitivity analysis provides a range of fair value for each reporting unit, where the low end of the range increases discount rates by 0.5%, and the high end of the range decreases discount rates by 0.5%. We use the
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
average of our fair values for purposes of our comparison between carrying value and fair value for the quantitative impairment test.
The table below displays the midpoint of the fair value range for each reporting unit tested in the 2024 and 2023 annual impairment tests, indicating that the fair value exceeded the carrying value for all reporting units.
2024 Impairment Test
2023 Impairment Test
Reporting Unit
Goodwill
Fair value exceeds carrying value by:
Reporting Unit
Goodwill
Fair value exceeds carrying value by:
Based on the analysis described above, for the reporting units for which we performed the quantitative impairment test, we concluded that our goodwill was not impaired as of October 1, 2024, because these reporting units passed the test as the fair values of each of the reporting units were substantially in excess of their respective carrying values.
We review intangible assets with definite lives subject to amortization whenever events or circumstances indicate that a carrying amount of an asset may not be recoverable. Recoverability of these assets is determined by comparing the carrying value of these assets to the estimated undiscounted future cash flows expected to be generated by these asset groups. These asset groups are impaired when their carrying value exceeds their fair value. Impaired intangible assets with definite lives subject to amortization are written down to their fair value with a charge to expense in the period the impairment is identified. Intangible assets with definite lives are amortized on a straight-line basis with estimated useful lives generally between 10 and 15 years. Events or circumstances that might require impairment testing include the loss of a significant client, the identification of other impaired assets within a reporting unit, loss of key personnel, the disposition of a significant portion of a reporting unit, significant decline in stock price or a significant adverse change in business climate or regulations.
Intangible assets with indefinite useful lives are not amortized but are evaluated for impairment annually or more frequently if events or changes in circumstances indicate that impairment may exist. The Company first assesses qualitative factors to determine whether it is necessary to perform a quantitative impairment test for indefinite-lived intangible assets. Impairment exists if the fair value of the indefinite-lived intangible asset is less than the carrying value. The determination of fair value is based on the relief from royalty method of the income approach, which models the cash flows from indefinite-lived intangibles assuming royalties were received under a licensing arrangement. This discounted cash flow analysis includes assumptions related to forecasted future revenues attributable to indefinite-lived intangibles, royalty rates and risk-adjusted discount rates. If the carrying value of an indefinite-lived intangible asset exceeds its estimated fair value, the indefinite-lived intangible asset is considered impaired, and an impairmentloss will be recognized in an amount equal to the excess of the carrying value over the fair value. Based on this analysis, for the indefinite lived-intangible asset for which we performed a quantitative impairment test as of October 1, 2024, we concluded that it was not impaired because its fair value was in excess of its carrying value.
Pension and Postretirement Benefit Plans
We use various actuarial assumptions in determining our net pension and postretirement benefit costs and obligations. Management is required to make significant judgments about a number of actuarial assumptions, including discount rates and expected returns on plan assets, which are updated annually or more frequently with the occurrence of significant events.
The discount rate is a significant assumption that impacts our net pension and postretirement benefit costs and obligations. We determine our discount rates for our domestic pension and postretirement benefit plans and significant foreign pension plans based on either a bond selection/settlement approach or bond yield curve approach. Using the bond selection/settlement approach, we determine the discount rate by selecting a portfolio of corporate bonds appropriate to provide for the projected benefit payments. Using the bond yield curve approach, we determine the discount rate by matching the plans' cash flows to spot rates developed from a yield curve. Both approaches utilize high-quality AA-rated corporate bonds and the plans' projected cash flows to develop a discounted value of the benefit payments, which is then used to develop a single discount rate. In countries where markets for high-quality long-term AA corporate bonds are not well developed, a portfolio of long-term government bonds is used as a basis to develop hypothetical corporate bond yields, which serve as a basis to derive the discount rate.
The discount rate used to calculate net pension and postretirement benefit costs is determined at the beginning of each year. For the year ended December 31, 2024, discount rates of 5.40% for both the domestic pension plan and the domestic postretirement benefit plan, and a weighted-average discount rate of 4.32% for the significant foreign pension plans were used
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
to calculate 2024 net pension and postretirement benefit costs. A 25 basis-point increase or decrease in the discount rate would not have impacted the 2024 net pension and postretirement benefit cost.
The discount rate used to measure our benefit obligations is determined at the end of each year. As of December 31, 2024, we used discount rates of 4.60% for the domestic pension plan, 5.80% for the domestic postretirement benefit plan and a weighted-average discount rate of 5.13% for our significant foreign pension plans to measure our benefit obligations. A 25 basis-point increase or decrease in the discount rate would have decreased or increased the benefit obligation as of December 31, 2024 by approximately $9.0 and $10.0, respectively.
The expected rate of return on pension plan assets is another significant assumption that impacts our net pension cost and is determined at the beginning of the year. Our expected rate of return considers asset class index returns over various market and economic conditions, current and expected market conditions, risk premiums associated with asset classes and long-term inflation rates. We determine both a short-term and long-term view and then select a long-term rate of return assumption that matches the duration of our liabilities.
For 2024, the weighted-average expected rates of return of 4.25% and 4.21% were used in the calculation of net pension costs for the domestic and significant foreign pension plans, respectively. For 2025, we plan to use expected rates of return of 4.25% and 5.35% for the domestic and significant foreign pension plans, respectively. Changes in the rates are typically due to lower or higher expected future returns based on the mix of assets held. A lower expected rate of return would increase our net pension cost. A 25 basis-point increase or decrease in the expected return on plan assets would have decreased or increased the 2024 net pension cost by approximately $1.0.
RECENT ACCOUNTING STANDARDS
See Note 18 in Item 8, Financial Statements and Supplementary Data for further information on certain accounting standards that have been adopted during 2024 or that have not yet been required to be implemented and may be applicable to our future operations.
NON-GAAP FINANCIAL MEASURE
This MD&A includes both financial measures in accordance with U.S. GAAP, as well as a non-GAAP financial measure. The non-GAAP financial measure represents Net Income Available to IPG Common Stockholders before Provision for Income Taxes, Total (Expenses) and Other Income, Equity in Net Income of Unconsolidated Affiliates, Net Income Attributable to Non-controlling Interests, and Amortization of Acquired Intangibles and Impairment of Goodwill which we refer to as “Adjusted EBITA”.
Adjusted EBITA should be viewed as supplemental to, and not as an alternative for, Net Income Available to IPG Common Stockholders calculated in accordance with U.S. GAAP ("net income") or operating income calculated in accordance with U.S. GAAP ("operating income"). This section also includes reconciliation of this non-GAAP financial measure to the most directly comparable U.S. GAAP financial measures, as presented below.
Adjusted EBITA is used by our management as an additional measure of our Company’s performance for purposes of business decision-making, including developing budgets, managing expenditures, and evaluati ng potential acquisitions or divestitures. Period-to-period comparisons of Adjusted EBITA help our management identify additional trends in our Company’s financial results that may not be shown solely by period-to-period comparisons of net income or operating income. In addition, we use Adjusted EBITA in the incentive compensation programs applicable to some of our employees in order to evaluate our Company’s performance. Our management recognizes that Adjusted EBITA has inherent limitations because of the excluded items, particularly those items that are recurring in nature. Management also reviews operating income and net income as well as the specific items that are excluded from Adjusted EBITA, but included in net income or operating income, as well as trends in those items. The amounts of those items are set forth, for the applicable periods, in the reconciliation of Adjusted EBITA to net income that accompany our disclosure documents containing non-GAAP financial measures, including the reconciliations contained in this MD&A.
We believe that the presentation of Adjusted EBITA is useful to investors in their analysis of our results for reasons similar to the reasons why our management finds it useful and because it helps facilitate investor understanding of decisions made by management in light of the performance metrics used in making those decisions. In addition, as more fully described below, we believe that providing Adjusted EBITA, together with a reconciliation of this non-GAAP financial measure to net income, helps investors make comparisons between our Company and other companies that may have different capital structures, different effective income tax rates and tax attributes, different capitalized asset values and/or different forms of employee compensation. However, Adjusted EBITA is intended to provide a supplemental way of comparing our Company with other public companies and is not intended as a substitute for comparisons based on net income or operating income. In making any comparisons to
Table of Contents
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in Millions, Except Per Share Amounts)
other companies, investors need to be aware that companies may use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding U.S. GAAP measures provided by each company under the applicable rules of the U.S. Securities and Exchange Commission.
The following is an explanation of the items excluded by us from Adjusted EBITA but included in net income:
• Total (Expenses) and Other Income, Provision for Income Taxes, Equity in Net Income of Unconsolidated Affiliates and Net Income Attributable to Non-controlling Interests. We exclude these items (i) because these items are not directly attributable to the performance of our business operations and, accordingly, their exclusion assists management and investors in making period-to-period comparisons of operating performance and (ii) to assist management and investors in making comparisons to companies with different capital structures. Investors should note that these items will recur in future periods.
• Amortization of Acquired Intangibles and Impairment of Goodwill . Amortization of acquired intangibles is a non-cash expense relating to intangible assets arising from acquisitions that are expensed on a straight-line basis over the estimated useful life of the related assets. Impairment of goodwill is a non-cash expense recognized when the carrying value of a reporting unit exceeds its fair value. We exclude amortization of acquired intangibles and impairment of goodwill because we believe that (i) the amounts of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization, or changes in the carrying values or fair values of goodwill reporting units. Accordingly, we believe that this exclusion assists management and investors in making period-to-period comparisons of operating performance. Investors should note that the use of intangible assets contributed to revenue in the periods presented and will contribute to future revenue generation and should also note that such expenses may recur in future periods.
The following table presents the reconciliation of Net Income Available to IPG Common Stockholders to Adjusted EBITA for the years ended December 31, 2024, 2023 and 2022.
Years ended December 31,
Revenue before billable expenses
Adjusted EBITA Reconciliation:
Net Income Available to IPG Common Stockholders 1,2
Add Back:
Provision for income taxes
Subtract:
Total (expenses) and other income
Equity in net income of unconsolidated affiliates
Net income attributable to non-controlling interests
Operating Income 1,2
Add Back:
Amortization of acquired intangibles
Impairment of goodwill
Adjusted EBITA 1,2
Adjusted EBITA Margin on Revenue before billable expenses 1,2
1 Calculations include restructuring charges of $(5.0) in 2024, $0.1 in 2023 and $102.4 in 2022. See “Restructuring Charges” in this MD&A and Note 12 in Item 8, Financial Statements and Supplementary Data , for further information.
2 Calculations include $9.3 of deal costs incurred during the fourth quarter of 2024 related to the planned acquisition of IPG by Omnicom. See Note 2 in Item 8, Financial Statements and Supplementary Data , for further information.
