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Text: We hope you are all well.
We will also refer to certain non-GAAP measures.
We believe that these measures provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance.
At this point, it is my pleasure to turn things over to Philippe Krakowsky.
As always, I'll start with a high level view of our performance in the quarter.
Ellen will then provide additional details, and I'll conclude with updates on key developments at our agencies to be followed by Q&A.
These include the transition to work from home, and now are planning for return to office in many parts of the world, as well as the significant personal difficulties presented by the long course of the pandemic.
It's due to the efforts of our people, their commitment to their craft, our clients and to each other that we can share with you today these very strong results.
Performance that demonstrates our resilience represents a remarkable rebound from the impact of the pandemic, and is also the largest second quarter in our company's history.
Our strong results in the quarter build on IPG's consistent record of industry outperformance and margin expansion.
Our growth across regions, disciplines and client sectors speaks to more than a recovering global economy.
It underscores the elevated value that marketing and media partners can deliver in the integration of creativity, technology and data at scale made the significantly increased velocity of digital transformation.
At Interpublic, we're confident that we are attuned to the powerful currents that are transforming consumer behavior and are required for business relevance.
And then we are increasingly delivering differentiated and higher-end solutions that help our clients win in a world of accelerated technological and societal change.
That takes creativity and precision, data and accountability, all of which we're able to bring together in customized teams that drive talent from across our portfolio.
Ultimately, our growth speaks to our ability to drive outstanding business results for our clients.
Our net organic revenue growth in the second quarter was 19.8%.
That's against the second quarter of 2020 when as you will recall our organic change was negative 9.9%, which while well ahead of our peer group did mark our steepest decrease of the recession.
It's also important to note that our 7.9% organic increase this quarter relative to the pre-pandemic second quarter of 2019.
Compared to last year, our organic growth was at double-digit rates around the world.
In the US, it was 17.4%, growth in our international markets ranged from 14% in the Asia-Pacific region to 49% in Latin America.
We also had a very broad contribution from our operating segments and disciplines.
Our IAN segment grew 20.5% organically with increases led by media, data and technology and with solid contributions from our global integrated networks.
There was also strength across most of our disciplines led by healthcare.
At our DXTRA segment, organic growth was 15.1% with strong increases from last year's heavily impacted Q2 across Octagon's sports and entertainment and Jack Morton's experiential offerings.
Looking at client sectors, the picture is also one of comprehensive acceleration.
Each of our eight major sectors had double-digit increases from a year ago.
The auto, retail and other sectors were up more than 20%, consumer goods, tech and telecom and healthcare increased in the mid to high teens, food and beverage and financial services were up in the low double-digit range.
Turning to operating expense and profitability.
Our teams once again demonstrated outstanding discipline.
And while remaining focused on appropriate cost control, we're also continuing to invest to support accelerating growth.
We continue to see the benefits of cost improvements from strategic restructuring actions taken last year, notably in our payroll expense and our expense for occupancy.
We also continue to see the benefits of low variable expenses as a result of the highly restrictive global travel environment and from the cost efficiencies of a largely remote workforce.
As we look ahead to post-pandemic work life, it's worth noting that we can, of course, expect that expenses for travel, meetings, office utilities and alike will begin to return in the second half of this year, most notably in Q4 and of course into next year.
Our second quarter net income was $263.3 million as reported.
Adjusted EBITDA was $405.8 million and adjusted EBITDA margin on net revenue was 17.9%.
Our results reflect significant operating leverage compared to both last year and the 2019 period on our expense for base payroll and our office and other expenses.
We delevered on our expense accrual for our performance based incentive compensation plans, but our operating performance is tracking well ahead of planned target.
Diluted earnings per share was $0.66 as reported and was $0.70 as adjusted for the after tax expense of the amortization of acquired intangibles.
As we look to the balance of the year, you'll recall that in April, we shared a full year 2021 performance outlook based on the assumption that there will continue to be a reasonably steady course of public health and global economic recovery.
At that time, we outlined our view toward full year organic growth of 5% to 6% and adjusted EBITDA margin of approximately 15.5%.
In light of our very strong second quarter and also having recently refreshed our bottom-up outlook for the second half of the year based on conversations with our clients and operating teams, we believe it's appropriate at the mid-point of this quite unusual year, unprecedented, in fact, to upgrade those expectations.
Of course, we do sadly need to recognize that the COVID pandemic and the related risks to the macro environment are not yet behind us.
In particular, as we look ahead, we all understand that lagging vaccination rates in many parts of the world and the emergence of new variants may entail a higher COVID risk.
That's something we'll watch closely as we enter the second half of the year, especially our seasonally important fourth quarter.
With predicated on the continued progress and public health issues, we believe that we can deliver organic growth for the full year of 9% to 10%.
And with that level of growth, we would expect to achieve 2021 adjusted EBITDA margin of approximately 16%.
As such, we see this as another year of strong value creation for all of our stakeholders.
We'll of course keep you apprised of progress as the year develops and we look forward to those conversations.
On that note, I'd like to hand over the call to Ellen now for more in-depth view of our results.
I hope that everyone is safe and healthy.
Adjusted EBITDA, before a small restructuring adjustment, was $405.8 million, and margin was 17.9%.
These are levels that compare very favorably against any previous second quarter.
With growth having accelerated, certain variable expenses continue to lag and we are additionally seeing the structural benefits of last year's restructuring program.
Diluted earnings per share were $0.66 as reported and $0.70 as adjusted before the after-tax impact of the amortization of acquired intangibles.
Turning to slide three, you'll see our P&L for the quarter.
I'll cover revenue and operating expenses in detail in the slides that follow.
Turning to second quarter revenue on slide four.
Our net revenue in the quarter was $2.27 billion, an increase of $416.2 million from a year ago.
Compared to Q2 2020, the impact of the change in exchange rates was positive 3.1% with the US dollar weaker against currencies in most of our largest markets.
Net divestitures were negative 40 basis points.
Our organic net revenue increase was 19.8%, which brings us to 10.6% organic growth for the six months.
At the bottom of this slide, we breakup segment revenue in the quarter.
Our IAN segment grew 20.5% organically.
We had notably strong growth across our offerings in media, data and tech, McCann, FCBs with healthcare, a significant driver, MullenLowe, Huge and R/GA.
At IPG DXTRA, organic growth was 15.1%, which reflects some recovery of the events and sports marketing offerings within the segment, the disciplines that have been most significantly impacted by the pandemic.
Our public relations offerings also had solid growth in the quarter.
Moving on to slide five, which is a look at our organic revenue change by region.
In the US, which was 63% of net revenue in the quarter, organic growth was 17.4%.
Revenue decreased a year ago in the same period by 8%.
Year-on-year performance was very strong across media, data and tech, FCB driven by healthcare, IPG DXTRA, McCann, MullenLowe and Huge.
International markets were 37% of our net revenue in the quarter and increased 24.4% organically.
You'll recall that the same market decreased 13.1% a year ago in the second quarter which ranged by region between negative 10% and negative 15%.
Continental Europe grew 27.9% with notably strong growth in Germany, Spain and France.
There were a number of operating highlights in the region led by media, data and tech, McCann, R/GA and DXTRA.
The UK increased 18.7% organically, led by McCann, DXTRA, media, data and tech and R/GA.
Asia-Pac grew 14% organically.
Our organic growth was paced by Australia, the Philippines, Singapore, Thailand and India, while China and Japan decreased.
Our organic growth in LatAm was 49% with exceptional results across the region, including Brazil, Mexico and Argentina.
Our other markets group grew 29.2% with notably strong performance in the Middle East and Canada.
Moving on to slide six, and operating expenses in the quarter.
Our operating expenses excluding billable expenses, the amortization of acquired intangibles and restructuring charges increased only 11% from a year ago and to 22.5% growth of net revenue.
The result was second quarter margin expansion to 17.9% from 9.4% a year ago.
We continue to see efficiencies in a number of different expense categories as we had in this year's first quarter and these were both structural and variable.
In the structural category, we are seeing the benefit of the strategic restructuring actions, which we initiated in the second quarter of last year and continued to execute over the second half.
As a reminder, these actions involve the elimination of certain positions, and resulting headcount reduction that will not return with revenue growth.
We also reduced our real estate footprint by 15% last year.
We are currently seeing the benefit of most of these actions and at a full run rate they will generate $160 million in annual cost savings.
We've also had over the course of the pandemic a sharp decrease in certain variable operating expenses.
I would call out specifically lower travel and related expenses, which was the case in the second quarter of 2020 and that's continued through Q2 2021.
As you can see on this slide, a ratio of total salaries and related expense, as a percentage of net revenue was 65.4%, which has significantly improved from the second quarter of 2020 when revenue had decreased sharply.
Underneath that, we drove very strong leverage on our expense for base payroll, benefits and tax, which was 53% of net revenue in the quarter.
That reflects the benefit of last year's restructuring and the fact that the pace of new hiring lags our significant revenue growth, as was in the case in past business cycles.
Our severance expense ratio also decreased sharply to only 40 basis points of net revenue, compared to 3% in Q2 2020, which was at an elevated level due to the impact of the recession.
Going the other way, our expense for performance-based incentive compensation increased to 6.4%, consistent with our very strong operating results.
Expense for temporary labor also increased, as a percentage of net revenue to 4.5%, as a result of servicing the top line's quick acceleration.
At quarter-end, total worldwide headcount was approximately 53,000, a 1.4% increase from a year ago and up 5.2% from the beginning of this year, with hiring to support our growth.
Also on this slide, our office and other direct expense decreased as a percentage of net revenue by 380 basis points to 13.3%.
Our occupancy expense decreased to 5% of net revenue, mainly due to the restructuring of our real estate, as well as leverage on our revenue growth.
We leveraged all other office and other direct expense by 220 basis points, which reflects lower expense for bad debt and acquisition costs and leverage as a result of our revenue growth.
Our SG&A expense was 1.3% of net revenue, with the increase from a year ago due to the higher unallocated performance-based incentive expense and increased employee insurance expense, which was at a very low level a year ago.
On slide seven, we present detail on adjustments to our reported second quarter results, in order to provide greater clarity and a picture of comparable performance.
This begins on the left-hand side with the reported results and steps through to adjusted EBITDA and our adjusted diluted EPS.
Our expense for the amortization of acquired intangibles in the second column was $21.6 million.
The restructuring refinement in the quarter is a benefit of $200,000.
To be clear, this is a small adjustment to estimate of the 2020 restructuring program.
Below operating expenses in column four, we had a pre-tax loss in the quarter of $1.7 million in other expenses due to the disposition of small non-strategic businesses.
At the foot of the slide, you can see the after-tax impact per diluted share of these adjustments was $0.04 per share, which bridges our diluted earnings per share as reported at $0.66 to adjusted earnings of $0.70 per diluted share.
On slide eight, we turn to cash flow in the quarter.
Cash from operations was $468.2 million, compared with the use of $87.1 million a year ago.
We generated $101.6 million from working capital compared to a use of $264.9 million last year.
Investing activities was $43.3 million in the quarter, mainly for capex of $34 million.
Financing activities used $101.8 million, mainly for our dividend.
Our net increase in cash for the quarter was $325.6 million.
Slide nine is the current portion of our balance sheet.
We ended the quarter with $2.34 billion of cash and equivalents.
Under current liabilities, the current portion of long-term debt refers to our $500 million, 3.75% senior note which matures in October of this year.
We plan to repay these notes from cash on hand.
Slide 10 depicts the maturities of our outstanding debt.
Again, we have the maturity in October of this year, and then only $250 million due in April 2024.
Thereafter, our next maturity is not until 2028.
In summary, on slide 11, our teams continue to execute at a high level in an unprecedented environment.
I would like to reiterate our pride in and gratitude for the efforts of our people.
The strength of our balance sheet and liquidity means that we remain well positioned, both financially and commercially.
While we remain very pleased with our results, it's worth reiterating as Ellen just said that this is an unusual, in fact, unprecedented environment in which we're operating.
Now importantly, it bears noting that when compared to our non-pandemic results in 2019, Q2 results show our company is performing at a very high level.
We continue to feel this is the result of strategic decisions that we've taken over a number of years to position our company for the future, investments and actions that have created a sustainable advantage for our organization.
Today's IPG delivers addressable and accountable digital marketing programs, combined with our world-class creative storytelling capabilities, these solutions make us higher value partners to our clients.
One of our many priorities over the years has been the creation and implementation of open architecture solutions, where we bring the best of IPG together in collaborative teams that are customized to client-specific business needs and increasingly a key element of this approach, Open Architecture 2.0, as it were, is Acxiom whose data management expertise and data assets play a role in an increasingly broad range of our offerings.
In addition, Kinesso powers many of our applications and services that provide clients with a deep understanding of audiences in order to provide insights and then form creative work, segments for media delivery and line of sight to the effectiveness of the work that we're doing together.
We saw this model come to life in the quarter with a Cigna count win, which combined talent from McCann Worldgroup Initiative and R/GA powered by Kinesso and Acxiom.
This is a continuation of several years of strong performance in integrated pitches, especially those that include creative and media, as well as media and data.
Another another key decision that's contributed to our success has been our continued investment in strong agency brands, which helps us attract and retain top talent and deliver breakthrough creative ideas across a range of marketing disciplines.
As a result of this strategy, IPG companies across our portfolio earned a number of important accolades during the quarter.
Most notably, we had an impressive showing at the 2021 Cannes International Festival of Creativity.
IPG agencies took home eight Grand Prix, the festival's highest honor.
Wins across the network represented a broad range of clients, categories, agencies, disciplines and geographies.
FCB's performance was a standout, as the agency took home four Grand Prix and was named Global Network of the Year.
The agency's creative community and its leadership deserved credit for this terrific accomplishment.
FCB Health was also named Healthcare Network of the Year and AREA 23 and FCB Health Agency was named Healthcare Agency of the Year.
McCann client, Microsoft was named Marketer of the Year at the festival, which is another major honor.
And the agency also won a Grand Prix in brand experience and activation for its remarkable true name work for Mastercard, which empowers transgender and non-binary cardholders to use their true name when using their credit card.
In PR, McCann Paris earned a Grand Prix, partnering with Weber Shandwick for a campaign that ran across the Middle East, which teaches women in a culturally sensitive way to perform self-checks for early breast cancer detection.
FCB Chicago and Weber Shandwick teamed to earn a Grand Prix for work for AB InBev.
And R/GA continues to be recognized for its ability to humanize technology, winning a Grand Prix in social and influencer marketing for disruptive work it did for Reddit on the Super Bowl.
On Ad Age's annual A-List and Creativity Awards, both Deutsch LA and The Martin Agency were named to the prestigious A-list.
Initiative was named Media Agency of the Year and FCB Health's CEO was recognized as our industry's Executive of the Year.
At the holding company level, we made a number of announcements that position us for further success.
Chief among them was our launch of IPG Health earlier this month.
The move will align our top performing companies, FCB Health and McCann Health under a new global network, IPG Health, led by a dynamic and proven CEO and a skilled executive leadership team.
In this new operating structure, the distinct agency brands within FCB Health and McCann Health will remain active and continue to go to market independently.
They will also benefit from access to additional specialty services, knowledge sharing, proactive career management, shared investment in new capabilities and skill-sets, highly complimentary geographic coverage, as well as an even higher level of collaboration.
Around the world, healthcare and well-being are areas of growing importance for our clients and society at large.
As an industry sector, healthcare represents an increasingly vital part of the economy, and one where innovation is becoming an ever more important driver of success.
So the alignment of IPG's fully dedicated healthcare networks under the banner of IPG Health strengthens our leadership position in this dynamic sector.
The scale, reach and most importantly, quality of our people and our work makes for an exciting combination.
And it's why we think this new offering will continue to deliver great things in the years to come.
This month, we also added to our strong roster of marketing technology and e-commerce providers with a launch of Performance Art, a data-led creative CRM agency, whose leadership team is known for delivering platform level creative ideas that are at home in a client's e-retail flow as they are in a 30-second spot.
Turning to performance at our agencies, growth at IAN in the quarter was once again highlighted by media, data and tech and FCB led by healthcare.
UM saw significant wins in the quarter with Enterprise Holdings, Behr Paint and most recently, NYC & Company, New York City's official marketing and tourism organization.
UM also saw an important account retention for the Australian government.
At the Campaign Agency of the Year Awards, UM earned Global Media Agency of the Year honors and UM APAC was named Best Media Network in that region.
At Initiative, the agency was named 2020's Most Competitive Network Globally in Media Pitches and saw a major win in the UK with banking and insurance company, NatWest Group.
We also continue to see terrific momentum at Reprise, especially as it relates to their growing e-commerce capabilities.
Acxiom, Kinesso, and Matterkind are also performing well and they're key to how we help clients thrive in the addressable media market, which requires flexibility, given the quickly shifting landscape.
At Acxiom, we continue to invest behind innovative new products and services, such as customer data platforms, and identity resolution, with which we are seeing increased client adoption.
Another important development saw Acxiom deploy their latest customer intelligence platform on the cloud with a key financial services client.
At our creative integrated networks, FCB, McCann and MullenLowe Group were named the ACT Responsible 2020 Good Report, a unique ranking of the world's best use of creative communications to promote sustainability and social responsibility.
On top of its exceptional showing at Cannes, at FCB Global, the network continues to invest in talent and new offerings, hiring a head of data science and connections to expand its expertise in commerce, data and technology fueled creativity.
McCann also continues to prove a creative powerhouse.
As we saw, the network was recently named Webby Network of the Year and McCann New York was named Webby Agency of the Year.
MRM continues to leverage its Martek expertise and is seeing strong growth with its MRM commerce division, which help marketers drive engagement, interaction and conversion on commerce platforms.
At MullenLowe Group, Mediahub continues its strong new business momentum and during the quarter, added Hallmark's parent company, Crown Media, as well as Tally Financial.
MullenLowe is also a global leader in purpose driven work.
And we saw that as it continued to partner with governments in a number of countries around the world to inform people the benefits of being vaccinated against COVID-19.
At R/GA, campaign named the London office as the UK's Digital Agency of the Year.
And R/GA London added two new clients, financial services company, Allianz, and Vollebak Clothing.
We named the new CEO at Huge who joined the digital agency after a very successful tenure at Initiative, where he helped turn the agency into a leader in the media space.
During the quarter, Huge also saw strong new business activity, adding Sub-Zero Appliances, Wakefern, Tezos Foundation and Nikko Asset Management.
The Martin Agency continues to impact culture and drive strong business results for its clients.
Notably, the agency sold the city's short film for DoorDash at the Tribeca Film Festival last month and had captured the resilience of New York City's restaurants and the role they play in the city's life.
At IPG DXTRA, we also saw recognition as the number of companies were called out for their ability to deliver creative solutions.
Weber Shandwick was the most awarded PR agency at Cannes this year.
Current Global demonstrated their commitment to closing the disability and inclusion gap by creating guidelines and toolkits for marketers so as to make content more accessible for consumers with sight, hearing, or other cognitive impairments.
And this program was recognized as one of Fast Company's World-Changing Ideas for 2021.
Jack Morton launched what they are referring to as the return-to-live dashboard and that's a tool for brand marketers to access where, when, and how businesses in the US can safely get back to hosting live experiences.
Golin continued its strong performance in new business, was selected as LinkedIn's Global Social Media Agency of Record and also Agency of Record for Yamaha Music.
Golin was also named PRWeek's Global Agency of the Year.
Pivoting now back to the holding company, another key area that bears mention is our long-term focus on ESG, including diversity, equity and inclusion.
In all of our operations and activities, we're working to build on and more fully live into this commitment.
And this includes reassessing how we hire, train and promote a diverse workforce, incorporate rigorous practices around data ethics and media responsibility as well as reduce our greenhouse gas emissions further around the world.
Key accomplishments on this front include IPG being recently named by Forbes to their top ten list of America's Best Employers for Diversity.
During the quarter, we also created a new position, our industry's first culture officer, to focus on long-term thought leadership relating to a broad range of social justice issues for underserved and underrepresented communities.
During the quarter, as part of our integrated ESG efforts, we also announced an action plan that consists of three climate roles, committing to set a science-based target; sourcing 100% renewable electricity by 2030, and joining the Climate Pledge, co-founded by Amazon and Global Optimism.
In addition, we've published our first SASB report, becoming the first company in the advertising and marketing sector to publish an alignment with SASB's industry standards.
Our agencies also contribute significantly to our ESG profile.
And importantly, here in the US, we saw media brands take a leading role in the industry conversation about promoting greater media equity.
And they announced that they're committing to invest at least 5% of client budgets in black-owned media by 2023.
Octagon launched an accelerator program with historically black colleges and universities for students interested in sports and entertainment as a career.
And R/GA created an innovative program to raise money for environmental organizations through a dedicated YouTube channel that plays nature videos, which have become hugely popular during the pandemic, and it directs all of the ad revenues generated on this channel to environmental NGOs.
Like many of us, I look forward to working live with colleagues and clients, especially given that we're an ideas-driven service business.
Our culture, our capacity for innovation and the ways in which we combine creativity with technology and data are all enhanced by in-person interactions.
Now here in the US, we expect to have more people returning to our offices in a flexible hybrid model, beginning in mid-September as is already the case in certain other parts of the world.
We will, of course, be mindful of the public health situation and of the learnings we've accumulated during the past 16 months when it comes to flexible work practices.
The expected costs associated with live collaboration with colleagues as well as travel will begin to return as a normal part of how we work and therefore be reflected in our operating results.
For example, as we look forward to the remainder of the year, we expect an increase in travel costs in the fourth quarter, which could return to levels consistent with what we saw in the fourth quarter of 2019.
As we said earlier, these are unprecedented times.
None of us had previously been required to adapt the constraints of living and working through a pandemic.
And likewise, none of us has experience in emerging for one.
Earlier on the call, we shared our perspective on the balance of the year, based on the assumption that there will continue to be a reasonably steady course of macro recovery that people continue to become vaccinated to protect themselves and their communities and that we're able to adequately mitigate the impact of dangerous new variants.
We've delivered a very strong first half of the year on top of the most challenging comps in our industry.
Further, despite continued macro uncertainty, we have greater clarity to the balance of 2021.
We therefore believe that current performance, combined with the continued execution of our long-term strategy, are significant drivers for the sustained enhancement of value for all of our stakeholders.
As always, we're committed to sound financial fundamentals, including debt reduction as well as continuing to grow our dividend.
We also remain focused on getting back to our share repurchase program and we will keep you apprised of our progress as the year develops.

user
compname announces q2 adj earnings per share of $0.70.
q2 adjusted earnings per share $0.70.
q2 net revenue was $2.27 billion, an increase of 22.5% from a year ago, with organic growth of 19.8%.
interpublic group of companies - upgrades expectation for fy 2021 performance to organic growth of 9%-10% and adjusted ebita margin of about 16.0%.

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