Interpublic Group of Cos. (NYSE: IPG) reported Q4 EPS of $0.84, $0.01 better than the analyst estimate of $0.83. Revenue for the quarter came in at $2.43 billion versus the consensus estimate of $2.41 billion.

• Q4 2019 net revenue was $2.43 billion, with organic net revenue growth of 2.9%, comprised of 2.1% in the U.S. and 4.1% in international markets
• FY19 net revenue grew 7.4%, with organic net revenue growth of 3.3%
• FY19 net income was $656.0 million compared to $618.9 million in 2018, and adjusted EBITA was $1.20 billion compared with $1.08 billion in 2018
• Adjusted EBITA margin expanded to 14.0% for FY19, an increase of 50 basis points from comparable FY18
• FY19 diluted EPS was $1.68 and was $1.93 as adjusted
• Board approves 9% increase in quarterly dividend

Summary

Revenue

• Fourth quarter 2019 net revenue was $2.43 billion, compared to $2.41 billion in 2018, with an organic net revenue increase of 2.9% compared to the prior-year period. This was comprised of an organic net revenue increase of 2.1% in the U.S. and 4.1% internationally. Fourth quarter 2019 total revenue was $2.90 billion compared to $2.86 billion in 2018.
• Full year 2019 net revenue was $8.63 billion, compared to $8.03 billion in 2018, with an organic net revenue increase of 3.3% compared to the prior-year period. This was comprised of an organic net revenue increase of 1.9% in the U.S. and 5.5% internationally. Full year 2019 total revenue was $10.22 billion, compared to $9.71 billion in 2018.

Operating Results

• Fourth quarter 2019 operating income was $491.3 million, compared to $459.1 million in 2018. EBITA was $512.7 million in the fourth quarter of 2019, compared to adjusted EBITA of $503.7 million in 2018, which excludes $22.6 million of transaction costs for the acquisition of Acxiom from the prior-year period. EBITA margin on net revenue was 21.1% in the fourth quarter of 2019, compared to adjusted EBITA margin of 20.9% for the same period in 2018.
• For the full year 2019, operating income was $1.09 billion, compared to $1.01 billion in 2018. Adjusted EBITA for the full year 2019 was $1.20 billion, which excludes restructuring charges of $31.8 million from the first quarter, compared to adjusted EBITA for the full year 2018 of $1.08 billion, which excludes Acxiom transaction costs of $35.0 million. Adjusted EBITA margin on net revenue was 14.0% in 2019, compared to 13.5% in 2018.

Net Results

• Income tax provision in the fourth quarter of 2019 was $86.1 million on income before income taxes of $427.8 million.
• Fourth quarter 2019 net income available to IPG common stockholders was $328.9 million, resulting in earnings of $0.85 per basic share and $0.84 per diluted share. Adjusted earnings were $0.88 per diluted share as adjusted for after-tax amortization of acquired intangibles of $17.2 million, an after-tax loss of $23.6 million on the sales of businesses, and the positive impact of tax valuation allowance reversals of $25.3 million. This compares to adjusted earnings of $0.89 per diluted share a year ago, due to a lower adjusted effective tax rate in the prior-year period.
• Income tax provision for the full year 2019 was 204.8 million on income before income taxes of 878.3 million.
• Full year 2019 net income available to IPG common stockholders was $656.0 million, resulting in earnings of $1.70 per basic share and $1.68 per diluted share. Adjusted earnings were $1.93 per diluted share as adjusted for after-tax amortization of acquired intangibles of $69.1 million, after-tax restructuring charges of $24.2 million from the first quarter of 2019, an after-tax loss of $45.9 million on the sales of businesses, and the positive impact of various discrete tax items of $39.2 million. This compares to adjusted earnings of $1.86 per diluted share a year ago.

Outlook

"We are pleased to report strong fourth quarter performance, as well as full-year financial results that deliver on our targets. Our results again demonstrate the strength of our client-centric, integrated model, and the quality of our offerings. Our differentiated culture and strategy are key reasons our long-term trajectory has been so strong, which has helped us to deliver leading organic growth and margin improvement in recent years,” commented Michael Roth, Chairman and CEO of IPG.

“As we turn to our outlook for 2020, our first thoughts are ones of concern and support for our people, clients, and partners in China, and for everyone around the world contending with the coronavirus outbreak. We are closely monitoring the situation and are focused on the well-being and safety of our people, and are taking appropriate steps to protect them during this difficult period,” added Mr. Roth.

“As our results demonstrate, IPG remains highly relevant to marketers in an increasingly crowded and complex environment. We have a strong portfolio of companies that combine marketing expertise and future-facing media, data and technology capabilities, which we can deliver through our collaborative open architecture model. Our 2020 targets are for organic growth of 3% and to further improve EBITA margin by an additional 20 basis points. We remain committed to our robust capital return program, as is evident in today’s announcement that our Board has again approved an increase in our dividend. We are also focused on debt reduction, with a view toward returning to share buybacks in the future as part of our capital allocation programs. We are confident that this combination of operating performance and capital returns will allow us to build on our strong track record of enhancing shareholder value," Mr. Roth concluded.

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