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The Interpublic Group of Companies' (IPG) CEO Michael Roth on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 22, 2016 08:30 AM ET

Executives

Jerome Leshne - Senior Vice President of Investor Relations

Michael Roth - Chairman and Chief Executive Officer

Frank Mergenthaler - Executive Vice President and Chief Financial Officer

Analysts

Alexia Quadrani - JPMorgan Securities LLC

Benjamin Swinburne - Morgan Stanley

Peter Stabler - Wells Fargo Securities LLC

Dan Salmon - BMO Capital Markets

Tim Nollen - Macquarie Capital

Tom Eagan - Telsey Advisory Group

James Dix - Wedbush Securities

Brian Wieser - Pivotal Research Group LLC

Operator

Good morning and welcome the Interpublic Group First Quarter 2016 Earnings Conference Call. All parties are in a listen-only mode until the question-and-answer portion. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this point.

I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Jerome Leshne

Good morning. Thank you for joining us. We have posted our earnings release and our slide presentation on our website interpublic.com. This morning, we are joined by Michael Roth and Frank Mergenthaler. We will begin with prepared remarks to be followed by Q&A. We plan to conclude before market open at 9:30 AM Eastern.

During this call, we will refer to forward-looking statements about our company. These are subject to the uncertainties in the cautionary statements that are included in our earnings release and the slide presentation and further detailed in our 10-K and other filings with the SEC.

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 Michael Roth.

Michael Roth

Thank you, Jerry. Thank you for joining us this morning as we review our results for the quarter. I'll start out by covering the highlights of our performance; Frank will then provide additional details; and I'll conclude with an update on our agencies, to be followed by our Q&A.

We’re pleased to report another quarter with very strong performance. Organic revenue growth was 6.7% notably that comes on top of 5.7% a year ago. Our growth was driven by increases in all major disciplines, geographic regions and across most client sectors. This strong growth is consistent with our performance in recent years and a sign of the strength of our offerings across the portfolio. It’s encouraging to see a start to year at a top of the competitive table in terms of growth.

Acquisitions headed another 30 basis points to growth in the quarter, while currency translation was a 3.1% drag on revenue. Reported revenue growth was therefore 3.9%.

Q1 operating profit was $21 million compared with $8 million last year. As you all know, our first quarter is seasonably small in terms of revenue, while total costs are distributed fairly evenly throughout the year. That said positive and sustain Q1 profit increases are yet another market with continued strength and progress.

During the quarter, we continue to combine our growth will effective expense discipline. We achieved leverage on our expenses for base payroll, benefits and tax and our office and general expenses. The result was Q1 operating margin expansion of 70 basis points.

Our growth this quarter continues to reflect contributions from nearly all of our major agencies led my McCann, R/GA, Huge, FCB, Mediabrands and Weber Shandwick. Our digital offerings continued their strong growth. This includes the range of embedded digital capabilities within our integrated agency networks as well as our standalone digital specialists.