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INTERPUBLIC GROUP OF COMPANIES, INC. (IPG)·Q2 2025 Earnings Summary

Executive Summary

  • Strong margin execution drove a clean EPS beat, while revenue was essentially in line with consensus. Adjusted EPS was $0.75 vs S&P Global consensus $0.561, and net revenue was $2.173B vs $2.173B consensus; Adjusted EBITA margin reached 18.1%, a historic high for a second quarter . EPS/Revenue estimates from S&P Global.*
  • Management reaffirmed FY25 organic net revenue decline of 1%–2% and raised margin ambitions: “well ahead of 16.6%” with the CEO indicating “north of 100 bps,” as transformation savings come through .
  • Top-line pressure persisted from 2024 account losses (Q2 headwind ~5.5 pts), but underlying momentum improved in media and healthcare; SC&E grew organically, while IA&C remained soft given a healthcare client loss and creative agency headwinds .
  • Strategic transformation is progressing: staff cost ratio fell 350 bps YoY to 63.4%, headcount -6% YoY, and adjusted EBITA before restructuring rose to $393.7M; restructuring charge outlook increased to $375–$400M as scope expands (non‑cash heavy) .
  • Omnicom merger: FTC cleared; most jurisdictions approved; closing still expected in H2’25. Management sees complementary strengths (data/commerce/AI) and an ability to invest behind platforms post‑deal .

What Went Well and What Went Wrong

What Went Well

  • Margin and EPS outperformance: Adjusted EBITA margin reached 18.1% (Q2 record) and Adjusted EPS was $0.75, reflecting structural cost reductions and operating leverage; CEO guided FY25 margin “well ahead of 16.6%,” “north of 100 bps” .
  • Underlying strength in key practices: Despite the loss headwinds, media and healthcare showed sequential improvement; SC&E grew organically (+2.3%) led by Octagon, Momentum and Golin .
  • AI and product velocity: Over half of employees use Interact, 40% daily; launched Agentic Systems for Commerce (ASC), piloted by ~20 brands with double‑digit improvements in impressions and sales; multiple Cannes/industry accolades underscore creative quality .

What Went Wrong

  • Revenue contraction from prior account churn: Organic net revenue declined 3.5% in Q2; management cited ~5.5 pts headwind from three large 2024 losses (media, pharma), with international markets -5.4% organically .
  • IA&C softness and traditional creative drag: IA&C organic -6.3% due largely to one healthcare client; creative agencies remain under pressure industry‑wide .
  • Elevated non‑GAAP add‑backs: Q2 restructuring charges of $118M and $10.9M deal costs lifted SG&A as % of revenue; FY25 restructuring envelope now $375–$400M (substantial non‑cash) .

Financial Results

Core P&L vs prior quarters

MetricQ4 2024Q1 2025Q2 2025
Revenue before billable expenses ($USD Millions)$2,434.9 $1,996.3 $2,172.7
Adjusted EBITA before restructuring & deal costs ($USD Millions)$591.2 $186.5 $393.7
Adjusted EBITA Margin % (on net revenue)24.3% 9.3% 18.1%
Diluted EPS (Reported)$0.92 $(0.23) $0.44
Diluted EPS (Adjusted)$1.11 $0.33 $0.75
Organic Net Revenue Change YoY-1.8% -3.6% -3.5%

Q2 2025 Actuals vs S&P Global Consensus

MetricConsensusActualBeat/Miss
Net Revenue ($USD Millions)$2,173.37*$2,172.7In line (≈ -$0.7)
Adjusted EPS ($)$0.561*$0.75+$0.19 (significant beat)
EPS Estimates (#)6*——
Revenue Estimates (#)3*——

Values marked with * retrieved from S&P Global.

Segment organic performance

SegmentQ1 2025Q2 2025
Media, Data & Engagement (MD&E)+2.2% -3.1%
Integrated Advertising & Creativity (IA&C)-10.3% -6.3%
Specialized Communications & Experiential (SC&E)-2.4% +2.3%

Regional organic performance

RegionQ1 2025Q2 2025
United States-4.0% -2.6% (66% of Q2 net revenue)
International-2.6% -5.4%

Operating KPIs

KPIQ1 2025Q2 2025
Staff cost ratio (Salaries & related / net revenue)70.9% 63.4%
Office & other direct expenses / net revenue16.0% 15.0%
SG&A / net revenue2.0% 2.1% (incl. ~50 bps deal costs)
Headcount (approx.)51,550 51,300
Cash & Equivalents ($B)$1.87 (Mar 31) $1.56 (Jun 30)
Total Debt ($B)$2.96 (Mar 31) $2.96 (Jun 30)
Net Interest Expense ($M)$15.5 (Q1) $24.3 (Q2)
Share Repurchases ($M)$90 (3.4M shares) $98 (4.0M shares)
Dividend per share ($)0.330 (Q1 paid) 0.330 (Q2 paid; subsequent declaration)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic net revenueFY 2025-1% to -2% (Feb/Apr) -1% to -2% (reaffirmed) Maintained
Adjusted EBITA marginFY 202516.6% target “Well ahead of 16.6%,” CEO: “north of 100 bps” Raised
Restructuring chargesFY 2025$300–$350M $375–$400M (substantial non‑cash) Raised
H2 organic phasing2H 2025Not specifiedH2 broadly flat; Q3≈Q4 New color
Share repurchases2025Resumed post‑pause (Q1) Expect consistent with $325M annual cap in merger agreement Clarified
DividendOngoing$0.33/qtr (unchanged) $0.33 declared (payable Sep 16, 2025) Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
AI/technology initiativesInteract platform highlighted; Intelligence Node acquisition to bolster commerce data AI Console rollout; Interact adoption growing across agencies Interact daily use by 40% of employees; launched ASC with double‑digit pilot uplifts Accelerating adoption/commercialization
Macro/client toneCautious but improving into late 2024 No marked change in client activity; scenario planning Macro volatile but clients methodical; net activity consistent with plan Stable/cautious
Prior account losses impactLargest retail/media and healthcare losses pressured Q4 Headwind ~4.5–5 pts Headwind ~5.5 pts in Q2; expected to ease in H2 Peaking; to ease H2
Healthcare/regulatoryN/ACategory mixed; leadership positions intact Policy uncertainty in pockets; confident in navigating changes Mixed but resilient
Principal mediaNamed as factor in 2024 media outcomes —Combined co. expected stronger principal/trading capability Structural fix via Omnicom
New businessAmgen, Little Caesars, Volvo; K-C consolidation Continued wins at Mediabrands, Golin, Acxiom Mediabrands wins Paramount/CBS (U.S.), Anthropic, 7‑Eleven; Merck renewal Improving pipeline
Transformation/margins2025 restructuring ($250M in‑year) laid out In‑year savings ~$250M; run‑rate >$300M Margin “well ahead of 16.6%”; in‑year savings ~$300M; structural Upside vs initial plan
Omnicom merger progressProcess underway; shareholder support expected Cleared in several jurisdictions FTC cleared; most jurisdictions approved; H2 close on track Advancing to close

Management Commentary

  • “Adjusted EBITA…18.1%, which is a historic high for a second quarter.” – CFO Ellen Johnson .
  • “I’d say north of 100 basis points” (re FY25 adjusted margin above prior 16.6%) – CEO Philippe Krakowsky .
  • “Our three largest losses in 2024 weighed on growth by approximately 5.5% in Q2.” – CEO .
  • “We now have more than half of our employee population using [Interact], and 40%…daily.” – CEO .
  • “ASC…already being piloted by almost two dozen…with…double‑digit improvements in impressions and sales.” – CEO .
  • “We’ve now secured antitrust clearance in all but four…Importantly…FTC clearance in the U.S.” – CEO .

Q&A Highlights

  • Margin outlook: Management explicitly framed FY25 adjusted margin “well ahead” of 16.6% with a directional “north of 100 bps” comment; transformation is strategic, not just cost‑cutting, and benefits are arriving faster than expected .
  • H2 phasing: H2 organic broadly flat; Q3 and Q4 “more or less at the same level,” consistent with guidance cadence .
  • Savings trajectory: In‑year savings ~$300M; run‑rate “north of $300M,” structural from centralization, process re‑engineering and right‑shoring .
  • Outcome‑based models: “More than 50%” of media contracts include outcomes‑based components; push to tie creative to data stack to support outcomes models .
  • Healthcare/macro: Policy volatility is showing up in pockets, but the franchise breadth and need to reach stakeholders underpin resilience; macro approach remains methodical by clients .
  • Principal media and merger: Omnicom’s principal media scale and commerce (Flywheel) seen as complementary to Acxiom and IPG platforms post‑close .

Estimates Context

  • Relative to S&P Global consensus, IPG delivered a material EPS beat on stronger‑than‑expected margin execution, while revenue was in line. Adjusted EPS $0.75 vs $0.561 consensus; net revenue $2,172.7M vs $2,173.4M consensus.* The beat was driven by lower staff cost ratio (63.4%, -350 bps YoY) and operating leverage from transformation, partially offset by restructuring/deal costs excluded from adjusted metrics . EPS/Revenue estimates from S&P Global.*

  • Estimate revisions risk: With management now guiding FY25 margin “well ahead” of 16.6% and indicating “north of 100 bps,” Street margins likely trend higher, while revenue estimates may stay cautious given reiterated -1% to -2% organic guide and H2 flat commentary .

Key Takeaways for Investors

  • Margin is the story near‑term: structural cost actions and platforming are translating to record Q2 margin and a raised FY25 margin outlook; this should support upward EPS revisions even with a muted top line .
  • Top‑line drag is transitory: the ~5.5‑pt loss headwind peaked in Q2 and should ease into H2, with underlying momentum in media/healthcare and improving SC&E .
  • AI/product innovation is commercializing: Interact usage is broad‑based, and ASC pilots show measurable commercial uplift, creating potential software/tech‑fee revenue streams and outcome‑based models .
  • Deal optionality: FTC clearance lowers execution risk; combined data/commerce/media platforms provide a structural remedy to principal media deficits and should enhance competitiveness post‑close .
  • Capital returns stable into close: dividend maintained at $0.33 and buybacks expected within the $325M annual cap; balance sheet remains solid ($1.6B cash, next debt maturity 2028) .
  • Watch the creative cycle: IA&C softness (ex‑healthcare loss) remains an industry issue; IPG’s strategy is to connect creative to the data/production spine to migrate toward outcomes‑based compensation .
  • H2 setup: Expect flattish organic growth with continued margin strength; net result should be EPS resilience even if revenue remains subdued near‑term .

Footnote: Values marked with * retrieved from S&P Global.