IPG’s Q3 Earnings Take Slight Hit as Covid-19 Fallout Continues

On IPG’s third quarter earnings call today, CEO Michael Roth said nearly all of its agencies and disciplines showed improved growth from the prior three-month period, a sign that it’s beginning to recover from the economic impact of Covid-19.

The holding company’s organic net revenue dipped 3.7% during the third quarter, an improvement from the 9.9% drop in its last earnings report in July. Organic net revenue fell 2.4% in the U.S. and 6% internationally.

“As expected, that result continues to show the effect of the pandemic and global economic contraction, though perhaps not to the extent anticipated,” Roth said during the earnings call. “The tone of the business was clearly better than the last quarter.”

In addition to its quarterly earnings, IPG announced today that Roth, who’s served as CEO of IPG for 15 years, is stepping down to become executive chairman of the board. Philippe Krakowsky, an 18-year veteran of the company who’s served as chief operating officer since last year, will become CEO at the start of next year.

IPG is continuing to cut costs in an effort to lower its operating expenses moving forward. According to the company, it parted ways with 900,000 square feet of leased space in roughly 60 locations during the first nine months of this year and let go of 2% of its workforce, or about 1,000 people. IPG expects to save between $110 million and $130 million annually as a result of these cuts.

On the earnings call, Roth shared some bright spots for the company. He said its “media, data and technology offerings together grew in the quarter compared to a year ago.” Additionally, he said its healthcare disciplines have grown.

In terms of client sectors, Roth said those operating within the retail and healthcare sectors were “top performers” during the quarter, while brands in the industrial, auto and transportation were hardest hit by the pandemic.

Looking ahead to the fourth quarter, Roth said the “unknowns related to the pandemic and its impact on the global economy” could affect the holiday-related assignments that IPG typically takes on at this time of year.

“Covid, as we are all painfully aware, remains a threat to everyday life and, regrettably, is picking up in many key global markets,” he elaborated. “All of this makes client decision-making for the holiday season difficult to forecast. It’s very likely that any improving growth we do see across our industry will not be linear by quarter.”

Under the leadership of Krakowsky, who will officially become CEO on Jan. 1, it appears as though IPG will continue to build out its data and technology chops. In 2018, IPG acquired Acxiom, a database marketing company.

“Acxiom continues to meet our expectations in terms of their performance,” Krakowski said during the earnings call. “A key to IPG’s future success will be our ability to make our data and technology offerings a foundational element for IPG overall.”

He said IPG has seen “good progress” aligning Kinesso and Matterkind—two units established within the past year—with Acxiom. Kinesso, which debuted last October, was created to help marketers maximize the impact of traditional and addressable media through better use of data. Matterkind, previously known as Cadreon, specializes in addressable advertising.

According to Krakowsky, Kinesso and Matterkind “played significant roles in new business pitches” during the third quarter.

“There’s still work to be done to fully develop and integrate these capabilities, and we expect that our progress will further accelerate once our people are able to more fully collaborate with one another in person,” he said.

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