IPG Q1 revenue dips 2.3%, but earnings beat estimates

Earnings per share, adjusted for amortization costs and non-recurring costs, came in at $0.38, a $0.07 increase over an average analyst estimate of $0.31, according to Zacks Investment Research.

Meanwhile, net revenue was $2.18bn, representing a 2.3% year-over-year decline from last year’s $2.23bn, with an organic drop of 0.2%.

“Financial results in the quarter are consistent with our internal forecast of pacing for the full year, both overall and across each of our operating segments,” said the company’s chief exec Philippe Krakowsky in a statement.

Across practice areas and regions, IPG saw somewhat mixed results.

What do the results show?

Total revenue for the business, including billable expenses, came in at $2.52bn. As mentioned above, net revenue dipped 2.3% year-on-year to $2.52bn, coming in under analysts’ average estimate by 0.90%.

Earnings per share beat analyst estimates, reaching $0.38 in the quarter. Meanwhile, IPG also repurchased 2.2m shares, resulting in a return of $78m to company shareholders.

IPG posted profits of $126m. Adjusted EBITA was $210.8m, with a 9.7% margin on net revenue before billable expenses. The company was careful to point out that Q1 is generally the smallest quarter for growth.

Operating expenses, excluding billable expenses, rose 0.4% in the quarter. The increase was primarily due to staffing costs, with office and other direct expenses, as well as selling costs, also contributing. “During the quarter, we … demonstrated ongoing strong expense discipline,” Krakowsky said.

As of March 31, 2023, cash and cash equivalents at IPG came to $1.68b,, compared to $2.40bn on March 31, 2022. Total debt as of March 31 of this year was $2.9bn, compared to $2.92 on December 31, 2022.

Key industries, practice areas and regions

During the first quarter, IPG saw growth in six of its top eight client sectors, including government clients, consumer goods, automotive, food and beverage and healthcare. Its business in the retail sector dipped.

IPG’s areas of specialization reported somewhat mixed results, though IPG’s leadership implied numbers are in line with their expectations. Growth of the company’s media, data and engagement division was down 0.7% year-on-year. Its advertising and creativity division, meanwhile, saw growth slow 0.9%. However, IPG’s communications and experiential solutions division saw organic growth spike 3.3%.

“In our first quarter, the services and capabilities that have led our substantial multi-year growth, notably media, healthcare and data-informed practices, continued to perform well, with strong growth that was offset by certain areas of softness, notably among marketers in the technology sector,” said Krakowsky. “The result was a slight decline in first-quarter organic revenue.”

Revenue saw various fluctuations across operating regions during the quarter. In the US, where IPG does the majority of its business, organic change of net revenue dropped 0.9%. It dipped a whole 4% in continental Europe but saw a lift of 2.9% in the UK market. In Latin America, revenues grew 3.9%, and in all other markets, revenues were up 9.3%.

Looking forward

The holding company, Krakowsky pointed out, has “won a number of the industry's most competitive account reviews” since the start of 2023. It’s a development that he said: “increasingly benefits [IPG’s] outlook as we move further into the year.”

The company says it’s still on track to meet its 2023 organic revenue growth goal of 2-4% and to achieve a full-year margin of 16.7%.

“The caliber of our people and our offerings, coupled with strong operating discipline and financial fundamentals,” said Krakowsky, “position us well to continue to deliver for our clients and stakeholders, and to further enhance shareholder value.”

In particular, IPG said it will continue to focus on bringing creativity and technology together to develop innovative solutions for clients, and, per Krakowsky, will invest in “precise, accountable, audience-led thinking and solutions.”

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