Interpublic Group has posted its Q3 net revenue growth at 8.7%, however “headwinds” from US account losses – as well a dip of year-on-year growth in the UK market – held its organic growth figure at a modest 1.4%.
IPG has pulled in $6.2bn in net revenue during the first nine months of 2019. This is up 10.2% from the $5.62bn reported at Q3 earnings in 2018.
However, the company’s organic growth has slowed in the third quarter: it posted a climb of just 1.4%, compared to the 5.4% it achieved during the same period last year.
This was primarily due to headwinds from account losses in the US. Organic revenues decreased by 0.6% in the region for the quarter, down from last year’s increase of 5%.
Michael Roth, IPG’s chief executive, had forewarned of this dive in previous earnings calls, having lost the Fiat Chrysler, US Army and Volkswagen US accounts in the fourth quarter of 2018.
However, he admitted this was the first time IPG had posted negative US growth in a quarter “since...well, I can remember”.
On a call with analysts today (22 October), he conceded these headwinds would continue to blow into the first and second quarter of 2020. The lost accounts weighed on US growth by -4.8% in Q3, although total US growth was up to 13.1%, due to the “net impact of acquisitions, including Acxiom, less dispositions”.
“The other reality of our business these days is you don’t have these big clients.... It’s a bunch of doubles and singles as opposed to home runs,” said Roth. “But we’re doing a pretty good job of that, which is why we’re net new business positive [a lot of that] is in the US.”
Across the period, IPG US agencies scored wins or retentions with the likes of Navy Federal Credit Union, Accuweather, Levi’s, CVS and Aetna Health. And with its share price up 3.1% this morning (22 October), the market appears satisfied by the holding co's response to the headwinds.
Data integration 'done'
APAC also saw organic revenues drop into the red at -0.5%. Roth attributed this to “soft” results in China and Australia.
Meanwhile the UK saw organic revenues grow just 0.5% – in stark contrast to 2018’s Q3 figure of 6.8% – “due to normal variability in projects”, according to chief financial officer, Frank Mergenthaler.
Despite the dips from its two largest markets, Roth was optimistic heading into the final quarter of the year.
“We have a very strong organic growth number right now ... our existing clients and new wins reflect a solid economy out there where clients are willing to spend,” he said. “I think we’re well-positioned given our new business performance and as we cycle through these headwinds, we’ll be posting decent leading industry organic growth, I hope.”
The chief executive also updated analysts on the progress of integrating Acxiom into IPG, which bought the data business in October 2018.
He declared the process was “done”, and while he did not disclose the work the new division had completed aside from “[adding] some new logos”, he noted the acquisition had proved critical to winning new business and retaining current clients, particularly CVS/Aetna.
“Frankly, I know that was one of the questions in our industry – whether we can absorb companies like this – and I think we’ve proven we can, and they continue to add value to us,” said Roth.
“To note, Acxiom now has a prominent seat at the table with our top open architecture clients. That is because clients increasingly recognize that the future of marketing is data-driven ... That is why we feel very strongly that what is worth owning is the highest level of capability and expertise in data management.
“That is a significant and increasingly necessary differentiator in today’s world. It makes a company like ours a more strategic business partner for our clients.”
Roth’s reiterative comments, which also imagined Acxiom and IPG’s future data capabilities with the recent launch of martech platform Kinesso, indirectly responded to the recent earnings comments of Omnicom chief, John Wren.
The rival holding co boss last week stressed why he had taken the exact opposite approach – holding off purchasing a data house such as Acxiom.
“...our investments in [homegrown data platform] Omni were made for the purpose of serving the specific needs of our agencies and clients,” Wren said. “It cannot be achieved simply by buying legacy data platforms that weren’t built with the flexibility required to meet the rapidly changing demands of today’s marketers.”
Meanwhile, Publicis' chief executive, Arthur Sadoun, recently credited the company's substantial Disney win to the sell-in of Epsilon, its own data business.