IPG upgrades 2021 growth expectations after strong third quarter results

The holding company owns agencies including FutureBrand, Golin, MullenLowe, R/GA and Weber Shandwick.

What do the results show?

• IPG’s net revenue for Q3 reached $2.26bn – an increase of 15.7% on the same period last year when advertising holding companies first began their recovery from the pandemic.

• Organic revenue (growth) increased 15% against 2020, and 10.7% on the same period in 2019.

• IPG’s margin on its Q3 net revenue was 16.3%, a 0.1% increase compared with 2020.

• In the year-to-date, IPG has brought in $6.56bn in net revenue, an increase of 13.5% on the same timeframe of 2020. The operating margin for the year-to-date was 15.9%, compared with 10.2% in 2020.

• The company has upgraded its expectations for its performance across 2021 and now predicts organic growth of 11%, with an EBITA margin of 16.8% ”based on continued progress on public health and sustained macro recovery”.

• Krakowsky added: “We are pleased with our third quarter performance, which was highlighted by strong revenue growth in all world regions and across our operating segments, and driven by broad-based contributions across our agencies and client sectors. Given 15.0% organic revenue growth from a year ago, our two-year organic increase on that important metric was 10.7% relative to the third quarter of 2019, which demonstrates the strength and relevance of our evolving offerings.“

Which regions and areas of the business performed best?

• Media, data and technology businesses led IPG’s growth, with R/GA, Huge, McCann and FCB highlighted by Krakowski as particularly high performers. Its integrated agency networks saw 14.4% organic growth collectively, while IPG’s ’DXTRA’ grouping of experiential, PR, digital experience and influencer agencies saw 18.6% organic growth over the quarter.

• ​IPG’s healthcare operations accounted for a quarter of its total revenue, Krakowski said. ”As health and wellness continue to be a top concern for people, companies and governments around the world, we’ve seen an increased need for sound healthcare information to be delivered at speed, in ways that are highly personal, culturally relevant, as well as respectful of privacy regulations.”

• The chief exec told investors: ”Our growth reflects the cyclical economic recovery as well as the important structural currents that favor the kinds of higher-order expertise with which we are well-resourced. The work we are doing solves for the increasingly complex world faced by clients in a marketing and media environment defined by an extremely rapid rate of change. This is a validation of our long-term strategic focus on building offerings that help clients integrate brand experience across all consumer touchpoints, improve their capacity to apply data in the way their business goes to market, and capitalize on the benefits of technology and digital channels.”

• The United States, which accounts for 67% of IPG’s revenue in the quarter, saw 14.7% organic growth, outpacing the UK and Europe, which hit 13.3% and 11.8% respectively.

• Smaller but faster growth markets, such as Latin America and Asia Pacific, saw growth of 20.3% and 17.4% respectively. IPG chief financial officer highlighted Singapore, Colombia and Chile as strong performers.

• IPG’s headcount now rests at 54,600; the company has added 4,500 staff since 2020 to support its growth. While chief financial office Ellen Johnson said travel expenses were currently still low, as the cost of salaries and increased travel catch up to IPG in the next quarter, the company’s costs may rise.

• Key account wins in the quarter included Morgan Stanley, Storck USA, Roku, Clubhouse and CVS.

• ”We are confident as well that the investments in talent and capabilities that we continue to make position IPG well for the future. This is an unprecedented time, but we have highly relevant and differentiated offerings, underpinned by a sound financial foundation and a strong balance sheet,” said Krakowski.