Agency Business Agency Models Financial Results

IPG records 9.8% revenue increase but margins shrink on rising labor costs

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By Sam Bradley | Senior Reporter

April 28, 2022 | 4 min read

US holding company Interpublic Group (IPG) increased its net revenue 9.8% in the first quarter of 2022, its financial results show. Its operating margin, however, shrank almost 1% relative to last year, reflecting restructuring costs.

ip graphic asset

IPG recorded higher revenues in the first quarter of 2022 / The Drum

IPG, which owns agencies such as R/GA, McCann and Mullenlowe, used its statement to caution shareholders about macroeconomic risks – namely, the war in Ukraine, remaining threats from Covid and rising inflation in the US.

Philippe Krakowsky, chief executive of IPG, said: “We are pleased to report a strong start to our year, with growth highlighted by increases across a broad range of geographies and client sectors. These results reflect the skill that our colleagues bring to their craft and the commitment they consistently demonstrate to our clients and in support of each other.”

What do the results show?

IPG’s net revenue was $2.23bn, an increase of 9.8% on the same period in 2021. Organic growth was 11.5%, while the company’s EBITA (earnings before interest, tax and amortization) operating margin fell to 12.3% – down almost a full point on 2021, when it was 13.1%.

Though the company put that down to restructuring charges in its statement, its operating costs rose by 11% – reflecting higher labor costs and expenses, and rising real estate costs. Salaries ate up around 70% of IPG’s revenue this quarter, equal to around $1.56bn – an increase of 12.3% on Q1 last year – while office expenses rose 10.4% compared to 2021 and accounted for over $300m in costs.

According to Krakowsky, IPG is still confident it will widen that margin to 16.6% by the end of the financial year.

The CEO also said that IPG had revised its expected yearly organic growth from 5% to 6%, despite latent economic uncertainty: “While macro uncertainty is still elevated as a result of geopolitical and public health issues, we recently refreshed our bottom-up outlook for the year with key clients and with our operating teams, and the tone of the business remains positive.

“As such, we are updating our outlook for the year, from the previously-announced expectation for 5% organic revenue growth in 2022 to approximately 6%, on this key metric. This would be an especially strong result, given that it compounds IPG’s outstanding multi-year growth stack. We are also reiterating our expectation for adjusted EBITA margin of 16.6% for the full year.”

The US saw 12.2% organic growth for IPG as a whole, while its international operations collectively experienced organic growth of 10.2%.

The holding company followed the example of WPP with a share buyback program; it’s spent $63.1m on buying back its own stock.

Agency Business Agency Models Financial Results

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