IPG posts nearly 20% growth in Q2 as economy rebounds
The holding company revised its full year growth expectations upwards
Jul 22, 2021 04:05:00 AM | Article | Alison Weissbrot
IPG posted strong Q2 results on Wednesday, following Omnicom in demonstrating that the advertising industry is on the rebound after a difficult 12 months.
Organic revenue grew 19.8% year-over-year in Q2, with net revenues clocking in at US$2.27 billion. Despite the backdrop of a 9.9% dip in Q2 2020, IPG’s worst performing quarter during the pandemic, organic growth still increased 7.9% over Q2 2019.
The results “demonstrate our resilience, represent a remarkable rebound from the impact of the pandemic, and is also the largest second quarter in our company’s history,” said IPG CEO Philippe Krakowsky on the earnings call.
Organic growth increased across all regions, including 7.4% in the US, led by media, data and tech, as well as by FCB Health, DCTRA, McCann, MullenLowe and Huge.
The UK grew 18.7% organically led by McCann, DXTRA, media, data and technology and R/GA; continental Europe grew 27.9% with strength in Germany, Spain and France.
Asia-Pacific posted 14% organic growth, led by Australia, the Philippines, Singapore, Thailand and India. Japan and China decreased organically. LATAM was the strongest region, up 49% year-over-year.
International markets, which made up 37% of IPG’s net revenues in the quarter, grew 24.4% organically, over a 13.1% decrease in Q2 2020.
By segment, IPG’s integrated agency networks grew 20.5% organically, led by media, data technology and healthcare. At DXTRA, IPG’s PR and experiential group, organic growth was 15.1% with increases in experiential spend—a sign of return to normalcy.
The strong results, driven by double digit spending increases across IPG’s eight major client sectors (including auto, retail, CPG, tech and telecom, healthcare, food and beverage and financial services), led IPG to increase its fully year outlook to between 9% and 10% organic growth, up from a projection of 5% to 6% organic growth earlier this year.
“We all understand that lagging vaccination rates in many parts of the world, and the emergence of new variants, may entail higher COVID risks, which is something we will watch closely as we enter the second half of the year, and especially our seasonally important fourth quarter,” Krakowsky said.
Back to the office, back to the skies
IPG continues to save costs in the work from home environment, including in office occupancy, travel and payroll expenses. The holding company cut its office footprint by 15% last year, contributing to $160 million in annual cost savings, Johnson said.
But those expenses are coming back fast. Krakowsky said investors can expect an increase in travel costs in Q4 “which could return to levels consistent with what we saw in the fourth quarter of 2019.”
IPG is also starting to hire again as clients begin to spend. Global headcount grew 1.4% to 53,000 year over year, and 5.2% since Q1 2021. “Here in the U.S., we expect to have more people returning to our offices, in a flexible, hybrid model, beginning in mid-September, as is already the case in certain other areas of the world,” Krakowsky said.
As business stabilizes, IPG is focusing on healthcare as a growth area. Krakowsky pointed to the recent merger of McCann Health and FCB Health to create the larger scale IPG Health, which “strengthens our leadership position in this dynamic sector.”
“As an industry sector, healthcare represents an increasingly vital part of the economy, and one where innovation is becoming an ever more important driver of success,” he added.
DE&I + ESG = table stakes
As is becoming common on holding company earnings calls, Krakowsky spent time talking about how IPG is addressing DE&I and sustainability.
On the DE&I front, the organisation is “re-assessing how we hire, train and promote a diverse workforce,” as well as “incorporat[ing] rigorous practices around data ethics and media responsibility,” Krakowsky said.
On the ESG front, IPG announced a climate plan with three goals in Q1: setting a target to reduce greenhouse gas emissions, sourcing 100% renewable energy by 2030 and joining The Climate Pledge.
(This article first appeared on CampaignLive.com)