Interpublic Group (IPG) reported flat organic revenue change (excluding billable expenses) and has held R/GA and Huge for sale in its Q3 earnings call this morning.
Total revenue including billable expenses for the quarter was $2.63 billion, down slightly from $2.68 billion the same period last year. Revenue before billable expenses, or net revenue, was $2.24 billion, down 2.9% from the same quarter in 2023.
With R/GA and Huge held for sale, IPG recorded a $232 million non-cash goodwill impairment expense to reflect the fair market value of IPG’s digital assets, as noted in a press release.
This had a significant impact on net income available to IPG common stockholders, which was just $20.1 million for the quarter — compared to $214.5 million in the previous quarter and $243.7 million in the same quarter from 2023.
Reported organic change in the U.S. remained flat, and declined 0.7% and 7.4% in the U.K. and Asia Pacific markets, respectively. These decreases were offset by 9.8% growth in the Latin American market, which makes up 5% of net revenue.
Creativity dip
IPG’s integrated advertising and creativity led solutions group, which performed strongest in the previous two quarters this year, did not fare as well in Q3; year-over-year organic net revenue declined 1.9% to $848.9 million.
Although it reported strong growth from Deutsch (formerly Deutsch LA), Krakowsky noted IPG Health and McCann Worldgroup dragged overall performance in this area of the business, which also includes shops MullenLowe and FCB.
IPG’s media, data and engagement solutions network was bolstered by growth from IPG Mediabrands and Acxiom, with organic revenue increasing 1.2% year over year to $1.03 billion. This branch of the business includes R/GA and Huge, though their financials did not factor into reporting for the quarter.
R/GA and Huge sale ‘far enough along’
With R/GA and Huge held for sale, IPG has reclassified them in its financial reporting and pointed to the sales process as the reason for its smaller revenue.
While the shops have not been sold yet, said Krakowsky, he noted the process is “a good way down the track.”
“We clearly feel that there is line of sight to a conclusion to that process,” he added.
Krakowsky did not disclose R/GA or Huge’s potential buyer, although The Wall Street Journal reported in June that IPG was in talks to sell R/GA to India’s Tata Consultancy Services.
The year ahead
IPG’s full-year growth expectations remain unchanged from the previous quarter, with CEO Philippe Krakowsky forecasting 1% organic growth and 16.6% margin growth for 2024. Huge and R/GA were excluded from forecasting as they are held for sale.
The organic growth projection falls on the lower end of the 1-2% margin forecast in April during IPG’s Q1 results.
Pointing to the rest of the year, Krakwosky noted that despite “economic and political uncertainty in the U.S.” and other regions globally, IPG has a “strong pipeline for project work in Q4 and larger AOR assignments” that will kick off in 2025.
