IPG posts 19.8% organic growth in 'largest second quarter' in company history

The holding company also revises its 2021 organic growth forecast up to 9-10%.

IPG posts 19.8% organic growth in 'largest second quarter' in company history

Interpublic Group of Cos. posted a second-quarter organic growth of 19.8%, a strong rebound from last year’s 9.9% decrease in the early months of the pandemic. New revenue in Q2 was up 22.5% year-over-year, to $2.27 billion, which CEO Philippe Krakowsky called “the largest second quarter in the company’s history.”

The holding company also upgraded its forecast for the year, predicting it would achieve 9-10% organic growth in 2021, up from the 5-6% it foresaw in April. Krakowsky credited the jump not just to the overall improved economic outlook but also to internal cost savings and strong growth in the public health sector.

“Our growth across regions, disciplines and client sectors speaks to more than a recovering global economy,” Krakowsky said during an earnings call this morning. “It underscores the elevated value marketing and media partners can deliver on the integration of creativity, technology, and data, at scale, amid the significantly increased velocity of digital transformation.”

IPG agencies saw 20.5% organic growth, and Krakowsky called out McCann Worldgroup, FCB, MullenLowe, Huge and R/GA as strong performers.

Organic growth in the U.S. was 17.4% over last year, 14% in the Asia-Pacific region and 49% in Latin America. IPG’s DXTRA segment—formed last year as an umbrella group of 28 agencies including Weber Shandwick, Golin, FutureBrand, Octagon and Jack Morton—posted 15.1% organic growth, a year after the latter two shops suffered from the collapse of the experiential market.

All eight of IPG’s major client sectors saw double-digit growth over last year, with auto and retail up more than 20%; consumer goods, tech & telecom and healthcare up in the mid-to-high teens; and food & beverage and financial services up in the low double digits.

Pandemic-induced staff reductions and a 15% decrease in real estate leases led to a $160 million cost savings. While hiring has picked back up (sometimes at higher wages due to the strong job market, noted Executive VP and Chief Financial Officer Ellen Johnson), the positions eliminated last year “will not return with revenue growth,” she added during the call.

IPG’s current headcount stands at about 53,000 people, a 1.4% increase over last year, and 5.2% higher than the start of 2021.

Sunny forecast

Looking ahead to the rest of the year, Krakowsky was optimistic, even given a rise in coronavirus cases in many parts of the world and the emergence of additional variants. But the continued impact of the pandemic may not be as significant to IPG’s business as last year, he said. In many countries, “the second or third wave won’t necessarily be the same as the first. There’s the sense that you’re still making progress towards an outcome,” now that vaccines and treatments are available.

“We also continue to see the benefit of low variable expenses, as a result of the highly restrictive global travel environment, and from the cost efficiencies of a largely remote workforce,” he added. “As we look ahead to post-pandemic work-life, it is worth noting that we can, of course, expect that expenses for travel, meetings, office utilities and the like to begin to return in the second half of this year, most notably in Q4, and of course into next year.”