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INTERPUBLIC GROUP OF COMPANIES, INC. (IPG)·Q3 2024 Earnings Summary

Executive Summary

  • Net revenue was $2.24B with organic growth flat YoY; adjusted EBITA margin held at 17.2% (unchanged YoY), with adjusted EPS of $0.70 and GAAP EPS of $0.05 due to a $232.1M non-cash goodwill impairment tied to R/GA and Huge being classified as held-for-sale .
  • Management reaffirmed FY24 outlook: approximately 1% organic revenue growth and 16.6% adjusted EBITA margin; Q4 project pipeline is strong, while 2025 faces topline headwinds from recent large account review outcomes .
  • Operating highlights: growth in Mediabrands, Acxiom, Octagon and PR; segment headwinds in IPG Health, McCann, MRM; regional softness in AsiaPac (-7.4% org) offset by strong LatAm (+9.8%) .
  • Capital returns: $100M of buybacks (3.2M shares) in Q3; quarterly dividend of $0.33 declared for payment on Dec 16, 2024; quarter-end cash $1.53B, total debt $2.9B, next maturity 2028 .

What Went Well and What Went Wrong

  • What Went Well

    • Margin resilience: Adjusted EBITA margin was 17.2% (flat YoY) on disciplined cost control and leverage on base payroll and incentives, despite higher tech and transformation investment .
    • Business mix strengths: Solid contributions from media (Mediabrands), data (Acxiom), sports marketing (Octagon) and PR (Weber, Golin) supported overall performance .
    • Strategic platform: Launch of Interact, an end-to-end marketing intelligence engine powered by Acxiom data and AI partnerships, aimed at faster personalization and activation across channels; “a significant increase in speed to market” for clients .

  • What Went Wrong

    • Reported revenue decline: Net revenue decreased 2.9% reported (FX -0.5%, dispositions -2.4%), reflecting held-for-sale classification of R/GA and Huge; organic was flat .
    • Impairment and underperformers: Non-cash goodwill impairment of $232.1M tied to digital specialist agencies; MRM and certain creative agencies weighed on performance .
    • Regional and sector headwinds: AsiaPac organic -7.4% and declines in tech & telecom and auto from prior account losses; IPG Health and McCann faced revenue headwinds in Q3 .

Financial Results

  • Consolidated results by quarter
MetricQ1 2024Q2 2024Q3 2024
Net Revenue ($B)$2.183$2.327 $2.243
Organic Growth YoY (%)+1.3% +1.7% 0.0%
Adjusted EBITA Margin (%)9.4%14.6% 17.2%
GAAP Diluted EPS ($)$0.29 $0.57 $0.05
Adjusted Diluted EPS ($)$0.36 $0.61 $0.70
  • YoY snapshot (Q3 2024 vs Q3 2023)
MetricQ3 2023Q3 2024YoY
Net Revenue ($B)$2.309 $2.243 (2.9%)
Adjusted EBITA Margin (%)17.2% 17.2% 0.0 pts
Adjusted EPS ($)$0.70 $0.70 0.0
  • Segment organic growth (by quarter)
SegmentQ1 2024Q2 2024Q3 2024
Media, Data & Engagement (MDE)(0.5%) +0.8% +1.2%
Integrated Advertising & Creativity (IAC)+3.2% +3.0% (1.9%)
Specialized Comms & Experiential (SC&E)+1.5% +1.3% +1.2%
  • Regional organic growth
RegionQ1 2024Q2 2024Q3 2024
U.S.+2.1% +1.3% 0.0%
U.K.+0.2% +3.4% (0.7%)
Continental Europe+8.9% +6.3% +0.6%
AsiaPac(8.1%) (2.4%) (7.4%)
Latin America+3.0% +4.1% +9.8%
Other Markets (Canada, MEA)(6.5%) +1.5% +1.5%
  • KPIs and balance sheet
KPIQ1 2024Q2 2024Q3 2024
Salaries & Related (% of net revenue)72.1% 66.9% 65.3%
Office & Other Direct (% of net revenue)14.8% 15.4% 14.6%
SG&A (% of net revenue)1.7% 1.2% 0.9%
Cash from Operations ($M)(157.4) 120.7 223.8
Cash & Equivalents ($B)1.93 1.55 1.53
Total Debt ($B)3.2 2.9 2.9
Share Repurchases$62M (1.9M sh) $68M (2.2M sh) $100M (3.2M sh)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Organic Revenue GrowthFY2024~1% (Q2 guide) ~1% (Q3 reaffirmed) Maintained
Adjusted EBITA MarginFY202416.6% (Q2 guide) 16.6% (Q3 reaffirmed) Maintained
Organic Revenue GrowthFY20241–2% (Q1 guide) ~1% (Q2/Q3 updates) Lowered vs Q1
Dividend per ShareQ4 2024 payable Dec 16$0.31 in Q3’23 (YoY reference) $0.33 declared Oct 28 Raised YoY

Management also cautioned that recent account review outcomes are expected to create topline headwinds into 2025, despite a strong Q4 pipeline .

Earnings Call Themes & Trends

TopicQ1 2024 (prior two quarters: Q1, Q2)Current Period (Q3 2024)Trend
AI/Technology initiatives (marketing engine)Q1: Integrated Adobe GenStudio; unified IPG marketing engine with Acxiom data . Q2: Continued scaling of engine; retail media tools; AI-enabled workflow; upskilling .Launch of Interact (end-to-end, AI-enabled, Acxiom-powered), faster speed-to-market .Building
Principal media buyingQ2: New practice to meet efficiency focus; early stage, to ramp over time .Adoption accelerating; many clients opting in for 2025; positions IPG in pitches and expands offerings to existing clients .Improving
Macro tone and project pipelineQ1: Cautiously improving sentiment; active pipeline . Q2: More caution and elongated decisions; still focused on ~1% FY growth .Pipeline strong into Q4 despite macro/political uncertainty; visibility to projects and AORs .Improving near-term
Portfolio actions (R/GA, Huge; asset mix)Q2: Evaluating strategic alternatives for digital specialists; underperformance noted .R/GA and Huge classified held-for-sale; $232.1M goodwill impairment .Actively restructuring
Retail media/commerceQ2: Unified Retail Media Solution differentiator; wins (Ulta expansion) .Interact connects retail media; continued emphasis on retail media tech/data M&A opportunities .Building
Privacy/cookiesQ2: Google cookie deprecation delays; IPG ready, first-party data advantage via Acxiom .Ongoing emphasis on first-party identity and Acxiom Real ID within Interact .Stable

Management Commentary

  • “Our third-quarter revenue before billable expenses was unchanged organically… adjusted EBITA margin was 17.2%… diluted EPS was $0.05 as reported and $0.70 as adjusted… we repurchased 3.2 million shares, returning $100 million” .
  • “We continue to believe we will deliver organic revenue growth of approximately 1% [for 2024]… and remain committed to our margin goal… of 16.6%” .
  • On Interact: “An end-to-end framework that integrates data flow… all the way through to creative ideation, production, commerce and personalized CRM programs… powered by Acxiom’s… data and Real ID” .
  • On principal buying: “There’s been strong interest… many of our clients have already fully opted into this new trading model… will allow us to offer existing clients a range of new products” .
  • On restructuring/portfolio: “We’re moving rapidly to address underperforming areas of the portfolio… considering internal combinations, further dispositions, and selective M&A” .

Q&A Highlights

  • Q4 setup and 2025 headwinds: Management sees improving tone and robust Q4 project pipeline but acknowledged likely topline headwinds into 2025 from recent large account decisions; too early to quantify net new business drag for 2025 .
  • Principal media adoption: Clients increasingly include principal buying in decision matrices; IPG sees incremental organic opportunities with existing clients and selective, strategic media-owner partnerships; adoption tracking ahead of plan .
  • Portfolio moves and M&A: R/GA and Huge processes are “well down the track”; open to dispositions and combinations to improve growth profile; focused M&A in retail media tech/data and international media scale while maintaining capital return discipline .
  • Sector color: Tech & telco stabilizing excluding losses; healthcare weighed by one large client change earlier in the year but IPG Health remains a strong asset .

Estimates Context

  • S&P Global consensus estimates for Q3 2024 could not be retrieved at this time due to a daily request limit. As a result, we cannot assess beats/misses versus Wall Street consensus in this report. Values would normally be sourced from S&P Global; data was unavailable at time of analysis.

Key Takeaways for Investors

  • Margin durability: Despite flat organic growth, IPG protected profitability (17.2% adjusted EBITA margin) through cost discipline while funding tech/platform investments—supportive for FY24 16.6% target .
  • Mix shift underway: Classification of R/GA and Huge as held-for-sale, impairment, and continued restructuring indicate active portfolio realignment toward higher-growth, higher-ROI capabilities (media/data, retail media, platform) .
  • Principal buying as a catalyst: Client opt-ins and pitch impact suggest incremental organic revenue drivers in 2025+ as scale builds; watch adoption pace and guardrails/quality execution .
  • Q4 execution vs 2025 visibility: Strong near-term pipeline (seasonally project-heavy Q4) but acknowledged topline headwinds into 2025 from account outcomes—monitor net new business trajectory and retention .
  • Capital returns and balance sheet: Continued buybacks ($100M in Q3), dividend declared ($0.33), ample liquidity ($1.53B cash) and manageable maturities (next in 2028) provide flexibility for M&A and shareholder returns .
  • Regional dispersion: Persistent AsiaPac softness contrasts with strong LatAm; U.S. flat in Q3 as portfolio transitions—regional performance should normalize as mix realignment progresses .
  • Watch for Interact commercialization: The platform ties data/identity, AI, and content supply chain—execution and client adoption could enhance win rates, speed, and performance accountability .

Supporting sources: Q3 press release and appendix ; Q3 8-K/transcript ; Q3 call transcript ; Q2 trend materials ; Q1 trend materials ; Dividend PR ; Interact PR .