Helped by Facebook Sale, Interpublic's Quarterly Profit Soars
Interpublic Group of Cos.'s quarterly profit hit $208.1 million -- more than quadruple what it was in the same period last year -- thanks in large part to the U.S. ad holding company's sale of a portion of its stake in Facebook.
A year ago, Interpublic's third-quarter profit was $42.4 million. The company saw a pre-tax gain in the third-quarter of $132.2 million from its August sale of about half of its tiny stake in Facebook.
Outside of the Facebook sale, Interpublic turned a strong performance with operating income hitting $173 million in the quarter, up a whopping 73% from the prior period.
Interpublic, whose agencies include McCann Worldgroup, DraftFCB and Mediabrands, brought in $1.73 billion in revenue for the third quarter, up 11.6% from the prior period. About 60% of its revenue comes from North America. The U.S. was a strong driver; organic growth was up 10.1% stateside vs. 6.7% internationally.That contributed to $4.94 billion in revenue for the first nine months of the year, up 9.7% from last year.
"This doesn't feel like 2008," said Michael Roth, Interpublic chairman and CEO, on a conference call with analysts. "Our clients have a fair amount of cash on their balance sheet." Despite the European debt crisis and tempered growth in the U.S. economy, Interpublic stands by its year-end targets of 4-5% organic revenue growth and 9.5% or better operating margin.
"As we move into fourth quarter, the tone of the business remains solid," Mr. Roth said. "We've seen little in the way of pullback from our clients." He added that in 2008, the major cuts in ad spending didn't come through until November and December.
He also added that digital, namely agencies R/GA and Huge , were a major contributor to growth, as was growth from clients in the automotive industry, finance, retail and food and beverage.
Interpublic did cite "some softening" in Europe, with decreases in France especially. However, in the first nine months, all geographic regions posted organic revenue growth, as did all Interpublic global agency networks, including McCann Worldgroup, which is in the midst of major reinvention.
Additionally, the first signs of DraftFCB's crushing loss of its SC Johnson business were evident in the company's severance expenses, which were up slightly this period. Interpublic can expect approximately 10% higher severance costs moving forward, said Mr. Roth.
When asked by an analyst about Interpublic's appetite for bigger billion-dollar acquisitions, Mr. Roth indicated no big deals are on the horizon; the company will stick with its roughly $150 million budget for new shops.