Interpublic Group of Cos. chief warns of 'very difficult second quarter' and more layoffs during earnings call
Interpublic Group of Cos. today reported a first quarter organic revenue increase of 0.3 percent but a net revenue decline of 1.6 percent to $1.97 billion, compared to the $2 billion in net revenue posted in the same quarter last year.
“In this environment, visibility into marketing and media spend is, to say the least, challenging,” IPG Chairman-CEO Michael Roth said on an earnings call. “Given the uncertain duration and extent of macroeconomic pressure and pace of eventual recovery, questions about forecasting and targeting are difficult to answer and quantify. Certainly, we expect a very difficult second quarter, after which we should have a better line of sight into the full year.”
Roth said, “as we move ahead,” the company remains “committed to the high level of transparency that you have come to expect from this management team.”
Roth outlined the cost-cutting measures IPG has taken to tackle the coronavirus pandemic so far, including “deferred merit increases, freezes on hiring and temporary labor, major cuts in non-essential spending, furloughs in markets where that option is available and salary reductions where possible or appropriate.”
“Given the breadth and complexity of our portfolio," he said "the types of the crisis will be quite different across many of our companies." He added: “As such, there is no one-size-fits-all approach to the appropriate combination of cost actions.”
"At a number of our agencies,” said Roth, salary reductions ranged up to 25 percent of base compensation and involved “the entire employee population” at a few agencies. Roth said since IPG first announced salary cuts for its management team within the holding company, the reductions “have been increased, and are deeper than anything else we have seen in the industry.”
“We are of course doing what we can to minimize the impact on our people to the greatest degree possible,” Roth said. “But, as you have already seen at some of our agencies, and will regrettably see again, in order to align costs with the new revenue reality, staff reductions will be unavoidable in the face of the pressures most every business is facing.”
Roth said there will be "staffing reductions" in areas of the business that deal with clients in retail, hospitality and events. Ad Age has learned that IPG agencies including McCann Worldgroup and MullenLowe have already implemented staff cuts.
Roth described clients' current spending habits as "schizophrenic" right now because they are constantly going back and forth between wanting to spend on marketing and pulling back. During the pandemic, Roth said clients have continued to spend most in areas such as healthcare, tech, new economy, public relations and first-party data through Acxiom.
IPG Executive VP and Chief Financial Officer Ellen Johnson said on the earnings call that in the first quarter, the U.S. saw an organic revenue increase of 0.8 percent, which was lower than the 5.7 percent growth in organic revenue reported in the same period a year ago. Johnson said agencies MullenLowe, FCB Health, Hill Holliday, Carmichael Lynch and Tierney were strong performers in the first quarter.
“Unfortunately, our solid results in the quarter cannot be indicative of the environment for the remainder of the year,” Roth said.