Interpublic Group of Cos. forecast somewhat slower revenue growth this year versus a strong 2021, with expectations in line with its peers, and is absorbing cost increases including plans to boost employee compensation.
The holding company's shares were down 9.4% in Thursday afternoon trading after jumping to a more than 20-year high on Wednesday.
IPG's fourth-quarter "organic net revenue" rose 11.7% after falling 5.4% in the same period a year earlier due to the impact of the pandemic. Full-year organic net revenue was also higher, up 11.9% from 2020 and up 6.5% on a two-year basis, IPG reported Thursday. Organic growth is a key financial measure that factors out acquisitions, divestitures and effects of exchange rates.
IPG has a positive outlook for 2022, targeting full-year organic net revenue growth of 5%, CEO Philippe Krakowsky said on a conference call.
Omnicom Group and Publicis Groupe also forecast mid-single-digit 2022 organic revenue growth in their recent earnings reports.
Krakowsky also spoke about an expectation for operational expenses to return to pre-COVID levels.
“Certain expenses that have been running at unusually low levels during the pandemic should begin to return to levels closer to their historic norms,” Krakowsky said. “These include our travel and related costs, and business development expenses, both of which are investments that build the future growth of our business. In light of the current environment, our outlook also includes a modest inflationary impact on our investment in employee compensation this year, which we are actively managing to support our strong growth.”
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Ad spending market
When asked about the general ad spending market across the industry, Krakowsky described the environment as healthy. He said the highest area of demand is for services and capabilities with greater digital and data-driven components.
“But there's still a strong need for thinking and for work, that's going to bring [a] brand to life in mass media, look at what's gonna happen this weekend," he said. "We've got a number of clients who are going to feature and make news on the Super Bowl. It's still a very effective platform.”
Krakowsky also mentioned demand for integrated campaigns and experiential offerings.
“Project activity in Q4 was healthy,” Krakowsky said, adding that there is interest in the kinds of work done by the company's marketing services and activation agencies. Experiential events, while a small piece of the holding company's overall offerings, were back to about 85% of the pre-pandemic level seen in the fourth quarter of 2019.
