Interpublic Group reported an organic decrease in net revenue of 0.2% in the first quarter, which was in line with the company’s expectations. The company cited a tough year-to-year comparison: First quarter 2022 organic growth was 11.5%. That said, the other big holding companies reporting Q1 results (WPP, Omnicom and Publicis) have all posted single-digit growth.

Investors sent IPG’s stock down around 5% in morning trading. 

Net revenue for the period was $2.18 billion, down 2.3% versus the first quarter of 2022. 

The company reaffirmed earlier guidance of full-year organic growth of between 2% and 4%.  

“In our first quarter, the services and capabilities that have led our substantial multi-year growth, notably media, healthcare and data-informed practices, continued to perform well with strong growth that was offset by certain areas of softness, notably among marketers in the technology sector,” IPG CEO Philippe Krakowsky said on an earnings call Thursday morning. “The result was a slight decline in first quarter organic revenue.” 

The technology and telecom client sectors combined caused about a 2% drag on growth, Krakowsky said. Other sectors remain stable, he noted.  

Digital specialist agencies Huge and R/GA continued to be a drag on organic growth in Q1 as the agencies evolve their go-to-market offerings. Krakowsky noted that in Q4 the two agencies’ drag on organic growth was about 1.6% with an additional 1% in the first quarter. The company projects that the negative impact the agencies are having on company growth will “cycle out” in the third quarter of this year. 

“Huge is further along,” Krakowsky told analysts on the call, and is already in market with an offering that has pivoted to a “consultative” approach with a focus on products and solutions. 

R/GA brought in new management in Q1 with Tiffany Rolfe being promoted to chair at the agency while Robin Forbes was named interim CEO. Those appointments followed the departure of former R/GA Global CEO Sean Lyons, who left to join Accenture Song. 

In the U.S., the organic decline was 0.9% in Q1 while growth in international markets (which account for nearly a third of IPG’s business) was 1.2%. The UK posted a gain of 2.9%, while Continental Europe posted a 4% decline. Asia Pacific was down 2.6% and Latin America grew by 3.9%.  

A big plus in the quarter was a huge media win with Mediabrands reeling in the estimated $1.4 billion GEICO account. Krakowsky noted that earlier in the year the company said it was entering 2023 in a net new business negative position. “In the intervening period, we have successfully neutralized that deficit, and the benefits of those wins will begin to come on-stream in the second half of the year,” Krakowsky said.  

More media accounts are expected to be put in play which “should present further upside opportunities for us,” the IPG chief said.  

The firm’s Integrated Advertising & Creativity Led Solutions segment posted a 0.9% organic decline. Performance in the segment was led by IPG Health. 

Like other holding companies IPG is scaling back its real estate portfolio in the aftermath of the pandemic which led to hybrid office/home working models. To date it has reduced occupied square footage by about 30%.