• by Steve McClellan  @mp_mcclellan, July 23, 2019

Interpublic Group issued its second-quarter earnings report today, posting a 9.1% net revenue gain to $2.31 billion, with organic growth of 3%, off the first quarter pace of 6.4%. The organic growth figures exclude the impact of M&A activity (including Acxiom) and currency fluctuations.

Organic growth in the U.S. took a sizeable hit, dropping from 5.7% in the first quarter to 0.6% in the second quarter -- largely the result of major client losses, including FCA (Fiat Chrysler) media, the U.S. Army full-service account and Volkswagen creative. Those losses were previously disclosed, but the impact on the numbers kicked in during the second quarter.

Investors drove IPG shares down about 3% in early-morning trading following release of the quarterly report.

Interpublic CEO Michael Roth told analysts on a call Tuesday morning that the company won’t “cycle through” the headwinds caused by those losses until the first quarter of 2020.

That said, Roth also noted the firm is confident it will hit the “high end” of its organic growth target for the full year of between 2% and 3%, with operating margin improvement of between 0.4% and 0.5%. He said the ability of the company to achieve those targets despite the headwinds reflects the company’s underlying strength and business model.

Asked what made him confident about reaching the high end of the target Roth responded the firm had just completed in-depth reviews of all of its operating companies, which looked at “the good, the bad and the ugly, including the health of their clients.” Contributing will be more client spending in the second half.

Roth also took issue with comments by others equating the company’s Acxiom purchase as a decision to "own" data versus renting it. “That is a misrepresentation of why we bought it,” he said.

First party (client) data management is now a “core competency” for advertising agencies and holding companies.

“It’s not a question of renting or buying,” he said, but rather helping clients optimize the use of their data to market effectively to consumers. That’s what Acxiom does, he added, noting its capabilities in areas such as cleansing, targeting and keeping data safe and secure.  

Roth said the Acxiom integration was proceeding apace. “There are no integration problems, and we’re on target.”

For the first half of the year, net revenue was up 11% to $4.13 billion, while organic growth was 4.6%. and U.S. growth for the period was 3%. Growth internationally was 7.1%, due to client wins and higher spending from existing clients.