Publicis Groupe Exceeds Q3 Expectations With Organic Revenue Down 5.6%

Publicis Groupe became the first of the major holding companies to report its Q3 earnings, coming in ahead of analyst and internal expectations with an organic revenue decline not as sizable as predicted. Organic revenue declined 5.6% for the quarter, year over year, ahead of a -8.9% consensus forecast across 20 analysts. In July, Publicis Groupe reported a Q2 organic revenue decline of 13%, and the holding company's stock value saw an increase on the news. By comparison, Omnicom’s organic revenue declined 23% during the second quarter, WPP's fell 15%, and IPG saw a 9.8% decline. "It is the second quarter where we are overperforming the market," Publicis Groupe CEO Arthur Sadoun told Adweek. "There are two lessons to take out of that: We are making the demonstration that we have a strong foundation to weather the crisis, and we have a model today that is working because it is going to capture part of the investment clients are making to transform." "Clients continue to accelerate investments into digital channels, ecommerce and direct-to-consumer," he explained. "What we have done in Q2 and Q3 is capture part of these new roles and compensate for clients' [spending decreases] in other areas. The gap between consensus and performance comes form our ability to bring to clients, through our model, the kind of services they need to transform." Sadoun pointed out that client ad expenditure had risen during the third quarter, to a 10% decline year over year, compared to a 23.5% drop in Q2. He was especially bullish on Publicis Groupe's performance in the U.S. market, which he pointed out represents 60% of the company's business. Publicis Groupe reported organic revenue decline of 2.4% for the U.S. in Q3, up from a 6.8% decline in Q2 and exceeding an analyst consensus forecast of a 7% decline. Organic revenue declined in the North America region by 3%. These results were aided in part by the performances of data management company Epsilon, which reported flat organic growth in the U.S. for the quarter. Europe rebounded from a decline of 23.5% in Q2 to a decline of just 9% for the third quarter. APAC, conversely, fell from a decline of 5.7% in Q2 to a 9.2% decline in Q3. Sadoun pointed to Publicis Groupe's recent new business wins, including winning media and performance duties for E.ON in Europe, and retaining Kraft Heinz's U.S. media account and the majority of Reckitt Benckiser's as further evidence that the holding company is providing a model which clients find valuable, while touting the global rollout of Publicis Groupe's AI-driven connectivity platform Marcel. "The thing that Marcel is doing that is priceless is helping our people to be connected, to learn more, and it has helped us to save many jobs," Sadoun said, calling the platform "incredibly useful in new business" where it can help Publicis Groupe assemble "tailor-made teams" from across the network quickly. Sadoun outlined a series of cost-saving measures across Publicis Groupe during the holding company's Q1 earnings call, including furloughs and salary reductions. A series of layoffs across its agencies in the U.S. followed in May. Publicis Groupe also instituted a policy whereby agencies would forego hiring freelance talent wherever possible in the service of protecting jobs within the network. Publicis Groupe's position continues to be to fill jobs from within the network as much as possible, aided by Marcel, something that Sadoun said has saved many jobs as talent has transferred to growing sectors during the pandemic, such as Publicis Health. In July, Publicis Groupe released its U.S. EEOC diversity data and outlined seven actions to address diversity, equity and inclusion. According to Sadoun, the holding company planned to release U.S. EEOC diversity data on an annual basis, with further updates to its companywide action plan before then. Publicis Groupe was cautious about its outlook for Q4, anticipating a potential decline in comparison to Q3. "The relatively solid business trends that the Groupe has demonstrated year-to-date should continue until year-end," Publicis Groupe said in a statement. "However, with the current resurgence of the pandemic and the restrictions imposed, the Groupe remains cautious about Q4, which might be impacted further and come below Q3." Unlike when Publicis Groupe reported its Q2 earnings, the holding company's stock value fell slightly today, down about 2.4% since Wednesday's close, as of reporting time.