CEO: IPG Had ‘Confusing’ Second Quarter

Analyst upgrades, weak revenues make for mixed results

Interpublic Group has just gone through "a confusing quarter," chairman and CEO Michael Roth admitted on a conference call with analysts Thursday.

IPG, which enjoyed upgrades from Moody’s and Standard & Poor’s during the second quarter, saw an overall revenue increase of 8 percent year over year. For shareholders, the key figure was up: earnings per share for the quarter were $0.19 compared to $0.15 at this time last year. 

However, the company reported weak June revenues. This may have come as a bit of a surprise to IPG, which spent big this quarter—reporting a significant $31 million decrease in cash and securities in contrast to a $2 million increase at the end of last June. Much of the company’s cash flow went toward a $128 million repurchase of its common stock, $28 million in stock dividends, and $44 million in acquisition expenses.

Roth acknowledged that the company is “seeing signs that costs are out of step with revenue." IPG's margins keep going down, something their shareholders won't be happy to see, and Roth admitted the company needs to do some work on that front. 

To drum up optimism for the rest of the year, Roth mentioned that an IPG holding is “in the pitch for BMW” and highlighted “wins in the pipeline” for McCann—though, when pressed, he would not announce the specifics. 

The company experienced revenue growth in almost every geographic region, most notably in the U.K., with about a 33 percent uptick. However, IPG saw a paltry 3 percent increase in the U.S. CFO Frank Mergenthaler placed some of the blame on the “loss of an auto client last year.” An astute analyst asked whether that was a Chevrolet reference to which Roth replied, “You know our business pretty well.”