On its most recent conference call with Wall Street analysts, Interpublic presented this PowerPoint chart of its organic growth (click to enlarge):
You won't find this chart on IPG's investor relations web site. Rather, it's tucked into an SEC filing -- hidden in plain sight, if you will. The numbers on it are a little unclear, but IPG recorded a 14.5 percent decline in organic revenue in Q2 2009. In a transcript of the conference call where the chart was discussed (it's slide 6), CFO Frank Mergenthaler said this:
On Slide #6 we present a longer view of organic revenue growth attracts our trailing 12-month performance. As you can see this clearly registers the impact on our top line of the recession over the last three quarters.Clear as crystal, I'd say. The slide is presented in percentage changes, not actual revenues, so the trend is comically exaggerated. It was good of IPG to be so brutally frank with its investors, but it didn't have to be. So why would Mergenthaler do this?
One possible answer is that Mergenthaler believes IPG is in the worst of the storm right now. He wants to lower Wall Street's expectations for McCann Erickson and DraftFCB et al as much as possible so that if any good news shows up it will make IPG look exaggeratedly good. He won't be the only CFO predicting that Q2 was the ad biz's darkest hour.
A more worrying slide -- for IPG staffers -- occurs later in the show:
It shows salaries as a percent of revenue over the last 12 months. As you can see, salary expenses have actually gone up proportionately as the recession has worn on, even though IPG has axed 3,000 jobs. Which is why there will be more job attrition in Q3 until the turnaround comes.
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