Publicis reports strong Q3 earnings — when will it feel a recessionary pinch, if ever?

French agency holding company Publicis Groupe reported another quarter of stellar results for its regions and operating units, including Publicis Media. This latest earnings report, issued early Tuesday morning, even had the company surpassing some results from pre-pandemic times. It may have taken two-and-a-half years to get there, but it’s resulted in Publicis even awarding half of its nearly 80,000 employees an extra week’s salary — at least those who don’t already earn a bonus.

Overall, Publicis’ Q3 revenue came in at 3.24 billion euros, a 23.5% increase over Q3 2021. For the full nine months, revenue stood at 9.11 billion euros, which was just shy of 21% over nine months 2021. The biggest growth regions were North America and Latin America, both of which exceeded 29% growth over Q3 2021 — aided by a stronger U.S. dollar against the euro.

Organic growth is perhaps the biggest surprise for the mature holding company, with North America and Europe each generating 11% growth, second only to Latin America’s nearly 20% growth for Q3. Within North America, Epsilon achieved 14% organic growth, while Publicis Sapient grew organically by 21%. Globally, the holding company said organic growth is up 16 percent over 2019 pre-pandemic results.

According to the company’s statement, Publicis Media, which houses major media shops including Starcom and Spark Foundry, generated “double-digit” growth for three quarters in a row, exceeding single-digit percent growth from creative agencies. The company didn’t share more specific results for media.

“Sapient and Epsilon’s growth reflect brands’ continuing need for business transformation and data-driven marketing solutions,” said Jay Pattisall, vp and senior agency analyst at Forrester, in assessing Publicis’ results. “Publicis Media’s performance shows the strength of the One Publicis approach and the importance of Epsilon to power media solutions. It also illustrates how media is fundamental for growth in business today, as driving acquisition fuels growth. This is the case in all the holding companies.”

Bottom line for Publicis: the company is so bullish on its results that it’s raising its growth estimates for the rest of 2022. Publicis chairman and CEO Arthur Sadoun, in a statement announcing the earnings, said the company expects to deliver “circa +8.5% organic growth versus +6 to +7%
previously, with an operating margin at close to 18% and a free cash flow close to €1.6 billion.”

Based on its Q3 statement, Publicis appears unconcerned with recessionary forces at play. The latest results “demonstrates our ability to more than withstand the ups and downs of the global economy, and makes us confident in our ability to face ongoing macroeconomic uncertainties,” Sadoun declared.

Pattisall agreed that for the rest of this year, agencies will likely not feel much of a sting, but 2023 could bode differently. “Firms are spending their 2022 budgets while they still have them, and while consumers continue to spend (albeit consumer spending slows),” said Pattisall. “This is budget season for many companies and indicators suggest cuts for 2023 for marketing budgets, which agencies will likely realize in Q1.”

Even if budgets do get cut, Pattisall noted, agencies are less reliant on them than they used to be. “As agencies deliver more transactional and evergreen programs like commerce and digital business projects, their dependence on revenue from pure advertising reduces,” he said.

But he added that glowing comparisons to 2021, which was a soft year for the entire industry, are pretty much over: “Their task will be to show growth on top of growth and no longer growth on top of pandemic budget cuts.”

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