The Interpublic Group of Companies, inc (IPG) Q3 2021 Earnings Call Transcript

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The Interpublic Group of Companies, inc (IPG -1.19%)
Q3 2021 Earnings Call
Oct 21, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Interpublic Group Third Quarter 2021 Conference Call. All parties are in a listen-only mode until the question-and-answer portion. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Jerry Leshne -- Senior Vice President of Investor Relations

Good morning. Thank you for joining us. This morning, we are joined by Philippe Krakowsky, Interpublic's CEO and by Ellen Johnson, our CFO. We have posted our earnings release and our slide presentation on our website, interpublic.com. We will begin our call with prepared remarks, to be followed by Q&A and plan to conclude before market open at 9:30 Eastern.

During this call, we will refer to forward-looking statements about our company. These are subject to the uncertainties and the cautionary statement that is included in our earnings release and the slide presentation and further detailed in our 10-Q and other filings with the SEC. We will also refer to certain non-GAAP measures. We believe that these measures provide useful supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance.

At this point, it is my pleasure to turn things over to Philippe Krakowsky.

Philippe Krakowsky -- Chief Executive Officer

Thank you, Jerry. And thank you all for joining us this morning. I hope everyone is keeping well. As usual, I'll start with a high level view of our performance in the quarter. Ellen will then provide additional details. I'll conclude with updates on key developments at our agencies, and then we'll follow that with Q&A.

We're pleased to share our very strong third quarter performance but before turning to the numbers, I'd like to begin by recognizing and thanking our people across all of Interpublic who have continued to show a high level of dedication and support to our clients into one another. They are the principal reason we can report such strong results again this quarter. Our people are delivering insight and execution required for the complex integration of creativity, technology and data at scale as marketers across industry sectors need in order to accelerate their business transformation journeys. This kind of work is helping set a standard for our industry and further build on IPG's record of industry outperformance and margin expansion.

As we've moved through September and now into October, it's also been rewarding to begin welcoming our people back to office settings and to see many of our teams together again in the places where creativity, collaboration and culture are ultimately rooted and regularly renewed.

Turning to our results in the quarter, our net organic revenue growth in the third quarter was 15%. That's against the third quarter of 2020 when, as you will all recall, our organic change was negative 3.7% due to the impact of the pandemic. It's also important to note that our 2-year organic increase was 10.7% relative to the third quarter of 2019, which is a strong result. Compared to 2020, our growth in the quarter was again broad based by region of the world, discipline as well as client sector. Organic growth was 14.7% in the U.S. and it ranged between 11% and 20% in international regions. Both of our operating segments also grew at double-digit rates. Our IAN segment increased 14.4% organically with all major agencies contributing high single to double-digit percentage increases. We were led by media, data and technology, R/GA and Huge as well as by MullenLowe, McCann and FCB highlighted by notable contributions from their Healthcare and Advertising disciplines.

At our DXTRA segment, organic growth was 18.6% reflecting double-digit increases across each of our DXTRA agencies and furthering the rebound from the sharp impact of the pandemic last year on our sports and entertainment as well as experiential businesses. Looking at client sectors, the picture is also one of balanced growth with nearly every one of our major client sectors increasing at a double-digit percentage rate, led by the auto sector and other sector with government and industrials and the tech and telecom retail and healthcare sectors.

Turning to profitability and expenses. Our results again demonstrate outstanding focus and execution by our operating teams even as we continue to invest to support areas of accelerating growth and to enhance our offerings. Third quarter net income was $239.9 million as reported. Our adjusted EBITDA was $369.5 million and our margin of adjusted EBITDA before restructuring was 16.3%, compared with 16.2% a year ago and 14.7% in the third quarter of 2019.

There were several factors worth noting within those comparisons. We have a solid operating leverage on our expenses for base payroll as we continue to see the structural benefits of the strategic cost actions taken last year. Those are reflected in our base payroll as well as our occupancy expense. To-date, our very strong top-line growth is also outpacing the associated hiring and therefore our expense for temporary labor increased from a year ago.

Our travel and related expenses continue to track at low levels but still were somewhat higher than last year. As we look ahead, T&E expense will pick up over the remainder of the year. Our expense accrual for employee performance based incentive compensation however increased as a percentage of net revenue which is a direct result of our strong operating performance.

Third quarter diluted earnings per share was $0.60 as reported and was $0.63 as adjusted for the after-tax expense for the amortization of acquired intangibles and other items. In sum, our quarter as well as our year-to-date speak to strong financial performance across the key metrics of growth, EBITA and earnings per share. Our growth reflects the cyclical economic recovery as well as the important structural current that favor the kinds of higher order expertise with which we're well resourced. The work we're doing solves for the increasingly complex world faced by our clients in marketing and media environment that's defined by a very rapid rate of change. This is a validation of our long-term strategic focus on building offerings that help clients integrate brand experience across all consumer touchpoints, improve their capacity to apply data in the way their business goes to market and capitalize on the benefits of technology and digital channels. Going back a number of years, we've anticipated transformational opportunities of this type of environment.

Other important drivers of our continued success, our ability to deliver fully integrated solutions through our open architecture model and our emphasis on strong agency brands and best industry talent so as to deliver breakthrough creative ideas and content. We've also fostered a culture that respects the individual, is transparent with respect to clients and is accountable when it comes to data privacy and media responsibility.

Turning to our outlook, with our seasonally important fourth quarter still ahead, we're pleased to increase our financial performance objectives. We now expect that we can deliver organic growth for the year of approximately 11% which is ahead of the 9% to 10% range we had previously indicated. With growth at that higher level and given our strong results through the 9-months, we would therefore expect to achieve adjusted EBITA margin of approximately 16.8% which is an increase of 80 basis points over the level that we had previously shared with you.

Our outlook is based on expectations of a reasonably steady course of public health and global economic recovery. We begin the fourth quarter well positioned and the strong operating momentum and the tone of the business remains solid, as we had into the year and into holiday season. As such, we see 2021 as another year of strong value creation for all of our stakeholders.

And on that note, I'll now hand over the call to Ellen for a more in-depth view of our results.

Ellen Johnson -- Chief Financial Officer

Thank you. I hope that everyone is safe and healthy. I would like to join Philippe and thank our people for their terrific accomplishments. As a reminder, my remarks will track the presentation slides that accompany our webcast.

Beginning on Slide 2 of the presentation, third quarter net revenue increased 15.7% from a year ago with organic growth of 15%. Adjusted EBITDA before a small restructuring adjustment was $369.5 million and margin was 16.3%. Diluted earnings per share was $0.60 as reported and $0.63 as adjusted for the after-tax impact of the amortization of acquired intangibles, a small restructuring adjustment and the net gain from the disposition of non-strategic businesses. On October 1st, following the conclusion of the third quarter, we repaid our $500 million 3.75% senior notes from cash-on-hand further deleveraging our balance sheet.

Turning to Slide 3, you'll see our P&L for the quarter. I'll cover revenue and operating expenses in detail in the slides that follow. Turning to the third quarter revenue on Slide 4. Our net revenue in the quarter was $2.26 billion, an increase of $307.1 million from a year ago. Compared to Q3 2020, the impact of the change of exchange rates was positive 1.1% with the U.S. dollar weaker than a year ago in all world regions, with the exception of LatAm.

Net divestitures were negative 40 basis points. Our net organic revenue increase was 15% which brings us to 12% organic growth for the nine months. At the bottom of this slide, we break out segment revenue in the quarter. Our IAN segment grew 14.4% organically. We had notably strong growth across our offerings in media, data and tech, R/GA, Huge, McCann Worldgroup, FCB driven by health and the MullenLowe Group.

At IPG DXTRA, organic growth was 18.6%, which reflects double-digit growth across public relations, experiential, sports and entertainment and branding disciplines.

Moving on to Slide 5, which is a look at our organic revenue change by region. In the U.S., which was 65% of our net revenue in the quarter, organic growth was 14.7%. The organic revenue decreased a year ago was 2.4%. Year-on-year performance was notably strong across both our IAN and DXTRA segments and at almost all of our agencies, led by media, data and tech, FCB, MullenLowe, McCann, Weber and Jack Morton.

International markets were 35% of our net revenue in the quarter and increased 15.4% organically. You'll recall that the same markets decreased 6% a year ago. The U.K. increased 13.3% organically, led by our offerings in media, data and tech, DXTRA, McCann and R/GA. Continental Europe grew 11.8%. Among our largest national markets, we had notably strong growth in Germany, Spain, Italy and France. There were a number of operating highlights in the region led by media, data and tech, DXTRA, and R/GA. Asia-Pac increased 17.4% organically, led by growth across most national markets notably, Australia, Singapore, India, the Philippines, China and Japan.

Our organic growth in LatAm was 20.3% with exceptional results in Brazil, Argentina, Colombia and Chile. Our Other Markets group, which consists of Canada, the Middle East and Africa grew 17.1% organically, led by notably strong performance in Canada.

Moving on to Slide 6 and operating expenses in the quarter. Our fully adjusted EBITDA margin was 16.3% compared with 16.2% a year ago and 14.7% in the third quarter of 2019. We continue to see efficiencies in a number of different expense categories as we had in this year's first half and these were both structural and variable.

In the structural category, we are seeing the benefit of the strategic restructuring actions, which we initiated in the second quarter last year and continue to execute over the back half of 2020. As we've called up previously, we also had a sharp decrease in certain variable operating expenses from pre-COVID levels. I would call out specifically travel and related expenses, which while increased from the third quarter of a year ago were still well below their level in 2019.

As you can see on this slide, our ratio of total salaries and related expense as a percentage of net revenue was 66.8% compared with 65% in last year's third quarter. The increase was due to higher expenses in two categories. Our approval for performance-based incentive compensation was 5.8% of net revenue and our expense for temporary labor, which was 5% of net revenue in the quarter. We had strong leverage on our expense for base payroll, benefits and tax, which was 53.9% of third quarter net revenue, which reflects the benefit of our restructuring actions and the fact of the pace of hiring lagged our strong revenue growth, which has been the case in past economic expansions.

At quarter-end, total worldwide head count was approximately 54,600, an 8% increase from a year ago. We have added net 4500 people year-to-date to support our growth. Also, on this slide, our office and other direct expense decreased as a percent of net revenue by 250 basis points to 13.3%. That reflects lower occupancy expense mainly due to the restructuring of our real estate. The ratio was 5% of net revenue. We also reduced all other office and other direct expense by 120 basis points compared to last year, which reflects lower expense for bad debt and leverage as a result of our growth.

Our SG&A expense was 1.4% of net revenue with the increase from a year ago due to higher unallocated performance-based incentive expense and increased employee insurance, which was at a very low level last year.

On Slide 7, we present detail on adjustments to our reported third quarter results in order to provide greater clarity and a picture of comparable performance. This begins on the left hand side of the page with our reported results and steps through to adjusted EBITDA and our adjusted diluted EPS. Our expense for the amortization of acquired intangibles in the second column was $21.5 million. The restructuring refinement in the quarter was a benefit of $3.5 million dollars. To be clear, this is an adjustment to estimates of the 2020 restructuring program.

Below operating expenses in column 4, we had a gain due to the disposition of certain non-strategic businesses, which was $1.7 million in the quarter. At the front portion of the slide, you can see the after-tax impact per diluted share of these adjustments, was $0.03 per share, which bridges our diluted EPS as reported at $0.60 to adjusted earnings of $0.63 per diluted share. The appendix to our presentation includes a similar bridge for diluted EPS for the 9-month period.

On Slide 8, we turn to cash flow in the quarter. Cash from operations was $390.2 million compared to $689.3 million a year ago. We generated $79.6 million from working capital compared to $376.8 million last year, which was unusually strong seasonal result. Investing activities is $72 million in the quarter, mainly for capex $61.3 million. Financing activities used $153.3 million mainly for our dividend. Our net increase in cash for the quarter was a $152.5 million.

Slide 9 is the current portion of our balance sheet. We ended the quarter with $2.5 billion of cash and equivalents. Under current liabilities, the current portion of long-term debt refers to our $500 million, 3.75% senior notes, which have matured since the balance sheet date and we repaid with cash on hand.

Slide 10 depicts the maturities of our outstanding debt. Again, this includes the October 1st maturity. Our next maturity is $250 million to April 2024 and following that, there is nothing until 2028.

In summary, on Slide 11. Our teams continue to execute at a high level in an unprecedented environment. I would like to reiterate our pride in and gratitude for the efforts of our people. The strength of our balance sheet and liquidity means that we remain well positioned, both financially and commercially.

And with that, I'll turn it back to Philippe.

Philippe Krakowsky -- Chief Executive Officer

Thank you, Ellen. The combination of our exceptionally talented people and a balanced portfolio of offerings and capabilities continues to set the standard for growth in our industry. The strategic steps we've taken over the long-term have positioned IPG as a high value business partner to our clients. We're able to combine the power of creativity and narrative storytelling with the benefits of data and technology in order to deliver growth for marketers across a broad range of sectors. These strategic steps are evident in our strong results and position us well going forward. By helping clients to better understand audiences and to engage with them with greater precision and accountability, we can help company succeed the digital economy.

Today, marketers are responsible for increasing business innovation, building new content platforms and e-commerce platforms as well as adopting emerging tech and leveraging data all while complying with an evolving data privacy landscape. Our clients are also at the forefront for addressing societal issues and corporate purpose on behalf of their companies and brands. As a partner, we're helping them solve all of these challenges. With our ability to deliver complex integrations focused on business results and outcomes, our ability to help marketers proactively address these issues is further assisted by our intentional focus on ESG priorities as core business imperatives. That's why we've been focused in working on ESG for many years at IPG. We continue to build on a strong industry record in DEI initiatives which are integral to nurturing the highest quality and most representative perspectives, insights and creative voices across our company.

More recently, we've launched our first formal human rights policy and our work with clients around social issues includes campaigns focused on LGBTQ+ rights, mental health awareness, ways in which we can remove implicit bias from core datasets and also use data to increase the health of our planet as well as sustainable consumption models.

With respect to climate, we're now measuring our total greenhouse gas emissions around the world. We're committed to setting a Science-based target and to reaching net zero carbon across our business by 2040. We've also agreed to source a 100% renewable electricity by 2030 for our entire portfolio.

Now turning to the highlights of performance from across that portfolio during the quarter, a key sector that continue to show strength for us is healthcare. As you know, IPG has significant operations in healthcare marketing totaling approximately a quarter of our total revenue. This includes specialized global healthcare networks as well as significant healthcare activity and client relationships at our media and public relations operations and within some of our U.S. independents. As health and wellness continue to be a top concern for people companies and governments around the world, we've seen an increased need for sound healthcare information to be delivered at speed in ways that are highly personal, culturally relevant as well as respectful of privacy regulations.

Within the healthcare sector as well as across other client sectors, our ability to deliver open architecture solutions will continue to drive success for our company. We have deep experience providing customized, integrated client service models to many of our largest client partners and we continue to perform well and winning new business on this sort of work especially in pitches that leverage the IPG data stack as a key part of the strategy. This past quarter for example, Morgan Stanley and E*Trade named Mediahub as media agency of record following a highly competitive review. Data strategy was a key component of the brief. For this reason our customer intelligence company, Acxiom was placed front and center in our winning proposal. The Mediahub team is leading media strategy, planning and activation in the U.S. leveraging Acxiom's consumer data and expertise to fuel tightly targeted and effective communication solutions.

In media brands, we continue to see a high degree of engagement with many of the world's most sophisticated marketers across our two largest brands, UM and Initiative. During the quarter, Initiative U.S. won Adweek's prestigious Media Agency Of the Year honor for 2021.

Last year at this time within media brands, we launched Reprise commerce, the global specialty e-commerce offering and since then, e-commerce revenue within that unit has increased significantly as we've held clients build out holistic approaches to e-commerce including e-retail, supply chain and warehousing, marketplaces and direct-to-consumer programs. There's never been a more important time to connect the e-commerce opportunity with the full power of clients media and marketing investments.

In addition, we can create and deploy consistent cross channel experiences that dynamically adapt to consumer needs and goals in real-time. Thanks to our outstanding creative and content capabilities. With the expertise as a key part of the news last week that the owner of Werther's Original candy business, Storck USA had selected UM as it's media agency of record. UM takes on all strategy, planning, buying and analytics duties, including the implementation of Storck's Shopper commerce activity.

Our data and technology offerings continue to be key drivers of performance for us as well, featuring an all major open architecture and new business activity of significant scale. This month marks the third anniversary of Acxiom becoming part of IPG. During the third quarter, Acxiom continued to post strong performance and to win in the marketplace bringing in major new clients from the media, retail and financial services sector.

Most recently, a top-10 financial services company engaged Acxiom to build their unified enterprise data layer which again shows the strength and depth of Acxiom's technology expertise. During Q3, Kinesso launched -- we are calling the Kinesso Intelligence Identity product also called as Kii and this is a new identity solution that works across the open web as well as the walled gardens and is already live with clients across a broad range of verticals. Along with IPG Mediabrands, the Trade Desk is among the first media partners using Kii and the launch comes at a particularly important moment as brands and agencies work to create and bolster privacy first identity solutions that can assure addressability as third-party cookies and mobile ad ideas begin to be phased out. Kii can match our brands first party CRM data and map it to key identifiers significantly increasing match rates and reducing the need for third-party onboarders.

When it comes to the strength of our brands in the creative advertising space, McCann, FCB and MullenLowe continued to distinguish themselves this quarter. McCann Worldgroup was named Global Network of the Year at the 2021 Gerety awards which recognizes the best creative communications from the female perspective. Also notable McCann Worldgroup named a new President and Global Chief Creative Officer who joins us from Nike where he served in senior brand marketing and creative leadership roles for more than 20 years, most recently leading Nike's men's brands globally. During his tenure at Nike, he was responsible for many of the world's best known and most iconic campaigns across a range of marketing disciplines and channels.

At FCB, the agency at Chicago office was ranked as the top creative agency in North America in the Lion's Creativity Report. In that same report, FCB was ranked among the top networks in the world and FCB was also named North American Agency of the Year at the 2021 New York Festival Awards. MullenLowe was named the second most effective agency at the recent U.S. Effie Awards. And MullenLowe Group was named the number 2 most effective network globally, in both cases punching well above its weight against larger competitors. During the quarter, the agency won the TJ Maxx creative account and just this week Mediahub won 3 Adweek Media Plan of the Year's awards as well as seeing it's U.K. office when global media duties [Phonetic] for Farfetch which is a luxury fashion e-commerce brand.

R/GA launched what they're calling a direct to avatar capability and that's going to create virtual stories for brands within metaverse platforms and that really stakes out new territory in direct to consumer sales. On the growth front, R/GA added projects for digital forward partners like Tonal, Slack, CBS and Roku.

Huge also launched a new commerce offering which we call the experienced stack of the future, and that's a tool that consolidates various elements of SaaS into an integrated growth solutions for brands. I think we're also going to see the agency's newly appointed CEO to further his plans to infuse data into Huge's core offerings.

IPG's DXTRA growth in the quarter was broad based and it benefited from the return of live events. Jack Morton won new client assignments with Amazon and Twitch and along with Octagon Sports and Entertainment was listed among event marketers ranking of the top 100 event agencies of 2021.

Audio social media app Clubhouse added Golin as its global agency, lead agency. Weber was named the Supplier of the Year by GM and security software company McAfee also named Weber Shandwick its global agency of record to help redefine the firm as a consumer brand. Lastly, Weber launched a media security center in partnership with Blackbird AI to address emerging information bridge and this is an offering that's built to offer solutions to what business leaders say is a really leading reputational issue, which is the spread of misinformation and disinformation.

During the quarter, we also saw continued positive momentum at our U.S. independent agencies. The Martin Agency won Hasbro's Nerf brand of products. Carmichael Lynch was named Strategy and Creative Lead for H&R Block where he will take on responsibility for strategy, creative and social media as well as public relations and Deutsch LA added energy drinks brand, A SHOC to its roster.

All in, we are in a positive position from a net new business standpoint for the year and our new business pipeline continues to be active. As it's typical at this time, we don't have full visibility and project work as we head into the fourth quarter which will include the crucial holiday shopping season.

Now in line with the growth we're seeing across much of the portfolio, our companies are adding staff with the requisite contemporary skillsets as well as expertise. So hiring is yet to fully keep pace with a very strong growth we've seen to date this year. We began seeing travel restrictions lifted in certain key markets as infection rates decline and we fully continue to use technology and practices developed during the pandemic to reduce travel and other carbon intensive parts of our business where and as appropriate but we believe that some of what we can call standard cost of doing business will return in Q4 and in larger measure in 2022.

Earlier on the call, we shared with you our perspective on the full year and our updated expectation that we will deliver approximately 11% organic growth and adjusted EBITDA margin of approximately 16.8% for the full year 2021. That view is predicated as we indicated on the assumption that will continue to be a reasonably steady course of macro recovery and we're very proud to have delivered a very strong 9-months thus far this year, on top of the most challenging comps in the industry.

Current performance, combined with the continued execution of our long-term strategy should continue to be significant drivers for sustained value creation for all of our stakeholders. We're committed to sound financial fundamentals as well as continuing to grow our dividend as we've consistently done, including through the pandemic and returning to our share repurchase program also remains a priority. As we turn our focus on planning for the upcoming year, we will of course, keep you updated on our progress on that front.

We're confident as well that the investments in talent and capabilities we continue to make, position IPG well for the future. As Ellen said, this is an unprecedented time, but we have a highly relevant and differentiated set of offerings underpinned by a sound financial foundation and a strong balance sheet. As always we want to thank our clients and our people. Those are the key pillars of our success and we want to thank you as well for your time this morning. So now, let's open the call for your questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. Our first question is from Alexia Quadrani with JPMorgan. You may go ahead.

Alexia Quadrani -- JPMorgan Securities LLC -- Analyst

Hi, thank you. Thank you. So Philippe, you gave some great color in terms of where you really standing out at IPG in terms of seamless outsized revenue growth and obviously the revenue growth has been sort of industry-leading for a while. I guess my question really is, when you look at the overall growth that you've been seeing as a company, how much of this sort of outperformance, do you think is due to the fact that you have leaned into areas and made investments in like Acxiom, which clearly in examples you gave made a difference in terms of winning incremental business or how much do you think again sort of high level, is it -- you're just positioned very well for the recovery given your exposure to healthcare and such. Thank you.

Philippe Krakowsky -- Chief Executive Officer

Good morning, Alexia. Look, I think it's obviously difficult to tell you for a fact what is behind some of the performance that our competitors are posting, and I also don't know that I would separate healthcare given that there was a moment in time when it was not the scale business that it is for us. And then a lot of what drives success in that business is analogous to what we've been doing across the portfolio, which is to say, can you help clients with a broader range of problems. Can you give them more accountability and more clarity around when they're making investments or when they're putting a message out into the marketplace. Who it is that you're trying to reach and how precisely it is that you're trying to to impact that potential consumer or that audience. So, I think it's hard for me to pull it apart or break it out for you. I mean, I think it's fair to say that we do consistently call out for you that whether it's media, data and technology, whether it is the healthcare space, our digital agencies, those are all clearly areas of strength for us and drivers of that multi-year now, if you look at the compounded change. We're clearly feeling like we are leaning into where there is demand and where there's opportunity in this space. The other thing that I think makes it difficult to answer the question is that, we think of it as an integrated whole and so obviously you can make the case to a client and you can prove the case to a client far more effectively if you've got a solution that encompasses as much of the ecosystem as possible, so that you're able to help them at every level in the funnel, at every level in the process, whether you're using that data to come up with the insights that will then inform of the messaging or the plans that inform the distribution of that message or then picking up on those signals, pulling them back in and having them continue to sort of feed that loop. So, I think to our mind, clearly the performance is indicative of the fact that some of the decisions we've made going back now strategically were the right ones, but it's still very much work in progress and to my mind there's a lot of opportunity ahead. But I think we could do better in both put it --pulling that together and continuing to demonstrate that it works but I can't tell you. I can only tell you that in our world, that's what we are seeing get traction.

Alexia Quadrani -- JPMorgan Securities LLC -- Analyst

I guess, put a different way. Do you think your sort of elevated growth rate that you've been seeing to certain degree is sustainable. Maybe not to this level given where you are in the recovery, but you sort of envision that's it's possible that IPG has an elevated growth rate, organic growth versus what it did sort of pre-pandemic given all the changes in your positioning. Maybe that's a better way to ask the question.

Philippe Krakowsky -- Chief Executive Officer

No, no, that's a very fair question and it's a very fair question as well. I think that to our mind, the industry is clearly undergoing transformation. There's an evolution that's taking place here. It's probably challenging to tell you again given how much upheaval there has been both last year and this year, when or at what that level that will be established but that's clearly the aspiration of whether it's by doing what we've done, which is to build out these incremental capabilities to combine them in a way where you've got the marketing services component and then the data and technology component which are in form of one another and then ultimately as you also know we're thinking that this approach should open new revenue streams and new commercial models to us, which again, we believe would go to the point that you're asking. So that's definitely where we're looking to get to.

Alexia Quadrani -- JPMorgan Securities LLC -- Analyst

And then maybe just a quick follow-up for Ellen on profitability. Any high-level comments you can give us in terms of how we should think about next year. I know you've mentioned that the cost haven't kept up with the revenue growth. So, I assume that you could potentially see some contraction next year as things normalize but any other sort of puts and takes that we should be thinking about for profitability in '22?

Ellen Johnson -- Chief Financial Officer

Good morning. Alexia, and thank you for the question. As far as the margin goes, I mean I would, for 2022 as we typically do we'll give you our view in February. But I think it's really important to look at the fact that we have been able to expand our margins as well as we have to date and we believe that we have long-term margin expansion capability. I mean, I go back to 2019 pre-pandemic and if you look at our margin then it was about 14%. Last year, we -- it was our intention to emerge a stronger company. As everyone knows, we did a restructuring and committed to $160 million of savings or about 180-190 basis points of 2019 revenue. We're seeing that savings, which makes us feel really good. Also, I'd point to we've had a consistent algorithm of being able to convert revenue growth to profitability and we expect that will continue as you point out this year and as I mentioned in my remarks, hiring is lagging revenue growth and that's not unusual in a period of time like this, but also our temp help as a result is running high and because of our very strong performance and targets that we set in the very beginning of the year, incentive comp is also running at very high levels, which will reset at the end of this year and the beginning of next year. So despite whether or not we have a difficult comp in the short-term in '22, we fully believe we have more room to expand our margins going forward in the long-term.

Philippe Krakowsky -- Chief Executive Officer

And Alexia, I would just add one thing, which is I think we closed, if I recall correctly in our last call on a question that was actually pretty much about on this very topic. So I think I'd say we're pleased that we're making it necessary for the question to be asked again and as Ellen said, I think we're comfortable that we see continued upside margin opportunity for the business going forward on a multi-year basis.

Alexia Quadrani -- JPMorgan Securities LLC -- Analyst

Thank you both.

Operator

Thank you. The next question is from John Janedis with Wolfe Research. You may go ahead.

John Janedis -- Wolfe Research, LLC -- Analyst

Thank you. Good morning. Jerry, just one for you. Can you just talk about the competitive dynamics you're seeing in the marketplace. Coming out of the pandemic, are you seeing any changes in go-to-market strategies rather your traditional or non-traditional competitors or any changing client behaviors as well.

Jerry Leshne -- Senior Vice President of Investor Relations

Well, it's a very broad question. Well, look, I mean I think that the kinds of questions and issues that need to be solved, if you're running a business today and you are looking to achieve whatever your goals are, imply that you're looking for partners that can help you address kind of a range of things that are sort of digital economy related. So whether that is your own business transformation, whether that is your data strategy at the enterprise level and then ultimately how you're going to take increasingly your own first party data and put it to use so that you are either, I think increasingly being more effective with your investment but also more efficient. And then lastly, how you show up and how you go direct to the consumer and therefore e-commerce, very, very broadly construed because I think that -- so much of what's happening now and e-com is happening in our own platforms and channels that companies and marketers own, it's clearly going to be happening in areas that go sort of from the ad tech world where we've generally or largely been focused as an industry for a number of years to MarTech but it will -- whether it's in the app world and the gaming world, etc. So, I think that it's both a fairly broad playing field. You've got some may be smaller entities with deep specialization in some of those areas. It's interesting from where we sit, because we think it creates a broader kind of addressable marketplace and if you look at our immediate competitive set, I mean I think they're clearly looking at and thinking about sitting where they are and with the portfolio they have how do they approach these things. In terms of -- we have the bigger or the broader competitive set, you see some activity, but I think the headlines are ahead of the reality there. And then I think you need to figure out ways to the partner up particularly kind of in the data and the tech world because I think that as everything changes there, there's going to need to be universal identifiers, there's going to need to be kind of ways to privacy compliant way engage with consumers and help again clients go to market and so that will clearly imply being able to work with the folks who are solving for that, whether it's from a measurement point of view or from an activation point of view. So I don't know that I'm seeing anything that we think is unexpected. I think probably if anything the pandemic has probably moved us forward faster along this track but it's a direction or an avenue that we were heading down anyway.

John Janedis -- Wolfe Research, LLC -- Analyst

Okay, great, thanks. Maybe Ellen, a quick one for you. Just coming back to the permanent cost savings. How are you tracking relative to plan the real estate from a timing and square footage perspective?

Ellen Johnson -- Chief Financial Officer

Good morning. We're tracking well. I think you see it coming through our numbers. I think you see the leverage that we're getting from. So we're absolutely on target and on plan with that we have a lot of them already subleased and a few more to come, but we're feeling really good about it.

John Janedis -- Wolfe Research, LLC -- Analyst

Alright, great. Thank you.

Philippe Krakowsky -- Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from Michael Nathanson with MoffettNathanson. You may go ahead.

Michael Nathanson -- MoffettNathanson LLC -- Analyst

Yeah. Good morning. Philippe, I have one for you and then one for Ellen. Starting with the third anniversary of Acxiom, congratulations, and I know some of us question the deal. I wonder when you look back on the 3 years, how did you do versus maybe what you expected and looking forward, the business was mostly U.S. based, I believe. Are you seeing demand come from either new geographies or new client verticals and maybe unexpected. That's one, and then for Ellen, I guess the only thing I worry about broadly is just wage inflation and the lack of people that are hired at this point. Are you concerned at all. We've not seen wage inflation in the U.S. in a while, and is that factored in at all to your thinking longer term about potentially some margin pressures down the road. Thanks.

Philippe Krakowsky -- Chief Executive Officer

Alright. Am I going first? Okay. I think I think we're pleased with the way that these 3 years have gone. I think that the integration went exceptionally well and that was clearly a focus of ours and particularly important when you consider that what Acxiom brought to us was a level of credibility and trust when it comes to sizable marketing and client organizations saying OK as a holder of our first-party data, you can do that in a way that we know is scaled, is secure, etc. So I think that was clearly an important area of focus. I think that you then heard from us and we have leaned into ensuring that the connectivity there with media, which was the most obvious adjacency in the place where we had been building, whether it was our own stack pre-Acxiom, with Acxiom is a foundational piece of it, or whether it was the activation piece Cadreon, which is now Matterkind addressable across all channels. But now we're definitely seeing Acxiom pretty consistently across the board. We are focused on what we can do there. In the healthcare space, we think there's a lot of opportunity there. We definitely have it baked into as we've called out anything that involves the scale opportunity that is complex or multi-agency with the client. A lot of anything that's a top-20 IPG client. I think if anything, the thing that's been holding us back is likely that during the pandemic, virtual has I think been a bit of a break on not specific or only in this space but I think that innovation internally is harder to do when people are not together, and so it's definitely the case that I think that whatever the next generation product wise is or the ways in which we can be even tighter and quicker on the integration is a place that I think will be focused on that I think it will unlock in large part because our teams are going to be able to get it together. We had a product roadmap off site with the Acxiom-Kinesso leadership of per day and a half and that was much more productive. It was about a month and a half ago, that we would have been otherwise. So I think all in plenty to do and still lots of upside but I think that we're pleased with where we are on that.

Ellen Johnson -- Chief Financial Officer

Okay. As far as inflation, we're not seeing materially higher broad based inflation in our numbers to date, but we're seeing what everyone else is seeing. The talent market clearly has become more competitive and attrition is higher post the pandemic, we went through a period of time where no one left. So you're seeing I think a 2-year attrition rate this year and as a result, specifically because we're growing so fast, our hiring is not kept up. So what we're focused on is really innovating our recruitment techniques. We're doing all kinds of different things in that front, including talent referral bonuses, looking for different places for our workforce including bringing working moms may be back into the workforce. We're also trying to create opportunities for our people by creating promotion opportunities and it's not all about the compensation, although we do pay people competitively. It's also really about the quality of the work environment that you provide, training and development, your values that you stand for as a company, including DE&I and ESG. So we're really focused on all of those things. One other thing I would point out is that, our company typically or an industry benefits from higher level of economic activity. So that could actually turn out to be a positive from a revenue perspective, and I think it's also important to note that we are investing in some of these more innovative ways of solving higher order client problems for our clients. So whether it's digital transformation or getting as Philippe said, direct-to-consumer e-commerce, we think all those things will do well in this environment as well.

Philippe Krakowsky -- Chief Executive Officer

Yeah. Outcome-based marketing would clearly be something that would call to clients if we get to a point where they're thinking hard about where and how to invest.

Michael Nathanson -- MoffettNathanson LLC -- Analyst

Thank you, guys.

Philippe Krakowsky -- Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from Julien Roch with Barclays. You may go ahead.

Julien Roch -- Barclays -- Analyst

Yes, good morning, Philippe. Good morning, Ellen. Congratulation on the results. My first question is on the full-year guidance and the 2-year stack. So if I look at your full year guidance where you're guiding to 11% for the full year versus 2020 that is 8% in Q4. So that means that on the 2-year stack, you would grow then 11% growth in Q3 to a 3% growth in Q4, which is an 8 point slowdown. If you could get Omnicom guidance, their guidance lead them to go from minus 2 to minus 5, a 3-point slowdown and Publicis guidance leaves them to go from plus 5 to plus 2, a 3-point slowdown. Again, all against 2019. So you, 8-point slowdown, Omnicom and Publicis 3-point slowdown. Why are you the most conservative when you all the best in class? Should you slow lesser than them, is my first question.

Philippe Krakowsky -- Chief Executive Officer

That is a big question. I think it's an interesting question, but I think that we don't look at the year on a quarter-to-quarter basis. So, I would ask to you then, let me give us some broader context in answering it. I think that the variability that we see in the business on a quarter-to-quarter basis reflects the fact that client activity has to do with their needs and their competitive situation. And then also with the macro and so we've always framed up our expectations and we manage the business in terms of the full year. So, if I look at the full year, with organic growth as we've said in the range of 11% on top of what are definitely the most challenging comps in the sector, that's a very strong result. And if I look at a 2-year compound stack if that 11% comes in, that still has us at just under 6% when without us in the mix, the industry is probably flat. I think if you get under that quarterly number and you think about the fluctuations, I think the point that you raised feels to me like it's about timing from where I sit. And so Q4 last year, timing clearly favors Q4 whether that's obscured somewhat by the recessionary environment that we were navigating at that point. So you had pullbacks early in the pandemic. Then our clients get their bearings. They figure out how to go virtual. They lean into a lot of what we've been talking [Technical Issues] digital e-com and so there is pent-up demand that clearly benefited Q4 from where we were sitting. We saw it in digital media spend, very strong spend in the retail category. There was a lot of COVID related government communications work which thankfully is going to hopefully be a little less necessary now and this year we've seen this marked acceleration in Q2 and Q3 and I think that reflects at the macro level, the progress that's been made broadly on public health and the fact that economic activity is up, but also the acceleration of the digital behaviors, which IPG has been anticipating for many years with strategic actions, and so those two quarters have been very, very strong. And so going into Q4, I'd say to you that what we're seeing is the tone of the business is solid. We're net new business positive but delta has definitely created some uncertainty at the macro level. The pent-up demand that was a plus in Q4, isn't necessarily there. And so that's where, as I said to you, we look at the year, we feel very comfortable with the year. We look at the 2-years stack, we think that is very strong as well. And so to my mind. I don't see it as you -- I don't read it the way that you do. I think that when you then -- when we have a discussion about what '22 looks like then we have the question that you put out there.

Julien Roch -- Barclays -- Analyst

No. I thank you for that. I understand your answer but at the same time, both Omnicom and Publicis must feel the same thing as you in terms of the phasing and client going back early and Q2 and Q3 strong being strong. It's just that you have saw a bigger slowdown than the accounting for, but fair enough.

Philippe Krakowsky -- Chief Executive Officer

We also have a stronger Q2, Q3 and stronger comps in the prior year.

Julien Roch -- Barclays -- Analyst

Yeah. No, sure. And then the next one, because I know we're running out of time is on margin. So you went from initial 15.5% to 16% to now 16.8%. So what is the best margin you could do this year if organic is better than expected in Q4. So for instance if Omnicom and Publicis are right and you're wrong and so the slowdown is 3 points, not 8 points and instead of doing 8% in Q4, you do 13%. What's the maximum margin we can dream about this year, can we -- 17% for sure but 17.5%, I mean what's the best outcome?

Philippe Krakowsky -- Chief Executive Officer

We're giving you our best line of sight into where the business is today and how we think we're going to finish the year. If what you just suggest is conceivable then I think you will see further margin upside but I don't know that it's constructive to sort of speculate on what that could be. And again to Alexia's question at the outset, we feel good about our long-term margin expansion case and we've proven it and we think it will prove out but I don't know that I can't speculate on that one. I don't think -- I don't know that it did, as I said, I don't see it as constructive.

Julien Roch -- Barclays -- Analyst

Okay, fair enough. Well, thank you very much for your answers and looking forward to you beating guidance when you report Q4.

Philippe Krakowsky -- Chief Executive Officer

Thanks for the question.

Operator

Thank you. And that was our last question. I'll now turn it back to Philippe for any final thoughts.

Philippe Krakowsky -- Chief Executive Officer

Thanks, Sue. Well, again, just we appreciate the time and the interest and the continued support and we will get back to work and focus on the fourth quarter. Thank you, and I hope everybody is staying safe and well.

Operator

[Operator Closing Remarks]

Duration: 61 minutes

Call participants:

Jerry Leshne -- Senior Vice President of Investor Relations

Philippe Krakowsky -- Chief Executive Officer

Ellen Johnson -- Chief Financial Officer

Alexia Quadrani -- JPMorgan Securities LLC -- Analyst

John Janedis -- Wolfe Research, LLC -- Analyst

Michael Nathanson -- MoffettNathanson LLC -- Analyst

Julien Roch -- Barclays -- Analyst

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