Headline: Ipsos Reports Growth Amidst Challenging Q3, Sets Sights on Future Acquisitions
In its third-quarter earnings presentation, global market research company Ipsos reported modest year-on-year growth, despite experiencing a notable slowdown due to political and budgetary challenges in key markets. The company remains optimistic about its long-term prospects, as indicated by recent acquisitions and the investment from the Lac1 fund. Recognized for its credibility and work environment by Newsweek and Time Magazine, Ipsos (ticker: IPS) focuses on strategic acquisitions and technological advancements to bolster future performance.
Key Points: Ipsos reported overall growth of 3.3% for the year; organic growth was 2.4%, and the scope effect from acquisitions was 2.8%. The company experienced a slowdown in the third quarter with only 0.5% growth, significantly impacted by political uncertainty in France, budget instability in the UK, and mixed results in the US. Ipsos Digital significantly contributed with 32% organic growth, boosting gross margins. The company is in the process of acquiring infas, a leader in Germany’s public sector research, and has secured investment from the Lac1 fund. Ipsos anticipates approximately 1% organic growth and around 13% operating margin for 2024.
Company Outlook: Ipsos forecasts about 1% organic growth and an estimated 13% operating margin in the fourth quarter. Acquisitions contributed approximately 60 million Euros this year, with negotiations for further deals ongoing. The company aims to preserve margins by focusing on strategic acquisitions and leveraging advancements in automation and Generative AI. Ipsos targets improving its growth trajectory by 2025, particularly in the US market.
Challenges: A noticeable slowdown in the third quarter was seen due to political instability and budget uncertainty in key markets like France and the UK. Growth challenges in the US were evenly split between internal management issues and external market conditions. The Citizens segment in the US is experiencing a slowdown due to recent government changes, with recovery expected by 2025.
Positives: The EMEA region reported strong organic growth of 4.9% in the third quarter; the Middle East, Germany, and Italy performed well. The company’s digital segment grew organically by 32%, indicating a strong market position. The investment from the Lac1 fund and the upcoming infas acquisition reflect confidence in Ipsos’ growth potential.
Shortcomings: Performance in the US market was mixed; strong growth was seen in Advertising and Innovation, while significant declines occurred in Public Affairs and Healthcare. Growth in the Americas was uneven.
Q&A Highlights: New senior management was appointed to the US Government business unit to address growth challenges. The Consumer Packaged Goods sector remains resilient despite inflation concerns. Ben Page emphasized the importance of strategic alignment in M&A discussions, focusing on small to medium-sized companies. Revenue predictability at the start of the year is around 30%, with some business units showing up to 80% predictability. The next earnings update is scheduled for February; management remains confident in the underlying structural growth.
Ipsos' third-quarter results reflect a company advancing amid turbulent times through strategic initiatives and a focus on long-term growth. Its efforts to adapt to market conditions and invest in technology and strategic acquisitions aim to improve its growth trajectory and maintain profitability. While the near-term outlook shows modest growth, the company’s actions demonstrate its commitment to strengthening its position in the global market research sector.