APCO Worldwide: Agency Business Report 2007

Since APCO returned to independence in 2004, its revenue has about doubled, notes president and CEO Margery Kraus, who says one investment focus in 2006 was expansion of its New York office.

Since APCO returned to independence in 2004, its revenue has about doubled, notes president and CEO Margery Kraus, who says one investment focus in 2006 was expansion of its New York office.

"New York was so strategic because we have always had a history of being in capital cities," says Kraus, "but in some cases the financial and capital cities are [not] one and the same. That's why we have a huge practice in Beijing, but we're also growing really rapidly in Shanghai. That's why we started in India in Delhi, but will go to Mumbai next."

Principals: Margery Kraus, president and CEO; Neal Cohen, CEO, Americas
Ownership: Independent
Offices: 5 US, 21 rest of the world

Staff
US staff is at 229; global staff is now at 503, up 23% from 2005. Senior hires included APCO advisory council member Pat Cox, ex-European Parliament president; APCO Insight SVP Bill Dalbec from Harris Interactive; senior counselor Chris Komisarjevsky, former Burson-Marsteller CEO; and VP Scott Milburn, ex-White House Office of Management and Budget press secretary. Departures included director Mark Cater and VPs Donna Erat and Geoff Freeman.

Regional performance
New offices were opened in 2006 in Guangzhou, Singapore, and New Delhi. North America remains APCO's largest and strongest market, but it continues to see rapid growth in EMEA and Asia.

Practice areas
APCO has 23 client service areas, including its most recent offering, business diplomacy. Solid growth was seen in global healthcare, including campaigns related to high-profile health issues and communications for drug or device litigation.

Accounts
2006 wins included Advamed, Kraft, CVS, Greenstone Media, Mortgage Insurance Companies of America, MMV/MVI, PR Newswire, Tesco, and United Airlines.

Financial performance
Global 2006 revenue totaled $81.8 million, up 11.6%, with US revenue at $49.5 million, up 18.4%. Public affairs generated close to $33 million, corporate communications $29 million, crisis communications about $10.5 million, and financial communications about $3.7 million.

Agency's full questionnaire follows below:

Name of parent division/company (enter both where applicable):
Not Applicable

Name of subsidiary companies:
Not Applicable

Has your ownership status changed in the past year? If yes, please explain:
Our ownership has not changed in the last year. APCO remains a majority employee- and women-owned company.

Name of global CEO and US CEO (or most senior equivalent)
Margery Kraus
, global president and CEO
Neal Cohen, CEO, Americas

Name of person, if any, the most senior person named above reports to:
Not applicable

What is your current headcount?
Our current headcount is 503.

How has your headcount changed since FY 2005?
In 2005, there were 408 employees globally. This is up 23 percent.

What was the percentage staff turnover in 2006?
The percentage of staff turnover in 2006 was 14.38 percent (calculated as new hires minus terms divided by headcount).

Did you make any senior hires in 2006 (VP or higher)? Please state name, title (and unique responsibilities, if applicable), and previous company:
Tom Allison,
director, strategic communication in London, former associate director, Hill & Knowlton
Ernest Chan, director public affairs in Hong Kong, former administrative officer of the Hong Kong SAR government
Jon Chandler, regional director corporate communication, EMEA, former regional communications and public affairs director for Coca-Cola in Europe
Pat Cox, member of APCO's International Advisory Council, former president of the European parliament
Bill Dalbec, SVP, APCO Insight, former VP and team leader of the public affairs and association research practices for Harris Interactive
Paul Feldman, director in Brussels, former US Federal Aviation Administration director for EMEA
Alisa Harrison, VP in Washing, former director of communications for USDA
David King, associate director, APCO Online, former managing director of Fullsix UK
Chris Komisarjevsky, senior counselor and member of APCO's International Advisory Council, former worldwide president and CEO of Burson-Marsteller
Stephanie Lvovich, director, public affairs in London, former managing director for European Public Affairs for Citigate Public Affairs
Scott Milburn, VP in Washington, former While House Office of Management and Budget press secretary
Phil Riggins, director of APCO Insight Europe, Middle East and Africa, former senior managing director of Weber Shandwick's opinion research affiliate
Kirk Stewart, EVP, leader of the corporate communication practice and member of APCO's International Advisory Council, former global VP of corporate communications for Nike
Ed Walsh, regional director, EMEA, former director of corporate communication for IBM France and Northwest Africa
Jeff Zelkowitz, SVP in New York, former managing director for Taylor Rafferty

What senior staff have departed the firm? Please state name and previous title
Mark Cater, director
Donna Erat,VP
Steve Faar, VP
Geoff Freeman, VP
Yunsong Gao, senior associate director
Chrystal Kern, CFO
Kelly Lau, director
Sue So, senior associate director
Peter Steere, director
Mark Story, VP

Please list any other senior management changes, including restructures and significant, senior-level promotions
Laurie Tvedt
was promoted to VP, APCO Online, and Jenny Brailey was promoted to VP in Seattle. There was no major senior management restructuring.

Have you made any acquisitions in the past year, or merged with another agency?
We did not make any acquisitions or merge with another agency.

How many wholly owned offices do you have globally? Please list with agency names and cities under the following headings. Add majority-owned offices in parentheses.
We have 26 wholly owned offices globally

North America: Washington, New York, Seattle, Sacramento, Chicago, Ottawa
Europe: Brussels, Berlin, Bonn, Paris, London, Russia, Rome, Geneva, Moscow
Africa: Johannesburg
Middle East: Tel Aviv
Asia Pacific: Beijing, Shanghai, Guangzhou, Hong Kong, Singapore, Hanoi, Ho Chi Minh, Jakarta, New Delhi

How many partly owned offices or affiliates do you operate globally? Please list agency names and cities under the following headings.
None

What offices opened in 2006 or early 2007? (State when.)
Guangzhou, March 2006
Singapore, April 2006
New Delhi, December 2006 (not formally announced)

What offices closed in 2006 or early 2007?
No offices closed in 2006 or early 2007

Which regions, US and globally, are shrinking and why?
None of our regions are shrinking. We are experiencing growth across all of our offices in every region.

Practice areas

How many practice areas do you have?
The way APCO operates is different from other firms. We have an integrated service offering that contribute to a single bottom line, and consultants work across service areas. From a client perspective, we have service offerings organized around our client's needs. These services include:

  • Antitrust & competition
  • Business diplomacy
  • Business-to-business communication
  • C-suite services
  • Coalition building & grassroots advocacy
  • Communication for goverments
  • Corporate responsibility & strategic philanthropy
  • Creative services - StudioAPCO
  • Crisis management
  • Global health
  • Global trade
  • Government relations
  • Health care
  • Internal communication
  • Investor communication
  • Issue management & public education campaigns
  • Litigation communication
  • Market entry & investment strategy
  • Media relations
  • Opinion research - APCO Insight
  • Positioning
  • Restructuring & distressed business services
  • Technology consulting - APCO online

Which ones are new?
In 2006, we added our business diplomacy service

Of those, which ones are part of the core strategy of the agency?
This additional service is part of our core strategy as an agency to work with senior executives at the highest levels in business and help them shape their gloabl growth strategies through extensive building of stakeholder relations and other communication strategies.

Which of these preactices have been phased out in the past year?
We did not phase out any practice in the past year.

What practice areas showed the most growth? Please elucidate.
We experienced a significant amount of growth in services to health care companies. Our global health care team is comprised of seasoned communication specialists from industry, government, and the media. Our team includes senior executives from leading pharmaceutical companies, experienced health care adminstrators, medical device experts, and former senior government and regulatory agency officials.

The team works in all sectors of the health care industry and leverages its experience, expertise and resources in support of clients' business objectives. We have worked on identifying government strategies and objectives and have engaged them using a variety of policy and communication tactics. Some of our other work in the health care area includes: managing campaigns surrounding high-profile health issue debates; preparing spokespeople to face the media and government audiences; designing creative marketing communication solutions; generating positive, "on message" media coverage; creating high-impact membership and internal communication programs; building allies with patient and physician communities; planning launches for pharmaceutical therapeutics, biotechnology
products, medical devices and medical services; and managing communication around drug or device litigation.

Which practice areas showed the least growth? Please elucidate.
We experienced the least amount of growth in consumer marketing. Our business strategy focuses on working with senior executives at the highest levels in business and helping them shape their global growth strategies through the extensive building of stakeholder relations and other communication strategies. As such, we don't focus as much on direct consumer marketing.

What is the distribution of accounts across practice areas?
The revenue distribution below rolls up the revenue among higher level categories of service:

a. Consumer marketing: $521,715
b. Business-to-business marketing: $1,529,925
c. Corporate communication: $29,058,700
d. Financial communication: $3,699,468
e. Public affairs: $32,972,640
f. Crisis communication: $10,471,589
g. Employee communication: $3,590,080

Accounts

What key account wins did you have in 2006? If based outside the US, or are global, please state regions.
The following are a few examples of key account wins for 2006:
Advamed
CVS
Greenstone Media
Kraft - U.S., Asia
Mortgage Insurance Companies of America
MMV/MVI - U.S., EMEA
PR Newswire
Tesco (Fresh and Easy Neighborhood Markets), Global
United Airlines
Many of our client assignments are confidential in nature and we are not able to disclose a complete list.

Of your 2006 wins, how many were across three or more countries?
40 percent

What key accounts did you lose in 2006? If based outside the US, or are global, please state regions.
We did not lose any accounts in 2006, however some of our assignments ended during the course of the year.

Did you expand any existing accounts into new domestic or international markets or sectors? Please elucidate.
We expanded a number of existing accounts into new markets, both domestically and internationally. A couple of examples of this type of expansion are Microsoft and Altimo. We expanded many other accounts, however, the nature of many of our assignments is confidential and we are not able to disclose a complete list.

What proportion of your clients are on a retainer?
36.5 percent of our clients are on retainer.

Has this changed over the past year?
This figure remained the same.

Performance

What was your 2006 global (including US) revenue?
$81,844,117

What was the % change over 2005 global revenue?
11.6 percent

What was your global profit margin in 2006?
We do not disclose our profit margin.

What was your US revenue?
$49,454,766

What was the % change over 2005 US revenue?
18.4 percent

What was your US profit margin?
We do not disclose our profit margin

Did you experience top-line or bottom-line growth in the past year, or both? Please elucidate.
We experienced a healthy top line growth and maintained our bottom line even with significant investment back into the firm.

How much of your growth was organic, and how much was due to new business won?
We experience organic client growth coupled with significant new cllient business. Overall, it was a healthy, but fairly equal mix of both expansions of work and new business that helped us attain our revenue goals.

How did your performance, in terms of revenue and growth, meet expectations you had for the year? Please answer even if you have not submitted revenue figures, including any information that characterizes your 2006 performance.
APCO's performance this year met our aggressive expectations of continuing to grow the company on a rapid trajectory while investing back into the firm. We added to our depth internationally at the very senior levels, expanded our offices in key geographies and opened new offices organically. We also continued to diversify our revenue internationally and continue to win client accounts for a number of major brands. These are all goals we hoped to accomplish when we set our plans for 2006.

We were also certified as a majority-women owned business by the Women's Business Enterprise Council. We are proud of our employee ownership model and continue to build the company by attracting and retaining the best people in our industry.

Please briefly outline any initiatives taken in 2006 that add to your agency's story, such as staff development/training, fundraising/charitable initiatives, community programs, business partnerships, etc.
In 2006, we created the APCO ART Boot Camp a two-day training program for all new employees designed to provide a comprehensive overview of the company, key programs and processes, and APCO's approach to business. The Boot Camp is also intended to provide an opportunity for new employees to meet and learn about their colleagues and clients from across the firm. This program is part of our training program, "APCO ART" (Achieve your goals, Realize your potential, Take charge of your future). The program was developed to help employees achieve their personal and professional goals and to increase their effectiveness in managing the business and it takes a three-dimensional approach (training, work/life and mentoring) to employee training and development.

APCO created a formal strategic alliance with AMO, the global strategic and financial communications network, to offer integrated services in public affairs and financial communication. Cross-border mergers and acquisitions increasingly involve regulators, national governments and other stakeholders beyond the traditional financial community. Our alliance with AMO creates a powerful advisor who can anticipate, understand and address the critical perception challenges that threaten the successful outcome of global transactions and complex corporate
restructurings. By combining the deep knowledge and specialized expertise of two industry leaders, the alliance is uniquely able to meet the needs of companies managing the converging challenges of complex capital markets transactions and sensitive public affairs issues.

This past year, APCO launched a global security and risk management consulting firm, ASERO Worldwide. ASERO operates in the homeland security market and it's consulting staff provides strategic and tactical counsel to governments and businesses on risk mitigation through integrated security solutions incorporating
training, consulting and technological innovation.

APCO also has an annual incentive program in place whereby all employees are eligible for an annual monetary reward based on the performance of the company and the individual. Senior management at APCO is considered for equity on an annual basis, which is also based on the performance of the company. APCO intends to share the success of the company in a meaningful way through this equity program coupled with the annual incentive program. Currently, APCO is a majority employee-owned company and the management team hopes to broaden employee ownership further over time.

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