Revenue of $3,443.4 million, with organic
growth of 7.5%
Operating profit of $546.0 million
Operating profit margin of 15.9%
Diluted earnings per share of $1.77
NEW
YORK, Oct. 18, 2022 /PRNewswire/ -- Omnicom
Group Inc. (NYSE: OMC) today announced results for the quarter
ended September 30, 2022.
"Omnicom delivered 7.5% organic revenue growth in the quarter
with double-digit organic growth in precision marketing, public
relations, and commerce & brand consulting, and solid results
across our portfolio broadly. Profitability also remained strong,
and our experience with challenging economic environments leaves us
confident that we can navigate through current business
uncertainty," said John Wren,
Chairman and Chief Executive Officer of Omnicom Group Inc. "One
thing remains certain - the path from marketer to consumer is
becoming exceedingly complex, and Omnicom has the talent and
capabilities to be the trusted advisor to drive success for our
clients."
$ in millions,
except per share amounts
|
Three Months Ended
September 30,
|
|
2022
|
|
|
2021
|
Revenue
|
$
3,443.4
|
|
|
$
3,435.0
|
Operating
Profit
|
546.0
|
|
|
541.6
|
Operating Profit
Margin
|
15.9 %
|
|
|
15.8 %
|
Interest expense,
net
|
29.1
|
|
|
43.7
|
Net Income
1
|
364.5
|
|
|
355.6
|
Net Income per Share -
Diluted 1
|
$
1.77
|
|
|
$
1.65
|
EBITA
2
|
$
566.1
|
|
|
$
560.3
|
EBITA Margin
2
|
16.4 %
|
|
|
16.3 %
|
Notes: 1) Net Income
and Net Income per Share for Omnicom Group Inc. 2) See
Reconciliations of Non-GAAP Financial Measures
|
Third Quarter 2022 Results
Revenues
Worldwide revenue growth in the third quarter
of 2022 compared to the third quarter of 2021 was led by an
increase in revenue from organic growth of $257.7 million, or 7.5%. Acquisition
revenue, net of disposition revenue, was a decrease of $32.7 million, or 1.0%, primarily reflecting the
disposition of our businesses in Russia in the first quarter of 2022. The
impact of foreign currency translation was a decrease of
$216.6 million, or 6.3%.
Reported total revenue in the third quarter of 2022 increased
$8.4 million, or 0.2%.
Organic growth in the third quarter of 2022 compared to the
third quarter of 2021 increased across all of our fundamental
disciplines, including: 5.9% for Advertising & Media, 16.3% for
Precision Marketing, 12.6% for Public Relations, 11.1% for Commerce
& Brand Consulting, 5.0% for Healthcare, 3.9% for Execution
& Support, and 2.3% for Experiential.
Organic growth in the third quarter of 2022 compared to the
third quarter of 2021 increased across our geographic markets as
follows: 7.6% for the United
States, 11.5% for the United
Kingdom, 6.0% for the Euro Markets & Other Europe, 4.4%
for Asia Pacific, 13.1% for
Latin America, 7.7% for Other
North America, and 12.2% for the Middle
East & Africa.
Expenses
Operating expenses increased $4.0 million, or 0.1%, to $2,897.4 million compared to the third quarter of
2021.
Salary and service costs, which tend to fluctuate with changes
in revenue, are comprised of salary and related costs, and
third-party service costs. In total, salary and service costs
increased $14.3 million, or
0.6%. Salary and related costs increased $18.8 million, or 1.1%, due primarily to the
increase in organic revenue, an increase in headcount, and an
increase in client-related business activities. Third-party service
costs decreased $4.5 million, or
0.6%, due primarily to the disposition of our businesses in
Russia in the first quarter of
2022, partially offset by an increase in organic revenue.
Occupancy and other costs, which are less directly linked to
changes in revenue than salary and service costs, decreased
$4.5 million, or 1.6%, to
$281.0 million, due to lower rent and
other occupancy costs, partially offset by an increase in general
office expenses resulting from the return of our workforce to the
office.
SG&A expenses decreased $8.6
million, or 9.1%, to $86.4
million.
Operating Profit
Operating profit increased
$4.4 million, or 0.8%, to
$546.0 million compared to the third
quarter of 2021. The related operating profit margin was
15.9% compared to 15.8% for the third quarter of 2021.
Interest Expense, net
Net interest expense in the
third quarter of 2022 decreased $14.6
million to $29.1 million
compared to the third quarter of 2021. Interest expense
increased $1.3 million to
$52.0 million, and interest income
increased $15.9 million to
$22.9 million, primarily as a result
of higher interest rates on cash balances and short-term
investments.
Income Taxes
Our effective tax rate of 26.1% in the
third quarter of 2022 increased from 24.1% in the third quarter of
2021 primarily related to the favorable settlements of uncertain
tax positions in certain jurisdictions in the prior year
period.
Net Income – Omnicom Group Inc. and Diluted Net Income per
Share
Net income - Omnicom Group Inc. for the third quarter
of 2022 increased $8.9 million, or
2.5%, to $364.5 million compared to
the third quarter of 2021. Diluted shares outstanding
decreased to 206.3 million, or 4.7%, from 215.4 million.
Diluted net income per share of $1.77
increased $0.12, or 7.3%, from
$1.65 per share.
EBITA
EBITA in the third quarter of 2022 increased
$5.8 million, or 1.0%, to
$566.1 million compared to the third
quarter of 2021. The related EBITA margin increased to 16.4% from
16.3%.
Risks and Uncertainties
Global economic challenges,
including the impact of the war in Ukraine, the COVID-19 pandemic, rising
inflation, rising interest rates and supply-chain disruptions could
cause economic uncertainty and volatility. The impact of these
issues on our business will vary by geographic market and
discipline. We monitor economic conditions closely, as well as
client revenue levels and other factors. In response to reductions
in revenue, we can take actions to align our cost structure with
changes in client demand and manage our working capital. However,
there can be no assurance as to the effectiveness of our efforts to
mitigate any impact of the current and future adverse economic
conditions, reductions in client revenue, changes in client
creditworthiness and other developments.
Definitions - Components of Revenue Change
We use
certain terms in describing the components of the change in revenue
above.
Foreign exchange rate impact: calculated by translating
the current period's local currency revenue using the prior period
average exchange rates to derive current period constant currency
revenue. The foreign exchange rate impact is the difference between
the current period revenue in U.S. Dollars and the current period
constant currency revenue.
Acquisition revenue, net of disposition revenue:
Acquisition revenue is calculated as if the acquisition occurred
twelve months prior to the acquisition date by aggregating the
comparable prior period revenue of acquisitions through the
acquisition date. As a result, acquisition revenue excludes the
positive or negative difference between our current period revenue
subsequent to the acquisition date and the comparable prior period
revenue and the positive or negative growth after the acquisition
date is attributed to organic growth. Disposition revenue is
calculated as if the disposition occurred twelve months prior to
the disposition date by aggregating the comparable prior period
revenue of disposals through the disposition date. The acquisition
revenue and disposition revenue amounts are netted in the
description above.
Organic growth: calculated by subtracting the foreign
exchange rate impact component and the acquisition revenue, net of
disposition revenue component from total revenue growth.
Conference Call
Omnicom will host a conference call to
review its financial results on Tuesday, October 18, 2022 at
4:30 p.m. Eastern Time. Participants
can listen to the conference call by calling 844-291-6362
(domestic) or 234-720-6995 (international), along with access
code 9962421. The call will also be simulcast and archived on our
investor relations website.
Corporate Responsibility
At Omnicom, we are committed
to promoting responsible practices and making positive
contributions to society around the globe. Please explore our
website (csr.omnicomgroup.com) for highlights of our progress
across the four areas on which we focus: People, Community,
Environment and Governance.
About Omnicom Group Inc.
Omnicom Group Inc. (NYSE:
OMC) (www.omnicomgroup.com) is a leading global marketing and
corporate communications company. Omnicom's branded networks and
numerous specialty firms offer services in advertising, strategic
media planning and buying, precision marketing, commerce and brand
consulting, experiential, customer relationship marketing (CRM),
public relations, healthcare marketing and other specialty
communications services to over 5,000 clients in more than 70
countries.
Non-GAAP Financial Measures
We use certain non-GAAP
financial measures in describing our performance. We use EBITA
(defined as earnings before interest, taxes and amortization of
intangible assets) and EBITA Margin (defined as EBITA divided by
revenue) as additional operating performance measures, which
exclude the non-cash amortization expense of intangible assets
(primarily consisting of amortization of intangible assets arising
from acquisitions). We believe EBITA and EBITA Margin are useful
measures for investors to evaluate the performance of our business.
Non-GAAP financial measures should not be considered in isolation
from, or as a substitute for, financial information presented in
compliance with U.S. GAAP. Non-GAAP financial measures reported by
us may not be comparable to similarly titled amounts reported by
other companies.
Forward-Looking Statements
Certain statements in this
press release constitute forward-looking statements, including
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. In addition, from time to time, the Company or
its representatives have made, or may make, forward-looking
statements, orally or in writing. These statements may discuss
goals, intentions and expectations as to future plans, trends,
events, results of operations or financial position, or otherwise,
based on current beliefs of the Company's management as well as
assumptions made by, and information currently available to, the
Company's management. Forward-looking statements may be accompanied
by words such as "aim," "anticipate," "believe," "plan," "could,"
"should," "would," "estimate," "expect," "forecast," "future,"
"guidance," "intend," "may," "will," "possible," "potential,"
"predict," "project" or similar words, phrases or expressions.
These forward-looking statements are subject to various risks and
uncertainties, many of which are outside the Company's control.
Therefore, you should not place undue reliance on such statements.
Factors that could cause actual results to differ materially from
those in the forward-looking statements include: adverse economic
conditions, including those caused by the the war in Ukraine; the impact of the COVID-19 pandemic;
severe and sustained inflation in countries that comprise our major
markets; rising interest rates; supply chain issues affecting the
distribution of our clients' products; international, national or
local economic conditions that could adversely affect the Company
or its clients; losses on media purchases and production costs
incurred on behalf of clients; reductions in client spending, a
slowdown in client payments and a deterioration or a disruption in
the credit markets; the ability to attract new clients and retain
existing clients in the manner anticipated; changes in client
advertising, marketing and corporate communications requirements;
failure to manage potential conflicts of interest between or among
clients; unanticipated changes relating to competitive factors in
the advertising, marketing and corporate communications industries;
the ability to hire and retain key personnel; currency exchange
rate fluctuations; reliance on information technology systems;
changes in legislation or governmental regulations affecting the
Company or its clients; risks associated with assumptions the
Company makes in connection with its critical accounting estimates
and legal proceedings; and the Company's international operations,
which are subject to the risks of currency repatriation
restrictions, social or political conditions and regulatory
environment. The foregoing list of factors is not exhaustive. You
should carefully consider the foregoing factors and the other risks
and uncertainties that may affect the Company's business, including
those described in Item 1A, "Risk Factors" and Item 7,
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our Annual Report on Form 10-K for the
year ended December 31, 2021. Except
as required under applicable law, the Company does not assume any
obligation to update these forward-looking statements.
Omnicom Group
Inc.
Consolidated
Statements of Income
Three Months Ended
September 30
(Unaudited)
(In Millions, Except
Per Share Data)
|
|
|
2022
|
|
2021
|
|
|
|
|
Revenue
|
$ 3,443.4
|
|
$ 3,435.0
|
Operating
Expenses:
|
|
|
|
Salary and service
costs
|
2,476.1
|
|
2,461.8
|
Occupancy and other
costs
|
281.0
|
|
285.5
|
Costs of
services
|
2,757.1
|
|
2,747.3
|
Selling, general and
administrative expenses
|
86.4
|
|
95.0
|
Depreciation and
amortization
|
53.9
|
|
51.1
|
|
2,897.4
|
|
2,893.4
|
Operating
Profit
|
546.0
|
|
541.6
|
Interest
Expense
|
52.0
|
|
50.7
|
Interest
Income
|
22.9
|
|
7.0
|
Income Before Income
Taxes and Income (Loss) From
Equity
Method Investments
|
516.9
|
|
497.9
|
Income Tax
Expense
|
134.7
|
|
120.0
|
Income From Equity
Method Investments
|
1.1
|
|
2.2
|
Net Income
|
383.3
|
|
380.1
|
Net Income Attributed
To Noncontrolling Interests
|
18.8
|
|
24.5
|
Net Income -
Omnicom Group Inc.
|
$
364.5
|
|
$
355.6
|
|
|
|
|
Net Income Per Share -
Omnicom Group Inc.
|
|
|
|
Basic
|
$
1.78
|
|
$
1.66
|
Diluted
|
$
1.77
|
|
$
1.65
|
|
|
|
|
Weighted average
shares
|
|
|
|
Basic
|
205.0
|
|
214.0
|
Diluted
|
206.3
|
|
215.4
|
|
|
|
|
Dividends Declared Per
Common Share
|
$
0.70
|
|
$
0.70
|
Omnicom Group
Inc.
Detail of Operating
Expenses
Three Months Ended
September 30
(Unaudited)
(In
Millions)
|
|
|
2022
|
|
2021
|
Operating
Expenses:
|
|
|
|
Salary and service
costs
|
|
|
|
Salary and related
service costs
|
$ 1,749.1
|
|
$ 1,730.3
|
Third-party service
costs
|
727.0
|
|
731.5
|
|
2,476.1
|
|
2,461.8
|
Occupancy and other
costs
|
281.0
|
|
285.5
|
Costs of
services
|
2,757.1
|
|
2,747.3
|
Selling, general and
administrative expenses
|
86.4
|
|
95.0
|
Depreciation and
amortization
|
53.9
|
|
51.1
|
Total Operating
Expenses
|
$ 2,897.4
|
|
$ 2,893.4
|
Omnicom Group
Inc.
Reconciliation of
Non-GAAP Financial Measures
Three Months Ended
September 30
(Unaudited)
(In
Millions)
|
|
|
2022
|
|
2021
|
|
|
|
|
Net Income -
Omnicom Group Inc.
|
$
364.5
|
|
$
355.6
|
Net Income Attributed
To Noncontrolling Interests
|
18.8
|
|
24.5
|
Net Income
|
383.3
|
|
380.1
|
Income From Equity
Method Investments
|
1.1
|
|
2.2
|
Income Tax
Expense
|
134.7
|
|
120.0
|
Income Before Income
Taxes
|
516.9
|
|
497.9
|
Interest
Income
|
22.9
|
|
7.0
|
Interest
Expense
|
52.0
|
|
50.7
|
Operating
Profit
|
546.0
|
|
541.6
|
Add back: Amortization
of intangible assets
|
20.1
|
|
18.7
|
Earnings before
interest, taxes and amortization of intangible assets
("EBITA")
|
566.1
|
|
560.3
|
|
|
|
|
Revenue
|
$
3,443.4
|
|
$ 3,435.0
|
EBITA
|
$
566.1
|
|
$
560.3
|
EBITA Margin
%
|
16.4 %
|
|
16.3 %
|
The above table reconciles the U.S. GAAP financial measure of
Net Income - Omnicom Group Inc. to EBITA (defined as earnings
before interest, taxes and amortization of intangible assets) and
EBITA Margin (defined as EBITA divided by revenue) for the periods
presented. We use EBITA and EBITA Margin as additional operating
performance measures, which exclude the non-cash amortization
expense of intangible assets (primarily consisting of amortization
of intangible assets arising from acquisitions). Accordingly, we
believe EBITA and EBITA Margin are useful measures for investors to
evaluate the performance of our business.
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SOURCE Omnicom Group Inc.