Omnicom Group Reports First Quarter 2022 Results
Omnicom Group Inc. (NYSE: OMC) reported Q1 2022 revenue of $3,410.3 million, down 0.5% year-over-year, despite strong organic growth of 11.9%. Operating profit decreased 24.2% to $353.0 million due to $113.4 million in charges related to the war in Ukraine. The operating profit margin fell to 10.4%, while diluted EPS decreased to $0.83, down 37.6%. The company also repurchased $300.3 million in stock. Despite challenges, Omnicom remains optimistic about future growth, highlighting significant organic revenue gains across its business disciplines.
- Organic revenue growth of 11.9% indicates strong market demand.
- Strategic investment in client-focused areas fosters future growth.
- Stock repurchases of $300.3 million suggest confidence in share value.
- Revenue decreased 0.5% year-over-year, indicating potential volatility.
- Operating profit decreased 24.2% due to war-related charges.
Revenue of
Charges arising from the effects of the war in Ukraine of
Operating profit of
Operating profit margin of
Diluted earnings per share of
Stock repurchases of
NEW YORK, April 19, 2022 /PRNewswire/ -- Omnicom Group Inc. (NYSE: OMC) today announced results for the quarter ended March 31, 2022.
"Our strong momentum continued in the first quarter with
$ in millions, except per share amounts | Three Months Ended March 31, | ||||||
Reported | Non-GAAP | Non-GAAP | Reported | ||||
Revenue | $ 3,410.3 | $ — | $ 3,410.3 | $ 3,426.9 | |||
Operating Profit 1 | 353.0 | 113.4 | 466.4 | 465.4 | |||
Operating Profit Margin | |||||||
Net Income 2 | 173.8 | 118.2 | 292.0 | 287.8 | |||
Net Income per Share - Diluted 2 | $ 0.83 | $ 0.56 | $ 1.39 | $ 1.33 | |||
EBITA 3 | 372.4 | 113.4 | 485.8 | 485.3 | |||
EBITA Margin 3 | |||||||
Notes: 1) Operating Profit and margin for the three months ended March 31, 2022 include |
Our worldwide revenue in the first quarter of 2022 continued to improve from the negative effects of the COVID-19 pandemic. Revenue decreased
Organic growth in the first quarter of 2022 compared to the first quarter of 2021 increased across all of our fundamental disciplines, including:
Organic growth in the first quarter of 2022 compared to the first quarter of 2021 across our regional markets was as follows:
Operating expenses increased
Operating profit decreased
Net interest expense of
Our effective tax rate of
Net income - Omnicom Group Inc. for the first quarter of 2022 decreased
EBITA in the first quarter of 2022 decreased
Global economic challenges, including the impact of the war in Ukraine, the COVID-19 pandemic, rising inflation 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.
We have historically conducted operations in Russia and Ukraine through local agencies in which we hold a majority stake. The minority partners in these agencies are local management, which report to the applicable Network management.
During the first quarter of 2022, the war in Ukraine required us to suspend our business operations in Ukraine. The war resulted in the imposition of sanctions by the United States, the United Kingdom, and the European Union that affect the cross-border operations of businesses operating in Russia. In addition, Russian regulators have imposed currency restrictions and regulations that created uncertainty regarding our ability to recover our investment in our businesses in Russia, as well as our ability to exercise control over the operations. Also, many multinational companies, including many of our large clients, ceased or suspended their operations in Russia. Therefore, the ability to continue operations in Russia without additional funding, which we will not provide, is uncertain.
As a result, we have sold, or committed to dispose of, all of our businesses in Russia. Accordingly, we recorded pre-tax charges of
We will continue to monitor these ongoing geopolitical events, evaluate available options to seek to mitigate further risk of loss and continue to evaluate the impact, if any, on our goodwill impairment test, which will be performed in June 2022.
Beginning in March 2020 and continuing through the first quarter of 2021, our business experienced the effects from reductions in client spending due to the economic impact related to the COVID-19 pandemic. While mixed by business and geography, the spending reductions impacted all our businesses and markets. Globally, the most impacted businesses were our Experiential discipline, especially in our event marketing businesses, and our Execution & Support discipline, primarily in field marketing. Most of our markets began to improve versus the prior year in March 2021, and the improvement continued through the first quarter of 2022 as clients substantially increased their spending on our services.
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.
Omnicom will host a conference call to review its financial results on Tuesday, April 19, 2022 at 4:30 p.m. EDT. Participants can listen to the conference call by calling 844-291-6362 (domestic) or 234-720-6995 (international), along with access code 1468163. The call will also be simulcast and archived on our investor relations website.
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.
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 provide advertising, strategic media planning and buying, digital and interactive marketing, direct and promotional marketing, public relations and other specialty communications services to over 5,000 clients in more than 70 countries. Follow us on Twitter for the latest news.
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). Accordingly, 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.
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 impact of the war in Ukraine and the COVID-19 pandemic, severe and sustained inflation in countries that comprise our major markets, 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 March 31 (Unaudited) (Dollars in Millions, Except Per Share Data) | |||
2022 | 2021 | ||
Revenue | $ 3,410.3 | $ 3,426.9 | |
Operating Expenses: | |||
Salary and service costs | 2,491.8 | 2,545.0 | |
Occupancy and other costs | 300.2 | 291.6 | |
Charges arising from the effects of the war in Ukraine | 113.4 | — | |
Costs of services | 2,905.4 | 2,836.6 | |
Selling, general and administrative expenses | 96.7 | 71.6 | |
Depreciation and amortization | 55.2 | 53.3 | |
3,057.3 | 2,961.5 | ||
Operating Profit | 353.0 | 465.4 | |
Interest Expense | 51.0 | 53.8 | |
Interest Income | 8.2 | 6.3 | |
Income Before Income Taxes | 310.2 | 417.9 | |
Income Tax Expense | 115.5 | 111.9 | |
Loss From Equity Method Investments | (0.1) | — | |
Net Income | 194.6 | 306.0 | |
Net Income Attributed To Noncontrolling Interests | 20.8 | 18.2 | |
Net Income - Omnicom Group Inc. | $ 173.8 | $ 287.8 | |
Net Income Per Share - Omnicom Group Inc. | |||
Basic | $ 0.83 | $ 1.33 | |
Diluted | $ 0.83 | $ 1.33 | |
Weighted average shares (in millions) | |||
Basic | 208.3 | 215.6 | |
Diluted | 209.8 | 216.8 | |
Dividends Declared Per Common Share | $ 0.70 | $ 0.70 | |
Omnicom Group Inc. Detail of Operating Expenses Three Months Ended March 31 (Unaudited) (Dollars in Millions) | |||
2022 | 2021 | ||
Operating Expenses: | |||
Salary and service costs | |||
Salary and related service costs | $ 1,794.6 | $ 1,649.2 | |
Third-party service costs | 697.2 | 895.8 | |
Occupancy and other costs | 300.2 | 291.6 | |
Charges arising from the effects of the war in Ukraine | 113.4 | — | |
Costs of services | 2,905.4 | 2,836.6 | |
Selling, general and administrative expenses | 96.7 | 71.6 | |
Depreciation and amortization | 55.2 | 53.3 | |
Total Operating Expenses | $ 3,057.3 | $ 2,961.5 | |
Omnicom Group Inc. Reconciliation of Non-GAAP Financial Measures - EBITA Three Months Ended March 31 (Unaudited) (Dollars in Millions) | |||
2022 | 2021 | ||
Net Income - Omnicom Group Inc. | $ 173.8 | $ 287.8 | |
Net Income Attributed To Noncontrolling Interests | 20.8 | 18.2 | |
Net Income | 194.6 | 306.0 | |
Loss From Equity Method Investments | (0.1) | — | |
Income Tax Expense | 115.5 | 111.9 | |
Income Before Income Taxes | 310.2 | 417.9 | |
Interest Income | 8.2 | 6.3 | |
Interest Expense | 51.0 | 53.8 | |
Operating Profit | 353.0 | 465.4 | |
Add back: Amortization of intangible assets | 19.4 | 19.9 | |
Earnings before interest, taxes and amortization of intangible assets ("EBITA") | $ 372.4 | $ 485.3 | |
Revenue | $ 3,410.3 | $ 3,426.9 | |
EBITA | $ 372.4 | $ 485.3 | |
EBITA Margin % | |||
The above table reconciles the U.S. GAAP financial measure of Net Income - Omnicom Group Inc. to EBITA (defined |
Omnicom Group Inc. Adjusted Non-GAAP Financial Measures Three Months Ended March 31 (Unaudited) | |||||
First Quarter | |||||
Reported 2022 | Non-GAAP Adjustments(b) | Non-GAAP | Reported 2021 | ||
Revenue | $ 3,410.3 | $ — | $ 3,410.3 | $ 3,426.9 | |
Operating expenses | 3,057.3 | (113.4) | 2,943.9 | 2,961.5 | |
Operating Profit | 353.0 | 113.4 | 466.4 | 465.4 | |
Operating Profit Margin % | |||||
Add back: Amortization of intangible assets | 19.4 | — | 19.4 | 19.9 | |
EBITA (a) | $ 372.4 | $ 113.4 | $ 485.8 | $ 485.3 | |
EBITA Margin % (a) | |||||
First Quarter | |||||
Reported 2022 | Non-GAAP Adjustments (b) | Non-GAAP | Reported 2021 | ||
Net Income - Omnicom Group Inc., Reported(a) | $ 173.8 | $ — | $ 173.8 | $ 287.8 | |
Charges arising from the effects of the war in Ukraine | — | 113.4 | 113.4 | — | |
Income tax expense related to the effects of the war in Ukraine | — | 4.8 | 4.8 | — | |
Net Income - Omnicom Group Inc., Adjusted | $ 173.8 | $ 118.2 | $ 292.0 | $ 287.8 | |
Diluted Shares (millions) | 209.8 | 209.8 | 209.8 | 216.8 | |
Net Income per diluted share - Omnicom Group Inc., Non-GAAP Adjusted | |||||
(a) | See Non-GAAP reconciliation on page 8. |
(b) | In the first quarter of 2022, we recorded a pre-tax charge of |
Omnicom Group Inc. Reconciliations of Non-GAAP Financial Measures - Effects of the war in Ukraine Three Months Ended March 31 (Unaudited) (Dollars in Millions, Except Per Share Data) | |||
Non-GAAP Adjusted | |||
EBITA | Operating | ||
Net Income - Omnicom Group Inc. | $ 173.8 | $ 173.8 | |
Net Income Attributed To Noncontrolling Interests | 20.8 | 20.8 | |
Net Income | 194.6 | 194.6 | |
Income (Loss) From Equity Method Investments | (0.1) | (0.1) | |
Income Tax Expense | 115.5 | 115.5 | |
Income Before Income Taxes | 310.2 | 310.2 | |
Net Interest Expense | 42.8 | 42.8 | |
Operating Profit - Reported | 353.0 | 353.0 | |
Charges arising from the effects of the war in Ukraine | 113.4 | ||
Non-GAAP Operating Profit - Adjusted | $ 466.4 | ||
Amortization of Intangible Assets | 19.4 | ||
EBITA - Reported | 372.4 | ||
Charges arising from the effects of the war in Ukraine | 113.4 | ||
Non-GAAP EBITA - Adjusted | $ 485.8 | ||
Non-GAAP Adjusted | |||||
Net Income - Omnicom | Diluted Shares | Net Income | |||
Net Income - Omnicom Group Inc. - Reported | $ 173.8 | 209.8 | $ 0.83 | ||
Charges arising from the effects of the war in Ukraine | 118.2 | 209.8 | 0.56 | ||
Non-GAAP Net Income - Omnicom Group Inc. - Adjusted | $ 292.0 | 209.8 | $ 1.39 | ||
Non-GAAP Adjusted | |
Net Income - Omnicom Group Inc. | $ 173.8 |
Net Income Attributed To Noncontrolling Interests | 20.8 |
Net Income - Reported | 194.6 |
Income (Loss) From Equity Method Investments | (0.1) |
Income Tax Expense - Reported | 115.5 |
Income Before Income Taxes | $ 310.2 |
Income Tax Expense - Reported | 115.5 |
Income tax expense related to charges arising from the effects of the war in Ukraine | (4.8) |
Non-GAAP Income Tax Expense - Adjusted | $ 110.7 |
The above tables reconcile the GAAP financial measure of Net Income – Omnicom Group Inc. to the non-GAAP financial |
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SOURCE Omnicom Group Inc.
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