Omnicom Group Reports Second Quarter 2022 Results
Omnicom Group Inc. (NYSE: OMC) reported flat revenue of $3,567.2 million for Q2 2022, with organic growth at 11.3%. Operating profit was $541.6 million, marking a decline of 4.7% compared to the previous year, leading to an operating profit margin of 15.2%. Diluted earnings per share rose by 5.0% to $1.68. The company noted strong organic growth across disciplines and regions, although facing challenges from foreign currency translations and acquisitions. Economic uncertainties, including inflation and geopolitical tensions, pose potential risks.
- Organic revenue growth of 11.3%, totaling an increase of $403.8 million.
- Diluted EPS increased by 5.0% to $1.68.
- Net income slightly increased to $348.4 million, a 0.1% rise.
- Net interest expense decreased by 45.4% to $40.1 million.
- Operating profit decreased by 4.7% to $541.6 million.
- Operating profit margin fell to 15.2% from 15.9%.
- Acquisition revenue decreased by 6.7%, reflecting substantial disposals.
- Foreign currency translation negatively impacted revenue by $168.4 million, or 4.7%.
Revenue of
Operating profit of
Operating profit margin of
Diluted earnings per share of
NEW YORK, July 19, 2022 /PRNewswire/ -- Omnicom Group Inc. (NYSE: OMC) today announced results for the quarter ended June 30, 2022.
"We performed well on every metric this quarter, led again by double-digit organic revenue growth," said John Wren, Chairman and Chief Executive Officer of Omnicom Group Inc. "The changes we have made in our portfolio are delivering better results for our clients as we are uniquely qualified to help them digitally transform their business, navigate complexity, and expand in high-growth areas like retail media and e-commerce. As we enter the second half of the year, we are in a strong financial position, and our company is well-prepared to manage through economic headwinds."
$ in millions, except per share amounts | Three Months Ended June 30, | |||||||
2022 | 2021 | Adjustments | 2021 | |||||
Revenue | $ 3,567.2 | $ 3,571.6 | $ — | $ 3,571.6 | ||||
Operating Profit 1 | 541.6 | 568.4 | (50.5) | 517.9 | ||||
Operating Profit Margin1 | 15.2 % | 15.9 % | 14.5 % | |||||
Interest expense 2 | 40.1 | 73.5 | (26.6) | 46.9 | ||||
Net Income 3 | 348.4 | 348.2 | (31.0) | 317.2 | ||||
Net Income per Share - Diluted 3 | $ 1.68 | $ 1.60 | $ (0.14) | $ 1.46 | ||||
EBITA 1,4 | $ 562.4 | $ 589.6 | $ (50.5) | $ 539.1 | ||||
EBITA Margin 1,4 | 15.8 % | 16.5 % | 15.1 % | |||||
Notes: Non-GAAP Adjustments for the three months ended June 30, 2021: 1) Operating Profit, EBITA and related margins include a |
Second Quarter 2022 Results
Revenues
Worldwide revenue growth in the second quarter of 2022 compared to the second quarter of 2021 was led by an increase in revenue from organic growth of
Organic growth in the second quarter of 2022 compared to the second quarter of 2021 increased across all of our fundamental disciplines, including:
Organic growth in the second quarter of 2022 compared to the second quarter of 2021 increased across our regional markets as follows:
Expenses
Operating expenses increased
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 decreased
Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, decreased
SG&A expenses increased
Operating Profit
Operating profit decreased
Interest Expense
Net interest expense in the second quarter of 2022 decreased
Income Taxes
Our effective tax rate of
Net Income – Omnicom Group Inc.
Net income - Omnicom Group Inc. for the second quarter of 2022 increased
EBITA
EBITA in the second quarter of 2022 decreased
Risks and Uncertainties
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.
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, July 19, 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 1468163. 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 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.
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. We use Operating Profit Adjusted, Operating Profit Margin Adjusted, EBITA Adjusted, EBITA Margin Adjusted, Net Income – Omnicom Group Inc. Adjusted and Net Income per diluted share – Omnicom Group Inc. Adjusted as additional operating performance measures. We believe these measures are useful in evaluating the impact of certain items on operating performance and allows for comparability between reporting periods. 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: the impact of the war in Ukraine, adverse economic conditions, 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 June 30 (Unaudited) (Dollars in Millions, Except Per Share Data) | |||
2022 | 2021 | ||
Revenue | $ 3,567.2 | $ 3,571.6 | |
Operating Expenses: | |||
Salary and service costs | 2,566.0 | 2,603.1 | |
Occupancy and other costs | 293.0 | 293.9 | |
Gain on disposition of subsidiary | — | (50.5) | |
Costs of services | 2,859.0 | 2,846.5 | |
Selling, general and administrative expenses | 110.9 | 103.2 | |
Depreciation and amortization | 55.7 | 53.5 | |
3,025.6 | 3,003.2 | ||
Operating Profit | 541.6 | 568.4 | |
Interest Expense | 51.2 | 80.3 | |
Interest Income | 11.1 | 6.8 | |
Income Before Income Taxes and Income (Loss) From Equity Method Investments | 501.5 | 494.9 | |
Income Tax Expense | 133.1 | 123.2 | |
Income (Loss) From Equity Method Investments | 1.6 | (0.1) | |
Net Income | 370.0 | 371.6 | |
Net Income Attributed To Noncontrolling Interests | 21.6 | 23.4 | |
Net Income - Omnicom Group Inc. | $ 348.4 | $ 348.2 | |
Net Income Per Share - Omnicom Group Inc. | |||
Basic | $ 1.70 | $ 1.62 | |
Diluted | $ 1.68 | $ 1.60 | |
Weighted average shares (in millions) | |||
Basic | 205.3 | 215.4 | |
Diluted | 206.9 | 217.1 | |
Dividends Declared Per Common Share | $ 0.70 | $ 0.70 | |
Omnicom Group Inc. Detail of Operating Expenses Three Months Ended June 30 (Unaudited) (Dollars in Millions) | |||
2022 | 2021 | ||
Operating Expenses: | |||
Salary and service costs | |||
Salary and related service costs | $ 1,800.8 | $ 1,721.7 | |
Third-party service costs | 765.2 | 881.4 | |
Occupancy and other costs | 293.0 | 293.9 | |
Gain on disposition of subsidiary | — | (50.5) | |
Costs of services | 2,859.0 | 2,846.5 | |
Selling, general and administrative expenses | 110.9 | 103.2 | |
Depreciation and amortization | 55.7 | 53.5 | |
Total Operating Expenses | $ 3,025.6 | $ 3,003.2 | |
Omnicom Group Inc. Reconciliation of Non-GAAP Financial Measures Three Months Ended June 30 (Unaudited) (Dollars in Millions) | |||
2022 | 2021 | ||
Net Income - Omnicom Group Inc. | $ 348.4 | $ 348.2 | |
Net Income Attributed To Noncontrolling Interests | 21.6 | 23.4 | |
Net Income | 370.0 | 371.6 | |
Income (Loss) From Equity Method Investments | 1.6 | (0.1) | |
Income Tax Expense | 133.1 | 123.2 | |
Income Before Income Taxes | 501.5 | 494.9 | |
Interest Income | 11.1 | 6.8 | |
Interest Expense | 51.2 | 80.3 | |
Operating Profit | 541.6 | 568.4 | |
Add back: Amortization of intangible assets | 20.8 | 21.2 | |
Earnings before interest, taxes and amortization of intangible assets ("EBITA") | 562.4 | 589.6 | |
Gain on disposition of subsidiary | (50.5) | ||
Non-GAAP EBITA - Adjusted | $ 539.1 | ||
Revenue | $ 3,567.2 | $ 3,571.6 | |
EBITA | $ 562.4 | $ 589.6 | |
EBITA Margin % | 15.8 % | 16.5 % | |
Non-GAAP EBITA - Adjusted | $ 539.1 | ||
Non-GAAP EBITA - Adjusted Margin % | 15.1 % | ||
For definition of Adjustments, see footnote on page 1. 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. The above table also reconciles the GAAP financial measure of Net Income – Omnicom Group Inc. to the non-GAAP financial measures of EBITA Adjusted and EBITA Margin Adjusted for the three months ended June 30, 2021. Management believes excluding the gain on disposition of subsidiary provides investors with a better picture of the performance of the business during the period presented. 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.
Omnicom Group Inc. Reconciliations of Non-GAAP Financial Measures Three Months Ended June 30, 2021 (Unaudited) (Dollars in Millions, Except Per Share Data) | |
Non-GAAP Adjusted | |
Net Income - Omnicom Group Inc. | $ 348.2 |
Net Income Attributed To Noncontrolling Interests | 23.4 |
Net Income | 371.6 |
Income (Loss) From Equity Method Investments | (0.1) |
Income Tax Expense | 123.2 |
Income Before Income Taxes | 494.9 |
Net Interest Expense | 73.5 |
Operating Profit - Reported | 568.4 |
Gain on disposition of subsidiary | (50.5) |
Non-GAAP Operating Profit - Adjusted | $ 517.9 |
Revenue | $ 3,571.6 |
Operating Profit - Adjusted | $ 517.9 |
Operating Profit - Adjusted Margin % | 14.5 % |
Non-GAAP Adjusted | |
Net Income - Omnicom Group Inc. | $ 348.2 |
Net Income Attributed To Noncontrolling Interests | 23.4 |
Net Income - Reported | 371.6 |
Income (Loss) From Equity Method Investments | (0.1) |
Income Tax Expense - Reported | 123.2 |
Income Before Income Taxes | $ 494.9 |
Net Interest Expense - Reported | 73.5 |
Early extinguishment of debt | (26.6) |
Non-GAAP Income Tax Expense - Adjusted | $ 46.9 |
Non-GAAP Adjusted | |||||
Net Income - Omnicom | Diluted | Net Income | |||
Net Income - Omnicom Group Inc. - Reported | $ 348.2 | 217.1 | $ 1.60 | ||
Gain on disposition of subsidiary | (50.5) | 217.1 | (0.23) | ||
Early extinguishment of debt | 26.6 | 217.1 | 0.12 | ||
Tax expense on early extinguishment of debt | (7.1) | 217.1 | (0.03) | ||
Non-GAAP Net Income - Omnicom Group Inc. - Adjusted | $ 317.2 | 217.1 | $ 1.46 | ||
The above tables reconcile the GAAP financial measure of Net Income – Omnicom Group Inc. to the non-GAAP financial measures of Operating Profit Adjusted, Net Interest Expense Adjusted, Net Income - Omnicom Group Inc. Adjusted and Net Income per share - Diluted Adjusted for the period presented. Management believes excluding the gain on disposition of subsidiary and the charge on the early extinguishment of debt provides investors with a better picture of the performance of the business during the period presented.
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SOURCE Omnicom Group Inc.
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