NEW YORK, April 28, 2020
/PRNewswire/ -- Omnicom Group Inc. (NYSE: OMC) today announced
that its diluted net income per share for the first quarter of 2020
increased two cents, or 1.7%, to
$1.19 per share compared to
$1.17 for the first quarter of
2019. Net income - Omnicom Group Inc. for the first quarter
of 2020 decreased $5.1 million, or
1.9%, to $258.1 million compared to
$263.2 million in the first quarter
of 2019. Net income - Omnicom Group Inc. for the first
quarter of 2020 was reduced by $3.9
million for a non-cash impairment charge related to the
decline in the market value of certain of our equity method
investments.
Primarily due to the negative effects of foreign exchange rates
and disposition activity in excess of acquisitions over the past
year, Omnicom's worldwide revenue in the first quarter of 2020
decreased 1.8% to $3,406.9 million
from $3,468.9 million in the first
quarter of 2019. The components of the change in revenue included a
decrease in revenue from the negative impact of foreign currency
translation of 1.4%, a decrease in acquisition revenue, net of
disposition revenue of 0.7% and an increase in revenue from organic
growth of 0.3% when compared to the first quarter of
2019. Beginning late in the first quarter of 2020, revenue was
also negatively impacted by the coronavirus 2019 ("COVID-19")
pandemic.
Organic growth in the first quarter of 2020 as compared to the
first quarter of 2019 in our five fundamental disciplines was as
follows: Advertising decreased 0.1%, CRM Consumer Experience
decreased 1.3%, CRM Execution & Support
decreased 0.9%, Public Relations increased 0.2% and
Healthcare increased 9.6%.
Across our regional markets, organic growth in the first quarter
of 2020 as compared to the first quarter of 2019 was as follows:
the United States increased 1.7%,
Other North America increased 0.6%, the United Kingdom increased 3.7%, the Euro
Markets & Other Europe decreased 2.3%, Asia Pacific increased 2.0%,
Latin America decreased 5.0% and
the Middle East & Africa decreased 28.4%.
Operating profit in the first quarter of 2020 decreased
$8.7 million, or 2.0%, to
$420.2 million from $428.9 million during the fourth quarter of
2019. Our operating margin for the first quarter of 2020
decreased to 12.3% versus 12.4% for the first quarter of 2019.
For the first quarter of 2020, our effective income tax rate
decreased to 26.0% compared to 26.8% during the same period in
2019. The decrease was primarily attributable to certain domestic
tax credits recognized during the current period.
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). Accordingly, we
believe EBITA and EBITA margin are useful measures for investors to
evaluate the performance of our business.
For the first quarter of 2020, EBITA decreased $9.5 million, or 2.1%, to $441.0 million from $450.5
million in the first quarter of 2019. Our EBITA margin
decreased to 12.9% for the first quarter of 2020 versus 13.0% in
the first quarter of 2019.
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.
COVID-19 Business Update
The COVID-19 pandemic has significantly impacted the global
economy. Public health efforts to mitigate the impact of the
pandemic include government actions such as travel restrictions,
limitations on public gatherings, shelter in place orders and
mandatory closures. These actions have negatively impacted many of
our clients' businesses and in turn clients have reduced or plan to
reduce their demand for our services. As a result, we experienced a
reduction in our revenue beginning late in the first quarter of
2020, as compared to the same period in 2019, and is expected to
continue for the remainder of the year. Such reductions in revenue
could adversely impact our ongoing results of operations and
financial position and the effects could be material.
While we expect the pandemic to affect substantially all of our
clients, certain industry sectors have been affected more
immediately and more significantly than others, including travel,
lodging and entertainment, energy and oil and gas, non-essential
retail and automotive. Clients in these industries have already
acted to cut costs, including postponing or reducing marketing
communication expenditures. While certain industries such as
healthcare and pharmaceuticals, technology and telecommunications,
financial services and consumer products have fared relatively well
to date, conditions are volatile and economic uncertainty cuts
across all clients, industries and geographies. Overall, while we
have a diversified portfolio of service offerings, clients and
geographies, demand for our services can be expected to decline as
marketers reduce expenditures in the short-term due to the
uncertain impact of the pandemic on the global economy. As a result
of the impact on our business, each of our agencies is in the
process of aligning their cost structures, including severance
actions and furloughs to reduce the workforce, and tailoring their
services and capabilities to changes in client demand.
We have recently taken numerous proactive steps to strengthen
our liquidity and financial position that we expect will help
mitigate the potential impacts of COVID-19, including:
- The amendment and extension of our $2.5
billion credit facility to February
2025,
- The suspension of our share repurchase program,
- The issuance in February of $600
million 10-year 2.45% Senior Notes,
- The early redemption of the remaining $600 million of 4.45% Senior Notes that were due
in August 2020,
- The issuance in early April of an additional $600 million 10-year 4.20% Senior Notes, and
- The completion in early April, of a $400
million 364-day revolving credit facility, which is in
addition to our existing $2.5 billion
revolving credit facility that expires in February 2025.
We have no long-term debt maturing until May 2022.
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.
Forward-looking Statements
Certain statements in this press release related to the
potential impact of the COVID-19 outbreak constitute
forward-looking statements, including statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These
statements may discuss goals, intentions and expectations as to
future plans, trends, events, results of operations or financial
condition, 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.
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.
You should carefully consider this 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, 2019 and other documents filed from
time to time with the Securities and Exchange Commission. Except as
required under applicable law, the Company does not assume any
obligation to update these forward-looking statements.
Conference Call
Omnicom will host a conference call to review the first quarter
financial results on Tuesday, April 28,
2020 at 8:00 AM (EDT).
Participants can listen to the conference call by dialing (877)
692-8955 (domestic) or (234) 720-6979 (international), along with
access code 3711425. The call will also be simulcast and archived
on our website at:
http://investor.omnicomgroup.com/investor-relations/news-events-and-filings.
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.
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Omnicom Group
Inc.
|
Consolidated
Statements of Income
|
Three Months Ended
March 31
|
(Unaudited)
|
(Dollars in Millions,
Except Per Share Data)
|
|
|
2020
|
|
2019
|
|
|
|
|
Revenue
|
$
|
3,406.9
|
|
|
$
|
3,468.9
|
|
Operating
Expenses:
|
|
|
|
Salary and service
costs
|
2,533.3
|
|
|
2,567.6
|
|
Occupancy and other
costs
|
309.6
|
|
|
309.2
|
|
Costs of
services
|
2,842.9
|
|
|
2,876.8
|
|
Selling, general and
administrative expenses
|
86.8
|
|
|
103.6
|
|
Depreciation and
amortization
|
57.0
|
|
|
59.6
|
|
|
2,986.7
|
|
|
3,040.0
|
|
Operating
Profit
|
420.2
|
|
|
428.9
|
|
Interest
Expense
|
58.5
|
|
|
63.0
|
|
Interest
Income
|
12.7
|
|
|
17.0
|
|
Income Before Income
Taxes
|
374.4
|
|
|
382.9
|
|
Income Tax
Expense
|
97.4
|
|
|
102.7
|
|
Loss From Equity
Method Investments
|
(5.3)
|
|
|
(0.5)
|
|
Net Income
|
271.7
|
|
|
279.7
|
|
Net Income Attributed
To Noncontrolling Interests
|
13.6
|
|
|
16.5
|
|
Net Income - Omnicom
Group Inc.
|
$
|
258.1
|
|
|
$
|
263.2
|
|
|
|
|
|
Net income per
share - Omnicom Group Inc.
|
|
|
|
Basic
|
$
|
1.19
|
|
|
$
|
1.18
|
|
Diluted
|
$
|
1.19
|
|
|
$
|
1.17
|
|
|
|
|
|
Weighted average
shares (in millions)
|
|
|
|
Basic
|
216.6
|
|
|
223.2
|
|
Diluted
|
217.5
|
|
|
224.2
|
|
|
|
|
|
Dividends Declared
Per Common Share
|
$
|
0.65
|
|
|
$
|
0.65
|
|
Omnicom Group
Inc.
|
Reconciliation of
Non-GAAP Financial Measures - EBITA
|
Three Months Ended
March 31
|
(Unaudited)
|
(Dollars in
Millions)
|
|
|
2020
|
|
2019
|
|
|
|
|
Net Income - Omnicom
Group Inc.
|
$
|
258.1
|
|
|
$
|
263.2
|
|
Net Income Attributed
To Noncontrolling Interests
|
13.6
|
|
|
16.5
|
|
Net Income
|
271.7
|
|
|
279.7
|
|
Loss From Equity
Method Investments
|
(5.3)
|
|
|
(0.5)
|
|
Income Tax
Expense
|
97.4
|
|
|
102.7
|
|
Income Before Income
Taxes
|
374.4
|
|
|
382.9
|
|
Interest
Income
|
12.7
|
|
|
17.0
|
|
Interest
Expense
|
58.5
|
|
|
63.0
|
|
Operating
Profit
|
420.2
|
|
|
428.9
|
|
Add back:
Amortization of intangible assets
|
20.8
|
|
|
21.6
|
|
Earnings before
interest, taxes and amortization of intangible assets
("EBITA")
|
$
|
441.0
|
|
|
$
|
450.5
|
|
|
|
|
|
Revenue
|
$
|
3,406.9
|
|
|
$
|
3,468.9
|
|
EBITA
|
$
|
441.0
|
|
|
$
|
450.5
|
|
EBITA Margin
%
|
12.9
|
%
|
|
13.0
|
%
|
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 intangibles) 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. 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.
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SOURCE Omnicom Group Inc.