NEW YORK, Oct. 27, 2020
/PRNewswire/ -- Omnicom Group Inc. (NYSE: OMC) today announced
net income - Omnicom Group Inc. for the third quarter of 2020 of
$313.3 million compared to net income
- Omnicom Group Inc. of $290.2
million in the third quarter of 2019. Diluted net income per
share for the third quarter of 2020 was $1.45 per share compared to diluted net income
per share of $1.32 for the third
quarter of 2019.
Net income - Omnicom Group Inc. and diluted net income per share
- Omnicom Group Inc. in the third quarter of 2020 included a net
after-tax increase of $52.3 million and $0.24 per share, respectively, related to
reimbursements and tax credits under government programs in several
countries where we have operations, as discussed further below.
Primarily due to the negative effects on our revenue arising
from the coronavirus disease 2019 ("COVID-19") pandemic, Omnicom's
worldwide revenue in the third quarter of 2020 decreased 11.5% to
$3,206.5 million from $3,623.8 million in the third quarter of 2019.
The components of the change in revenue included an increase in
revenue from the positive impact of foreign currency translation of
0.5%, a decrease in acquisition revenue, net of disposition revenue
of 0.3% and a decrease in revenue from negative organic growth of
11.7% when compared to the third quarter of 2019.
Organic growth in the third quarter of 2020 as compared to the
third quarter of 2019 in our five fundamental disciplines was as
follows: Advertising decreased 11.7%, CRM Consumer Experience
decreased 19.3%, CRM Execution & Support
decreased 19.4%, Public Relations decreased 3.4% and
Healthcare increased 3.8%.
Across our regional markets, organic growth in the third quarter
of 2020 as compared to the third quarter of 2019 was as follows:
the United States decreased 11.4%,
Other North America decreased 7.6%, the United Kingdom decreased 12.5%, the Euro
Markets & Other Europe decreased 9.6%, Asia Pacific decreased 12.8%, Latin
America decreased 22.3% and the Middle
East & Africa decreased
21.4%.
Operating profit increased $28.1
million, or 5.9%, to $501.4
million compared to $473.3
million during the third quarter of 2019. Our operating
margin for the third quarter of 2020 increased to 15.6% versus
13.1% for the third quarter of 2019.
Salary and related service costs for the third quarter of 2020
includes the reduction in operating expenses related to
reimbursements and tax credits under government programs in several
countries where we have operations, including the Coronavirus Aid,
Relief, and Economic Security Act ("CARES Act") in the U.S., the
Kurzarbeit program in Germany, and
other programs in the U.K., France, Canada and other jurisdictions. The impact of
these items reduced salary and related service costs and increased
operating profit by $68.7 million in
the third quarter of 2020.
For the third quarter of 2020, our effective income tax rate
increased period-over-period to 26.7% from 26.5%.
Year-to-Date
Net income - Omnicom Group Inc. for the nine months ended
September 30, 2020 decreased $376.8
million to $547.3 million compared to $924.1 million in the same period in
2019. Diluted net income per share - Omnicom Group Inc. for
the nine months ended September 30, 2020 decreased
$1.64 to $2.53 per share compared to $4.17 per share for the nine months ended
September 30, 2019.
Net income - Omnicom Group Inc. and diluted net income per share
- Omnicom Group Inc. for the nine months ended September 30,
2020 included a net after-tax decrease of $133.9 million and $0.62 per share, respectively, as a result of
repositioning costs and a net loss on dispositions during the
second quarter of 2020 as well as the credit related to
reimbursements and tax credits under government programs in several
countries where we have operations, as discussed further below.
Primarily due to the negative effects on our revenue arising
from the COVID-19 pandemic in the second and third quarters of
2020, worldwide revenue for the nine months ended
September 30, 2020 decreased 12.9% to $9,414.1 million from $10,812.5 million in the same period of
2019. The components of the change in revenue included a
decrease in revenue from the negative impact of foreign currency
translation of 0.9%, a decrease in acquisition revenue, net of
disposition revenue of 0.4% and a decrease in revenue from negative
organic growth of 11.7% when compared to the same period of
2019.
Organic growth for the nine months ended September 30, 2020
compared to the same period in 2019 in our five fundamental
disciplines was as follows: Advertising decreased 13.2%, CRM
Consumer Experience decreased 15.8%, CRM Execution & Support
decreased 15.6%, Public Relations decreased 5.8% and Healthcare
increased 5.3%.
Across our regional markets, organic growth for the nine months
ended September 30, 2020 as compared to the same period of
2019 was as follows: the United
States decreased 10.3%, Other North America decreased 12.7%,
the United Kingdom decreased
11.1%, the Euro Markets & Other Europe decreased 14.4%,
Asia Pacific decreased 10.2%,
Latin America decreased 17.5% and
the Middle East & Africa decreased 29.7%.
Operating profit decreased $491.8 million, or 33.3%, to
$984.1 million from $1,475.9 million for the nine months ended
September 30, 2019. Our operating margin for the nine months
ended September 30, 2020 decreased to 10.5% versus 13.6% for
the same period of 2019.
Operating profit for the nine months ended September 30,
2020 includes a net decrease aggregating $160.1 million due to repositioning costs
recorded during the second quarter of 2020, comprised of
incremental severance charges, right-of-use asset impairments and
other real estate costs of $252.8
million, and a net loss on the disposition of certain
subsidiaries and other charges of $25.1
million, partially offset by reimbursements and tax credits
under government programs in several countries where we have
operations, including the CARES Act in the U.S., the Kurzarbeit
program in Germany, and other
programs in the U.K., France,
Canada and other jurisdictions,
which reduced salary and related service costs by $117.8 million.
Our effective tax rate for the nine months ended
September 30, 2020 increased period-over-period to 28.5% from
26.0%. The non-deductibility in certain jurisdictions of a portion
of the repositioning costs and net loss on dispositions recorded in
the second quarter of 2020 had the effect of increasing our
effective tax rate for the nine months ended September 30,
2020 from 26.6% to 28.5%. In addition, in the same period
of 2019, income tax expense was reduced by $10.8 million, primarily from the net favorable
settlements of uncertain tax positions in certain
jurisdictions. As a result, our effective rate for the nine
months ended September 30, 2020 would have approximated the
rate in the same period in 2019 after considering these items.
COVID-19 Business Update
The COVID-19 pandemic has significantly impacted the global
economy, our business and the results of operations. 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. The reduction in our revenue
continued during the second and third quarters of 2020 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. During the
second quarter of 2020, we realigned our agencies' cost structures,
which included severance actions and furloughs to reduce the
workforce, right-of-use asset impairments and other real estate
costs, a net loss on the disposition of certain subsidiaries and
other charges. These actions were taken to tailor their services
and capabilities to changes in client demand.
As we previously reported, during the first half of 2020, we
took 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, which were used to
finance 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 third quarter
financial results on Tuesday, October 27, 2020 at 8:15 a.m. EDT. Participants can listen to the
conference call by dialing (844) 291-5490 (domestic) or (409)
207-6993 (international), along with access code 5158965. 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. Follow us on Twitter for the latest news.
Omnicom Group
Inc.
|
Consolidated
Statements of Income
|
Three Months Ended
September 30
|
(Unaudited)
|
(Dollars in Millions,
Except Per Share Data)
|
|
|
2020
(a)
|
|
2019
|
|
|
|
|
Revenue
|
$
|
3,206.5
|
|
|
$
|
3,623.8
|
|
Operating
Expenses:
|
|
|
|
Salary and service
costs
|
2,287.1
|
|
|
2,704.7
|
|
Occupancy and other
costs
|
273.1
|
|
|
290.7
|
|
Costs of
services
|
2,560.2
|
|
|
2,995.4
|
|
Selling, general and
administrative expenses
|
90.2
|
|
|
97.2
|
|
Depreciation and
amortization
|
54.7
|
|
|
57.9
|
|
|
2,705.1
|
|
|
3,150.5
|
|
Operating
Profit
|
501.4
|
|
|
473.3
|
|
Interest
Expense
|
54.4
|
|
|
62.8
|
|
Interest
Income
|
5.9
|
|
|
13.5
|
|
Income Before Income
Taxes
|
452.9
|
|
|
424.0
|
|
Income Tax
Expense
|
120.9
|
|
|
112.3
|
|
Income From Equity
Method Investments
|
2.9
|
|
|
0.5
|
|
Net Income
|
334.9
|
|
|
312.2
|
|
Net Income Attributed
To Noncontrolling Interests
|
21.6
|
|
|
22.0
|
|
Net Income - Omnicom
Group Inc.
|
$
|
313.3
|
|
|
$
|
290.2
|
|
|
|
|
|
Net Income Per Share
- Omnicom Group Inc.
|
|
|
|
Basic
|
$
|
1.45
|
|
|
$
|
1.33
|
|
Diluted
|
$
|
1.45
|
|
|
$
|
1.32
|
|
|
|
|
|
Weighted average
shares (in millions)
|
|
|
|
Basic
|
215.4
|
|
|
218.2
|
|
Diluted
|
215.8
|
|
|
219.4
|
|
|
|
|
|
Dividends Declared
Per Common Share
|
$
|
0.65
|
|
|
$
|
0.65
|
|
|
|
(a)
|
Salary and related
service costs for the third quarter of 2020 includes the reduction
in operating expenses related to reimbursements and tax credits
under government programs in several countries where we have
operations, including the Coronavirus Aid, Relief, and Economic
Security Act ("CARES Act") in the U.S., the Kurzarbeit
program in Germany, and other programs in the U.K., France, Canada
and other jurisdictions. The impact of these items reduced salary
and related service costs and increased Operating Profit by $68.7
million, Net Income - Omnicom Group Inc. by $52.3 million and
diluted net income per share - Omnicom Group Inc. by $0.24 for the
three months ended September 30, 2020.
|
Omnicom Group
Inc.
|
Consolidated
Statements of Income
|
Nine Months Ended
September 30
|
(Unaudited)
|
(Dollars in Millions,
Except Per Share Data)
|
|
|
2020 (a)
(b)
|
|
2019
|
|
|
|
|
Revenue
|
$
|
9,414.1
|
|
|
$
|
10,812.5
|
|
Operating
Expenses:
|
|
|
|
Salary and service
costs
|
6,851.5
|
|
|
7,937.5
|
|
Occupancy and other
costs
|
872.6
|
|
|
915.4
|
|
Repositioning costs
and net loss on dispositions
|
277.9
|
|
|
—
|
|
Costs of
services
|
8,002.0
|
|
|
8,852.9
|
|
Selling, general and
administrative expenses
|
259.2
|
|
|
308.4
|
|
Depreciation and
amortization
|
168.8
|
|
|
175.3
|
|
|
8,430.0
|
|
|
9,336.6
|
|
Operating
Profit
|
984.1
|
|
|
1,475.9
|
|
Interest
Expense
|
166.6
|
|
|
192.4
|
|
Interest
Income
|
25.1
|
|
|
46.9
|
|
Income Before Income
Taxes
|
842.6
|
|
|
1,330.4
|
|
Income Tax
Expense
|
240.2
|
|
|
345.5
|
|
Income (Loss) From
Equity Method Investments
|
(10.1)
|
|
|
1.2
|
|
Net Income
|
592.3
|
|
|
986.1
|
|
Net Income Attributed
To Noncontrolling Interests
|
45.0
|
|
|
62.0
|
|
Net Income - Omnicom
Group Inc.
|
$
|
547.3
|
|
|
$
|
924.1
|
|
|
|
|
|
Net Income Per Share
- Omnicom Group Inc.
|
|
|
|
Basic
|
$
|
2.54
|
|
|
$
|
4.19
|
|
Diluted
|
$
|
2.53
|
|
|
$
|
4.17
|
|
|
|
|
|
Weighted average
shares (in millions)
|
|
|
|
Basic
|
215.6
|
|
|
220.3
|
|
Diluted
|
216.2
|
|
|
221.5
|
|
|
|
|
|
Dividends Declared
Per Common Share
|
$
|
1.95
|
|
|
$
|
1.95
|
|
|
|
(a)
|
During the second
quarter of 2020, we recorded expenses for certain repositioning
actions related to the realignment of our businesses in reaction to
the COVID-19 pandemic and recorded a net loss on the disposition of
certain subsidiaries. The impact of these items decreased Operating
Profit by $277.9 million, Net Income - Omnicom Group Inc. by $223.1
million and diluted net income per share - Omnicom Group Inc. by
$1.03 for the nine months ended September 30, 2020.
|
(b)
|
Salary and related
service costs include the reduction in operating expenses related
to reimbursements and tax credits under government programs in
several countries where we have operations, including the
Coronavirus Aid, Relief, and Economic Security Act ("CARES
Act") in the U.S., the Kurzarbeit program in Germany, and
other programs in the U.K., France, Canada and other jurisdictions.
The impact of these items reduced salary and related service costs
and increased Operating Profit by $117.8 million, Net Income -
Omnicom Group Inc. by $89.2 million and diluted net income per
share - Omnicom Group Inc. by $0.41 for the nine months ended
September 30, 2020.
|
Omnicom Group
Inc.
|
Detail of
Operating Expenses
|
Three Months Ended
September 30
|
(Unaudited)
|
|
|
2020
|
|
2019
|
|
|
|
|
Operating
Expenses:
|
|
|
|
Salary and service
costs
|
|
|
|
Salary and related
service costs
|
$
|
1,501.1
|
|
|
$
|
1,724.5
|
|
Third-party service
costs
|
786.0
|
|
|
980.2
|
|
Occupancy and other
costs
|
273.1
|
|
|
290.7
|
|
Costs of
services
|
2,560.2
|
|
|
2,995.4
|
|
Selling, general and
administrative expenses
|
90.2
|
|
|
97.2
|
|
Depreciation and
amortization
|
54.7
|
|
|
57.9
|
|
Total Operating
Expenses
|
$
|
2,705.1
|
|
|
$
|
3,150.5
|
|
Omnicom Group
Inc.
|
Detail of
Operating Expenses
|
Nine Months Ended
September 30
|
(Unaudited)
|
|
|
2020
|
|
2019
|
|
|
|
|
Operating
Expenses:
|
|
|
|
Salary and service
costs
|
|
|
|
Salary and related
service costs
|
$
|
4,568.2
|
|
|
$
|
5,050.7
|
|
Third-party service
costs
|
2,283.3
|
|
|
2,886.8
|
|
Occupancy and other
costs
|
872.6
|
|
|
915.4
|
|
Repositioning costs
and net loss on dispositions
|
277.9
|
|
|
—
|
|
Costs of
services
|
8,002.0
|
|
|
8,852.9
|
|
Selling, general and
administrative expenses
|
259.2
|
|
|
308.4
|
|
Depreciation and
amortization
|
168.8
|
|
|
175.3
|
|
Total Operating
Expenses
|
$
|
8,430.0
|
|
|
$
|
9,336.6
|
|
Omnicom Group
Inc.
|
Impact of
Repositioning Actions, Net Loss on Dispositions and Government Wage
Programs
|
Three and Nine
Months Ended September 30, 2020
|
(Unaudited)
|
(Dollars in
Millions)
|
|
|
Three Months
ended
September 30, 2020
|
|
Nine Months ended
September 30, 2020
|
|
Gov't Wage
Programs
|
|
Total
|
|
Severance
Actions
|
Real Estate
Actions
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
(a) (b):
|
|
|
|
|
|
|
|
|
|
Salary and service
costs
|
|
|
|
|
|
|
|
|
|
Salary and related
service costs
|
$
|
(68.7)
|
|
|
$
|
(68.7)
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(117.8)
|
|
|
$
|
(117.8)
|
|
Third-party
costs
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
Occupancy and other
costs
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
Repositioning costs
and net loss
on dispositions
|
—
|
|
|
—
|
|
|
150.0
|
|
102.8
|
|
25.1
|
|
|
277.9
|
|
Costs of
services
|
(68.7)
|
|
|
(68.7)
|
|
|
150.0
|
|
102.8
|
|
(92.7)
|
|
|
160.1
|
|
Selling, general
and
administrative expenses
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
Depreciation and
amortization
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
Operating
Expenses
|
$
|
(68.7)
|
|
|
$
|
(68.7)
|
|
|
$
|
150.0
|
|
$
|
102.8
|
|
$
|
(92.7)
|
|
|
$
|
160.1
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The above table
identifies the pre-tax impact of certain repositioning actions
related to the realignment of our businesses in reaction to the
COVID-19 pandemic and recorded a net loss on the disposition of
certain subsidiaries of $277.9 million.
|
(b)
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Additionally, salary
and related service costs for the third quarter of 2020 and the
year to date 2020 periods include the reduction in operating
expenses related to reimbursements and tax credits under government
programs in several countries where we have operations. The
impact of these items reduced salary and related service costs and
increased operating profit by $68.7 million and $117.8 million for
the three and nine months ended September 30, 2020,
respectively.
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content:http://www.prnewswire.com/news-releases/omnicom-group-reports-third-quarter-and-year-to-date-2020-results-301160049.html
SOURCE Omnicom Group Inc.