8-K
Omnicom Group Inc. (OMC)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 7, 2023
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OMNICOM GROUP INC.
(Exact Name of Registrant as Specified in its Charter)
| New York | 1-10551 | 13-1514814 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (IRS Employer<br><br>Identification No.) |
| 280 Park Avenue, New York, NY | 10017 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 415-3600
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.15 per share | OMC | New York Stock Exchange |
| 0.800% Senior Notes due 2027 | OMC/27 | New York Stock Exchange |
| 1.400% Senior Notes due 2031 | OMC/31 | New York Stock Exchange |
| 2.250% Senior Notes due 2033 | OMC/33 | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On February 7, 2023, Omnicom Group Inc. (“Omnicom” or the “Company”) published an earnings release reporting its financial results for the three and twelve months ended December 31, 2022. A copy of the earnings release is furnished as Exhibit 99.1 to this report and is incorporated by reference herein in its entirety.
Item 7.01. Regulation FD Disclosure.
On February 7, 2023, Omnicom hosted an earnings call and posted on its website a related investor presentation in connection with publishing its financial results for the three and twelve months ended December 31, 2022. A copy of the presentation is furnished as Exhibit 99.2 and is incorporated by reference herein in its entirety.
The information under Items 2.02 and 7.01 above (including Exhibits 99.1 and 99.2 hereto) is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing. Additionally, the submission of the information set forth in this Item 7.01 is not deemed an admission as to the materiality of any information that is required to be disclosed solely by Regulation FD.
Forward-Looking Statements.
Certain statements in the exhibits to this Current Report on Form 8-K 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 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 and in 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.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description |
|---|---|
| 99.1 | Earnings release datedFebruarya2022q4earningsrelease.htm7, 2023. |
| 99.2 | Investor presentation materials datedFebruarya2022q4investorpresentat.htm7, 2023. |
| 104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Omnicom Group Inc. | |||
|---|---|---|---|
| By: | /s/ Andrew L. Castellaneta | ||
| Name: | Andrew L. Castellaneta | ||
| Title: | Senior Vice President,<br><br>Chief Accounting Officer | ||
| Date: February 7, 2023 |
Document
OMNICOM GROUP REPORTS FOURTH QUARTER AND FULL YEAR 2022 RESULTS
2022 Fourth Quarter:
Revenue of $3,868.2 million, with organic growth of 7.2%
Operating profit of $642.7 million
Operating profit margin of 16.6%
Diluted earnings per share of $2.09
NEW YORK, February 7, 2023 - Omnicom Group Inc. (NYSE: OMC) today announced results for the quarter and full year ended December 31, 2022.
"Fourth quarter organic revenue growth of 7.2% was stronger than we expected, led by resilient performance across global geographies and continued strength in our faster growing disciplines,” said John Wren, Chairman and Chief Executive Officer of Omnicom Group Inc. "We enter 2023 in a very strong position, building on last year's significant new business wins and bringing together creativity, digital technology, and data to create marketing solutions that are responsive to the business transformation needs of our clients. At the same time, we are closely tracking the macroeconomic outlook and are fully prepared to respond appropriately. We are confident that the flexibility and diversity of our business and the strength of our balance sheet will continue to create value for our shareholders."
Fourth Quarter 2022 Results
| $ in millions, except per share amounts | Three Months Ended December 31, | |||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Revenue | $ | 3,868.2 | $ | 3,855.9 | ||
| Operating Profit | 642.7 | 622.5 | ||||
| Operating Profit Margin | 16.6 | % | 16.1 | % | ||
| Interest expense, net | 25.9 | 44.4 | ||||
| Net Income 1 | 429.8 | 416.2 | ||||
| Net Income per Share - Diluted 1 | $ | 2.09 | $ | 1.95 |
Notes: 1) Net Income and Net Income per Share for Omnicom Group Inc.
Revenues
Worldwide revenue growth in the fourth quarter of 2022 compared to the fourth quarter of 2021 was led by an increase in revenue from organic growth of $276.8 million, or 7.2%. Acquisition revenue, net of disposition revenue, decreased $53.5 million, or 1.4%, 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 $211.0 million, or 5.5%. Reported total revenue in the fourth quarter of 2022 increased $12.3 million, or 0.3%, to $3,868.2 million.
280 Park Avenue, New York, NY 10017. Tel (212) 415-3672
Organic growth by discipline in the fourth quarter of 2022 compared to the fourth quarter of 2021 was as follows: 6.0% for Advertising & Media, 11.6% for Precision Marketing, 12.7% for Public Relations, 7.2% for Commerce & Brand Consulting, 6.4% for Healthcare, and 17.0% for Experiential. Execution & Support decreased 2.8%.
Organic growth by region in the fourth quarter of 2022 compared to the fourth quarter of 2021 was as follows: 5.6% for the United States, 9.9% for the United Kingdom, 5.1% for the Euro Markets & Other Europe, 6.9% for Asia Pacific, 18.2% for Latin America, 7.3% for Other North America, and 32.6% for the Middle East & Africa.
Expenses
Operating expenses decreased $7.9 million, or 0.2%, to $3,225.5 million compared to the fourth quarter of 2021. The weakening of most foreign currencies against the U.S. Dollar reduced operating expenses in the quarter compared to prior year in line with the percentage reduction from changes in foreign currencies on revenue.
Salary and service costs, which tend to fluctuate with changes in revenue, are comprised of salary and related costs, and third-party service costs. Salary and service costs decreased $0.1 million to $2,792.0 million. Salary and related costs decreased $16.4 million, or 0.9%, to $1,853.4 million as the increase related to organic revenue growth and increased headcount was offset by the effects of foreign currency translation. Third-party service costs increased $16.3 million, or 1.8%, to $938.6 million primarily due to an increase in organic revenue.
Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, increased $17.2 million, or 6.2%, to $294.4 million, due to an increase in general office expenses resulting from the return of our workforce to the office, partially offset by lower rent.
SG&A expenses decreased $25.4 million to $84.5 million, primarily due to lower professional fees, lower marketing related costs, and reductions from the effects of foreign currency translation.
Operating Profit
Operating profit increased $20.2 million, or 3.2%, to $642.7 million compared to the fourth quarter of 2021. The related operating profit margin was 16.6% compared to 16.1% for the fourth quarter of 2021.
Interest Expense, net
Net interest expense in the fourth quarter of 2022 decreased $18.5 million to $25.9 million compared to the fourth quarter of 2021. Interest expense increased $2.8 million to $54.4 million, and interest income increased $21.3 million to $28.5 million, primarily as a result of higher interest rates on cash balances and short-term investments.
Income Taxes
Our effective tax rate of 26.5% in the fourth quarter of 2022 increased from 23.1% in the fourth 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 fourth quarter of 2022 increased $13.6 million, or 3.3%, to $429.8 million compared to the fourth quarter of 2021. Diluted shares outstanding decreased to 205.2 million, or 3.8%, from 213.3 million as a result of net share repurchases. Diluted net income per share of $2.09 increased $0.14, or 7.2%, from $1.95 per share.
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EBITA
EBITA increased $20.0 million, or 3.1%, to $662.7 million compared to the fourth quarter of 2021. The related EBITA margin was 17.1% compared to 16.7% for the fourth quarter of 2021.
Full Year 2022 Results
| $ in millions, except per share amounts | Twelve Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|---|
| 2022 | 2021 | ||||||
| Revenue | $ | 14,289.1 | $ | 14,289.4 | |||
| Operating Profit | 2,083.3 | 2,197.9 | |||||
| Operating Profit Margin | 14.6 | % | 15.4 | % | |||
| Interest expense, net | 137.9 | 209.1 | |||||
| Net Income 1 | $ | 1,316.5 | $ | 1,407.8 | |||
| Net Income per Share - Diluted 1 | $ | 6.36 | $ | 6.53 | |||
| Adj. Operating Profit 2 | $ | 2,196.7 | $ | 2,147.4 | |||
| Adj. Operating Profit Margin 2 | 15.4 | % | 15.0 | % | |||
| Adj. Net Income per Share - Diluted 2 | $ | 6.93 | $ | 6.39 |
Notes: 1) Net Income and Net Income per Share for Omnicom Group Inc. 2) See Reconciliations of Non-GAAP Adjustments on pages 12-13.
Revenues
Worldwide revenue growth in 2022 compared to 2021 was led by an increase in revenue from organic growth of $1,346.3 million, or 9.4%. Acquisition revenue, net of disposition revenue, was a decrease of $665.6 million, or 4.7%, primarily reflecting dispositions in the Advertising & Media discipline in the second quarter of 2021 and the disposition of our businesses in Russia in the first quarter of 2022. The impact of foreign currency translation was a decrease of $681.0 million, or 4.8%. Reported total revenue in 2022 decreased $0.3 million to $14,289.1 million.
Organic growth by discipline in 2022 compared to 2021 was as follows: 7.3% for Advertising & Media, 17.1% for Precision Marketing, 13.7% for Public Relations, 10.7% for Commerce & Brand Consulting, 7.1% for Healthcare, 4.0% for Execution & Support, and 26.1% for Experiential.
Organic growth by region in 2022 compared to 2021 was as follows: 8.7% for the United States, 10.9% for the United Kingdom, 9.7% for the Euro Markets & Other Europe, 6.6% for Asia Pacific, 14.1% for Latin America, 9.2% for Other North America, and 33.2% for the Middle East & Africa.
Expenses
Operating expenses in 2022 increased $114.3 million, or 0.9%, to $12,205.8 million compared to 2021. In 2022, operating expenses include charges arising from the effects of the war in Ukraine of $113.4 million. In 2021, operating expenses were favorably impacted by a $50.5 million gain recorded in connection with dispositions in the Advertising & Media discipline. The weakening of most foreign currencies against the U.S. Dollar reduced operating expenses for 2022 as compared to the prior year in line with the percentage reduction from changes in foreign currencies on revenue.
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 $76.1 million, or 0.7%, to $10,325.9 million. Salary and related costs increased $226.9 million, or 3.3%, to $7,197.9 million
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due to organic revenue growth and increased headcount. Third-party service costs decreased $303.0 million, or 8.8%, to $3,128.0 million due primarily to dispositions in the Advertising & Media discipline in the second quarter of 2021 and the disposition of our businesses in Russia in the first quarter of 2022.
Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, increased $20.4 million, or 1.8%, to $1,168.6 million, due to an increase in general office expenses resulting from the return of our workforce to the office, partially offset by lower rent and other occupancy costs.
SG&A expenses decreased $1.2 million, or 0.3%, to $378.5 million.
Operating Profit
Operating profit in 2022 decreased $114.6 million, or 5.2%, to $2,083.3 million compared to 2021. The related operating profit margin was 14.6% in 2022 compared to 15.4% in 2021. Operating profit and operating profit margin in 2022 include $113.4 million in charges related to the effects of the war in Ukraine. Operating profit and operating profit margin for 2021 were favorably impacted by the $50.5 million gain recorded in connection with dispositions in the Advertising & Media discipline. Non-GAAP Adjusted operating profit increased 2.3%, and the related margin increased to 15.4% from 15.0%.
Interest Expense, net
Net interest expense in 2022 decreased $71.2 million to $137.9 million compared to 2021. Interest expense decreased $27.8 million to $208.6 million, and interest income increased $43.4 million to $70.7 million, primarily as a result of higher interest rates on cash balances and short-term investments.
Income Taxes
Our effective tax rate of 28.1% in 2022 increased from 24.6% in 2021. The higher effective tax rate for 2022 was primarily due to the result of the non-deductibility of $113.4 million in charges recorded in the first quarter of 2022 arising from the effects of the war in Ukraine, as well as an additional increase in income tax expense of $4.8 million related to the disposition of our businesses in Russia. These charges were partially offset by the tax benefit arising from our share-based compensation awards. The effective tax rate for 2021 reflects a nominal tax applied to the book gain on the disposition in the Advertising & Media discipline resulting from the excess of tax over book basis and a reduction in income tax expense of $32.8 million primarily related to the favorable settlements of uncertain tax positions in certain jurisdictions.
Net Income – Omnicom Group Inc. and Diluted Net Income per Share
Net income - Omnicom Group Inc. for 2022 decreased $91.3 million, or 6.5%, to $1,316.5 million compared to 2021. Diluted shares outstanding decreased to 207.0 million, or 4.0%, from 215.6 million as a result of net share repurchases. Diluted net income per share of $6.36 decreased $0.17, or 2.6%, from $6.53 per share. Non-GAAP adjusted diluted earnings per share for 2022 increased 8.5% to $6.93 from $6.39.
EBITA
EBITA decreased $114.3 million, or 5.0%, to $2,163.6 million compared to 2021. The related EBITA margin was 15.1% compared to 15.9% for 2021. EBITA and EBITA margin in 2022 include $113.4 million in charges related to the effects of the war in Ukraine. Operating profit and operating profit margin for 2021 were favorably impacted by the $50.5 million gain recorded in connection with dispositions in the Advertising & Media discipline.
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
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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, February 7, 2023 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 (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.
Contact
| Investors: | Gregory Lundberg | greg.lundberg@omnicomgroup.com |
|---|---|---|
| Media: | Joanne Trout | joanne.trout@omnicomgroup.com |
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Non-GAAP Financial Measures
We present financial measures determined in accordance with generally accepted accounting principles in the United States (“GAAP”) and adjustments to the GAAP presentation (“Non-GAAP”), which we believe are meaningful for understanding our performance. We use Adjusted Operating Profit, Adjusted Operating Profit Margin, Adjusted EBITA, Adjusted EBITA Margin, Adjusted Net Interest Expense, Adjusted Income Tax Expense, Adjusted Net Income – Omnicom Group Inc. and Adjusted Net Income per diluted share – Omnicom Group Inc. 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. EBITA, is defined as operating profit before interest, taxes, and amortization of intangible assets and EBITA margin, defined as EBITA divided by revenue. 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 arising from acquisitions). Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP. Non-GAAP financial measures as 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.
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Omnicom Group Inc.
Consolidated Statements of Income
Three Months Ended December 31
(Unaudited)
(In Millions, Except Per Share Data)
| 2022 | 2021 | |||
|---|---|---|---|---|
| Revenue | $ | 3,868.2 | $ | 3,855.9 |
| Operating Expenses: | ||||
| Salary and service costs | 2,792.0 | 2,792.1 | ||
| Occupancy and other costs | 294.4 | 277.2 | ||
| Costs of services | 3,086.4 | 3,069.3 | ||
| Selling, general and administrative expenses | 84.5 | 109.9 | ||
| Depreciation and amortization | 54.6 | 54.2 | ||
| 3,225.5 | 3,233.4 | |||
| Operating Profit | 642.7 | 622.5 | ||
| Interest Expense | 54.4 | 51.6 | ||
| Interest Income | 28.5 | 7.2 | ||
| Income Before Income Taxes and Income From Equity Method Investments | 616.8 | 578.1 | ||
| Income Tax Expense | 163.5 | 133.6 | ||
| Income From Equity Method Investments | 2.6 | 5.4 | ||
| Net Income | 455.9 | 449.9 | ||
| Net Income Attributed To Noncontrolling Interests | 26.1 | 33.7 | ||
| Net Income - Omnicom Group Inc. | $ | 429.8 | $ | 416.2 |
| Net Income Per Share - Omnicom Group Inc. | ||||
| Basic | $ | 2.11 | $ | 1.96 |
| Diluted | $ | 2.09 | $ | 1.95 |
| Weighted average shares | ||||
| Basic | 203.9 | 212.2 | ||
| Diluted | 205.2 | 213.3 | ||
| Dividends Declared Per Common Share | $ | 0.70 | $ | 0.70 |
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Omnicom Group Inc.
Consolidated Statements of Income
Twelve Months Ended December 31
(Unaudited)
(In Millions, Except Per Share Data)
| 2022 | 2021 | |
|---|---|---|
| Revenue | ||
| Operating Expenses: | ||
| Salary and service costs | 10,325.9 | 10,402.0 |
| Occupancy and other costs | 1,168.6 | 1,148.2 |
| Charges arising from the effects of the war in Ukraine | 113.4 | — |
| Gain on disposition of subsidiary | — | (50.5) |
| Cost of services | 11,607.9 | 11,499.7 |
| Selling, general and administrative expenses | 378.5 | 379.7 |
| Depreciation and amortization | 219.4 | 212.1 |
| 12,205.8 | 12,091.5 | |
| Operating Profit | 2,083.3 | 2,197.9 |
| Interest Expense | 208.6 | 236.4 |
| Interest Income | 70.7 | 27.3 |
| Income Before Income Taxes and Income From Equity Method Investments | 1,945.4 | 1,988.8 |
| Income Tax Expense | 546.8 | 488.7 |
| Income From Equity Method Investments | 5.2 | 7.5 |
| Net Income | 1,403.8 | 1,507.6 |
| Net Income Attributed To Noncontrolling Interests | 87.3 | 99.8 |
| Net Income - Omnicom Group Inc. | ||
| Net Income Per Share - Omnicom Group Inc. | ||
| Basic | 6.40 | 6.57 |
| Diluted | 6.36 | 6.53 |
| Weighted average shares | ||
| Basic | 205.6 | 214.3 |
| Diluted | 207.0 | 215.6 |
| Dividends Declared Per Common Share | 2.80 | 2.80 |
All values are in US Dollars.
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Omnicom Group Inc.
Detail of Operating Expenses
Three Months Ended December 31
(Unaudited)
(In Millions)
| 2022 | 2021 | |||
|---|---|---|---|---|
| Operating Expenses: | ||||
| Salary and service costs | ||||
| Salary and related service costs | $ | 1,853.4 | $ | 1,869.8 |
| Third-party service costs | 938.6 | 922.3 | ||
| 2,792.0 | 2,792.1 | |||
| Occupancy and other costs | 294.4 | 277.2 | ||
| Costs of services | 3,086.4 | 3,069.3 | ||
| Selling, general and administrative expenses | 84.5 | 109.9 | ||
| Depreciation and amortization | 54.6 | 54.2 | ||
| Total Operating Expenses | $ | 3,225.5 | $ | 3,233.4 |
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Omnicom Group Inc.
Detail of Operating Expenses
Twelve Months Ended December 31
(Unaudited)
(In Millions)
| 2022 | 2021 | |||
|---|---|---|---|---|
| Operating Expenses: | ||||
| Salary and service costs | ||||
| Salary and related service costs | $ | 7,197.9 | $ | 6,971.0 |
| Third-party service costs | 3,128.0 | 3,431.0 | ||
| 10,325.9 | 10,402.0 | |||
| Occupancy and other costs | 1,168.6 | 1,148.2 | ||
| Charges arising from the effects of the war<br> in Ukraine | 113.4 | — | ||
| Gain on sale of subsidiary | — | (50.5) | ||
| Cost of services | 11,607.9 | 11,499.7 | ||
| Selling, general and administrative expenses | 378.5 | 379.7 | ||
| Depreciation and amortization | 219.4 | 212.1 | ||
| Total Operating Expenses | $ | 12,205.8 | $ | 12,091.5 |
Page 10
Omnicom Group Inc.
Reconciliation of Non-GAAP Financial Measures
Three Months Ended December 31
(Unaudited)
(In Millions)
| 2022 | 2021 | |||||
|---|---|---|---|---|---|---|
| Net Income - Omnicom Group Inc. | $ | 429.8 | $ | 416.2 | ||
| Net Income Attributed To Noncontrolling Interests | 26.1 | 33.7 | ||||
| Net Income | 455.9 | 449.9 | ||||
| Income From Equity Method Investments | 2.6 | 5.4 | ||||
| Income Tax Expense | 163.5 | 133.6 | ||||
| Income Before Income Taxes and Income From Equity Method Investments | 616.8 | 578.1 | ||||
| Interest Income | 28.5 | 7.2 | ||||
| Interest Expense | 54.4 | 51.6 | ||||
| Operating Profit | 642.7 | 622.5 | ||||
| Add back: Amortization of intangible assets | 20.0 | 20.2 | ||||
| Earnings before interest, taxes and amortization of intangible assets ("EBITA") | $ | 662.7 | $ | 642.7 | ||
| Revenue | $ | 3,868.2 | $ | 3,855.9 | ||
| EBITA | $ | 662.7 | $ | 642.7 | ||
| EBITA Margin % | 17.1 | % | 16.7 | % |
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.
Page 11
Omnicom Group Inc.
Reconciliation of Non-GAAP Financial Measures
Twelve Months Ended December 31
(Unaudited)
(In Millions)
| 2022 | 2021 | |||||
|---|---|---|---|---|---|---|
| Net Income - Omnicom Group Inc. | $ | 1,316.5 | $ | 1,407.8 | ||
| Net Income Attributed To Noncontrolling Interests | 87.3 | 99.8 | ||||
| Net Income | 1,403.8 | 1,507.6 | ||||
| Income From Equity Method Investments | 5.2 | 7.5 | ||||
| Income Tax Expense | 546.8 | 488.7 | ||||
| Income Before Income Taxes and Income From Equity Method Investments | 1,945.4 | 1,988.8 | ||||
| Interest Expense | 208.6 | 236.4 | ||||
| Interest Income | 70.7 | 27.3 | ||||
| Operating Profit | 2,083.3 | 2,197.9 | ||||
| Add back: Amortization of intangible assets | 80.3 | 80.0 | ||||
| Earnings before interest, taxes and amortization of intangible assets (“EBITA”) | $ | 2,163.6 | $ | 2,277.9 | ||
| Revenue | $ | 14,289.1 | $ | 14,289.4 | ||
| EBITA | $ | 2,163.6 | $ | 2,277.9 | ||
| EBITA Margin % | 15.1 | % | 15.9 | % |
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.
Page 12
Omnicom Group Inc.
Reconciliation of Non-GAAP Adjustments
Twelve Months Ended December 31
(Unaudited)
(In Millions)
| Full Year | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Reported 2022 | Non-GAAP Adjustments | Non-GAAP Adjusted 2022 | Reported 2021 | Non-GAAP Adjustments | Non-GAAP Adjusted 2021 | |||||||||||
| Revenue | $ | 14,289.1 | $ | — | $ | 14,289.1 | $ | 14,289.4 | $ | — | $ | 14,289.4 | ||||
| Operating Expenses(a)(c) | 12,205.8 | (113.4) | 12,092.4 | 12,091.5 | 50.5 | 12,142.0 | ||||||||||
| Operating Profit | 2,083.3 | 113.4 | 2,196.7 | 2,197.9 | (50.5) | 2,147.4 | ||||||||||
| Operating Margin % | 14.6 | % | 15.4 | % | 15.4 | % | 15.0 | % | ||||||||
| Net Interest Expense(b) | 137.9 | — | 137.9 | 209.1 | (26.6) | 182.5 | ||||||||||
| Income Tax Expense(b)(c) | 546.8 | (4.8) | 542.0 | 488.7 | 7.1 | 495.8 | ||||||||||
| Income from Equity Method Investments | 5.2 | — | 5.2 | 7.5 | — | 7.5 | ||||||||||
| Net Income Attributed to Noncontrolling Interests | 87.3 | — | 87.3 | 99.8 | — | 99.8 | ||||||||||
| Net Income - Omnicom Group Inc.(c)(d) | $ | 1,316.5 | $ | 118.2 | $ | 1,434.7 | $ | 1,407.8 | $ | (31.0) | $ | 1,376.8 | ||||
| Diluted Shares | 207.0 | — | 207.0 | 215.6 | — | 215.6 | ||||||||||
| Net Income per Share - Diluted(d) | $ | 6.36 | $ | 0.57 | $ | 6.93 | $ | 6.53 | $ | (0.14) | $ | 6.39 | ||||
| Dividends Declared Per Common Share | $ | 2.80 | $ | — | $ | 2.80 | $ | 2.80 | $ | — | $ | 2.80 |
(a) Full Year 2021 Operating expenses and Net Income - Omnicom Group Inc. include $50.5 million related to a gain on the disposition of a subsidiary in the second quarter of 2021.
(b) Full Year 2021 Net interest expense includes a $26.6 million pre-tax charge ($19.5 million after-tax) on the early extinguishment of debt in the second quarter of 2021.
(c) In the first quarter of 2022, we recorded a pre-tax charge of $113.4 million in Operating Expenses related to the effects of the war in Ukraine, resulting in an additional $4.8 million of Income tax expense.
(d) The combined effect of the after-tax gain from the disposition in the Advertising & Media discipline and the loss on the early redemption of the 2022 Notes increased Net income - Omnicom Group Inc. for 2021 by $31.0 million and Net Income per Share- Diluted by $0.14.
The above table reconciles the nearest U.S. GAAP financial measures to Non-GAAP Adjusted financial measures. We believe Non-GAAP Adjusted financial measures are useful for investors to evaluate the performance of our business.
Page 13
a2022q4investorpresentat
2022 Fourth Quarter & Full Year February 7, 2023
2 Fourth Quarter Highlights Revenue – 7.2% organic revenue growth – Double-digit organic growth in Precision Marketing, Public Relations, and Experiential – Solid organic growth in every global region Profit – 16.6% operating profit margin – 7.2% year-over-year growth in Diluted EPS, net of approximately 6% headwind from foreign currency translations (a) Business update – Continued investment in retail media, data clean rooms, and connected TV – Planning for macroeconomic uncertainty, with confidence in the flexibility of our business Capital allocation – 95% of LTM Net Income returned to shareholders as dividends or net share repurchases – 88% of LTM Free Cash Flow used for net share repurchases, common dividends, and acquisitions (a) The 6% headwind from foreign currency translations on Net Income and Diluted EPS was in-line with the negative percentage impact of foreign currency translations on our revenue, and is a Non-GAAP measure.
3 Fourth Quarter 2022 2021 Revenue $ 3,868.2 $ 3,855.9 Operating Expenses 3,225.5 3,233.4 Operating Profit 642.7 622.5 Net Interest Expense 25.9 44.4 Income Tax Expense 163.5 133.6 Income from Equity Method Investments 2.6 5.4 Net Income Attributed to Noncontrolling Interests 26.1 33.7 Net Income - Omnicom Group Inc. $ 429.8 $ 416.2 Diluted Shares 205.2 213.3 Net Income per Share - Diluted $ 2.09 $ 1.95 Dividends Declared Per Common Share $ 0.70 $ 0.70 Income Statement Summary Note: In millions except per share amounts
4 Full Year Reported 2022 Non-GAAP Adjustments Non-GAAP Adjusted 2022 Reported 2021 Non-GAAP Adjustments Non-GAAP Adjusted 2021 Revenue $ 14,289.1 $ — $ 14,289.1 $ 14,289.4 $ — $ 14,289.4 Operating Expenses (a)(c) 12,205.8 (113.4) 12,092.4 12,091.5 50.5 12,142.0 Operating Profit 2,083.3 113.4 2,196.7 2,197.9 (50.5) 2,147.4 Net Interest Expense(b) 137.9 — 137.9 209.1 (26.6) 182.5 Income Tax Expense(b)(c) 546.8 (4.8) 542.0 488.7 7.1 495.8 Income from Equity Method Investments 5.2 — 5.2 7.5 — 7.5 Net Income Attributed to Noncontrolling Interests 87.3 — 87.3 99.8 — 99.8 Net Income - Omnicom Group Inc.(c)(d) $ 1,316.5 $ 118.2 $ 1,434.7 $ 1,407.8 $ (31.0) $ 1,376.8 Diluted Shares 207.0 — 207.0 215.6 — 215.6 Net Income per Share - Diluted(d) $ 6.36 $ 0.57 $ 6.93 $ 6.53 $ (0.14) $ 6.39 Dividends Declared Per Common Share $ 2.80 $ — $ 2.80 $ 2.80 $ — $ 2.80 Income Statement Summary - Adjusted Note: In millions except per share amounts. See Non-GAAP reconciliations on page 19 and 20. (a) Full Year 2021 Operating expenses and Net Income - Omnicom Group Inc. include $50.5 million related to a gain on the disposition of a subsidiary in the second quarter of 2021. (b) Full Year 2021 Net interest expense includes a $26.6 million pre-tax charge ($19.5 million after-tax) on the early extinguishment of debt in the second quarter of 2021. (c) In the first quarter of 2022, we recorded a pre-tax charge of $113.4 million in Operating Expenses related to the effects of the war in Ukraine, resulting in an additional $4.8 million of Income tax expense. (d) The combined effect of the after-tax gain from the disposition in the Advertising & Media discipline and the loss on the early redemption of the 2022 Notes increased Net income - Omnicom Group Inc. for 2021 by $31.0 million and Net Income per Share- Diluted by $0.14.
5 Revenue Change Fourth Quarter Full Year $ % ∆ $ % ∆ Prior Period Revenue $ 3,855.9 $ 14,289.4 Foreign exchange rate impact(a) (211.0) (5.5) % (681.0) (4.8) % Acquisition revenue, net of disposition revenue(b) (53.5) (1.4) % (665.6) (4.7) % Organic growth(c) 276.8 7.2 % 1,346.3 9.4 % Current Period Revenue $ 3,868.2 0.3 % $ 14,289.1 — % Note: In millions (a) 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. (b) 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 presentation above. (c) Organic growth: calculated by subtracting the foreign exchange rate impact, and the acquisition revenue, net of disposition revenue components from total revenue growth.
6 Revenue by Discipline Fourth Quarter Revenue % of Rev % Growth % Organic Growth(a) Advertising & Media(b) $ 2,061.9 53.3 % (2.8) % 6.0 % Precision Marketing 358.8 9.3 % 11.3 % 11.6 % Commerce & Brand Consulting 246.3 6.4 % 1.2 % 7.2 % Experiential 225.3 5.8 % 12.2 % 17.0 % Execution & Support 235.4 6.1 % (12.9) % (2.8) % Public Relations 401.5 10.4 % 8.8 % 12.7 % Healthcare 339.0 8.8 % 2.8 % 6.4 % Total $ 3,868.2 100.0 % 0.3 % 7.2 % Note: In millions (a) “Organic Growth” reflects the year-over-year increase in revenue from the prior period, excluding the foreign exchange rate impact and acquisition revenue, net of disposition revenue as defined on page 5. (b) Negative growth resulted from dispositions in the second quarter of 2021, which were principally in our Advertising & Media discipline in the United States. Numbers may not sum due to rounding. Full Year Revenue % of Rev % Growth % Organic Growth(a) Advertising & Media(b) $ 7,424.7 52.0 % (6.7) % 7.3 % Precision Marketing 1,417.9 9.9 % 18.7 % 17.1 % Commerce & Brand Consulting 958.4 6.7 % 5.2 % 10.7 % Experiential 645.5 4.5 % 18.2 % 26.1 % Execution & Support 980.0 6.9 % (4.5) % 4.0 % Public Relations 1,545.8 10.8 % 11.1 % 13.7 % Healthcare 1,316.8 9.2 % 4.5 % 7.1 % Total $ 14,289.1 100.0 % — % 9.4 %
7 Fourth Quarter Revenue % of Rev % Growth % Organic Growth(a) United States $ 1,952.1 50.5 % 6.6 % 5.6 % Other North America 126.4 3.2 % 0.2 % 7.3 % United Kingdom 382.7 9.9 % (4.1) % 9.9 % Euro Markets & Other Europe 702.7 18.2 % (13.4) % 5.1 % Asia Pacific 462.3 12.0 % (5.8) % 6.9 % Latin America 104.1 2.7 % 15.7 % 18.2 % Middle East & Africa 137.9 3.5 % 28.9 % 32.6 % Total $ 3,868.2 100.0 % 0.3 % 7.2 % Revenue by Region Note: In millions (a) “Organic Growth” reflects the year-over-year increase in revenue from the prior period, excluding the foreign exchange rate impact and acquisition revenue, net of disposition revenue as defined on page 5. Full Year Revenue % of Rev % Growth % Organic Growth(a) United States $ 7,367.3 51.6 % 1.7 % 8.7 % Other North America 488.7 3.4 % 5.4 % 9.2 % United Kingdom 1,526.1 10.7 % 0.5 % 10.9 % Euro Markets & Other Europe 2,484.4 17.4 % (8.0) % 9.7 % Asia Pacific 1,746.9 12.2 % (2.8) % 6.6 % Latin America 329.0 2.3 % 11.1 % 14.1 % Middle East & Africa 346.7 2.4 % 29.6 % 33.2 % Total $ 14,289.1 100.0 % — % 9.4 %
8 Full Year 2022 2021 Pharmaceuticals and Healthcare 16% 15% Food and Beverage 14% 14% Technology 10% 11% Auto 10% 10% Consumer Products 8% 8% Financial Services 8% 7% Travel & Entertainment 7% 7% Retail 6% 7% Telecommunications 4% 5% Government 4% 3% Services 2% 2% Oil, Gas & Utilities 2% 2% Not-for-Profit 1% 1% Education 1% 1% Other 7% 7% Total 100% 100% Revenue by Industry Sector
9 Operating Expense Detail Note: In millions (a) Third-party service costs are expenses paid to third-party vendors incurred primarily in connection with performance obligations for our services where we have determined that we are acting as principal. These third-party expenses also include incidental costs incurred in the performance of our services including airfare, mileage, hotel and other out-of-pocket expenses. (b) The first quarter of 2022 includes a pre-tax charge of $113.4 million in connection with charges arising from the effects of the war in Ukraine. (c) The second quarter of 2021 includes $50.5 million related to a gain on the disposition of a subsidiary. Fourth Quarter Full Year 2022 % of Rev 2021 % of Rev 2022(b) % of Rev 2021(c) % of Rev Revenue $ 3,868.2 $ 3,855.9 $ 14,289.1 $ 14,289.4 Operating expenses: Salary and related service costs 1,853.4 47.9 % 1,869.8 48.5 % (a) 7,197.9 50.4 % 6,971.0 48.8 % Third-party service costs (a) 938.6 24.3 % 922.3 23.9 % (a) 3,128.0 21.9 % 3,431.0 24.0 % Salary and service costs 2,792.0 2,792.1 10,325.9 10,402.0 Occupancy and other costs 294.4 7.6 % 277.2 7.2 % 1,168.6 8.2 % 1,148.2 8.0 % Gain on disposition of subsidiary(c) — — — (50.5) (0.4) % Charges arising from the effects of the war in Ukraine(b) — — 113.4 0.8 % — Cost of services 3,086.4 3,069.3 11,607.9 11,499.7 Selling, general and administrative expenses 84.5 2.2 % 109.9 2.9 % 378.5 2.6 % 379.7 2.7 % Depreciation and amortization 54.6 1.4 % 54.2 1.4 % 219.4 1.5 % 212.1 1.5 % Total operating expenses 3,225.5 83.4 % 3,233.4 83.9 % 12,205.8 85.4 % 12,091.5 84.6 % Operating Profit $ 642.7 $ 622.5 $ 2,083.3 $ 2,197.9
10 Adjusted Non-GAAP Operating Profit & Adjusted EBITA Fourth Quarter Full Year Reported 2022 Reported 2021 Reported 2022 Non-GAAP Adjustments Adjusted 2022 Reported 2021 Non-GAAP Adjustments Adjusted 2021 Revenue $ 3,868.2 $ 3,855.9 $ 14,289.1 $ — $ 14,289.1 $ 14,289.4 $ — $ 14,289.4 Operating expenses(b)(c) 3,225.5 3,233.4 12,205.8 (113.4) 12,092.4 12,091.5 50.5 12,142.0 Operating Profit 642.7 622.5 2,083.3 113.4 2,196.7 2,197.9 (50.5) 2,147.4 Operating Profit Margin % 16.6 % 16.1 % 14.6 % 15.4 % 15.4 % 15.0 % Add back: Amortization of intangible assets 20.0 20.2 80.3 80.3 80.0 80.0 EBITA (a) $ 662.7 $ 642.7 $ 2,163.6 $ 113.4 $ 2,277.0 $ 2,277.9 $ (50.5) $ 2,227.4 EBITA Margin % (a) 17.1 % 16.7 % 15.1 % 15.9 % 15.9 % 15.6 % Note: In millions (a) See Non-GAAP reconciliations on page 18 and 19. (b) The second quarter of 2021 includes $50.5 million related to a gain on the disposition of a subsidiary. (c) The first quarter of 2022 includes a pre-tax charge of $113.4 million in connection with charges arising from the effects of the war in Ukraine.
11 Cash Flow Performance Full Year 2022 2021 Free Cash Flow(a) $ 1,770.5 $ 1,784.9 Primary Uses of Cash: Dividends paid to Common Shareholders 581.1 592.3 Dividends paid to Noncontrolling Interest Shareholders 79.5 113.1 Capital Expenditures 78.2 665.8 Acquisition payments, including payment of contingent purchase price obligations, and acquisition of additional noncontrolling interests, net of proceeds from sale of investments and other 330.2 202.0 Stock Repurchases, net of Proceeds from Stock Plans 594.0 518.2 Primary Uses of Cash(a) 1,663.0 2,091.4 Net Free Cash Flow(a) $ 107.5 $ (306.5) Note: In millions (a) See page 16 for the reconciliation of Non-GAAP financial measures, which reconciles Free Cash Flow to the Net Cash Provided by Operating Activities and Net Free Cash Flow to the Net Decrease in Cash and Cash Equivalents for the periods presented above. The Free Cash Flow, Primary Uses of Cash and Net Free Cash Flow amounts presented above are Non-GAAP liquidity measures. See page 21 for the definition of these measures
12 Credit & Liquidity $ Millions Full Year 2022 2021 EBITDA(a) $ 2,302.7 $ 2,410.0 Total Debt / EBITDA 2.4 x 2.4 x Net Debt(b) / EBITDA 0.5 x 0.2 x Debt Bank Loans (Due Less Than 1 Year) $ 16.9 $ 9.6 USD-denominated Senior Notes 4,150.0 4,150.0 EUR-denominated Senior Notes 1,069.8 1,137.2 GBP-denominated Senior Notes 392.0 439.8 Other (34.6) (41.3) Total Debt $ 5,594.1 $ 5,695.3 Cash and Equivalents 4,281.8 5,316.8 Short Term Investments 60.7 — Net Debt(b) $ 1,251.6 $ 378.5 Note: In millions (a) EBITDA is a Non-GAAP performance measure. See page 21 for the definition of this measure and page 18 for the reconciliation of Non-GAAP financial measures. (b) Net Debt is a Non-GAAP liquidity measure. See page 21 for the definition of this measure, which is reconciled in the table above.
13 Historical Returns (a) Return on Invested Capital is After Tax Reported Operating Profit (a Non-GAAP performance measure – see page 21 for the definition of this measure and page 16 for the reconciliation of Non-GAAP financial measures) divided by the average of Invested Capital at the beginning and the end of the period (book value of all long-term liabilities, including those related to operating leases, short-term interest bearing debt, the short-term liability related to operating leases plus shareholders’ equity less cash, cash equivalents, short-term investments and operating lease right of use assets). (b) Return on Equity is Reported Net Income for the given period divided by the average of shareholders’ equity at the beginning and end of the period. Return on Invested Capital (ROIC)(a) Return on Equity(b) Twelve months ended December 31, 2022 27.7 % Twelve months ended December 31, 2022 40.4 % Twelve months ended December 31, 2021 33.4 % Twelve months ended December 31, 2021 44.3 %
14 Appendix
15 Free Cash Flow Note: In millions (a) 2021 amount includes $50.5 million related to a gain on the disposition of a subsidiary (b) The Free Cash Flow amounts presented above are Non-GAAP liquidity measures. See page 21 for the definition of this measure and page 16 for the reconciliation of the Non-GAAP financial measures, which reconciles Free Cash Flow to the Net Cash (Used in) Provided by Operating Activities for the periods presented above. Full Year 2022 2021 Net Income $ 1,403.8 $ 1,507.6 Depreciation and Amortization of Intangible Assets 219.4 212.1 Share-Based Compensation 81.7 84.7 Non-cash charge related to the effects of the war in Ukraine 65.8 — Other Items to Reconcile to Net Cash (Used in) Provided by Operating Activities, net (a) (0.2) (19.5) Free Cash Flow(b) $ 1,770.5 $ 1,784.9
16 Non-GAAP Reconciliations Full Year 2022 2021 Net Cash Provided by Operating Activities $ 926.5 $ 1,945.4 Operating Activities items excluded from Free Cash Flow: Changes in Operating Capital (844.0) 160.5 Free Cash Flow $ 1,770.5 $ 1,784.9 Net Decrease in Cash and Cash Equivalents $ (1,035.0) $ (283.7) Cash Flow items excluded from Net Free Cash Flow: Changes in Operating Capital (844.0) 160.5 Proceeds from Dispositions of Subsidiaries — 114.1 Proceeds from Long-term Borrowings — 1,221.3 Repayment of Long-term Debt — (1,250.0) Changes in Short-term Debt, net 8.9 6.4 Other, net (88.8) (100.6) Effect of foreign exchange rate changes on cash and cash equivalents (218.6) (128.9) Net Free Cash Flow $ 107.5 $ (306.5) Full Year 2022 2021 Reported Operating Profit $ 2,083.3 $ 2,197.9 Effective Tax Rate for the applicable period 28.1 % 24.6 % Income Taxes on Reported Operating Profit 585.4 540.7 After Tax Reported Operating Profit $ 1,497.9 $ 1,657.2 Note: In millions
17 Operating Expense Detail - Constant $ Note: In millions (a) Third-party service costs are expenses paid to third-party vendors incurred primarily in connection with performance obligations for our services where we have determined that we are acting as principal. These third-party expenses also include incidental costs incurred in the performance of our services including airfare, mileage, hotel and other out-of-pocket expenses. (b) In the first quarter of 2022, we recorded a pre-tax charge of $113.4 million in connection with charges arising from the effects of the war in Ukraine. (c) Constant Dollar ("C$") expense is calculated by translating the current period’s local currency expense using the prior period average exchange rates to derive current period C$ expense. The foreign exchange rate impact is the difference between the current period expense in U.S. Dollars and the current period C$ expense. Fourth Quarter Full Year 2022 2022 C$(c) 2021 2022 2022 C$(c) 2021 Operating expenses: Salary and related service costs $ 1,853.4 $ 1,960.7 $ 1,869.8 $ 7,197.9 $ 7,549.0 $ 6,971.0 Third-party service costs (a) 938.6 985.1 922.3 3,128.0 3,276.1 3,431.0 Salary and service costs 2,792.0 2,945.8 2,792.1 10,325.9 10,825.1 10,402.0 Occupancy and other costs 294.4 313.2 277.2 1,168.6 1,231.0 1,148.2 Charges arising from the effects of the war in Ukraine(b) — — — 113.4 113.4 — Gain on disposition of subsidiary — — — — — (50.5) Cost of services 3,086.4 3,259.0 3,069.3 11,607.9 12,169.5 11,499.7 Selling, general and administrative expenses 84.5 88.2 109.9 378.5 392.8 379.7 Depreciation and amortization 54.6 57.1 54.2 219.4 227.9 212.1 Total operating expenses $ 3,225.5 $ 3,404.3 $ 3,233.4 $ 12,205.8 $ 12,790.2 $ 12,091.5
18 Non-GAAP Reconciliations Note: In millions The above table reconciles the GAAP financial measure of Net Income – Omnicom Group Inc. to the Non-GAAP financial measures of EBITDA and EBITA for the periods presented. EBITDA and EBITA, which are defined on page 21, are Non-GAAP financial measures within the meaning of applicable SEC rules and regulations. Our credit facility defines EBITDA as earnings before deducting interest expense, income taxes, depreciation and amortization, and excludes certain other one-time items. Our credit facility uses EBITDA to measure our compliance with covenants, such as our leverage ratios, as presented on page 12 of this presentation. Three Months Ended Twelve Months Ended December 31 December 31 2022 2021 2022 2021 Net Income - Omnicom Group Inc. $ 429.8 $ 416.2 $ 1,316.5 $ 1,407.8 Net Income Attributed to Noncontrolling Interests 26.1 33.7 87.3 99.8 Income From Equity Method Investments 2.6 5.4 5.2 7.5 Income Tax Expense 163.5 133.6 546.8 488.7 Income Before Income Taxes and Income From Equity Method Investments 616.8 578.1 1,945.4 1,988.8 Net Interest Expense 25.9 44.4 137.9 209.1 Operating Profit 642.7 622.5 2,083.3 2,197.9 Amortization of Intangible Assets 20.0 20.2 80.3 80.0 EBITA 662.7 642.7 2,163.6 2,277.9 Depreciation 34.6 34.0 139.1 132.1 EBITDA $ 697.3 $ 676.7 $ 2,302.7 $ 2,410.0
19 Non-GAAP Reconciliations Note: In millions The above table reconciles the GAAP financial measure of Net Income – Omnicom Group Inc. to the Non-GAAP financial measures of EBITA Adjusted and Operating Profit Adjusted for the periods presented. Management believes that excluding the charges arising from the effects of the war in Ukraine and the Gain on disposition of subsidiary provides investors with a better picture of the performance of the business during the period presented. EBITA, which is defined on page 21, is a Non-GAAP financial measures within the meaning of applicable SEC rules and regulations. Twelve Months Ended December 31, 2022 Non-GAAP Adjusted EBITA Operating Profit Net Income - Omnicom Group Inc.- reported $ 1,316.5 $ 1,316.5 Net Income Attributed To Noncontrolling Interests 87.3 87.3 Income From Equity Method Investments 5.2 5.2 Income Tax Expense 546.8 546.8 Income Before Income Taxes and Income From Equity Method Investments 1,945.4 1,945.4 Net Interest Expense 137.9 137.9 Operating Profit - Reported 2,083.3 2,083.3 Charges arising from the effects of the war in Ukraine 113.4 Gain on disposition of subsidiary Non-GAAP Operating Profit - Adjusted $ 2,196.7 Amortization of Intangible Assets 80.3 EBITA - Reported 2,163.6 Charges arising from the effects of the war in Ukraine 113.4 Gain on disposition of subsidiary EBITA - Adjusted $ 2,277.0 Revenue- reported $ 14,289.1 $ 14,289.1 Margin 15.9 % 15.4 % Twelve Months Ended December 31, 2021 Non-GAAP Adjusted EBITA Operating Profit $ 1,407.8 $ 1,407.8 99.8 99.8 7.5 7.5 488.7 488.7 1,988.8 1,988.8 209.1 209.1 2,197.9 2,197.9 (50.5) $ 2,147.4 80.0 2,277.9 (50.5) $ 2,227.4 $ 14,289.4 $ 14,289.4 15.6 % 15.0 %
20 Fourth Quarter Full Year In millions except per share amounts 2022 2021 2022 2021 Net Income - Omnicom Group Inc. - Reported $ 429.8 $ 416.2 $ 1,316.5 $ 1,407.8 Gain on disposition of subsidiary — — — (50.5) Early extinguishment of debt — — — 26.6 Tax expense on early extinguishment of debt — — — (7.1) Charges arising from the effects of the war in Ukraine — — 113.4 — Tax expense on charges arising from the effects of the war in Ukraine — — 4.8 — Net Income - Omnicom Group Inc. - Adjusted $ 429.8 $ 416.2 $ 1,434.7 $ 1,376.8 Diluted Shares 205.2 213.3 207.0 215.6 Net Income per Share - Omnicom Group Inc. - Adjusted(a) $ 2.09 $ 1.95 $ 6.93 $ 6.39 Non-GAAP Reconciliations Note: In millions except per share amounts See page 21 for definition of Non-GAAP financial measures. (a) Net Income per Share- Omnicom Group Inc.- Adjusted increased year over year 7.2% in Forth Quarter and 8.5% in the Full Year.
21 Disclosures The preceding materials have been prepared for use in the February 7, 2023 conference call on Omnicom’s results of operations for the three and twelve months ended December 31, 2022. The call will be archived on the Internet at http:// investor.omnicomgroup.com Forward-Looking Statements Certain statements in this presentation 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 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. Non-GAAP Financial Measures We present financial measures determined in accordance with generally accepted accounting principles in the United States (“GAAP”) and adjustments to the GAAP presentation (“Non-GAAP”), which we believe are meaningful for understanding our performance. We use Adjusted Operating Profit, Adjusted Operating Profit Margin, Adjusted EBITA, Adjusted EBITA Margin, Adjusted Net Interest Expense, Adjusted Income Tax Expense, Adjusted Net Income – Omnicom Group Inc. and Adjusted Net Income per diluted share – Omnicom Group Inc. 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 GAAP. Non-GAAP financial measures as reported by us may not be comparable to similarly titled amounts reported by other companies. We provide a reconciliation of Non-GAAP measures to the comparable GAAP measures on pages 16 through 20. The Non-GAAP measures used in this presentation include the following: Free Cash Flow, defined as net income plus depreciation, amortization, share based compensation expense plus/(less) other items to reconcile to net cash (used in) provided by operating activities. We believe Free Cash Flow is a useful measure of liquidity to evaluate our ability to generate excess cash from our operations. Primary Uses of Cash, defined as dividends to common shareholders, dividends paid to non-controlling interest shareholders, capital expenditures, cash paid on acquisitions, payments for additional interest in controlled subsidiaries and stock repurchases, net of the proceeds from our stock plans, and excludes changes in operating capital and other investing and financing activities, including commercial paper issuances and redemptions used to fund working capital changes. We believe this liquidity measure is useful in identifying the significant uses of our cash. Net Free Cash Flow, defined as Free Cash Flow less the Primary Uses of Cash. Net Free Cash Flow is one of the metrics used by us to assess our sources and uses of cash and was derived from our consolidated statements of cash flows. We believe that this liquidity measure is meaningful for understanding our primary sources and primary uses of that cash flow. EBITDA, defined as operating profit before interest, taxes, depreciation and amortization of intangible assets. We believe EBITDA is a meaningful operating performance measure because the financial covenants in our credit facilities are based on EBITDA. EBITA, defined as operating profit before interest, taxes and amortization of intangible assets and EBITA margin, defined as EBITA divided by revenue. 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 arising from acquisitions). Accordingly, we believe they are useful measures for investors to evaluate the performance of our business. Net Debt, defined as total debt less cash, cash equivalents and short-term investments. We believe net debt, together with the comparable GAAP measures, reflects one of the liquidity metrics used by us to assess our cash management. After Tax Reported Operating Profit, defined as reported operating profit less income taxes calculated using the effective tax rate for the applicable period. Management uses after tax operating profit as a measure of after tax operating performance as it excludes the after tax effects of financing and investing activities on results of operations. Other Information All dollar amounts are in millions except for per share figures. The information contained in this document has not been audited, although some data has been derived from Omnicom’s historical financial statements, including its audited financial statements. In addition, industry, operational and other non-financial data contained in this document have been derived from sources that we believe to be reliable, but we have not independently verified such information, and we do not, nor does any other person, assume responsibility for the accuracy or completeness of that information. Certain amounts in prior periods have been reclassified to conform to our current presentation. The inclusion of information in this presentation does not mean that such information is material or that disclosure of such information is required.