Omnicom Group Inc. (OMC) on Q2 2021 Results - Earnings Call Transcript

Operator: Good morning ladies and gentlemen and welcome to the Omnicom second quarter 2021 earnings release conference call. At this time, all participants are is listen-only mode. Later, we will conduct a question and answer session. To participate, please press one then zero, and if you need assistance during the call, please press star then zero. As a reminder, this conference call is being recorded, and at this time I’d like to introduce you to your host for today’s conference, Chief Communications Officer Joanne Trout. Please go ahead. Joanne Trout: Good morning. Thank you for taking the time to listen to our second quarter 2021 earnings call. On the call with me today is John Wren, our Chairman and Chief Executive Officer, and Phil Angelastro, our Chief Financial Officer. John Wren: Thank you Joanne, and good morning to everyone on the call today. I hope you are staying safe and healthy. We are pleased to kick off today’s call by reporting that we’ve rounded the corner into positive growth. We had extremely strong results top and bottom line and continue to make very good progress on several of our strategic initiatives. Organic growth for the second quarter was a positive 24.4%. This growth was broad-based across our agencies, geographies, disciplines and client sectors. We experienced a significant increase in spend from existing clients as the effects of the pandemic subsided, and we benefited from strong new business wins. EBIT was $568 million in the quarter, an increase of 67% versus the second quarter of 2020. Q2 2021 included a gain of $50.5 million from the sale of Icon International in early June, and Q2 2020 EBIT included $278 million of charges related to the repositioning actions. Excluding gains and charges, EBIT margin was 14.5% in the quarter compared to 12.2% in Q2 2020. Phil will provide further details on the expected impact of the sale of Icon on our results for the balance of the year. As we stated on our last call, we view 2019 as a reasonable proxy for our ongoing margin expectations. Excluding the sale of Icon, our six months 2021 EBIT margin was 14%, which is in line with our EBIT margin of 13.9% for the first six months of 2019. Net income was $348 million in the second quarter, an increase of 75% from the second quarter of 2020, and EPS was $1.60 per share, an increase of 74%. The net impact from the gain on the sale of Icon, which was offset by an interest expense charge related to the early retirement of debt, increased EPS in Q2 2021 by $0.14 per share. Philip Angelastro: Thanks John, and good morning. As John discussed in his remarks, while the impact of the pandemic continues to be felt across the globe, that impact has moderated significantly as evidenced by our return to growth in Q2. We expect our return to growth will continue in the second half; however, as long as COVID-19 remains a public health threat, some uncertainty regarding economic conditions will continue which could impact our clients’ spending plans and the performance of our businesses may vary by geography and discipline. Organic growth for the quarter was 24.4% or $682 million, which represents a significant increase compared to Q2 of 2020, which reflected the onset of the pandemic when revenue declined by 23% or $855 million. In addition, in early June we completed the disposition of Icon, our specialty media business, which resulted in a pre-tax gain of $50.5 million. The sale of Icon was consistent with our strategic plan and investment priorities and the disposition is not expected to have a material impact on our ongoing operating income for 2021. Flipping to Slide 4 for a summary of our revenue performance for the second quarter, in addition to our organic revenue growth of 24.4% for the quarter, the impact of foreign exchange rates increased our revenue by 5.4% in the quarter, higher than we anticipated entering the quarter as the dollar continued to weaken against most of our larger currencies compared to the prior year. The impact on revenue from acquisitions net of dispositions decreased revenue by 2.2%, primarily related to the sale of Icon. As a result, our reported revenue in the second quarter increased 27.5% to $3.57 billion from the $2.8 billion reported for Q2 of 2020. I’ll return to discuss the details of the changes in revenue in a few minutes. Turning back to Slide 1, our reported operating profit for the quarter increased to $568 million, including a $50.5 million gain on the sale of Icon. As you’ll remember, our Q2 2020 results included a $278 million COVID-19 repositioning charge which included severance actions, real estate lease impairments and terminations and related fixed asset charges, as well as a loss on the disposition of several small non-core underperforming agencies. Our operating margin for the quarter was 15.9%, up significantly from Q2 2020 even after excluding the gain on the sale of Icon in the current period and adding back the repositioning charge recorded in Q2 of 2020. We also continued to see operating margin improvement year-over-year resulting from proactive management of our discretionary addressable spend cost categories, including a reduction in travel and related costs as well as reductions in certain costs of operating our offices given the continued remote work environment, as well as benefits from some of the repositioning actions taken back in the second quarter of 2020. Our reported EBITDA for the quarter was $590 million and EBITDA margin was 16.5%. Excluding the $50.5 million gain on the Icon disposition, EBITDA margin for Q2 2021 was 15.1%. EBITDA margin in Q2 of 2020 after adding back the $278 million repositioning charge was 12.9%. On Slide 3 of our investor presentation, we present the details of our operating expenses. We’ve also included a supplemental slide on Page 15 that shows the 2021 amounts presented in constant dollars to exclude the effects of year-on-year FX changes. As we’ve discussed previously, we have and will continue to actively manage our costs to ensure they are aligned with our current revenues. We also continue to evaluate ways to improve efficiency throughout the organization, focusing on real estate portfolio management, back office services, procurement, and IT services. As for the details, our salary and service costs are variable and fluctuate with revenue. They increased by about $300 million versus Q2 of 2020, or $220 million on a constant dollar basis driven by the increase in our overall business activity. We would also note that the Q2 2020 salary and service cost amounts were reduced by reimbursements received from government programs of $49.2 million. Third party service costs increased by $275 million or $242 million on a constant dollar basis. These costs include expenses incurred with third party vendors when we act as a principal when performing services for our clients. Occupancy and other costs, which are not directly linked to changes in revenue, increased by $4 million. Excluding the impact of FX, these costs declined by $10 million in the quarter as we continued our efforts to reduce infrastructure costs and we benefited from a decrease in general office expenses as the majority of our staff continued to work remotely in Q2. SG&A expenses increased by $21 million, or $18 million on a constant dollar basis, again related to the return to more normal activities in the quarter. Finally, depreciation and amortization declined by $3.6 million. Net interest expense in the second quarter of 2021 increased $26.3 million period over period to $73.5 million. Because of our solid working capital and cash flow performance during the pandemic period, in Q2 we determined we no longer needed the liquidity insurance we added in early April 2020 when we issued $600 million in debt and added a $400 million, 364-day revolving credit facility. In April 2021, the credit facility expired unused. In May, we issued $800 million of 2.6% senior notes due 2031. In June, proceeds from the issuance of the 2.6% notes plus cash on hand we used to redeem early all of our outstanding $1.25 billion 3.625% notes that were due in May of 2022. Gross interest expense in the second quarter of 2021 increased $26.6 million, resulting from the loss we recognized on the early redemption of all the outstanding $1.2 billion of 3.625% 2022 senior notes. Additionally, the impact of this refinancing activity reduced our leverage ratio to 2.2 times at June 30, 2021, and is expected to result in lower interest expense on our debt in the second half of approximately $6 million as compared to the prior year. Interest income in the second quarter of 2021 was relatively flat. Our effective tax rate for the second quarter was 24.9%, down a bit from the effective tax rate we estimated for 2021 of between 26.5% to 27%, primarily due to nominal taxes recorded on the book gain on sale. Earnings from our affiliates was marginally negative for the quarter while the allocation of earnings to minority shareholders of certain of our agencies increased to $23.4 million. As a result, reported net income for the second quarter was $348.2 million. While we restarted our share repurchase program during the second quarter, our diluted share count for the quarter increased slightly versus Q2 of last year to 217.1 million shares resulting from the year-over-year increase in our share price and the increase in common stock equivalents included in our diluted share count. As a result, our diluted EPS for the second quarter was $1.60 versus the loss of $0.11 per share we reported in Q2 of 2020. The gain on the sale of Icon and the loss on the early redemption of the 2022 senior notes resulted in a net increase of $31 million to net income, or $0.14 to EPS. As we previously discussed, the prior year period included the net impact of the repositioning charges which reduced last year’s second quarter net income EPS by $223.1 million and $1.03 respectively. On Slide 2 for your reference, we provide the summary P&L, EPS and other information for the year-to-date period. Now returning to the details of the changes in our revenue performance on Slide 4, reported revenue for the second quarter was $3.57 billion, up $771 million or 27.5% from Q2 of 2020. Turning to the FX impacts, on a year-over-year basis the impact of foreign exchange rates increase our reported U.S. dollar revenue by 5.4% or $150.8 million, which was above the 3.5% to 4% increase that we estimated entering the quarter. The strengthening of foreign currencies against the dollar was widespread and included most of our largest major foreign currencies. In the quarter, the largest FX increases were driven by the strengthening of the euro, the British pound, the Chinese yuan, and the Australian dollar. In the quarter, the U.S. dollar only strengthened against the Japanese yen and the Russian ruble. In light of the weakening of the U.S. dollar compared to 2020, assuming FX rates continue where they currently stand, our estimate is that FX could increase our reported revenues by approximately 1.5% for the third quarter and 1% for the fourth quarter, resulting in a full year projected increase of approximately 2.5%. The impact of our acquisition and disposition activities over the past 12 months primarily reflecting the Icon disposition as well as the recent acquisitions of Archbow and Areteans during the second quarter of 2021 resulted in a net decrease in revenue of $62 million in the quarter, or 2.2%. Based on transactions that have been completed through June 30 of 2021, our estimate is the net impact of our acquisition and disposition activity for the balance of the year will decrease revenue by between 6% to 7% for the third and fourth quarters, resulting in a full year reduction of approximately 4%. While we will continue our process of evaluating our portfolio of businesses as part of our strategic planning, as John has said with regard to dispositions, we are substantially complete. Our organic growth of $682 million or 24.4% in the second quarter reflects strong performance across all of our major geographic markets and across all of our service disciplines. Turning to our mix of business by discipline on Page 5, for the second quarter the split was 56% for advertising and 44% for marketing services. As for the organic change by discipline, advertising was up nearly 30% primarily on the growth of our media businesses, reflecting a strong recovery of activity within the media space. Our global and national advertising agencies achieved strong growth this quarter, although the pace of growth by agency remained somewhat mixed. CRM precision marketing increased 25%. Through the strength of their service offerings, the agencies within this discipline have delivered solid revenue performance throughout the pandemic and they continue to perform well. CRM commerce and brand consulting was up 15.2%, but the performance within this discipline was mixed as our shopper marketing agencies cycled through the effects of recent client losses. While organic revenue for CRM experiential was up over 50%, it should be noted that events were virtually shut down as lockdowns took effect in March and April of 2020. While government restrictions on events have been eased recently in certain markets, these businesses still face challenges regarding when they will return to pre-pandemic levels. CRM execution and support was up 22.7%, reflecting a recovery in client spend compared to Q2 of 2020 in our field marketing and merchandising and point of sale businesses, while our non-for-profit businesses continue to lag. PR was up 15.1% coming off pandemic lows in 2020, and finally our healthcare discipline was up 4.5% organically. Healthcare was the only one of our service disciplines that have positive organic growth in Q2 2020. The performance of these agencies remains solid across the group. Now turning to the details of our regional mix of businesses on Page 6, you can see the quarterly split was 51.5% in the U.S., 3.3% for the rest of North America, 10.6% in the U.K., 18.6% for the rest of Europe, 12.5% for Asia Pacific, 2% for Latin America, and 1% for the Middle East and Africa. In reviewing the details of our performance by region on Page 7, organic revenue in the second quarter in the U.S. was up nearly 20% or $316 million. Our advertising discipline was positive for the quarter. Our media agencies excelled in the quarter, as did our CRM precision marketing agencies and our PR agencies, and our commerce and brand consulting category rebounded to growth in the quarter while our healthcare agencies were flat versus last year when organic growth was 3.7% in the quarter. Our other CRM domestic disciplines, experiential and execution and support, also performed well organically versus Q2 of 2020. We expect it will take a bit longer for them to return to 2019 revenue levels as social distancing restrictions and pandemic concerns subside. Outside the U.S., our other North American agencies were up 37% driven by the strength of our media and precision marketing agencies in Canada. Our U.K. agencies were up 23.8% organically led by the performance of our CRM precision marketing, advertising and healthcare agencies. The rest of Europe was up 34.5% organically. In the euro zone, among our major markets France, Germany, Italy and the Netherlands were up greater than 30% organically while Spain was up in the mid single digits. Outside the euro zone, our organic growth was up around 35% during the quarter. Organic revenue performance in Asia Pacific for the quarter was up 27.9% with our performance from our agencies in Australia, Greater China, India and New Zealand leading the way. Latin America was up 20.8% organically in the quarter with our agencies in Mexico and Colombia growing more than 20%, and Brazil was up almost 17%. Lastly, the Middle East and Africa was up over 40% for the quarter. On Slide 8, we present our revenue by industry information on a year-to-date basis. We’ve seen improvement in performance across most industries with the overall mix of revenue by industry remaining relatively stable. The travel and entertainment sector was boosted in Q2 of 2021 by increased activity related to spend by clients in the entertainment category, which mitigated continued reduced spend levels from many of our travel and lodging clients. Turning to our cash flow performance, on Slide 9 you can see that the first six months of the year we generated nearly $800 million of free cash flow, excluding changes in working capital, up over $70 million versus the first half of last year. As for our primary uses of cash on Slide 10, dividends paid to our common shareholders were $292 million, up about $10 million when compared to last year due to the $0.05 per share increase in the quarterly payment effective with the dividend payment we made in April. Dividends paid to our non-controlling interest shareholders totaled $39 million. Capital expenditures in the first half of 2021 were $23 million. Acquisitions, which include our recently completed transactions as well as earn-out payments, totaled $36 million, and stock repurchases were $95 million net of the proceeds from our stock plans, reflecting the resumption of our share repurchases during the second quarter of this year. As a result of our continuing efforts to prudently manage the use of our cash, we were able to generate $311 million of free cash flow during the first half of the year. Regarding our capital structure at the end of the quarter, as detailed on Slide 11, our total debt was $5.31 billion, down about $410 million since this time last year and down just over $500 million compared to year-end 2020. Both changes reflect the early retirement in Q2 of 2021 of $1.25 billion of 3.65% senior notes which were due in 2022, partially replaced with the issuance of $800 million of 2.6% 10-year notes due in 2031. In addition to the net reduction in debt of $450 million from the refinancing, the only other meaningful change to the net balance for the LTM period was an increase of approximately $65 million resulting from the FX impact of converting our €1 billion euro-dominated borrowings into U.S. dollars at the balance sheet date. Our net debt position as of June 30 was $922 million, up about $710 million from last year-end but down $1.5 billion when compared to where we stood 12 months ago. The increase in net debt since year-end was a result of the typical uses of working capital that occur over the first half of the year, totaling just under $1.1 billion, which was partially offset by the $311 million we generated in free cash flow in the first half of the year. Over the past 12 months, the improvement in net debt is primarily due to our positive free cash flow of $790 million, positive changes in operating capital of $525 million, and the impact of FX on our cash and debt balances which decreased our net debt position by $154 million. As for our debt ratios, as a result of our overall operating improvement versus Q2 of 2020 and our recent refinancing activity, we’ve reduced our total debt to EBITDA ratio to 2.2 times and our net debt to EBITDA ratio to 0.4 times. As a result of our overall operating improvement versus Q2 of 2020 and our recent refinancing activity, we have reduced our total debt to EBITDA ratio to 2.2 times and our net debt to EBITDA ratio to 0.4 times. Finally, moving to our historical returns on Page 12, the last 12 months our return on invested capital ratio was 25.9% while our return on equity was 46.8%, both significantly better than our returns from 12 months ago. That concludes our prepared remarks. Please note that we have included several of the supplemental slides in our presentation materials for your review. At this point, we are going to ask the Operator to open the call for questions. Thank you. Operator: Our first question comes from the line of Alexia Quadrani with JP Morgan. Please go ahead. Alexia Quadrani: Thank you very much. Just a couple questions, if I may. The first one, really I guess in Icon and the disposition there, I think you mentioned it won’t have too much of an impact on the business going forward, but it sounds like it’s a pretty sizeable revenue contributor given the fact that it’s impacting dispositions going forward, so I’m wondering, it must be--is it much more of a low margin business, so maybe a positive for profitability longer term now that you’re no longer involved in that business, and then maybe if you can comment on margins in general, how we should think about them longer term. I think you mentioned this year more of a baseline looking like 2019, but given the efficiencies, that some of them might be permanent on the real estate side, should we think of maybe slightly higher margins longer term? John Wren: Sure, let me first talk about Icon. Icon was very low margin business for sure, and it was a very large business. We purchased Icon in 2000 and it grew rather nicely for the first 10 or 15 years, and then for the last several years it’s actually--it hasn’t declined, but it hasn’t grown, and when you take a large number with no growth, it mutes the growth of the rest of the organization. The margins are such that we more than make up for it in our pursuit of more profit and EBIT, and we’ve taken all that into consideration. It took quite a long time to take a decision, but we finally did, and the most important aspect because we can cover the profits, it was a low margin business, is that we’re substantially complete with the exercise that we started three or four years ago of scrutinizing the portfolio and ridding ourselves of legacy companies that weren’t going to contribute to our long term growth. We’re very happy with the decision and that’s where that stands. I’ll do a quick thing on margins and then Phil can add to both of my comments. With respect to margins, we’ve said all along that we think 2019 is really the benchmark that we’re going to look at and then start to plan some growth from. Last year, you had the disruption of COVID in every single office around the company, you had the restructuring charges we had to take and you had government subsidies in certain instances, but they certainly didn’t cover the costs that we incurred. We will get efficiencies for certain out of the real estate actions that we took and the agile workforce and hybrid workforce that will be impacted as we come back to work, but against that what you have is some inflation in terms of wages and the resurgence of some of the addressable spend that when people weren’t permitted to get on airplanes and visit offices, they will be hopefully in the near term. I know I’ve been able to travel, principally because of my position I’ve been able to go wherever I want, but most people can’t do that. Phil, you might want to add on both points. Philip Angelastro: I would echo what John said - I think as far as margins, certainly going forward we think ’19 is the right baseline. We do expect, or did expect that the first half certainly of ’20 would be a little easier given the remote workforce impact on both the addressable spend that John just touched on and not having as many people back in the office reduces some of the operating cost associated with running those offices when people are back. Some of that is going to come back. We’re going to welcome a bunch of cost back when we’re in growth mode, like we are now. The challenge is going to be continuing to be disciplined about controlling those costs. I think the goal is certainly do a bit better than ’19, but ’19 is really the baseline for the business going forward and then striving to do better than it. John Wren: A final comment on this is obviously there are challenges as you reopen, but there’s a renewed energy which I think is going to contribute to both the top line and consistently to the bottom line. Alexia Quadrani: John, just to follow up, if I may, on the overall environment, I think most people can characterize it, while uneven and volatile, it’s been a robust advertising recovery . Are you getting the sense--you’ve got great such perspective with your relationship with advertisers, are you getting the sense that there is some beginning of hesitancy on the recovery or the spend, given the delta variant, or not at all - while uneven, it still seems to be pretty robust? John Wren: I think the delta variant is--because of the headlines, it’s somewhat an unknown, and we can’t predict illness. One of the things that gives me some comfort is that when you get past the headlines and you read the people that have been impacted, it’s people who haven’t been vaccinated, received only one shot of the two-shot protocol, and/or who already have an existing health problem of one form or another and had put themselves in a risky situation. We’ll be starting to bring back the vaccinated people that we have in earnest after Labor Day and I think people are encouraged to go back to the office. So yes, there’s hesitancy on the part of everyone because we don’t know--we can’t predict the future, but we do know that we’ve lived through a hell of a past and we’ve done it successfully, so that gives us confidence. The other thing, which will be temporary, I think, is there’s going to be certain industries where we’re already seeing some concern about the adjustments that have had to be made to certain clients’ supply lines and certain components that they need and delay in receiving them, but we see that as a temporary issue, as do most of our clients, at least the ones that I’ve been speaking to. Alexia Quadrani: Thank you very much. John Wren: Thank you. Operator: We do have a question from the line of Tim Nollen with Macquarie. Please go ahead. Tim Nollen: Great, thanks. Even coming into COVID, before COVID, you guys were taking about returning to GDP type of growth levels, which typically was your norm up until a few years ago. I wonder if you could give us an update now, given the divestitures, given the state of the market - I know it’s very much in flux right now, but just where do you see your longer term growth rate settling out once we move through these COVID impacts? On the acquisition side, maybe a tack-on question. You mentioned getting back on the acquisition trail. We’ve seen in the technology space some very high valuations. Just wondering if you could comment on pricing in the market, and also noting your leverage is quite low right now, if there might be any appetite to raise leverage to do more acquisitions. Thanks. John Wren: There was a couple of questions there, right? The first one, I’m not changing my tune. Twenty five years later it’s GDP-plus, all right, and without the burden of a non-growth large entity, it makes it more achievable than it was the last time I said it. Doesn’t mean it’s going to happen next week, but we do know the quality of our businesses and the quality of our portfolio. We have the benefit of having always protected the creative product, which is our ISP, and whilst we have the technology and all the other systems, we can service a client, like in the case of Philips, as if we were one company, Omnicom, or if a client has individual needs, our brands are more than happy and excellent and excel at taking care of them, so that’s all going to benefit that. In terms of acquisition pricing, you’re absolutely right - there is an insane amount of money chasing things that are out there. We’ve already looked for people who wanted to be partners on a longer term and we’ve always looked to do accretive acquisitions, and when we haven’t been able to find accretive acquisition, we’ve borne the expense of starting up companies and doing things ourselves. I think as we--well, I know, I don’t think, as we go forward, there is one or two areas which I’m not going to speak about on the phone that I’m probably--I’d be willing to break even on if I had to pay the price to get the reputation to use as a basis from which then to grow organically, but none that at this point is going to result in the increase in our leverage, and our capital program, which I typically have in my script and I didn’t bother to mention this time, is exactly the same. It’s first to pay our dividends, second to do accretive acquisitions, and last but not least share buybacks. Phil, do you want to--? Philip Angelastro: Yes, I don’t think there’s much to add. I think certainly from a capital allocation strategy perspective, we don’t expect to change anything other than our goal is to spend more of our free cash flow on acquisitions in the areas that we think the opportunities for growth are the highest, and we’re going to be a little more active, as we’ve indicated the last few calls, in pursuing those potential deals. John Wren: Just having said that, kind of on a humorous note, prior to getting on the call this morning we saw the treasuries today were 1.16, and Phil and I were just ruminating - dammit, we don’t need any more money, because it’s so cheap. Operator: We do have a question from the line of Craig Huber with Huber Research Partners. Please go ahead. Craig Huber: Yes, good morning. Just a few questions. Under the revenue by industry chart here, what areas would be the two areas, John, you’re the most optimistic about as you think out here over the next year? John Wren: There’s a couple of area that I’m very optimistic about. I’m optimistic about our precision marketing group, very optimistic about our media operations and some of the changes we made there. I am optimistic that our experiential business, which has suffered dearly during COVID but has returned in places like China, will come back, and when it does, it will contribute to our growth significantly. And healthcare continues, and I think especially coming out of things like COVID and especially people who have issues being more exposed than otherwise healthy people, I think is a commitment that every person on the planet is going to be over--you know, is going to be really focused on, so I think we’re in some great places. With all the confusion and noise and various media that you can reach out to, I cannot understate our creativity. I can’t understate how it’s in every component of our business and it’s always been, since the foundation by two creative leaders of Omnicom 30 years ago. It’s not something that you can add to a technology-based company or add to an account service type of company. Creative is a philosophy, it’s not an individual, so I think I’m very bullish across the board about the things that we’re able to do. Craig Huber: Then Phil, if I could ask on share buybacks, obviously your balance sheet is very strong here - 0.4 net debt ratio, so it’s good as it’s been in many, many years. When should we start to expect share buybacks will kick in, in a meaningful way so that we see the fully diluted share count number actually start going down? Thank you. Philip Angelastro: I don’t think you should expect much difference in the second half of 2021 relative to what we’ve done in prior second halves, Q3, Q4. I don’t think we expect anything to dramatically change, but I think if things progress as we expect and the business continues to grow and we don’t have any setbacks from the outside that we can’t control in terms of these COVID variants, which we don’t expect currently, certainly 2022 I would expect that we’ll be back to more normalized levels from a buyback perspective. Again, if we can do more, find more and close more acquisitions, we will adjust the share buyback number accordingly. John Wren: Yes, and this last part I can’t overstate for you enough - in the month of July, since I was the one who could travel internationally most freely, I completed two transactions myself, which haven’t yet closed but will close in the coming weeks and months, and our M&A groups are really beefed up and we’re looking at quite a number of--it’s almost back to the early 2000s in term of the number of companies we’re actually looking at. Share buybacks will come back for certain, but I have some immediate needs within the next 90 days for Phil to fulfill. Craig Huber: Great, thank you guys. John Wren: Thank you. Philip Angelastro: I think we have time for one more call, Operator, given the market open. John Wren: As the legal guys look . Operator: Of course. We have a question coming from the line of Julien Roch with Barclays. Please go ahead. Julien Roch: Yes, good morning John, good morning Phil. Coming back on a question on Icon, it looks like disposition of six, seven percentage points from Phil’s previous guidance, so Icon should have been $900 million of revenues in 2020, and if you assume being media it fell a bit more than the overall business in 2020, say 25%, it looks like it was about $1.2 billion in 2019. Are those in the right ballpark? Then John, when you said Icon was low margin, what do you mean - less than 5%, or even less than that? Then last question is on media. What can you tell us about media performance in Q2? you didn’t want to give us a number for international for the group and for the U.S., so any color on media, which you say was very good, would be appreciated. Thank you. Philip Angelastro: Sure. In terms of Icon, I think your ballpark for 2020 is certainly within the range in terms of size. I don’t have a ’19 number-- John Wren: . Philip Angelastro: Yes, ’19 is really kind of irrelevant at this point. As far as margins go, I think that’s probably somewhat in the same neighborhood as well. When it comes to media, we’ve been through this before. We don’t break out media because it’s integrated within all our businesses and all our disciplines, so we don’t intend to break out the specific numbers because that’s not how we look at it. Julien Roch: Okay. I know we’ve done that before, but I’m stubborn. Okay, thank you very much. Philip Angelastro: Okay, thank you all for joining the call. Operator: Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Conferencing Services. You may now disconnect.
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Morgan Stanley Upgrades Omnicom Group to Overweight - New Insights

Morgan Stanley Upgrades Omnicom Group (OMC:NYSE) to Overweight

Morgan Stanley's recent upgrade of Omnicom Group (OMC:NYSE) to Overweight, with a revised price target of $105, signals a strong vote of confidence in the company's future prospects. This adjustment, announced on April 17, 2024, when OMC was trading at $92.47, comes on the heels of Omnicom's Q1 2024 Earnings Conference Call. During this call, key executives, including Chairman & CEO John Wren and EVP & CFO Philip Angelastro, presented the company's financial performance and strategic initiatives, aiming to bolster investor confidence and provide a clear vision of Omnicom's future direction.

The timing of Morgan Stanley's rating update closely follows Omnicom's earnings call, suggesting that the insights shared during the event played a crucial role in shaping the financial institution's optimistic outlook. The presence of analysts from top firms, including Morgan Stanley itself, underscores the significance of the event in the investment community. This gathering provided a platform for Omnicom to articulate its achievements and future plans, likely influencing Morgan Stanley's positive reassessment.

Omnicom's stock performance in the wake of these developments further illustrates the market's receptive response. Currently trading at $92.815, the stock has experienced a notable increase of approximately 2.04%, with trading volumes reflecting active investor interest. This uptick, within a trading range of $91.2 to $94.1 for the session, mirrors the positive sentiment generated by the earnings call and Morgan Stanley's subsequent rating upgrade.

Moreover, the broader financial metrics of Omnicom, including a market capitalization of about $18.38 billion and a year-long trading range between $72.2 and $99.23, highlight the company's solid market presence and investor appeal. These figures, coupled with the strategic insights shared during the earnings call, provide a comprehensive backdrop to Morgan Stanley's decision to maintain an Overweight rating on OMC.

In essence, Morgan Stanley's updated assessment of Omnicom Group, buoyed by the company's promising first-quarter earnings and strategic outlook, reflects a broader consensus on OMC's potential for growth. The alignment between the earnings call revelations and the stock's positive market performance post-announcement paints a picture of a company on a robust upward trajectory, backed by the confidence of both its leadership and key financial analysts.

Omnicom Group Inc. Q1 2024 Earnings Report Preview: Key Financial Insights

Omnicom Group Inc. Quarterly Earnings Report Preview

Omnicom Group Inc. (NYSE: OMC) is gearing up to unveil its quarterly earnings report on Tuesday, April 16, 2024, before the market opens. Analysts on Wall Street have set their sights on an earnings per share (EPS) of $1.52 for this period. Additionally, the revenue for the quarter is projected to hit around $3.62 billion. These figures are crucial as they provide investors and stakeholders with insights into the company's financial health and operational efficiency during the quarter.

In the run-up to the release of Omnicom's earnings for the first quarter ending March 2024, expectations from Wall Street analysts suggest a nuanced picture of the company's financial performance. They anticipate that Omnicom will post an EPS of $1.52, which represents a slight decrease of 2.6% year-over-year. However, on the revenue side, the company is expected to witness growth, with forecasts indicating a total of $3.58 billion. This would mark a 3.8% increase compared to the revenue figures from the same quarter in the previous year. These projections highlight a mixed financial performance, with a minor dip in earnings but a positive uptrend in revenue generation.

The stability in the EPS estimates over the last 30 days is particularly noteworthy. This unchanged consensus among analysts suggests a strong confidence in their assessments of Omnicom's financial outlook. Such consistency in earnings estimates is often seen as a positive signal by investors, as it implies a consensus view on the company's financial stability and future performance. The lack of revisions in these estimates could play a pivotal role in shaping investor expectations and confidence in the stock, especially as the earnings release date approaches.

The relationship between earnings estimate revisions and stock price movements is a critical aspect for investors to consider. Studies have shown that trends in earnings estimate revisions can significantly influence a stock's performance in the short term. Given that there have been no revisions to Omnicom's earnings estimates, investors might view this as an indicator of potential stability in the stock's near-term price movement. This aspect of financial analysis underscores the importance of monitoring analyst projections and revisions as part of an investment decision-making process.

As Omnicom prepares to share its first-quarter results for 2024, the financial community will be keenly watching how the actual figures compare with the analysts' expectations. The scheduled conference call following the earnings release will further provide valuable insights into the company's performance, strategic direction, and outlook. With a reported quarterly revenue of approximately $4.06 billion and a net income of around $337.6 million in a previous period, stakeholders will be looking for signs of sustained growth, operational efficiency, and strategic initiatives that could influence the company's future trajectory.

Omnicom Shares Drop 6% Following Q2 Revenue Miss

Omnicom Group (NYSE:OMC) stock dropped more than 6% pre-market today after the company released its Q2 financial results, which fell short of Street expectations. The company reported EPS of $1.81, slightly exceeding the Street estimate of $1.80. However, revenue only grew by 1.2% compared to the previous year, reaching $3.61 billion, which was lower than the Street estimate of $3.67 billion.

CEO John Wren acknowledged the prevailing economic uncertainty but expressed optimism about the company's prospects, stating that they are entering a dynamic and promising new era.

In terms of organic revenue, Omnicom Group saw a year-over-year increase of 3.4%, slightly below the anticipated growth of 3.7% by the Street. Additionally, while the consensus forecasted an operating margin of 15.8%, the Q2 report revealed a margin of 15.3%.