omc-20220331

___________________________________________________________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

_________________________

Commission File Number: 1-10551

OMNICOM GROUP INC.

(Exact name of registrant as specified in its charter)


New York			13-1514814
(State or other jurisdiction of incorporation or organization)			(IRS Employer 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, former address and former fiscal year, if changed since last report)

____________________________________________________________

Securities Registered Pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, $0.15 Par Value	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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

_________________________

As of April 13, 2022, there were 205,732,684 shares of Omnicom Group Inc. Common Stock outstanding.

OMNICOM GROUP INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION	Page
Item 1.	Financial Statements
	Consolidated Balance Sheets - March 31, 2022 and December 31, 2021	1
	Consolidated Statements of Income - Three Months Ended March 31, 2022 and 2021	2
	Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 2022 and 2021	3
	Consolidated Statements of Equity - Three Months Ended March 31, 2022 and 2021	4


	Consolidated Statements of Cash Flows - Three Months Ended March 31, 2022 and 2021	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 6.	Exhibits	26
SIGNATURES		26

FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements, including statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, from time to time, the Company or its representatives have made, or may make, forward-looking statements, orally or in writing. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial position, or otherwise, based on current beliefs of the Company’s management as well as assumptions made by, and information currently available to, the Company’s management. Forward-looking statements may be accompanied by words such as “aim,” “anticipate,” “believe,” “plan,” “could,” “should,” “would,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project” or similar words, phrases or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include: the impact of the war in Ukraine; adverse economic conditions, including those caused by the impact of the COVID-19 pandemic, severe and sustained inflation in countries that comprise our major markets, supply chain issues affecting the distribution of our clients’ products; international, national or local economic conditions that could adversely affect the Company or its clients; losses on media purchases and production costs incurred on behalf of clients; reductions in client spending, a slowdown in client payments and a deterioration or a disruption in the credit markets; the ability to attract new clients and retain existing clients in the manner anticipated; changes in client advertising, marketing and corporate communications requirements; failure to manage potential conflicts of interest between or among clients; unanticipated changes relating to competitive factors in the advertising, marketing and corporate communications industries; the ability to hire and retain key personnel; currency exchange rate fluctuations; reliance on information technology systems; changes in legislation or governmental regulations affecting the Company or its clients; risks associated with assumptions the Company makes in connection with its critical accounting estimates and legal proceedings; and the Company’s international operations, which are subject to the risks of currency repatriation restrictions, social or political conditions and regulatory environment. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that may affect the Company’s business, including those described in Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 and in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. Except as required under applicable law, the Company does not assume any obligation to update these forward-looking statements.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OMNICOM GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions)


	March 31, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	3,925.5	$	5,316.8
Short-term investments	92.7		—
Accounts receivable, net of allowance for doubtful accounts of $21.0 and $21.7	7,071.6		8,472.5
Work in process	1,316.8		1,201.0
Other current assets	990.9		919.2
Total Current Assets	13,397.5		15,909.5
Property and Equipment at cost, less accumulated depreciation of $1,178.2 and $1,165.7	970.6		992.1
Operating Lease Right-Of-Use Assets	1,204.3		1,202.9
Equity Method Investments	77.6		76.3
Goodwill	9,951.9		9,738.6
Intangible Assets, net of accumulated amortization of $821.7 and $856.5	333.0		298.0
Other Assets	210.8		204.4
TOTAL ASSETS	$	26,145.7	$	28,421.8

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable	$	9,899.6	$	11,897.2
Customer advances	1,463.8		1,644.5

Short-term debt	12.4		9.6
Taxes payable	328.5		263.3
Other current liabilities	2,472.9		2,411.6
Total Current Liabilities	14,177.2		16,226.2
Long-Term Liabilities	960.0		961.5
Long-Term Liability - Operating Leases	950.1		952.1
Long-Term Debt	5,646.4		5,685.7
Deferred Tax Liabilities	458.1		477.3
Commitments and Contingent Liabilities (Note 11)
Temporary Equity - Redeemable Noncontrolling Interests	405.3		345.3
Equity:
Shareholders’ Equity:
Preferred stock	—		—
Common stock	44.6		44.6
Additional paid-in capital	584.5		622.0
Retained earnings	9,027.3		8,998.8
Accumulated other comprehensive income (loss)	(1,222.6)		(1,252.3)
Treasury stock, at cost	(5,434.1)		(5,142.9)
Total Shareholders’ Equity	2,999.7		3,270.2
Noncontrolling interests	548.9		503.5
Total Equity	3,548.6		3,773.7
TOTAL LIABILITIES AND EQUITY	$	26,145.7	$	28,421.8

The accompanying notes to the consolidated financial statements are an integral part of these statements.

OMNICOM GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In millions, except per share amounts)


	Three Months Ended March 31,
		2022		2021
Revenue		$	3,410.3	$	3,426.9
Operating Expenses:
Salary and service costs		2,491.8		2,545.0
Occupancy and other costs		300.2		291.6
Charges arising from the effects of the war in Ukraine		113.4		—

Cost of services		2,905.4		2,836.6
Selling, general and administrative expenses		96.7		71.6
Depreciation and amortization		55.2		53.3
		3,057.3		2,961.5
Operating Profit		353.0		465.4
Interest Expense		51.0		53.8
Interest Income		8.2		6.3
Income Before Income Taxes and Loss From Equity Method Investments		310.2		417.9
Income Tax Expense		115.5		111.9
Loss From Equity Method Investments		(0.1)		—
Net Income		194.6		306.0
Net Income Attributed To Noncontrolling Interests		20.8		18.2
Net Income - Omnicom Group Inc.		$	173.8	$	287.8
Net Income Per Share - Omnicom Group Inc.:
Basic		$0.83		$1.33
Diluted		$0.83		$1.33

The accompanying notes to the consolidated financial statements are an integral part of these statements.

OMNICOM GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)


	Three Months Ended March 31,
		2022		2021
Net Income		$	194.6	$	306.0
Other Comprehensive Income (Loss):
Cash flow hedge:

Amortization of loss included in interest expense		1.4		1.4
Income tax effect		(0.4)		(0.4)
		1.0		1.0
Defined benefit pension plans and postemployment arrangements:

Amortization of prior service cost		1.0		1.2
Amortization of actuarial losses		1.6		3.3
Income tax effect		(1.3)		(1.8)
		1.3		2.7

Foreign currency translation adjustment		28.1		(46.9)

Other Comprehensive Income (Loss)		30.4		(43.2)

Comprehensive Income		225.0		262.8
Comprehensive Income Attributed To Noncontrolling Interests		21.5		7.4
Comprehensive Income - Omnicom Group Inc.		$	203.5	$	255.4

The accompanying notes to the consolidated financial statements are an integral part of these statements.

OMNICOM GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In millions, except per share amounts)


	Three Months Ended March 31,
		2022		2021
Common Stock, shares issued		297.2		297.2
Common Stock, par value		$	44.6	$	44.6
Additional Paid-in Capital:
Beginning Balance		622.0		747.8
Net change in noncontrolling interests		(5.6)		1.0
Change in temporary equity		(57.8)		(2.8)
Share-based compensation		20.0		20.8
Stock issued, share-based compensation		5.9		2.9
Ending Balance		584.5		769.7
Retained Earnings:
Beginning Balance		8,998.8		8,190.6

Net income		173.8		287.8
Common stock dividends declared		(145.3)		(150.9)
Ending Balance		9,027.3		8,327.5
Accumulated Other Comprehensive Income (Loss):
Beginning Balance		(1,252.3)		(1,213.8)

Other comprehensive income (loss)		29.7		(32.4)
Ending Balance		(1,222.6)		(1,246.2)
Treasury Stock:
Beginning Balance		(5,142.9)		(4,684.8)
Stock issued, share-based compensation		9.1		1.1
Common stock repurchased		(300.3)		(0.7)
Ending Balance		(5,434.1)		(4,684.4)
Shareholders’ Equity		2,999.7		3,211.2
Noncontrolling Interests:
Beginning Balance		503.5		492.5
Net income		20.8		18.2
Other comprehensive income (loss)		0.7		(10.8)
Dividends to noncontrolling interests		(14.0)		(13.6)
Net change in noncontrolling interests		(9.9)		(5.8)
Increase in noncontrolling interests from business combinations		47.8		—
Ending Balance		548.9		480.5

Total Equity		$	3,548.6	$	3,691.7

Dividends Declared Per Common Share		$0.70		$0.70

The accompanying notes to the consolidated financial statements are an integral part of these statements.

OMNICOM GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)


	Three Months Ended March 31,
	2022		2021
Cash Flows from Operating Activities:
Net income	$	194.6	$	306.0
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of right-of-use assets	35.8		33.4
Amortization of intangible assets	19.4		19.9
Amortization of net deferred gain on interest rate swaps	1.4		(1.3)
Share-based compensation	20.0		20.8
Non-cash charges related to the effects of the war in Ukraine	65.8		—



Other, net	2.7		3.8
Use of operating capital	(884.2)		(843.5)
Net Cash Used In Operating Activities	(544.5)		(460.9)
Cash Flows from Investing Activities:
Capital expenditures	(23.2)		(12.4)
Acquisition of businesses and interests in affiliates, net of cash acquired	(246.6)		—
Purchase of short-term investments	(92.7)		—
Other, net	0.7		1.6
Net Cash Used In Investing Activities	(361.8)		(10.8)
Cash Flows from Financing Activities:


Change in short-term debt	2.4		2.2
Dividends paid to common shareholders	(147.4)		(140.1)
Repurchases of common stock	(300.3)		(0.7)
Proceeds from stock plans	13.5		3.4
Acquisition of additional noncontrolling interests	(6.3)		(2.2)
Dividends paid to noncontrolling interest shareholders	(14.0)		(13.6)
Payment of contingent purchase price obligations	(6.0)		(6.9)
Other, net	(18.2)		(17.8)
Net Cash Used In Financing Activities	(476.3)		(175.7)
Effect of foreign exchange rate changes on cash and cash equivalents	(8.7)		(55.8)

Net Decrease in Cash and Cash Equivalents	(1,391.3)		(703.2)
Cash and Cash Equivalents at the Beginning of Period	5,316.8		5,600.5
Cash and Cash Equivalents at the End of Period	$	3,925.5	$	4,897.3

The accompanying notes to the consolidated financial statements are an integral part of these statements.

OMNICOM GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Presentation of Financial Statements

The terms “Omnicom,” “the Company,” “we,” “our” and “us” each refer to Omnicom Group Inc. and its subsidiaries, unless the context indicates otherwise. The accompanying unaudited consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP or GAAP, for interim financial information and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosure have been condensed or omitted.

In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, in all material respects, of the information contained herein. These unaudited consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, or 2021 10-K. Results for the interim periods are not necessarily indicative of results that may be expected for the year.

Risks and Uncertainties

Global economic challenges, including the impact of the war in Ukraine, the COVID-19 pandemic, rising inflation and supply-chain disruptions could cause economic uncertainty and volatility. The impact of these issues on our business will vary by geographic market and discipline. We monitor economic conditions closely, as well as client revenue levels and other factors. In response to reductions in revenue, we can take actions to align our cost structure with changes in client demand and manage our working capital. However, there can be no assurance as to the effectiveness of our efforts to mitigate any impact of the current and future adverse economic conditions, reductions in client revenue, changes in client creditworthiness and other developments.

Impact of the War in Ukraine

We have historically conducted operations in Russia and Ukraine through local agencies in which we hold a majority stake. The minority partners in these agencies are local management, which report to the applicable network management.

During the first quarter of 2022, the war in Ukraine required us to suspend our business operations in Ukraine. The war resulted in the imposition of sanctions by the United States, the United Kingdom, and the European Union, that affect the cross-border operations of businesses operating in Russia. In addition, Russian regulators have imposed currency restrictions and regulations that created uncertainty regarding our ability to recover our investment in our operations in Russia, as well as our ability to exercise control over the operations. Also, many multinational companies, including many of our large clients, ceased or suspended their operations in Russia. Therefore, the ability to continue operations in Russia without additional funding, which we will not provide, is uncertain. As a result, we have sold, or committed to dispose of, all of our businesses in Russia. Accordingly, we recorded pretax charges of $113.4 million in the first quarter of 2022, primarily consisting of the net investment in our Russian businesses, and also including charges related to the suspension of operations in Ukraine.

Impact of the COVID-19 Pandemic - Update

Beginning in March 2020 and continuing through the first quarter of 2021, our business experienced the effects from reductions in client spending due to the economic impact related to the COVID-19 pandemic. While mixed by business and geography, the spending reductions impacted all our businesses and markets. Globally, the most impacted businesses were our Experiential discipline, especially in our event marketing businesses, and our Execution & Support discipline, primarily in field marketing. Most of our markets began to improve in April 2021, and the improvement continued through the first quarter of 2022 as clients substantially increased their spending on our services.

2. Revenue

Nature of our services

We provide an extensive range of advertising, marketing and corporate communications services through various client-centric networks that are organized to meet specific client objectives. Our networks and agencies provide a comprehensive range of services in the following fundamental disciplines: Advertising & Media, Precision Marketing, Commerce & Brand Consulting, Experiential, Execution & Support, Public Relations and Healthcare. Advertising & Media includes creative services across digital and traditional media, strategic media planning and buying, and data analytics services. Precision Marketing includes digital and direct marketing, digital transformation and data and analytics. Commerce & Brand Consulting services include brand consulting, strategy and research, and retail ecommerce. Experiential marketing services include live and digital events and experience design and execution. Execution & Support includes field marketing, sales support, digital and physical merchandising and point-of-sale, as well as other specialized marketing and custom communications services. Public relations services include corporate communications, crisis management, public affairs, and media and media relations services. Healthcare includes advertising and media services to global healthcare and pharmaceutical clients. At the core of all our services is the ability to create or develop a

client’s marketing or corporate communications message into content that can be delivered to a target audience across different communications mediums.

Revenue by discipline was (in millions):


	Three Months Ended March 31,
		2022		2021
Advertising & Media		$	1,769.4	$	2,003.7
Precision Marketing		336.1		269.5
Commerce & Brand Consulting		237

SEC Form 10-Q filed by Omnicom Group Inc.