Omnicom Group Reports Second Quarter and Year-to-Date 2017 Results

Year-to-date

Diluted net income per common share for the six months ended June 30, 2017 increased seventeen cents, or 7.6%, to $2.42 per share compared to $2.25 per share for the six months ended June 30, 2016.   

Worldwide revenue for the six months ended June 30, 2017 decreased 0.1% to $7,377.6 million from $7,384.0 million in the same period of 2016.  The components of the change in revenue included a decrease in revenue from the negative  foreign exchange rate impact of 1.3%,  a decrease in acquisition revenue, net of disposition revenue of 2.7% and an increase in revenue from organic growth of 3.9% when compared to the same period of 2016. 

Across our regional markets, organic growth for the six months ended June 30, 2017 as compared to the same period of 2016 was 0.6% in North America, 8.7% in the United Kingdom, 8.0% in the Euro Markets and Other Europe, 8.1% in Asia Pacific, 5.2% in Latin America and 28.7% in the Middle East and Africa.

Organic growth for the six months ended June 30, 2017 compared to the same period in 2016 in our four fundamental disciplines was as follows: advertising increased 5.2%, CRM increased 2.9%, public relations increased 0.7% and specialty communications increased 2.7%.

Operating profit for the six months ended June 30, 2017 increased $21.6 million, or 2.3%, to $975.5 million compared to $953.9 million for the same period in 2016.  Our operating margin for the six months ended June 30, 2017 increased to 13.2% versus 12.9% for the same period in 2016.

For the six months ended June 30, 2017, our income tax rate was 30.8% compared to 32.6% for the same period in 2016. The year over year difference resulted from the adoption of  ASU 2016-09 on January 1, 2017.  Income tax expense for the six months ended June 30, 2017 included a benefit of $14.8 million arising from a cash tax deduction on restricted stock awards that vested and stock option awards that were exercised in the first six months of 2017 in excess of the book tax deduction on the amortization of these awards over the vesting period.  In prior periods only the book tax deduction was reflected in income tax expense.  ASU 2016-09 is required to be adopted prospectively, and prior periods have not been restated.

Net income - Omnicom Group Inc. for the six months ended June 30, 2017 increased $25.9 million, or 4.8%, to $570.4 million from $544.5 million in the same period in 2016.

Non-GAAP Financial Measures

We use certain non-GAAP financial measures in describing our performance. We use EBITA (defined as earnings before interest, taxes and amortization of intangibles) and EBITA margin (defined as EBITA divided by revenue) as additional operating performance measures, which exclude the non-cash amortization expense of intangible assets (primarily consisting of amortization arising from acquisitions). Accordingly, we believe they are useful measures for investors to evaluate the performance of our businesses. The financial tables at the end of this document reconcile the GAAP financial measure of net income to EBITA for the periods presented.

For the second quarter of 2017, EBITA increased $3.7 million, or 0.6%, to $594.0 million from $590.3 million in the second quarter of 2016.  Our EBITA margin increased to 15.7% for the second quarter of 2017 versus 15.2% in the second quarter of 2016.

For the six months ended June 30, 2017, EBITA increased 2.3%, or $23.7 million, to $1,034.4 million from $1,010.7 million for the same period in 2016. Our EBITA margin for the six months ended June 30, 2017 increased to 14.0% versus 13.7% for the same period in 2016.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP. Non-GAAP financial measures reported by us may not be comparable to similarly titled amounts reported by other companies.

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 presentation 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.

About Omnicom Group Inc.

Omnicom Group Inc. (NYSE: OMC) (www.omnicomgroup.com) is a leading global marketing and corporate communications company.  Omnicom's branded networks and numerous specialty firms provide advertising, strategic media planning and buying, digital and interactive marketing, direct and promotional marketing, public relations and other specialty communications services to over 5,000 clients in more than 100 countries.  Follow us on Twitter for the latest news.

For a live webcast or a replay of our second quarter earnings conference call, go to http://investor.omnicomgroup.com/investor-relations/news-events-and-filings.

Omnicom Group Inc.
Consolidated Statements of Income
Three Months Ended June 30
(Unaudited)
(Dollars in Millions, Except Per Share Data)
	2017				2016
Revenue	$	3,790.1			$	3,884.9
Operating Expenses:
Salary and service costs	2,736.1				2,824.0
Occupancy and other costs	297.0				315.2
Costs of services	3,033.1				3,139.2
Selling, general and administrative expenses	120.4				110.9
Depreciation and amortization	71.1				73.0
	3,224.6				3,323.1
Operating Profit	565.5				561.8
Interest Expense	56.8				54.3
Interest Income	11.5				9.5
Income Before Income Taxes	520.2				517.0
Income Tax Expense (a)	166.7				167.9
Income From Equity Method Investments	1.6				2.8
Net Income	355.1				351.9
Net Income Attributed To Noncontrolling Interests	26.5				25.8
Net Income -  Omnicom Group Inc.	328.6				326.1
Less: Net income allocated to participating securities	0.5				2.0
Net income available for common shares	$	328.1			$	324.1
Net income per common share  -  Omnicom Group Inc.
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