Omnicom Q3 Revenue And Profit Declines

Omnicom reported a year-to-year 1.1% drop in revenue for the third quarter to $3.70 billion that the company said was attributable primarily to currency fluctuations. Net income was down about 3%.

Organic revenue growth, which excludes the impact of foreign exchange rates, acquisitions and asset sales, was up 6.1%.

The New York-based firm is the first of the big ad holding companies to report third-quarter results. Interpublic, Publicis Groupe and WPP will report their results later this week or next week.

Broken out by discipline, Omnicom said its advertising business posted 9.9% organic growth for the quarter while CRM posted 2.8% growth. The company’s specialty communications operations posted a 5.4% gain and public relations showed a 1.5% decrease.

The strengthening dollar has had an impact on the company’s international revenues for three straight quarters and is expected to continue into Q4, said Omnicom CFO Phil Angelastro on a conference call with analysts Tuesday morning. The revenue drop attributable to exchange rates for the first three quarters is 7% or $750 million.



Organic growth for the first nine months however is 5.5%. But if currency rates stay the same, Q4 revenues could decline another 4.5% for a cumulative 2015 reported revenue decline of $1 billion (6.3%). The hope is that the negative impact from exchange rates will ease at least a bit in Q4 and continue easing in 2016 although Angelastro said future fluctuations were hard to predict.

By region both North America and the UK turned in strong performances with 6.3% and 9.1% organic revenue growth respectively. North America accounted for 60% of total revenues in the quarter. The Euro markets showed significant improvement while Latin America was the one region showing an organic revenue decline due largely to a tanking Brazilian economy.

Net new business for the quarter was $950 million. Accuen, the company’s programmatic arm, increased revenues by $25 million in the quarter. That compares to the roughly $40 million the unit added to last year’s Q3 total, said Angelastro. “We expect it to be a good business going forward,” he said.

Omnicom CEO John Wren said most of the big media reviews that kicked off earlier this year should be completed by Thanksgiving. Wren noted that the firm has picked up new business from S.C. Johnson, Bacardi and Wells Fargo while retaining JC Penney and GlaxoSmithKline for a net billings increase of $1.4 billion among those big reviews.

Wren also commented on several ongoing issues, including viewability, asserting that it was time for publishers to “step up” and embrace third party verification firms that are accepted industry wide so that advertisers “know what they’re paying for.”  

He said he wasn’t terribly worried about technology advances that enable clients to take some capabilities in-house. “We continue to see growth,” he said. When clients do take certain “pieces” of work in house “we sit beside them” providing guidance and other services. “It’s not that impactful,” he said.

When asked about ad blocking, Wren replied, “it’s a large question.” He said consumers will embrace ad-supported content models “when they understand what it is we’re trying to communicate.” Thus the quality of creative work put out by agencies is critical. “It’s incumbent upon us to improve the product,” he said, noting that consumers no longer have to “suffer through” advertising they don’t think is worth their time. 

This story has been updated, adding commentary from Omnicom executives on a Tuesday morning conference call with analysts.

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