Citing the negative impact of the pandemic on its business, Omnicom Group reported a second quarter revenue decline of 24.7% to $2.8 billion. The net loss for the quarter was $24.2 million compared to net income a year ago of $370.7 million.
The firm also reported a global organic revenue decline of 23%. No region was spared: The U.S. fell 20.7%, the UK 23.7%, Europe 29.4%, Asia Pacific 18.6%, Latin America 24.1% and the Middle East & Africa 39.4%.
Company shares were down nearly 7% in morning trading after the earnings report was released.
Cost cutting in the period was extraordinary—6,100 staffers were let go as the firm cut its real estate space by one million square feet. Severance, impairment and other “repositioning costs” totaled about $278 million. But going forward the cost cuts are expected to save $500 million on an annualized basis.
That savings would only come back to extent that revenue comes back in future quarters, Omnicom CFO Phil Angelastro said on an earnings call Tuesday.
CEO John Wren said the cost management helped keep the company’s “underlying fundamentals solid.” He added that the company believes the second quarter was “the low point for revenue,” in 2020. That’s based on a “bottom up” assessment from operating managers across the company, Wren told analysts.
Recovery in the second half will vary by geography and is hard to predict given the unknowns of COVID-19 and how economic reopenings or reclosings will occur around the world.
As expected categories like travel, automotive and entertainment were hit hardest during the quarter, while healthcare, technology and telecom fared better.
Event and field marketing businesses and media were hard hit particularly with respect to third party service costs where the company serves as principal (as when for example it buys and resells media to clients in packaged programmatic deals). Those service cost revenues were down by $400 million in the second quarter.
There were some bright spots on the new business front. Wren noted account wins for Peugeot, Air France and Clorox among others.
Wren also touched on the racial justice movement that erupted onto the national scene (and beyond) in the wake of the George Floyd killing by police in May and corresponding demands by Black advertising professionals (among others) that Adland improve workforce diversity.
Just yesterday Omnicom released its workforce diversity data disclosing that 2.7% of its executive managers are Black, 7.2% are Asian, and 4.9% are Hispanic. Wren said the firm “doesn’t tolerate racism.” The firm’s diversity numbers are in line with the industry’s-- meaning they need to improve-- and Omnicom released a plan focused on driving better recruitment and retention of minorities. As part of the plan some executive compensation will now be tied to raising minority representation in the workforce.
For the first six months revenue fell 3.6% to $6.2 billion. Net income was down 63.1% to $234.0 million. The organic revenue decline for the first half was 11.7%.