Omnicom Group reported an 11.5% third quarter revenue dip to $3.2 billion, a result of the continuing impact of the pandemic.
The company said it narrowed its organic revenue decline (which strips out currency and M&A impact) by about half the drop experienced in Q2 to 11.4%, but acknowledged that it does not expect see an equivalent improvement in the fourth quarter.
In fact the fourth quarter is looking pretty iffy right now. Omnicom CEO John Wren told investors on a call early Tuesday that there are too many unknowns—including the trajectory of the COVID-19 virus, now spiking again in a number of regions, the U.S. presidential election and economic variables—to accurately forecast likely Q4 performance.
“I don’t expect similar sequential improvement,” in Q4, Wren said.
Normally the fourth quarter generates between $200 million and $250 million in project work mostly dedicated to the holiday marketing season. Those dollars usually flow in during the last six weeks of the year. As of now Wren said there is very little visibility on how much of that work will materialize this year. He did say that he was “not as optimistic” as he usually is that all of the project work will occur this year.
The company took a number of cost measures in the first half including layoffs, furloughs, certain financial moves that will result in $230 million in second half savings. The firm also trimmed its real estate portfolio by about 1 million square feet realizing additional savings of between $40 and $50 million. The company said it wasn’t clear what percentage of those costs would be permanent. But with future growth some of the costs will be added back as well, said company CFO Phil Angelastro.
By discipline advertising services posted an organic decline of 11.7%, CRM Consumer Experience fell 19.3% and CRM execution and support dropped 19.4%. PR was off 3.4% while health care was up 3.8%. Media (part of advertising services) improved “better than the overall average but not substantially better,” said Angelastro.
All regions posted organic revenue declines including the U.S. (down 11.4%), the UK (-12.5%), Europe (-9.6%), Asia Pacific (-12.8%) and Latin America (-22.3%).
New business activity has been more robust through the first three quarters of the year than the company expected and mostly pitched remotely. But Wren said he was not aware of any “sizeable accounts” in play “that will change our course.”
For now, Wren said, the health care sector and precision marketing and ecommerce “is where the growth is,” for the company.
As for how the company works in the future Wren said that “we will come back to the office,” but in a way that is “far more agile and flexible,” with many workers splitting time between office work and WFH. “We can do a lot of remote things,” is one lesson learned from the pandemic, he said. While there are no immediate plans to do so, he mentioned New York City as one area where the company could shift operations away to lower cost areas.
Through the first nine months of the year reported company revenue is down 12.9% to $9.4 billion with an organic revenue decline of 11.7%.
Company shares slid more than 4% during Tuesday morning trading.