NEW YORK, April 18, 2017 – Omnicom Group Inc. (NYSE: OMC) today announced that its diluted net income per common share for the first quarter of 2017 increased twelve cents, or 13.3%, to $1.02 per share versus $0.90 per share for the first quarter of 2016.
Omnicom’s worldwide revenue in the first quarter of 2017 increased 2.5% to $3,587.4 million from $3,499.1 million in the first quarter of 2016. The components of the change in revenue included a decrease in revenue from the negative foreign exchange rate impact of 1.2%, a decrease in acquisition revenue, net of disposition revenue of 0.7% and an increase in revenue from organic growth of 4.4% when compared to the first quarter of 2016.
Across our regional markets, organic growth in the first quarter of 2017 as compared to the first quarter of 2016 was 1.1% in North America, 8.1% in the United Kingdom, 8.2% in the Euro Markets and Other Europe, 9.1% in Asia Pacific, 5.4% in Latin America and 37.9% in the Middle East and Africa.
Organic growth in the first quarter of 2017 as compared to the first quarter of 2016 in our four fundamental disciplines was as follows: advertising increased 6.4%, CRM increased 2.1%, public relations increased 1.8% and specialty communications increased 3.3%.
Operating profit in the first quarter of 2017 increased $17.8 million, or 4.5%, to $409.9 million from $392.1 million in the first quarter of 2016. Our operating margin for the first quarter of 2017 increased to 11.4% versus 11.2% for the first quarter of 2016.
For the first quarter of 2017, our income tax rate was 29.2% compared to 32.8% for the same period in 2016. The year over year difference resulted from the adoption of FASB Accounting Standards Update 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”) on January 1, 2017. Income tax expense for the first quarter of 2017 included a benefit of $12.4 million arising from a cash tax deduction on restricted stock awards that vested and stock option awards that were exercised in the first three 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 first quarter of 2017 increased $23.4 million, or 10.7%, to $241.8 million from $218.4 million in the first quarter of 2016, including the effects of the adoption of ASU 2016-09.
Excluding the $12.4 million benefit from the adoption of ASU 2016-09, Net income – Omnicom Group Inc. would have been $229.4 million and diluted net income per common share for the first quarter of 2017 would have increased seven cents, or 7.8%, to $0.97 per share versus $0.90 per share for the first quarter of 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 table at the end of this document reconciles the GAAP financial measure of net income to EBITA for the periods presented.
For the first quarter of 2017, EBITA increased $19.9 million, or 4.7%, to $440.3 million from $420.4 million in the first quarter of 2016. Our EBITA margin increased to 12.3% for the first quarter of 2017 versus 12.0% in the first quarter of 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.
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 first quarter earnings conference call, go to https://investor.omnicomgroup.com/investor-relations/news-events-and-filings.
Omnicom Group Inc.
Consolidated Statements of Income
Three Months Ended March 31
(Unaudited)
(Dollars in Millions, Except Per Share Data)
2017
2016
Revenue
$
3,587.4
3,499.1
Operating Expenses:
Salary and service costs
2,694.2
2,623.3
Occupancy and other costs
302.0
301.4
Costs of services
2,996.2
2,924.7
Selling, general and administrative expenses
108.6
108.1
Depreciation and amortization
72.7
74.2
3,177.5
3,107.0
Operating Profit
409.9
392.1
Interest Expense
53.5
50.3
Interest Income
13.9
10.2
Income Before Income Taxes
370.3
352.0
Income Tax Expense (a)
108.0
115.5
Income From Equity Method Investments
0.1
(0.2
)
Net Income
262.4
236.3
Net Income Attributed To Noncontrolling Interests
20.6
17.9
Net Income – Omnicom Group Inc.
241.8
218.4
Less: Net income allocated to participating securities
0.5
1.5
Net income available for common shares
241.3
216.9
Net income per common share – Omnicom Group Inc.
Basic
1.03
0.90
Diluted
1.02
Weighted average shares (in millions)
234.6
240.0
236.5
241.1
Dividend declared per common share
0.55
0.50
(a) On January 1, 2017, we adopted FASB ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” (ASU 2016-09), which requires all additional tax benefits or deficiencies related to share-based compensation to be recognized in the results of operations on the restricted stock vesting date or on the exercise date for stock options. ASU 2016-09 is required to be adopted on a prospective basis and retroactive restatement is not permitted. As a result, income tax expense for the three months ended March 31, 2017 reflects a reduction of $12.4 million arising from a larger cash tax deduction as compared to the book tax deduction resulting from the vesting of restricted stock and stock options that were exercised in the first three months of 2017. The larger tax deduction is primarily due to the increase in the intrinsic value of these awards that resulted from an increase in the price of our common stock since the grant date of the awards.
Reconciliation of Non-GAAP Financial Measures
(Dollars in Millions)
Income Tax Expense
Add back: Amortization of intangible assets
30.4
28.3
Earnings before interest, taxes and amortization of intangible assets (“EBITA”)
440.3
420.4
EBITA
EBITA Margin – %
12.3
%
12.0
The above table reconciles the U.S. GAAP financial measure of Net Income – Omnicom Group Inc. to EBITA (defined as earnings before interest, taxes and amortization of intangibles) and EBITA Margin (defined as EBITA divided by revenue) for the periods presented. We use EBITA and EBITA margin 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. 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.
Katie Beaule [email protected]
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