Form 8-K OMNICOM GROUP INC. For: Feb 08
OMNICOM GROUP REPORTS FOURTH QUARTER AND FULL YEAR 2021 RESULTS
Revenue of $3,855.9 million increased 2.6%, with organic growth of 9.5%
Operating profit of $622.5 million increased 1.3%
Operating profit margin of 16.1%
Net income of $416.2 million increased 4.5%
Diluted earnings per share of $1.95 increased 6.0%
NEW YORK, February 8, 2022 - Omnicom Group Inc. (NYSE: OMC) today announced results for the quarter and full year ended December 31, 2021.
“Global organic revenue growth of 9.5% exceeded our expectations in the fourth quarter, operating profit margins remained very strong, and we posted solid quarterly earnings per share," said John Wren, Chairman and Chief Executive Officer of Omnicom Group Inc. “Once again, thanks to the efforts of our people across Omnicom, we were pleased to see strong results across all geographies and services, led by our focus on digital, precision marketing and consulting. Our teams are working together in powerful new ways – with leading technology and data solutions – to deliver the best client outcomes in a rapidly evolving market. We are optimistic in our 2022 outlook and expect to continue build on our long-term record of improving profitability and sustained value creation."
| $ in millions, except per share amounts | Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
| Revenue | $ | 3,855.9 | $ | 3,757.0 | $ | 14,289.4 | $ | 13,171.1 | ||||||||||||||||||
Operating Profit 1 | 622.5 | 614.7 | 2,197.9 | 1,598.8 | ||||||||||||||||||||||
| Operating Profit Margin | 16.1 | % | 16.4 | % | 15.4 | % | 12.1 | % | ||||||||||||||||||
Net Income 2 | 416.2 | 398.1 | 1,407.8 | 945.4 | ||||||||||||||||||||||
Net Income per Share - Diluted 2 | $ | 1.95 | $ | 1.84 | $ | 6.53 | $ | 4.37 | ||||||||||||||||||
EBITA 3 | 642.7 | 635.4 | 2,277.9 | 1,681.9 | ||||||||||||||||||||||
EBITA Margin 3 | 16.7 | % | 16.9 | % | 15.9 | % | 12.8 | % | ||||||||||||||||||
Notes: 1) 2020 results include a reduction in salary and service costs of $44.7 million and $162.6 million for the three and twelve months ended December 31, 2020, respectively, related to reimbursements from governmental pandemic relief programs in several countries. Results for the twelve months ended December 31, 2021 includes $50.5 million related to a Gain on disposition of subsidiary and the twelve months ended December 31, 2020 includes $277.9 million for COVID-19 repositioning costs and a $55.8 million asset impairment charge. 2) Net Income and Net Income per Share are for Omnicom Group Inc. 3) See Reconciliation of Non-GAAP Financial Measures.
Fourth Quarter 2021 Results
Revenues
Our worldwide revenue in the fourth quarter of 2021 continued to improve from the negative effects of the COVID-19 pandemic. Revenue increased 2.6% to $3,855.9 million from $3,757.0 million in the fourth quarter of 2020. The components of the change in revenue included an increase in revenue from organic growth of
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9.5%, a decrease in acquisition revenue, net of disposition revenue, of 6.6%, and a decrease in revenue from the negative impact of foreign currency translation of 0.3%. The decrease in acquisition revenue, net of disposition revenue, reflects the sale of ICON International, a specialty media business, in June 2021.
Organic growth in the fourth quarter of 2021 compared to the fourth quarter of 2020 increased across all of our fundamental disciplines, including: 7.4% for Advertising, 19.6% for Precision Marketing, 12.4% for Commerce & Brand Consulting, 56.7% for Experiential, 5.2% for Execution & Support, 4.4% for Public Relations and 4.5% for Healthcare.
Organic growth in the fourth quarter of 2021 compared to the fourth quarter of 2020 across our regional markets was as follows: 7.8% for the United States, 1.8% for Other North America, 10.1% for the United Kingdom, 12.7% for the Euro Markets & Other Europe, 7.8% for Asia Pacific, 7.3% for Latin America and 48.1% for the Middle East & Africa.
Expenses
Operating expenses increased $91.1 million, or 2.9%, to $3,233.4 million compared to the fourth quarter of 2020, including a decrease of 0.2% from the impact of foreign currency translation. Salary and service costs, which tend to fluctuate with changes in revenue, increased $70.9 million, or 2.6%, to $2,792.1 million, reflecting an increase in salary and related costs of $187.2 million and a decrease in third-party service costs of $116.3 million. The increase in salary and related service costs resulted primarily from the increase in organic revenue. Third-party service costs, including proprietary media, decreased during the quarter due primarily to the disposition of ICON, partially offset by costs related to our organic growth in revenue. Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, increased $11.3 million, or 4.2%, to $277.2 million compared to the fourth quarter of 2020, due to higher general office expenses, partially offset by lower rent and other occupancy costs. SG&A expenses increased $8.5 million, or 8.4%, to $109.9 million compared to the fourth quarter of 2020, due to an increase in marketing, professional fees, and new business costs.
Operating Profit
Operating profit increased $7.8 million, or 1.3%, to $622.5 million compared to the fourth quarter of 2020, and our operating margin of 16.1% decreased from 16.4%.
Interest Expense
Net interest expense in the fourth quarter of 2021 decreased $3.6 million, or 7.5%, to $44.4 million compared to the fourth quarter of 2020. Interest expense on debt in the fourth quarter of 2021 decreased $2.4 million to $45.8 million primarily as a result of the benefit from the early redemption in May 2021 of all the outstanding $1.250 billion principal amount of 3.625% Senior Notes due 2022, partially offset by the May 2021 issuance of $800 million of 2.60% Senior Notes due 2031 and the November 2021 issuance of £325 million of 2.25% Senior Notes due 2033.
Income Taxes
Our effective tax rate of 23.1% in the fourth quarter of 2021 decreased from 25.0% in the fourth quarter of 2020. In the fourth quarter of 2021, income tax expense was reduced by $21.1 million primarily from the favorable settlements of uncertain tax positions in certain jurisdictions.
Net Income – Omnicom Group Inc.
Net income - Omnicom Group Inc. for the fourth quarter of 2021 increased $18.1 million, or 4.5%, to $416.2 million compared to the fourth quarter of 2020. Diluted shares outstanding decreased to 213.3 million, or 1.3%, from 216.1 million. Diluted net income per share of $1.95 increased 6.0% from $1.84 per share.
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EBITA
EBITA in the fourth quarter of 2021 increased $7.3 million, or 1.1%, to $642.7 million compared to the fourth quarter of 2020. Our EBITA margin of 16.7% decreased from 16.9%.
Full Year 2021 Results
Revenues
Our worldwide revenue in 2021 continued to improve from the negative effects of the COVID-19 pandemic. Total revenues increased 8.5% to $14,289.4 from $13,171.1 in 2020. The components of the change in revenue included an increase in revenue from organic growth of 10.2%, a decrease in acquisition revenue, net of disposition revenue, of 3.9%, and an increase in revenue from the positive impact of foreign currency translation of 2.2%.
Organic growth in 2021 compared to 2020 increased across all of our fundamental disciplines, including: 10.7% for Advertising, 19.0% for Precision Marketing, 9.9% for Commerce & Brand Consulting, 27.0% for Experiential, 4.2% for Execution & Support, 6.3% for Public Relations and 4.0% for Healthcare.
Organic growth in 2021 compared to 2020 across our regional markets was as follows: 8.1% for the United States, 11.7% for Other North America, 8.8% for the United Kingdom, 13.6% for the Euro Markets & Other Europe, 13.7% for Asia Pacific, 9.4% for Latin America and 26.4% for the Middle East & Africa.
Expenses
Operating expenses increased $519.2 million, or 4.5%, to $12,091.5 million compared to 2020, including a 2.1% increase from the impact of foreign currency translation. Salary and service costs, which tend to fluctuate with changes in revenue, increased $829.2 million, or 8.7%, to $10,402.0 million, reflecting an increase in salary and related service costs of $720.1 million and an increase in third-party service costs of $109.1 million. The increase in salary and related service costs resulted primarily from the increase in organic revenue and was partially offset by a $50.5 million gain on the sale of subsidiary recorded in the second quarter. The prior year period reflects a reduction in salary and service costs of $162.6 million related to reimbursements from governmental pandemic-related programs in several countries, partially offset by asset impairment charges of $55.8 million. Third-party service costs, including proprietary media, increased due primarily to costs related to our organic growth in revenue, partially offset by the disposition of ICON. Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, increased $9.7 million, or 0.9%, to $1,148.2 million compared to 2020, due to higher general office expenses, partially offset by lower rent and other occupancy costs. SG&A expenses increased $19.2 million, or 5.3%, to $379.7 million compared to 2020, due primarily to an increase in professional fees, new business costs, and marketing.
Operating Profit
Operating profit increased $599.1 million, or 37.5%, to $2,197.9 million compared to 2020, and our operating margin of 15.4% increased from 12.1%.
COVID-19 Business Update
As the impact of the COVID-19 pandemic on the global economy continues to moderate, we experienced an improvement in our business in 2021 as compared to 2020. In 2021, revenue increased $1,118.3 million, or 8.5%, compared to 2020. The increase in revenue primarily reflects increased client spending in all our disciplines and across all our geographic areas compared to the prior year and the strengthening of most foreign currencies, primarily the British Pound and the Euro, against the U.S. Dollar. The increase in revenue year-over-year was partially offset by a reduction in acquisition revenue, net of disposition revenue reflecting
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the sale of ICON International, or ICON, a specialty media business, in the second quarter of 2021. Global economic conditions may continue to be volatile as long as the COVID-19 pandemic remains a public health threat, which could negatively impact our clients' spending plans. We expect global economic performance and the performance of our businesses to vary by geography and discipline until the impact of the COVID-19 pandemic on the global economy subsides.
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 description 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.
Revenue by Discipline
Effective January 1, 2021, we realigned the classification of certain services primarily within our CRM Consumer Experience discipline. As a result, this discipline is now grouped into four categories: Precision Marketing, which includes our precision marketing and digital/direct marketing agencies; Commerce and Brand Consulting, which is primarily comprised of Omnicom Commerce Group, including our shopper marketing businesses, and Omnicom Brand Consulting agencies; Experiential, which includes our experiential marketing agencies and events businesses; and Execution & Support, which includes field marketing, merchandising and point of sale, as well as other specialized marketing and custom communications services.
Conference Call
Omnicom will host a conference call to review its financial results on Tuesday, February 8, 2022 at 4:30 p.m. EST. Participants can listen to the conference call by dialing 844-291-6362 (domestic) or 234-720-6995 (international), along with access code 1468163. The call will also be simulcast and archived on our investor relations website.
Corporate Responsibility
At Omnicom, we are committed to promoting responsible practices and making positive contributions to society around the globe. Please explore our website (csr.omnicomgroup.com) for highlights of our progress across the four areas on which we focus: People, Community, Environment and Governance.
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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 70 countries. Follow us on Twitter for the latest news.
Contact
| Investors: | Gregory Lundberg | greg.lundberg@omnicomgroup.com | ||||||
| Media: | Joanne Trout | joanne.trout@omnicomgroup.com | ||||||
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 intangible assets) 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 of intangible assets arising from acquisitions). Accordingly, we believe EBITA and EBITA Margin are useful measures for investors to evaluate the performance of our business. 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.
Forward-Looking Statements
Certain statements in this press release constitute forward-looking statements, including statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, from time to time, the Company or its representatives have made, or may make, forward-looking statements, orally or in writing. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial position, or otherwise, based on current beliefs of the Company’s management as well as assumptions made by, and information currently available to, the Company’s management. Forward-looking statements may be accompanied by words such as “aim,” “anticipate,” “believe,” “plan,” “could,” “should,” “would,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project” or similar words, phrases or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include: adverse economic conditions, including those caused by the impact of the COVID-19 pandemic, severe and sustained inflation in countries that comprise our major markets, supply chain issues affecting the distribution of our clients’ products; international, national or local economic conditions that could adversely affect the Company or its clients; losses on media purchases and production costs incurred on behalf of clients; reductions in client spending, a slowdown in client payments and a deterioration or a disruption in the credit markets; the ability to attract new clients and retain existing clients in the manner anticipated; changes in client advertising, marketing and corporate communications requirements; failure to manage potential conflicts of interest between or among clients; unanticipated changes relating to competitive factors in the advertising, marketing and corporate communications industries; the ability to hire and retain key personnel; currency exchange rate fluctuations; reliance on information technology systems; changes in legislation or governmental regulations affecting the Company or its clients; risks associated with assumptions the Company makes in connection with its critical accounting estimates and legal proceedings; and the Company’s international operations, which are subject to the risks of currency repatriation restrictions, social or political conditions and regulatory environment. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that may affect the Company’s business, including those described in Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. Except as required under applicable law, the Company does not assume any obligation to update these forward-looking statements.
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Omnicom Group Inc.
Consolidated Statements of Income
Three Months Ended December 31
(Unaudited)
(Dollars in Millions, Except Per Share Data)
2021 | 2020 (a) | ||||||||||
| Revenue | $ | 3,855.9 | $ | 3,757.0 | |||||||
| Operating Expenses: | |||||||||||
| Salary and service costs | 2,792.1 | 2,721.2 | |||||||||
| Occupancy and other costs | 277.2 | 265.9 | |||||||||
| Costs of services | 3,069.3 | 2,987.1 | |||||||||
| Selling, general and administrative expenses | 109.9 | 101.4 | |||||||||
| Depreciation and amortization | 54.2 | 53.8 | |||||||||
| 3,233.4 | 3,142.3 | ||||||||||
| Operating Profit | 622.5 | 614.7 | |||||||||
| Interest Expense | 51.6 | 55.3 | |||||||||
| Interest Income | 7.2 | 7.3 | |||||||||
| Income Before Income Taxes | 578.1 | 566.7 | |||||||||
| Income Tax Expense | 133.6 | 141.5 | |||||||||
| Income From Equity Method Investments | 5.4 | 3.3 | |||||||||
| Net Income | 449.9 | 428.5 | |||||||||
| Net Income Attributed To Noncontrolling Interests | 33.7 | 30.4 | |||||||||
| Net Income - Omnicom Group Inc. | $ | 416.2 | $ | 398.1 | |||||||
| Net Income Per Share - Omnicom Group Inc. | |||||||||||
| Basic | $ | 1.96 | $ | 1.85 | |||||||
| Diluted | $ | 1.95 | $ | 1.84 | |||||||
| Weighted average shares (in millions) | |||||||||||
| Basic | 212.2 | 215.5 | |||||||||
| Diluted | 213.3 | 216.1 | |||||||||
| Dividends Declared Per Common Share | $ | 0.70 | $ | 0.65 | |||||||
(a) Salary and service costs for the three months ended December 31, 2020 includes the reduction of $44.7 million in operating expenses related to reimbursements under government pandemic relief programs in several countries where we have operations and an increase of $55.8 million related to asset impairment charges. The net after tax effect of these items to Net Income - Omnicom Group was an increase of $23.0 million.
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Omnicom Group Inc.
Consolidated Statements of Income
Twelve Months Ended December 31
(Unaudited)
(Dollars in Millions, Except Per Share Data)
2021 (a) | 2020 (b) (c) | ||||||||||
| Revenue | $ | 14,289.4 | $ | 13,171.1 | |||||||
| Operating Expenses: | |||||||||||
| Salary and service costs | 10,402.0 | 9,572.8 | |||||||||
| Occupancy and other costs | 1,148.2 | 1,138.5 | |||||||||
| Gain on disposition of subsidiary | (50.5) | — | |||||||||
| COVID-19 repositioning costs | — | 277.9 | |||||||||
| Costs of services | 11,499.7 | 10,989.2 | |||||||||
| Selling, general and administrative expenses | 379.7 | 360.5 | |||||||||
| Depreciation and amortization | 212.1 | 222.6 | |||||||||
| 12,091.5 | 11,572.3 | ||||||||||
| Operating Profit | 2,197.9 | 1,598.8 | |||||||||
| Interest Expense | 236.4 | 221.8 | |||||||||
| Interest Income | 27.3 | 32.3 | |||||||||
| Income Before Income Taxes | 1,988.8 | 1,409.3 | |||||||||
| Income Tax Expense | 488.7 | 381.7 | |||||||||
| Income (Loss) From Equity Method Investments | 7.5 | (6.8) | |||||||||
| Net Income | 1,507.6 | 1,020.8 | |||||||||
| Net Income Attributed To Noncontrolling Interests | 99.8 | 75.4 | |||||||||
| Net Income - Omnicom Group Inc. | $ | 1,407.8 | $ | 945.4 | |||||||
| Net Income Per Share - Omnicom Group Inc. | |||||||||||
| Basic | $ | 6.57 | $ | 4.38 | |||||||
| Diluted | $ | 6.53 | $ | 4.37 | |||||||
| Weighted average shares (in millions) | |||||||||||
| Basic | 214.3 | 215.6 | |||||||||
| Diluted | 215.6 | 216.2 | |||||||||
| Dividends Declared Per Common Share | $ | 2.80 | $ | 2.60 | |||||||
(a) During the second quarter of 2021, we recorded a gain on the disposition of subsidiaries, which increased Operating Profit and Net Income - Omnicom Group Inc. by $50.5 million for the twelve months ended December 31, 2021. Additionally, Net Interest Expense during the second quarter of 2021 included a $26.6 million charge related to the early extinguishment of our 2022 Senior Notes, which decreased Net Income - Omnicom Group Inc. by $19.5 million for the twelve months ended December 31, 2021.
(b) The net after-tax effect on Net Income - Omnicom Group Inc. for the twelve months ended December 31, 2020 from the COVID-19 repositioning costs and assets impairment charges of $55.8 million, decreased Net Income - Omnicom Group Inc. by $270.2 million.
(c) Salary and service costs for the twelve months ended December 31, 2020 includes the reduction of $162.6 million in operating expenses related to reimbursements under pandemic relief government programs in several countries where we have operations. The net after tax effect of these items was an increase to Net Income - Omnicom Group Inc. of $123.4 million.
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Omnicom Group Inc.
Detail of Operating Expenses
Three Months Ended December 31
(Unaudited)
(Dollars in Millions)
2021(a) | 2020(a) | ||||||||||
| Operating Expenses: | |||||||||||
| Salary and service costs | |||||||||||
| Salary and related service costs | $ | 1,869.8 | $ | 1,682.6 | |||||||
| Third-party service costs | 922.3 | 1,038.6 | |||||||||
| Occupancy and other costs | 277.2 | 265.9 | |||||||||
| Costs of services | 3,069.3 | 2,987.1 | |||||||||
| Selling, general and administrative expenses | 109.9 | 101.4 | |||||||||
| Depreciation and amortization | 54.2 | 53.8 | |||||||||
| Total Operating Expenses | $ | 3,233.4 | $ | 3,142.3 | |||||||
Omnicom Group Inc.
Detail of Operating Expenses
Twelve Months Ended December 31
(Unaudited)
(Dollars in Millions)
2021(a) | 2020(a) | ||||||||||
| Operating Expenses: | |||||||||||
| Salary and service costs | |||||||||||
| Salary and related service costs | $ | 6,971.0 | $ | 6,250.9 | |||||||
| Third-party service costs | 3,431.0 | 3,321.9 | |||||||||
| Occupancy and other costs | 1,148.2 | 1,138.5 | |||||||||
| Gain on disposition of subsidiary | (50.5) | — | |||||||||
| COVID-19 repositioning costs | — | 277.9 | |||||||||
| Costs of services | 11,499.7 | 10,989.2 | |||||||||
| Selling, general and administrative expenses | 379.7 | 360.5 | |||||||||
| Depreciation and amortization | 212.1 | 222.6 | |||||||||
| Total Operating Expenses | $ | 12,091.5 | $ | 11,572.3 | |||||||
(a) See footnotes on pages 6-7
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Omnicom Group Inc.
Reconciliation of Non-GAAP Financial Measures - EBITA
Three Months Ended December 31
(Unaudited)
(Dollars in Millions)
2021 | 2020 | ||||||||||
| Net Income - Omnicom Group Inc. | $ | 416.2 | $ | 398.1 | |||||||
| Net Income Attributed To Noncontrolling Interests | 33.7 | 30.4 | |||||||||
| Net Income | 449.9 | 428.5 | |||||||||
| Income From Equity Method Investments | 5.4 | 3.3 | |||||||||
| Income Tax Expense | 133.6 | 141.5 | |||||||||
| Income Before Income Taxes | 578.1 | 566.7 | |||||||||
| Interest Income | 7.2 | 7.3 | |||||||||
| Interest Expense | 51.6 | 55.3 | |||||||||
| Operating Profit | 622.5 | 614.7 | |||||||||
| Add back: Amortization of intangible assets | 20.2 | 20.7 | |||||||||
| Earnings before interest, taxes and amortization of intangible assets ("EBITA") | $ | 642.7 | $ | 635.4 | |||||||
| Revenue | $ | 3,855.9 | $ | 3,757.0 | |||||||
| EBITA | $ | 642.7 | $ | 635.4 | |||||||
| EBITA Margin % | 16.7 | % | 16.9 | % | |||||||
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 intangible assets) 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 of intangible assets arising from acquisitions). Accordingly, we believe EBITA and EBITA Margin are useful measures for investors to evaluate the performance of our business. 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.
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Omnicom Group Inc.
Reconciliation of Non-GAAP Financial Measures - EBITA
Twelve Months Ended December 31
(Unaudited)
(Dollars in Millions)
2021 | 2020 | ||||||||||
| Net Income - Omnicom Group Inc. | $ | 1,407.8 | $ | 945.4 | |||||||
| Net Income Attributed To Noncontrolling Interests | 99.8 | 75.4 | |||||||||
| Net Income | 1,507.6 | 1,020.8 | |||||||||
| Income (Loss) From Equity Method Investments | 7.5 | (6.8) | |||||||||
| Income Tax Expense | 488.7 | 381.7 | |||||||||
| Income Before Income Taxes | 1,988.8 | 1,409.3 | |||||||||
| Interest Income | 27.3 | 32.3 | |||||||||
| Interest Expense | 236.4 | 221.8 | |||||||||
| Operating Profit | 2,197.9 | 1,598.8 | |||||||||
| Add back: Amortization of intangible assets | 80.0 | 83.1 | |||||||||
| Earnings before interest, taxes and amortization of intangible assets ("EBITA") | $ | 2,277.9 | $ | 1,681.9 | |||||||
| Revenue | $ | 14,289.4 | $ | 13,171.1 | |||||||
| EBITA | $ | 2,277.9 | $ | 1,681.9 | |||||||
| EBITA Margin % | 15.9 | % | 12.8 | % | |||||||
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 intangible assets) 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 of intangible assets arising from acquisitions). Accordingly, we believe EBITA and EBITA Margin are useful measures for investors to evaluate the performance of our business. 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.
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Omnicom Group Inc.
Revenue by Discipline
Three & Twelve Months Ended December 31
(Unaudited)
(Dollars in Millions)
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
| Advertising | $ | 2,120.5 | $ | 2,220.4 | $ | 7,959.3 | $ | 7,511.4 | ||||||||||||||||||
| Precision Marketing | 322.3 | 261.5 | 1,194.8 | 944.6 | ||||||||||||||||||||||
| Commerce & Brand Consulting | 243.4 | 219.0 | 910.7 | 821.8 | ||||||||||||||||||||||
| Experiential | 200.8 | 128.9 | 545.9 | 426.8 | ||||||||||||||||||||||
| Execution & Support | 270.3 | 259.3 | 1,026.6 | 961.3 | ||||||||||||||||||||||
| Public Relations | 368.9 | 353.5 | 1,391.7 | 1,310.9 | ||||||||||||||||||||||
| Healthcare | 329.7 | 314.4 | 1,260.4 | 1,194.3 | ||||||||||||||||||||||
| Revenue | $ | 3,855.9 | $ | 3,757.0 | $ | 14,289.4 | $ | 13,171.1 | ||||||||||||||||||
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2021 Fourth Quarter & Full Year February 8, 2022
2 Fourth Quarter Highlights Revenue strength – Revenue growth 2.6% reported, 9.5% organic – Growth across all disciplines and geographies – Strong 19.6% organic growth in Precision Marketing Profitable growth – Operating profit up 1.3%, margin 16.1% on total revenue – Net income per diluted share of $1.95, up 6.0% Investing for the future – Investment & acquisitions in faster-growing disciplines to continue to shift our future business mix – Attracting and retaining the best talent as the global pandemic subsides Capital allocation – $0.70 dividend per share – $134 million used for strategic acquisitions – $254 million of share repurchases in Q4 2021
3 Fourth Quarter Full Year 2021 2020 2021(b) 2020 (c) Revenue $ 3,855.9 $ 3,757.0 $ 14,289.4 $ 13,171.1 Operating Expenses (a) 3,233.4 3,142.3 12,091.5 11,572.3 Operating Profit 622.5 614.7 2,197.9 1,598.8 Operating Profit Margin % 16.1 % 16.4 % 15.4 % 12.1 % Net Interest Expense 44.4 48.0 209.1 189.5 Income Tax Expense 133.6 141.5 488.7 381.7 Tax Rate % 23.1 % 25.0 % 24.6 % 27.1 % Income (Loss) From Equity Method Investments 5.4 3.3 7.5 (6.8) Net Income Attributed To Noncontrolling Interests 33.7 30.4 99.8 75.4 Net Income - Omnicom Group Inc. 416.2 398.1 1,407.8 945.4 Diluted Shares (millions) 213.3 216.1 215.6 216.2 Net Income per Share - Diluted $ 1.95 $ 1.84 $ 6.53 $ 4.37 Dividends Declared Per Common Share $ 0.70 $ 0.65 $ 2.80 $ 2.60 Income Statement Summary (a) Additional information on our operating expenses can be found on page 8. (b) We recorded a gain on the disposition of subsidiaries, which increased Operating Profit and Net Income - Omnicom Group Inc. by $50.5 million for the year ended December 31, 2021. Additionally, Net Interest Expense during 2021 included a $26.6 million charge related to the early extinguishment of our 2022 Senior Notes, which decreased Net Income - Omnicom Group Inc. by $19.5 million for the year ended December 31, 2021. (c) During 2020, we recorded expenses for certain repositioning actions related to the realignment of our businesses in reaction to the COVID-19 pandemic and recorded a net loss on the disposition of certain subsidiaries. The impact of these items decreased Operating Profit by $277.9 million and Net Income - Omnicom Group Inc. by $223.1 million for the year ended December 31, 2020. Operating expenses also include the reduction in operating expenses related to pandemic relief reimbursements under government programs in several countries where we have operations, partially offset by the impact of asset impairment charges. The impact of these items reduced salary and related service costs and increased Operating Profit by $106.8 million and Net Income - Omnicom Group Inc. by $76.3 million for the year ended December 31, 2020.
4 Revenue Change Fourth Quarter Full Year $ % ∆ $ % ∆ Prior Period Revenue $ 3,757.0 $ 13,171.1 Foreign exchange rate impact (a) (10.1) (0.3) % 288.2 2.2 % Acquisition revenue, net of disposition revenue (b) (248.9) (6.6) % (516.5) (3.9) % Organic growth (c) 357.9 9.5 % 1,346.6 10.2 % Current Period Revenue $ 3,855.9 2.6 % $ 14,289.4 8.5 % (a) 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. (b) 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. (c) Organic growth: calculated by subtracting the foreign exchange rate impact, and the acquisition revenue, net of disposition revenue components from total revenue growth.
5 Revenue by Discipline Fourth Quarter Revenue % of Rev % Growth % Organic Growth (a) Advertising $ 2,120.5 55.0 % (4.5) % 7.4 % Precision Marketing 322.3 8.4 % 23.3 % 19.6 % Commerce and Brand Consulting 243.4 6.3 % 11.1 % 12.4 % Experiential 200.8 5.2 % 55.8 % 56.7 % Execution & Support 270.3 7.0 % 4.2 % 5.2 % PR 368.9 9.6 % 4.4 % 4.4 % Healthcare 329.7 8.6 % 4.9 % 4.5 % Total $ 3,855.9 100.0 % 2.6 % 9.5 % Full Year $ Mix % of Rev % Growth % Organic Growth (a) Advertising $ 7,959.3 55.7 % 6.0 % 10.7 % Precision Marketing 1,194.8 8.4 % 26.5 % 19.0 % Commerce and Brand Consulting 910.7 6.4 % 10.8 % 9.9 % Experiential 545.9 3.8 % 27.9 % 27.0 % Execution & Support 1,026.6 7.2 % 6.8 % 4.2 % PR 1,391.7 9.7 % 6.2 % 6.3 % Healthcare 1,260.4 8.6 % 5.5 % 4.0 % Total $ 14,289.4 100.0 % 8.5 % 10.2 % (a) “Organic Growth” reflects the year-over-year increase in revenue from the prior period, excluding the foreign exchange rate impact and acquisition revenue, net of disposition revenue as defined on page 4. Numbers may not sum due to rounding.
6 Full Year $ Mix % of Rev % Growth % Organic Growth (a) United States $ 7,245.9 50.7 % 0.8 % 8.1 % Other North America 463.8 3.2 % 18.6 % 11.7 % UK 1,518.5 10.6 % 18.6 % 8.8 % Euro Markets & Other Europe 2,701.1 18.9 % 16.1 % 13.6 % Asia Pacific 1,796.4 12.6 % 19.5 % 13.7 % Latin America 296.1 2.1 % 7.5 % 9.4 % Middle East & Africa 267.6 1.9 % 29.2 % 26.4 % Total $ 14,289.4 100.0 % 8.5 % 10.2 % Fourth Quarter $ Mix % of Rev % Growth % Organic Growth (a) United States $ 1,831.9 47.5 % (5.6) % 7.8 % Other North America 126.1 3.3 % 5.3 % 1.8 % UK 399.0 10.3 % 13.7 % 10.1 % Euro Markets & Other Europe 811.2 21.0 % 11.0 % 12.7 % Asia Pacific 490.7 12.7 % 7.9 % 7.8 % Latin America 90.0 2.3 % 2.9 % 7.3 % Middle East & Africa 107.0 2.8 % 48.6 % 48.1 % Total $ 3,855.9 100.0 % 2.6 % 9.5 % Revenue by Region (a) “Organic Growth” reflects the year-over-year increase in revenue from the prior period, excluding the foreign exchange rate impact and acquisition revenue, net of disposition revenue as defined on page 4. Numbers may not sum due to rounding.
7 Full Year 2021 2020 Pharmaceuticals and Healthcare 15 % 16 % Food and Beverage 14 % 14 % Technology 11 % 9 % Auto 10 % 10 % Consumer Products 8 % 8 % Financial Services 7 % 8 % Retail 7 % 7 % Travel and Entertainment 7 % 7 % Telecommunications 5 % 6 % Government 3 % 3 % Services 2 % 2 % Oil, Gas & Utilities 2 % 1 % Not‑for‑Profit 1 % 1 % Education 1 % 1 % Other 7 % 7 % Total 100 % 100 % Revenue by Industry Sector
8 Operating Expense Detail (a)(b) See footnote on page 3 (c) Third-party service costs are expenses paid to third-party vendors incurred primarily in connection with performance obligations for our services where we have determined that we are acting as principal. These third-party expenses also include incidental costs incurred in the performance of our services including airfare, mileage, hotel and other out-of-pocket expenses. Fourth Quarter Full Year 2021 % of Rev 2020(a) % of Rev 2021(b) % of Rev 2020(a)(b) % of Rev Revenue $ 3,855.9 $ 3,757.0 $ 14,289.4 $ 13,171.1 Operating expenses: Salary and related service costs 1,869.8 48.5 % 1,682.6 44.8 % 6,971.0 48.8 % 6,250.9 47.5 % Third-party service costs (c) 922.3 23.9 % 1,038.6 27.6 % 3,431.0 24.0 % 3,321.9 25.2 % Occupancy and other costs 277.2 7.2 % 265.9 7.1 % 1,148.2 8.0 % 1,138.5 8.6 % Gain on disposition of subsidiary — n/a — n/a (50.5) (0.4) % — n/a COVID-19 repositioning costs — n/a — n/a — n/a 277.9 2.1 % Cost of services 3,069.3 2,987.1 11,499.7 10,989.2 Selling, general and administrative expenses 109.9 2.9 % 101.4 2.7 % 379.7 2.7 % 360.5 2.7 % Depreciation and amortization 54.2 1.4 % 53.8 1.4 % 212.1 1.5 % 222.6 1.7 % Total operating expenses 3,233.4 83.9 % 3,142.3 83.6 % 12,091.5 84.6 % 11,572.3 87.9 % Operating Profit $ 622.5 $ 614.7 $ 2,197.9 $ 1,598.8
9 EBITA & Margins Fourth Quarter Full Year 2021 2020 2021 2020 Revenue $ 3,855.9 $ 3,757.0 $ 14,289.4 $ 13,171.1 Operating expenses (a) 3,233.4 3,142.3 12,091.5 11,572.3 Operating Profit 622.5 614.7 2,197.9 1,598.8 Operating Profit Margin % 16.1 % 16.4 % 15.4 % 12.1 % Add back: Amortization of intangible assets 20.2 20.7 80.0 83.1 EBITA (b) $ 642.7 $ 635.4 $ 2,277.9 $ 1,681.9 EBITA Margin % (c) 16.7 % 16.9 % 15.9 % 12.8 % (a) Additional information regarding our operating expenses can be found on page 8. (b) EBITA is a non-GAAP financial performance measure. Please see page 21 for the definition of this measure and page 14 for the reconciliation of non-GAAP financial measures, which reconciles the EBITA figures presented above to Net Income - Omnicom Group Inc. for the periods presented above. (c) EBITA Margin is a non-GAAP financial performance measure, which is calculated by dividing EBITA (please see page 21 for the definition of this measure) by revenue for the periods presented. (d) See footnote on page 3
10 Cash Flow Performance Full Year 2021 2020 Free Cash Flow (a) $ 1,784.9 $ 1,693.7 Primary Uses of Cash: Dividends paid to Common Shareholders 592.3 562.7 Dividends paid to Noncontrolling Interest Shareholders 113.1 95.5 Capital Expenditures(b) 665.8 75.4 Acquisition payments, including payment of contingent purchase price obligations and acquisition of additional noncontrolling interests, net of proceeds from sale of investments 202.0 117.4 Stock Repurchases, net of Proceeds from Stock Plans 518.2 217.9 Primary Uses of Cash (a) 2,091.4 1,068.9 Net Free Cash Flow (a) $ (306.5) $ 624.8 (a) The Free Cash Flow, Primary Uses of Cash and Net Free Cash Flow amounts presented above are non-GAAP liquidity measures. See page 21 for the definition of these measures and page 15 for the reconciliation of non-GAAP financial measures, which reconciles Free Cash Flow to the Net Cash Provided by Operating Activities and Net Free Cash Flow to the Net Decrease in Cash and Cash Equivalents for the periods presented above. (b) Includes cash related to the acquisition of our primary office building in London, United Kingdom of approximately $575 million.
11 Credit & Liquidity $ Millions Full Year 2021 2020 EBITDA (a) $ 2,410.0 $ 1,821.4 Total Debt / EBITDA 2.4 x 3.2 x Net Debt (b) / EBITDA 0.2 x 0.1 x Debt Bank Loans (Due Less Than 1 Year) $ 9.6 $ 3.9 CP & Borrowings Issued Under Revolver — — USD-denominated Senior Notes 4,150.0 4,600.0 EUR-denominated Senior Notes 1,137.2 1,223.0 GBP-denominated Senior Notes 439.8 — Other Debt (41.3) (15.7) Total Debt $ 5,695.3 $ 5,811.2 Cash and Cash Equivalents 5,316.8 5,600.5 Net Debt (b) $ 378.5 $ 210.7 (a) EBITDA is a non-GAAP performance measure. See page 21 for the definition of this measure and page 14 for the reconciliation of non-GAAP financial measures. (b) Net Debt is a non-GAAP liquidity measure. See page 21 for the definition of this measure, which is reconciled in the table above.
12 Historical Returns (a) Return on Invested Capital is After Tax Reported Operating Profit (a non-GAAP performance measure – see page 21 for the definition of this measure and page 15 for the reconciliation of non-GAAP financial measures) divided by the average of Invested Capital at the beginning and the end of the period (book value of all long-term liabilities, including those related to operating leases, short-term interest bearing debt, the short-term liability related to operating leases plus shareholders’ equity less cash, cash equivalents, short-term investments and operating lease right of use assets). (b) Return on Equity is Reported Net Income for the given period divided by the average of shareholders’ equity at the beginning and end of the period. Return on Invested Capital (ROIC)(a) Return on Equity(b) Twelve months ended December 31, 2021 33.4 % Twelve months ended December 31, 2021 44.3 % Twelve months ended December 31, 2020 23.0 % Twelve months ended December 31, 2020 31.8 %
13 Appendix
14 Non-GAAP Reconciliations The above table reconciles the GAAP financial measure of Net Income – Omnicom Group Inc. to the non-GAAP financial measures of EBITDA and EBITA for the periods presented. EBITDA and EBITA, which are defined on page 21, are non-GAAP financial measures within the meaning of applicable SEC rules and regulations. Our credit facility defines EBITDA as earnings before deducting interest expense, income taxes, depreciation and amortization. Our credit facility uses EBITDA to measure our compliance with covenants, such as our leverage ratios, as presented on page 11 of this presentation. Three Months Ended Twelve Months Ended December 31 December 31 2021 2020 2021 2020 Net Income - Omnicom Group Inc. $ 416.2 $ 398.1 $ 1,407.8 $ 945.4 Net Income Attributed to Noncontrolling Interests 33.7 30.4 99.8 75.4 Net Income 449.9 428.5 1,507.6 1,020.8 Income (Loss) From Equity Method Investments 5.4 3.3 7.5 (6.8) Income Tax Expense 133.6 141.5 488.7 381.7 Income Before Income Taxes 578.1 566.7 1,988.8 1,409.3 Net Interest Expense 44.4 48.0 209.1 189.5 Operating Profit 622.5 614.7 2,197.9 1,598.8 Amortization of Intangible Assets 20.2 20.7 80.0 83.1 EBITA 642.7 635.4 2,277.9 1,681.9 Depreciation 34.0 33.1 132.1 139.5 EBITDA $ 676.7 $ 668.5 $ 2,410.0 $ 1,821.4
15 Non-GAAP Reconciliations Full Year 2021 2020 Net Cash Provided by Operating Activities $ 1,945.4 $ 1,724.6 Operating Activities items excluded from Free Cash Flow: Changes in Operating Capital 160.5 30.9 Free Cash Flow $ 1,784.9 $ 1,693.7 Full Year 2021 2020 Net Increase (Decrease) in Cash and Cash Equivalents $ (283.7) $ 1,294.8 Cash Flow items excluded from Net Free Cash Flow: Changes in Operating Capital 160.5 30.9 Proceeds from Dispositions of Subsidiaries 114.1 3.2 Changes in Short-term Debt, net 6.4 (5.6) Proceeds from Long-term Borrowings 1,221.3 1,186.6 Repayment of Long-term Debt (1,250.0) (600.0) Other Financing Activities, net (100.6) (59.8) Effect of foreign exchange rate changes on cash and cash equivalents (128.9) 114.7 Net Free Cash Flow $ (306.5) $ 624.8 Full Year 2021 2020 Reported Operating Profit 2,197.9 1,598.8 Effective Tax Rate for the applicable period 24.6 % 27.1 % Income Taxes on Reported Operating Profit 540.7 433.3 After Tax Reported Operating Profit $ 1,657.2 $ 1,165.5
16 Free Cash Flow (a) The Free Cash Flow amounts presented above are non-GAAP liquidity measures. See page 21 for the definition of this measure and page 15 for the reconciliation of the non-GAAP financial measures, which reconciles Free Cash Flow to the Net Cash Used in Operating Activities for the periods presented above. Full Year 2021 2020 Net Income $ 1,507.6 $ 1,020.8 Depreciation and Amortization of Intangible Assets 212.1 222.6 Share-Based Compensation 84.7 70.8 Gain on disposition of subsidiary (50.5) — COVID-19 Repositioning Costs — 277.9 Other Items to Reconcile to Net Cash Used in Operating Activities, net 31.0 101.6 Free Cash Flow (a) $ 1,784.9 $ 1,693.7
17 Operating Expense Detail - Constant $ (a) See footnote on page 3 (b) Constant Dollar ("C$") expense is calculated by translating the current period’s local currency expense using the prior period average exchange rates to derive current period C$ expense. The foreign exchange rate impact is the difference between the current period expense in U.S. Dollars and the current period C$ expense. (c) Third-party service costs are expenses paid to third-party vendors incurred primarily in connection with performance obligations for our services where we have determined that we are acting as principal. These third-party expenses also include incidental costs incurred in the performance of our services including airfare, mileage, hotel and other out-of-pocket expenses. Fourth Quarter Full Year 2021 2021 C$(a) 2020(b) 2021 2021 C$(a) 2020(b)(c) Operating expenses: Salary and related service costs $ 1,869.8 $ 1,874.4 $ 1,682.6 $ 6,971.0 $ 6,824.0 $ 6,250.9 Third-party service costs (d) 922.3 921.3 1,038.6 3,431.0 3,365.2 3,321.9 Occupancy and other costs 277.2 280.5 265.9 1,148.2 1,123.5 1,138.5 Gain on disposition of subsidiary — — — (50.5) (50.5) — COVID-19 repositioning costs — — — — — 277.9 Cost of services 3,069.3 3,076.2 2,987.1 11,499.7 11,262.2 10,989.2 Selling, general and administrative expenses 109.9 110.5 101.4 379.7 374.0 360.5 Depreciation and amortization 54.2 54.5 53.8 212.1 208.5 222.6 Total operating expenses $ 3,233.4 $ 3,241.2 $ 3,142.3 $ 12,091.5 $ 11,844.7 $ 11,572.3
18 Acquisition: Jump 450 Media • October 2021 • Jump is a performance media agency and is part of Omnicom Media Group • Jump optimizes digital media spend and drives customer acquisition for high-growth and enterprise clients by leveraging algorithmic scaling strategies, rapid creative testing, and robust data analytics • Founded in 2016, based in New York City. Jump is one of Inc.'s 2019 Best Workplaces, AdAge's 2020 Best Places to Work, and Fast Company's 2020 Best Workplaces for Innovators • www.jump450.com “Jump's focus on pure performance marketing and e- commerce media will add a distinct set of capabilities to OMG's existing performance media offerings. Their performance and transformation expertise will amplify impact for high-growth and outcomes-focused clients. We are thrilled to welcome such an entrepreneurial team of leaders and talented professionals.” - Daryl Simm President & COO, Omnicom Group
19 Acquisition: BrightGen • November 2021 • BrightGen is an award-winning, innovative digital business transformation specialist with end-to-end Salesforce strategy, consulting, delivery and service offerings for enterprises • Adds a cornerstone Salesforce offering to our martech consulting capabilities under Credera and Precision Marketing, the digital and CRM specialist within Omnicom Group • BrightGen is a Summit/Platinum Salesforce implementation partner • www.brightgen.com “We remain committed to prioritizing investment in organizations that create remarkable customer experiences with meaningful outcomes for our diverse client base, and we have tremendous confidence that BrightGen’s depth of expertise will better enable us to do just that. We saw in BrightGen a clear strategic fit, as well as a strong cultural alignment with shared values for excellence and integrity.” -Justin Bell President and CEO, Credera
20 OMC Marketing & Communications Services Portfolio Note: For more information regarding companies within each of our disciplines, please visit www.omnicomgroup.com
21 Disclosures The preceding materials have been prepared for use in the February 8, 2022 conference call on Omnicom’s results of operations for the three and twelve months ended December 31, 2021. The call will be archived on the Internet at http:// investor.omnicomgroup.com/investor-relations/news-events-and-filings/. Forward-Looking Statements Certain statements in this presentation constitute forward-looking statements, including statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, from time to time, the Company or its representatives have made, or may make, forward-looking statements, orally or in writing. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial position, or otherwise, based on current beliefs of the Company’s management as well as assumptions made by, and information currently available to, the Company’s management. Forward-looking statements may be accompanied by words such as “aim,” “anticipate,” “believe,” “plan,” “could,” “should,” “would,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project” or similar words, phrases or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include: adverse economic conditions including, those caused by the impact of the COVID-19 pandemic, severe and sustained inflation in countries that comprise our major markets; supply chain issues affecting the distribution of our clients' products; international, national or local economic conditions that could adversely affect the Company or its clients; losses on media purchases and production costs incurred on behalf of clients; reductions in client spending, a slowdown in client payments and a deterioration or a disruption in the credit markets; the ability to attract new clients and retain existing clients in the manner anticipated; changes in client advertising, marketing and corporate communications requirements; failure to manage potential conflicts of interest between or among clients; unanticipated changes relating to competitive factors in the advertising, marketing and corporate communications industries; the ability to hire and retain key personnel; currency exchange rate fluctuations; reliance on information technology systems; changes in legislation or governmental regulations affecting the Company or its clients; risks associated with assumptions the Company makes in connection with its critical accounting estimates and legal proceedings; and the Company’s international operations, which are subject to the risks of currency repatriation restrictions, social or political conditions and regulatory environment. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that may affect the Company’s business, including those described in Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-L. Except as required under applicable law, the Company does not assume any obligation to update these forward-looking statements. Non-GAAP Financial Measures We present financial measures determined in accordance with generally accepted accounting principles in the United States (“GAAP”) and adjustments to the GAAP presentation (“Non-GAAP”), which we believe are meaningful for understanding our performance. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP. Non-GAAP financial measures as reported by us may not be comparable to similarly titled amounts reported by other companies. We provide a reconciliation of non-GAAP measures to the comparable GAAP measures on pages 14 and 15. The Non-GAAP measures used in this presentation include the following: Free Cash Flow, defined as net income plus depreciation, amortization, share based compensation expense plus/(less) other items to reconcile to net cash used in operating activities. We believe Free Cash Flow is a useful measure of liquidity to evaluate our ability to generate excess cash from our operations. Primary Uses of Cash, defined as dividends to common shareholders, dividends paid to non-controlling interest shareholders, capital expenditures, cash paid on acquisitions, payments for additional interest in controlled subsidiaries and stock repurchases, net of the proceeds from our stock plans, and excludes changes in operating capital and other investing and financing activities, including commercial paper issuances and redemptions used to fund working capital changes. We believe this liquidity measure is useful in identifying the significant uses of our cash. Net Free Cash Flow, defined as Free Cash Flow less the Primary Uses of Cash. Net Free Cash Flow is one of the metrics used by us to assess our sources and uses of cash and was derived from our consolidated statements of cash flows. We believe that this liquidity measure is meaningful for understanding our primary sources and primary uses of that cash flow. EBITDA, defined as operating profit before interest, taxes, depreciation and amortization of intangible assets. We believe EBITDA is a meaningful operating performance measure because the financial covenants in our credit facilities are based on EBITDA. EBITA, defined as operating profit before interest, taxes and amortization of intangible assets and EBITA margin, defined as EBITA divided by revenue. 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 business. Net Debt, defined as total debt less cash, cash equivalents and short-term investments. We believe net debt, together with the comparable GAAP measures, reflects one of the liquidity metrics used by us to assess our cash management. After Tax Reported Operating Profit, defined as reported operating profit less income taxes calculated using the effective tax rate for the applicable period. Management uses after tax operating profit as a measure of after tax operating performance as it excludes the after tax effects of financing and investing activities on results of operations. Other Information All dollar amounts are in millions except for per share figures on pages 2 and 3. The information contained in this document has not been audited, although some data has been derived from Omnicom’s historical financial statements, including its audited financial statements. In addition, industry, operational and other non-financial data contained in this document have been derived from sources that we believe to be reliable, but we have not independently verified such information, and we do not, nor does any other person, assume responsibility for the accuracy or completeness of that information. Certain amounts in prior periods have been reclassified to conform to our current presentation. The inclusion of information in this presentation does not mean that such information is material or that disclosure of such information is required.