What changed in this filing

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Item 1. Financial Statements

2023-07-19 compared with 2023-04-19 · 119 added, 87 removed, 403 unchanged (34% of the section changed)

4 unchanged sentences

(In millions)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Current Assets:

43 unchanged sentences

(In millions, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2023 2022 2023 2022

REVENUE $ 3,609.9 $ 3,567.2 $ 7,053.2 $ 6,977.5

2 unchanged sentences

Occupancy and other costs 297.7 293.0 589.3 593.2

Real estate repositioning costs 119.2 —

Real estate and other repositioning costs 72.3 — 191.5 —

Charges arising from the effects of the war in Ukraine — — — 113.4

Gain on disposition of subsidiary ( 78.8 ) — ( 78.8 ) —

Cost of services 2,909.0 2,859.0 5,862.7 5,764.4

5 unchanged sentences

Interest Income 30.1 11.1 65.7 19.3

INCOME BEFORE INCOME TAXES AND INCOME (LOSS) FROM EQUITY METHOD INVESTMENTS 327.2 310.2

INCOME BEFORE INCOME TAXES AND INCOME FROM EQUITY METHOD INVESTMENTS 523.3 501.5 850.5 811.7

Income Tax Expense 141.2 133.1 224.6 248.6

Income (Loss) From Equity Method Investments 0.1 ( 0.1 )

Income From Equity Method Investments 1.1 1.6 1.2 1.5

NET INCOME 383.2 370.0 627.1 564.6

13 unchanged sentences

(In millions)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2023 2022 2023 2022

NET INCOME $ 383.2 $ 370.0 $ 627.1 $ 564.6

20 unchanged sentences

(In millions, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2023 2022 2023 2022

COMMON STOCK:

38 unchanged sentences

(In millions)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

5 unchanged sentences

Share-based compensation 41.1 40.1

Real estate repositioning costs 119.2 —

Real estate and other repositioning costs 191.5 —

Gain on disposition of subsidiary ( 78.8 ) —

Non-cash charges related to the effects of the war in Ukraine — 65.8

5 unchanged sentences

Acquisition of businesses and interests in affiliates, net of cash acquired ( 6.1 ) ( 263.8 )

Other, net ( 14.5 ) ( 92.0 )

Net Cash Used In Investing Activities ( 37.6 ) ( 361.8 )

Proceeds from disposition of subsidiary and other 178.7 ( 86.5 )

Net Cash Provided By (Used In) Investing Activities 132.6 ( 392.8 )

CASH FLOWS FROM FINANCING ACTIVITIES:

22 unchanged sentences

GAAP or GAAP, for interim financial information and Article 10 of Regulation S-X of the Securities and Exchange Commission.

Accordingly, certain information and footnote disclosure have been condensed or omitted.

Accordingly, certain information and footnote disclosures have been condensed or omitted.

In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, in all material respects, of the information contained herein.

24 unchanged sentences

Adverse economic conditions pose a risk that our clients may reduce, postpone or cancel spending for our services, which would impact our revenue.

OMNICOM GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in tables in millions, except per share data or unless otherwise noted)

Revenue by discipline was:

Three Months Ended March 31,

Revenue by discipline:

Three Months Ended June 30,

Six Months Ended June 30,

2023 2022 2023 2022

Advertising & Media $ 1,911.5 $ 1,834.4 $ 3,688.0 $ 3,604.6

6 unchanged sentences

Revenue $ 3,609.9 $ 3,567.2 $ 7,053.2 $ 6,977.5

Effective January 1, 2023, we realigned the classification of certain services primarily within our Commerce & Brand Consulting, Execution & Support, and Experiential disciplines .

Revenue in our geographic markets was:

Three Months Ended March 31,

OMNICOM GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in tables in millions, except per share data or unless otherwise noted)

Effective January 1, 2023, we realigned the classification of certain services primarily within our Commerce & Brand Consulting, Execution & Support, and Experiential disciplines and prior year amounts have been reclassified .

Revenue by geographic market:

Three Months Ended June 30,

Six Months Ended June 30,

2023 2022 2023 2022

North America $ 1,978.8 $ 1,969.5 $ 3,905.6 $ 3,808.5

7 unchanged sentences

Asia-Pacific includes Australia, Greater China, India, Japan, Korea, New Zealand, Singapore and other Asian countries.

Revenue in the United States for the three months ended March 31, 2023 and 2022 was $ 1,812.2 million and $ 1,724.6 million, respectively.

Revenue in the United States for the three months ended June 30, 2023, and 2022 was $ 1,850.6 million and $ 1,842.8 million, respectively, and revenue in the United States for six months ended June 30, 2023, and 2022 was $ 3,662.8 million and $ 3,567.4 million, respectively.

Contract assets and liabilities

Contract assets and contract liabilities were:

March 31, 2023 December 31, 2022 March 31, 2022

Contract assets and contract liabilities:

June 30, 2023 December 31, 2022 June 30, 2022

Media and production costs $ 797.1 $ 725.1 $ 588.5

7 unchanged sentences

Substantially all unbilled fees and costs will be billed within the next 30 days.

There were no impairment losses to the contract assets recorded in the three months ended March 31, 2023 and 2022.

There were no impairment losses to the contract assets recorded in the six months ended June 30, 2023 and 2022.

Contract liabilities primarily represent advance billings to customers in accordance with the terms of the client contracts, principally for the reimbursement of third-party costs that are generally incurred in the near term.

OMNICOM GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in tables in millions, except per share data or unless otherwise noted)

Net Income per Share

The computations of basic and diluted net income per share were:

Three Months Ended March 31,

The computations of basic and diluted net income per share:

Three Months Ended June 30,

Six Months Ended June 30,

2023 2022 2023 2022

Net Income - Omnicom Group Inc.

8 unchanged sentences

Diluted $ 1.82 $ 1.68 $ 2.92 $ 2.51

OMNICOM GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in tables in millions, except per share data or unless otherwise noted)

Goodwill and Intangible Assets

Three Months Ended March 31,

Change in goodwill:

Six Months Ended June 30,

January 1 $ 9,734.3 $ 9,738.6

1 unchanged sentence

Noncontrolling interests in acquired businesses — 47.9

Contingent purchase price obligations of acquired businesses 3.3 —

Dispositions ( 118.6 ) ( 19.6 )

1 unchanged sentence

$ 9,703.4 $ 9,701.8

There were no goodwill impairment losses recorded in the three months ended March 31, 2023 and 2022, and there are no accumulated goodwill impairment losses.

There were no goodwill impairment losses recorded in the six months ended June 30, 2023 and 2022, and there are no accumulated goodwill impairment losses.

Intangible assets:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Value Accumulated

6 unchanged sentences

Total Intangible Assets $ 1,112.1 $ ( 823.1 ) $ 289.0 $ 1,133.3 $ ( 819.9 ) $ 313.4

We completed our annual goodwill impairment test as of May 1, 2023.

The market assumptions used in our assessment reflected the current economic environment (see Note 1- Risks and Uncertainties ).

Based on the results of our impairment test, we concluded that at May 1, 2023 our goodwill was not impaired.

To better align with our internal financial processes, in 2023, the date of our annual impairment test was changed from June 30 to May 1.

Credit Facilities

We have a $ 2.5 billion multi-currency revolving credit facility, or Credit Facility, with a termination date of February 14, 2025 .

We have a $ 2.5 billion multi-currency revolving credit facility, or Credit Facility.

In June 2023, the Credit Facility was amended to, among other things, extend the termination date of the Credit Facility to June 2, 2028 and transition the benchmark rate for U.S.

Dollar denominated loans from LIBOR to the Secured Overnight Financing Rate, or SOFR.

In addition, we have the ability to issue up to $ 2 billion of U.S.

Dollar denominated commercial paper and issue up to the equivalent of $ 500 million in British Pounds or Euro under a Euro commercial paper program.

During the second quarter of 2023, the maximum amount of commercial paper outstanding was $ 200 million, which was redeemed.

Certain of our international subsidiaries have uncommitted credit lines that are guaranteed by Omnicom aggregating $ 585.5 million.

These facilities provide additional liquidity sources for operating capital and general corporate purposes.

During the three months ended March 31, 2023, there were no borrowings under the Credit Facility, and there were no commercial paper issuances.

At June 30, 2023, there were no outstanding borrowings under the Credit Facility, and no outstanding commercial paper.

The Credit Facility contains a financial covenant that requires us to maintain a Leverage Ratio of consolidated indebtedness to consolidated EBITDA (earnings before interest, taxes, depreciation, amortization and non-cash charges) of no more than 3.5 times for the most recently ended 12-month period.

At March 31, 2023, we were in compliance with this covenant as our Leverage Ratio was 2.4 times.

At June 30, 2023, we were in compliance with this covenant as our Leverage Ratio was 2.4 times.

The Credit Facility does not limit our ability to declare or pay dividends or repurchase our common stock.

Short-Term Debt

Short-term debt of $ 20.5 million and $ 16.9 million at June 30, 2023 and December 31, 2022, respectively, represented bank overdrafts and short-term borrowings primarily of our international subsidiaries.

Due to the short-term nature of this debt, carrying value approximates fair value.

OMNICOM GROUP INC.

2 unchanged sentences

(Amounts in tables in millions, except per share data or unless otherwise noted)

Short-Term Debt

Short-term debt of $ 18.5 million and $ 16.9 million at March 31, 2023 and December 31, 2022, respectively, represented bank overdrafts and short-term borrowings primarily of our international subsidiaries.

Due to the short-term nature of this debt, carrying value approximates fair value.

Long-Term Debt

Long-term debt was:

March 31, 2023 December 31, 2022

Long-term debt:

June 30, 2023 December 31, 2022

3.65 % Senior Notes due 2024

30 unchanged sentences

The Sterling Notes and the related guarantee are senior unsecured obligations that rank equal in right of payment with all existing and future unsecured senior indebtedness of OCH and Omnicom, respectively.

OMNICOM GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in tables in millions, except per share data or unless otherwise noted)

Segment Reporting

3 unchanged sentences

Therefore, given these similarities, we aggregate our six operating segments, which are our agency networks, into one reporting segment.

OMNICOM GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in tables in millions, except per share data or unless otherwise noted)

The agency networks' regional reporting units comprise three regions:

the Americas, EMEA and Asia-Pacific.

The regional reporting units monitor the performance and are responsible for the agencies in their region.

The regional reporting units monitor the performance of and are responsible for the agencies in their region.

Agencies within the regional reporting units serve similar clients in similar industries and, in many cases, the same clients, and have similar economic characteristics.

Revenue and long-lived assets and goodwill by geographic region were:

Revenue and long-lived assets and goodwill by geographic region:

Americas EMEA Asia-Pacific

March 31, 2023

June 30, 2023

Revenue - Three months ended $ 2,063.4 $ 1,108.2 $ 438.3

Revenue - Six months ended $ 4,064.2 $ 2,145.0 $ 844.0

Long-lived assets and goodwill $ 7,521.9 $ 3,431.1 $ 706.5

March 31, 2022

June 30, 2022

Revenue - Three months ended $ 2,049.4 $ 1,089.8 $ 428.0

Revenue - Six months ended $ 3,956.1 $ 2,163.7 $ 857.7

Long-lived assets and goodwill $ 7,850.0 $ 3,282.6 $ 661.8

Our effective tax rate for the three months ended March 31, 2023 decreased period-over-period to 25.5 % from 37.2 %.

The decrease for the three months ended March 31, 2023 primarily reflects the favorable impact of approximately $ 10.0 million of previously unrecognized tax benefits, partially offset by approximately $ 6.0 million related to a lower tax benefit in certain jurisdictions for the real estate repositioning costs in the quarter and the increase in the U.K.

statutory tax rate.

The effective tax rate for the three months ended March 31, 2022 was negatively impacted by the non-deductibility of the $ 113.4 million charges recorded in the first quarter of 2022, arising from the effects of the war in Ukraine, as well as an additional increase in income tax expense of $ 4.8 million related to the disposition of our businesses in Russia.

Our effective tax rate for the six months ended June 30, 2023 decreased period-over-period to 26.4 % from 30.6 %.

The six months ended June 30, 2023 includes an increase of $ 10.7 million in income tax expense related to a lower tax benefit in certain jurisdictions for the real estate and other repositioning costs and an increase in the U.K.

statutory tax rate, partially offset by $ 10.0 million of previously unrecognized tax benefits.

The higher effective tax rate for the six months ended June 30, 2022 was predominantly due to the non-deductibility of the $ 113.4 million charges recorded in the first quarter of 2022, arising from the effects of the war in Ukraine, as well as an additional increase in income tax expense of $ 4.8 million related to the disposition of our businesses in Russia.

On August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law.

The IRA levies a 1% excise tax on net stock repurchases after December 31, 2022.

The excise tax is included in treasury stock on our balance sheet and was immaterial.

The excise tax is recorded as part of the cost of acquiring treasury stock and is not material.

Additionally, the IRA imposes a 15% corporate alternative minimum tax, or CAMT, for tax years beginning after December 31, 2022.

The CAMT is not expected to have a material impact on our results of operations or financial position.

Various foreign jurisdictions are in the process of enacting legislation to adopt a minimum effective tax rate described in the Global Anti-Base Erosion, GloBE or Pillar Two, tax model rules issued by the Organization for Economic Co-operation and Development.

Various foreign jurisdictions are in the process of enacting legislation to adopt a minimum effective tax rate described in the Global Anti-Base Erosion, GloBE or Pillar Two, model rules issued by the Organization for Economic Cooperation and Development.

A minimum effective tax rate of 15% would apply to multinational companies with consolidated revenue above €750 million.

Currently, South Korea and Japan are the only countries to have enacted legislation consistent with the GloBE rules.

Currently, only South Korea and Japan have enacted legislation consistent with the GloBE rules.

Other countries are expected to adopt GloBE rules in 2023 with effective dates beginning in 2024.

1 unchanged sentence

If the jurisdictional effective tax rate is less than 15%, a top-up tax generally will be due to bring the jurisdictional effective tax rate up to 15%.

At March 31, 2023, our unrecognized tax benefits were $ 159.8 million.

At June 30, 2023, our unrecognized tax benefits were $ 159.6 million.

Of this amount, approximately $ 153.8 million would affect our effective tax rate upon resolution of the uncertain tax positions.

OMNICOM GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in tables in millions, except per share data or unless otherwise noted)

Pension and Other Postemployment Benefits

The components of net periodic benefit expense for our defined benefit pension plans and our postemployment arrangements were:

Net periodic benefit expense:

Defined Benefit Pension Plans

Postemployment Arrangements

Three Months Ended March 31,

Six Months Ended June 30,

2023 2022 2023 2022

5 unchanged sentences

Total net periodic benefit expense $ 6.9 $ 4.1 $ 6.4 $ 6.7

We contributed $ 0.1 million and $ 0.2 million to our defined benefit pension plans in the three months ended March 31, 2023 and 2022, respectively.

Real Estate Repositioning Costs

In connection with the transition to a flexible working environment, a hybrid model which allows for partial remote work, we took certain actions to reduce and reposition our office lease portfolio.

In the three months ended March 31, 2023, we recorded a pretax charge of $ 119.2 million ($ 91.0 million after-tax), which included an $ 80.4 million non-cash impairment charge for the operating lease right-of-use, or ROU, assets, $ 20.0 million for the write-off of the net book value of leasehold improvements at the affected locations, and $ 18.8 million of other lease obligations that will be paid in less than one year.

We contributed $ 0.3 million to our defined benefit pension plans in both the six months ended June 30, 2023 and 2022 .

OMNICOM GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in tables in millions, except per share data or unless otherwise noted)

Real Estate and Other Repositioning Costs

In connection with the transition to a flexible working environment, a hybrid model which allows for partial remote work, we took certain actions in the first quarter of 2023 to reduce and reposition our office lease portfolio.

In the second quarter of 2023, as a result of our continuing efforts to increase efficiencies and relevant skill sets to meet client demands, we incurred severance charges and other exit costs associated with rebalancing our workforce and consolidating operations in certain markets.

For the three and six months ended June 30, 2023, operating expenses included $ 72.3 million ($ 54.5 million after tax), primarily related to severance actions in the second quarter of 2023 and $ 191.5 million ($ 145.5 million after tax), respectively, for non-cash impairment charges for the operating lease right-of-use, or ROU, assets, severance charges, and other exit costs.

All severance and other costs will be paid in less than one year.

Substantially all of the operating lease payments related to the ROU assets will be paid out over three years.

Disposition of Subsidiaries

In April 2023, we disposed of certain research businesses included in our Execution & Support discipline.

As a result, we recorded a pretax gain of $ 78.8 million.

The disposition will not have a material impact on our ongoing results of operations or financial position.

Charges Arising from the Effects of the War in Ukraine

3 unchanged sentences

Supplemental Cash Flow Data

The change in operating capital was:

Three Months Ended March 31,

Change in operating capital:

Six Months Ended June 30,

(Increase) decrease in accounts receivable $ 584.6 $ 950.5

9 unchanged sentences

Finance leases $ 25.6 $ 35.7

Commitments and Contingent Liabilities

In the ordinary course of business, we are involved in various legal proceedings.

We do not presently expect that these proceedings will have a material adverse effect on our results of operations or financial position.

OMNICOM GROUP INC.

2 unchanged sentences

(Amounts in tables in millions, except per share data or unless otherwise noted)

Commitments and Contingent Liabilities

In the ordinary course of business, we are involved in various legal proceedings.

We do not presently expect that these proceedings will have a material adverse effect on our results of operations or financial position.

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss), net of income taxes were:

Changes in accumulated other comprehensive income (loss), net of income taxes:

Hedge Defined Benefit Pension Plans and Postemployment Arrangements Foreign

Currency Translation Total

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

January 1 $ ( 12.1 ) $ ( 41.3 ) $ ( 1,384.5 ) $ ( 1,437.9 )

3 unchanged sentences

$ ( 10.1 ) $ ( 39.6 ) $ ( 1,304.5 ) $ ( 1,354.2 )

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

January 1 $ ( 16.1 ) $ ( 90.4 ) $ ( 1,145.8 ) $ ( 1,252.3 )

10 unchanged sentences

Financial assets and liabilities measured at fair value on a recurring basis:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

3 unchanged sentences

Foreign currency derivatives $ — $ — $ 0.1 $ 0.1

Cross currency swaps - net investment hedge 14.3 14.3 16.5 16.5

Cross currency swaps - net

investment hedge 6.4 6.4 16.5 16.5

Contingent purchase price obligations $ 158.0 158.0 $ 115.0 115.0

OMNICOM GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in tables in millions, except per share data or unless otherwise noted)

Change in Level 3 fair value measurements:

Three Months Ended March 31,

Change in the Level 3 fair value measurement of contingent purchase price obligations:

Six Months Ended June 30,

January 1 $ 115.0 $ 167.1

4 unchanged sentences

$ 158.0 $ 154.5

The carrying amount and fair value of our financial assets and liabilities were:

March 31, 2023 December 31, 2022

OMNICOM GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in tables in millions, except per share data or unless otherwise noted)

C arrying amount and fair value of our financial assets and liabilities:

June 30, 2023 December 31, 2022

Value Carrying

14 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements