01—Abstract
Summary
Summary of the 10-K filed February 12, 2019. Cited figures are marked; the original filing is the authoritative source.
Omnicom Group Inc. reported 2018 revenue of $15,290.2 milliona, up $16.6 million, or 0.1%, from $15,273.6 million in 2017.
Organic growth contributed $404.2 millionb (2.6%), while acquisitions net of dispositions reduced revenue by $326.6 million (2.1%), changes in foreign exchange added $85.1 million (0.6%), and the adoption of ASC 606 reduced revenue by $146.1 million (1.0%). Net income attributable to Omnicom Group Inc. rose $238.0 million, or 21.9%, to $1,326.4 million, and diluted net income per share increased 25.4% to $5.83. Results were helped by a $178.4 million net gain on the disposition of subsidiaries, primarily the sale of Sellbytel, offset by $149.4 million of repositioning charges taken in the third quarter.
Operating profit rose to $2,133.5 millionc, and operating margin improved to 14.0% from 13.6%. The effective tax rate fell to 25.6% from 36.9%, mainly due to the reduction in the U.S. federal statutory rate under the Tax Act. Cash and cash equivalents and short-term investments were $3,657.9 million at year-end, against net debt of $1,233.9 million.
Management expects organic revenue to increase modestly in 2019, and expects a net reduction to revenue of approximately 2.5%d for the full year from dispositions. Revenue growth was uneven by region: North America decreased 2.8%, Europe rose 6.0%, Asia-Pacific rose 3.6%, and Latin America fell 7.5%.
02—Key points
Key Highlights
- Revenue of $15,290.2 million, up 0.1% year over year, with organic growth of 2.6%
- Net income attributable to Omnicom Group Inc. of $1,326.4 million, up 21.9%; diluted EPS of $5.83, up 25.4%
- Operating profit of $2,133.5 million; operating margin of 14.0% versus 13.6% in 2017
- Third-quarter 2018 net gain of $178.4 million on disposition of subsidiaries, primarily Sellbytel, offset by $149.4 million of repositioning charges
- Effective tax rate of 25.6%, down from 36.9%, reflecting the lower U.S. federal statutory rate under the Tax Act
- Year-end net debt of $1,233.9 million; $2.5 billion revolving credit facility expiring July 31, 2021; leverage ratio of 2.1 times
- Top 100 clients represented approximately 51% of revenue; largest client was 3.0% of revenue
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Omnicom Group kept $0.09.
- Revenue$15.29B100.0%
- Cost of revenue−$12.44B81.3%
- Gross profit$2.85B18.7%
- Operating costs−$719.4M4.7%
- Operating income$2.13B14.0%
- Interest, other & tax−$807.1M5.3%
- Net income$1.33B8.7%
Where FY2018 revenue went
$15.29B- Cost of revenue: $12.44B, 81% of revenue
- Net income: $1.33B, 8.7% of revenue
- SG&A: $455.4M, 3.0% of revenue
- Other operating costs: $264.0M, 1.7% of revenue
- Interest, other & tax: $807.1M, 5.3% of revenue
Kept 8.7% as net incomeNet income $1.33B · 8.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 12, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $15.29B$15.27B | +0.1% |
| Cost of Revenue | $12.44B$12.47B | −0.2% |
| Gross Profit | $2.85B$2.81B | +1.7% |
| SG&A Expenses | $455.40M$439.70M | +3.6% |
| Operating Expenses | $13.16B$13.19B | −0.3% |
| Operating Income | $2.13B$2.08B | +2.4% |
| Interest Expense | $266.40M$248.60M | +7.2% |
| Net Income | $1.33B$1.09B | +21.9% |
| EPS (Basic) | $5.85$4.68 | +25.0% |
| EPS (Diluted) | $5.83$4.65 | +25.4% |
| Shares Outstanding (Basic) | 226.60M232.30M | −2.5% |
| Shares Outstanding (Diluted) | 227.60M233.90M | −2.7% |
05—Questions
Frequently Asked Questions
How did Omnicom's revenue and profitability change in 2018?
Revenue rose $16.6 million, or 0.1%, to $15,290.2 million. Net income attributable to Omnicom increased $238.0 million, or 21.9%, to $1,326.4 million, aided by the $178.4 million disposition gain and a lower tax rate, partly offset by $149.4 million of repositioning charges.
What drove the change in revenue?
Organic growth added $404.2 million (2.6%) and favorable foreign exchange added $85.1 million (0.6%). Acquisitions net of dispositions reduced revenue by $326.6 million (2.1%), and adoption of ASC 606 reduced revenue by $146.1 million (1.0%).
What is management's outlook for 2019?
Management expects organic revenue to increase modestly in 2019 and over the long term to exceed weighted average nominal GDP growth in major markets. It expects a net reduction to revenue from dispositions of approximately 3% to 3.5% in the first half of 2019 and 2.5% for the full year, and a 1.5% reduction from foreign exchange for the full year.
How is Omnicom financed and how strong is its balance sheet?
At December 31, 2018, long-term debt including the current portion was $4,883.7 million, and cash and short-term investments totaled $3,657.9 million, for net debt of $1,233.9 million. The Credit Facility covenants were met, with a leverage ratio of 2.1 times against a 3 times maximum and an interest coverage ratio of 9.9 times against a 5 times minimum. Credit ratings were BBB+ (S&P) and Baa1 (Moody's).
Are there material legal proceedings or known risks?
The company states it does not presently expect material adverse effects from ordinary-course proceedings. A Department of Justice Antitrust Division investigation into video production practices was closed in November 2018 without action against the company, its subsidiaries or employees. Key risks cited include economic downturns, client concentration, currency fluctuations, Brexit and cybersecurity.
06—Continue