01—Abstract
Summary
Summary of the 10-K filed February 9, 2022. Cited figures are marked; the original filing is the authoritative source.
Omnicom Group Inc. (NYSE: OMC) reported 2021 revenue of $14,289.4 milliona, up $1,118.3 million, or 8.5%, from $13,171.1 million in 2020.
Management attributed the increase to organic growth of 10.2% and a 2.2% favorable foreign exchange impact, partially offset by a 3.9% reduction from acquisitions net of dispositions, primarily the sale of ICON International in the second quarter of 2021. Operating profit rose $599.1 million to $2,197.9 millionb, with operating margin of 15.4% versus 12.1% in 2020 and EBITA margin of 15.9% versus 12.8%. Net income attributed to Omnicom was $1,407.8 million, or $6.53 per diluted share, compared with $945.4 million, or $4.37 per diluted share, in 2020.
The prior year included $277.9 millionc of COVID-19 repositioning costs, partly offset by $162.6 million of government pandemic relief reimbursements. For 2022, the company expects organic revenue growth of 5% to 6%, an approximately 1.5% reduction in revenue from foreign exchange at current rates, a 3.0% to 3.5% reduction from net acquisition and disposition activity, and an effective tax rate of 26.5% to 27%. Management expects to maintain its 2021 operating margins for the full year.
Liquidity remained solid, with cash and cash equivalents of $5,316.8 milliond, total debt of $5,695.3 million, and a Credit Facility leverage ratio of 2.3 times against a covenant maximum of 4.0 times. Dividends declared were $2.80 per share in 2021, up from $2.60, and the company repurchased $527.3 million of common stock during the year. The filing highlights risk factors including client concentration (the 100 largest clients represented approximately 54% of revenue, and the largest client 3.2%), exposure to economic downturns and media payment default risk, international operations (about 49% of revenue), and cybersecurity, including a February 2021 incident that the company stated was not material.
02—Key points
Key Highlights
- Revenue rose 8.5% to $14,289.4 million, with organic growth contributing 10.2%.
- Operating profit increased $599.1 million to $2,197.9 million; operating margin expanded to 15.4% from 12.1%.
- Diluted EPS was $6.53, up from $4.37 in 2020; net income attributable to Omnicom was $1,407.8 million.
- 2022 guidance: organic revenue growth of 5% to 6%, net acquisition and disposition drag of 3.0% to 3.5%, and maintained operating margins.
- Sale of ICON International in Q2 2021 produced a $50.5 million pre-tax gain and reduced acquisition-net revenue by 3.9%.
- Balance sheet: $5,316.8 million cash and cash equivalents against $5,695.3 million total debt; leverage ratio 2.3 times versus a 4.0 times covenant maximum.
- Capital returns: $592.3 million paid in common dividends and $527.3 million of share repurchases; dividends declared rose to $2.80 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Omnicom Group kept $0.10.
- Revenue$14.29B100.0%
- Cost of revenue−$11.50B80.5%
- Gross profit$2.79B19.5%
- Operating costs−$591.8M4.1%
- Operating income$2.20B15.4%
- Interest, other & tax−$790.1M5.5%
- Net income$1.41B9.9%
Where FY2021 revenue went
$14.29B- Cost of revenue: $11.50B, 80% of revenue
- Net income: $1.41B, 9.9% of revenue
- SG&A: $379.7M, 2.7% of revenue
- Other operating costs: $212.1M, 1.5% of revenue
- Interest, other & tax: $790.1M, 5.5% of revenue
Kept 9.9% as net incomeNet income $1.41B · 9.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 9, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $14.29B$13.17B | +8.5% |
| Cost of Revenue | $11.50B$10.99B | +4.6% |
| Gross Profit | $2.79B$2.18B | +27.9% |
| SG&A Expenses | $379.70M$360.50M | +5.3% |
| Operating Expenses | $12.09B$11.57B | +4.5% |
| Operating Income | $2.20B$1.60B | +37.5% |
| Interest Expense | $236.40M$221.80M | +6.6% |
| Net Income | $1.41B$945.40M | +48.9% |
| EPS (Basic) | $6.57$4.38 | +50.0% |
| EPS (Diluted) | $6.53$4.37 | +49.4% |
| Shares Outstanding (Basic) | 214.30M215.60M | −0.6% |
| Shares Outstanding (Diluted) | 215.60M216.20M | −0.3% |
05—Questions
Frequently Asked Questions
How did Omnicom perform in 2021 compared with 2020?
Revenue increased $1,118.3 million, or 8.5%, to $14,289.4 million. Organic growth contributed 10.2%, foreign exchange added 2.2%, and acquisitions net of dispositions reduced revenue by 3.9%. Operating profit rose to $2,197.9 million from $1,598.8 million, and net income attributable to Omnicom increased to $1,407.8 million from $945.4 million.
What is Omnicom's outlook for 2022?
The company expects organic revenue growth of 5% to 6%. It expects foreign exchange to reduce revenue by about 1.5% for the year and net acquisition and disposition activity to reduce revenue by 3.0% to 3.5%. It expects to maintain its 2021 operating margins and an effective tax rate of 26.5% to 27%, before any equity compensation tax effects.
How concentrated is Omnicom's client base?
The largest client represented 3.2% of 2021 revenue and was served by approximately 110 agencies. The 100 largest clients represented approximately 54% of revenue. The filing notes that clients can reduce or cancel spending on short notice, so losing several large clients could have a material adverse effect.
What were the main risks Omnicom disclosed?
Key risks include adverse economic conditions and client payment delays, the risk of material losses on media purchases and production costs if clients default, currency fluctuations across more than 50 currencies with international operations at about 49% of revenue, goodwill impairment, regulatory changes, and cybersecurity threats. The company disclosed a February 2021 cybersecurity incident that it said did not have a material impact.
How is Omnicom funding its operations and returning capital?
Operating cash flow was $1,945.4 million in 2021. Capital expenditures were $665.8 million, dividends to common shareholders were $592.3 million, and share repurchases were $527.3 million. The company has a $2.5 billion revolving Credit Facility maturing in February 2025, and it issued $800 million of 2.60% Senior Notes due 2031 and £325 million of 2.25% Senior Notes due 2033.
06—Continue