Omnicom Group Inc. (OMC)
Q3 2008 Earnings Call
October 21, 2009 8:30 am ET
Randall J. Weisenburger - Chief Financial Officer, Executive Vice President
John D. Wren - President, Chief Executive Officer, Director
John Janedis - Wells Fargo
Alexia Quadrani - JPMorgan
Jason Helfstein - Oppenheimer
William Bird - Bank of America Merrill Lynch
James Dix - Wedbush
Craig Huber - Private Investor
Benjamin Swinburne - Morgan Stanley
Peter Stabler - Credit Suisse
Previous Statements by OMC
» Omnicom Group Inc. Q2 2009 Earnings Call Transcript
» Omnicom Group, Inc. Q1 2009 Earnings Call Transcript
» Omnicom Group Q4 2008 Earnings Call Transcript
Randall J. Weisenburger
Thank you, and thank you all for taking the time to listen to our third quarter 2009 earnings call. We hope everyone's had a chance to review our earnings release. We have posted to our Web site both the press release and the presentation covering the information that we are going to present this morning. This call is also being simulcast and will be archived on our website.
Before we start, I have been asked to remind everyone to read the forward-looking statements and other information that's included on Page 1 of our investor presentation, and to point out the certain of the statements made today may constitute forward-looking statements and that these statements are present expectations and that actual events or results may differ materially.
We are going to begin the call with some brief remarks from John Wren. Following John's remarks, we will review our financial statements for the quarter and then both John and I will be happy to take questions.
John D. Wren
Good morning and thanks for joining our call this morning. Third quarter results were in line with our expectations. While the recession has resulted in a significant reduction in advertising and marketing expenditures, our agencies have done a very good job adjusting costs and our service capabilities to this new environment.
Before we get into an explanation of the quarter, I would like to discuss just a few areas and what we see at the moment. On an overall basis, client spending while significantly down from 2008, is showing signs of stability. Additionally, net new business activity is robust. It’s improving and we continue to perform very well across all of our businesses. As Randy will discuss, FX, which has been negative for this quarter and for the past 12 months, is improving as we go forward as the dollar continues to weaken.
And finally, before I get into revenue, changes in our capital and debt structure have significantly strengthened our balance sheet.
Now I’d like to turn to revenue -- as I mentioned, our third quarter performance came in as we expected. Despite continued weakness in global economic growth, our performance reflects different signs of recovery by region. In Europe, both Euro and non-
Euro countries remain weak, and as we go into 2010 we expect any recovery to be slow.
BRIC and other developing countries are showing signs of recovery and we are hoping for faster growth in these markets as we move forward. Growth in developed markets such as Japan and Korea remain weak, especially when compared to the rest of Asia.
And in the United States, with the exception of several sectors, client spending has stabilized and there are even a few signs of positive growth.
The sectors which continue to under-perform are the same ones we discussed in the last quarter. The auto sector -- year over year, revenue in this sector has declined 30% for us, reflecting a reduction in the scope of work we perform and reduced client spending. Sports and event marketing were also down 30% as clients eliminated discretionary spending for these areas. We are hopeful that as we get into 2010, these areas will start to recover slowly.
Recruitment advertising, which we have discussed for the last several quarters, was down 45%. And branding and design, again which are discretionary and projects can be delayed, was down 25% for the quarter.
Client spending in other areas, as I said, have stabilized and should improve as the economy improves in 2010. That, coupled with net new business activities, hopefully will help us as we move forward.
Finally, before turning the call back to Randy, given the strength of our balance sheet, I fully expect that the company will become more active and you can expect more acquisition activity from us as we move forward.
Now I’ll turn it back to Randy.
Randall J. Weisenburger
Thanks, John. Well, we are clearly not happy with the state of the overall global consumer economy. We believe our agencies have done an excellent job of navigating the market challenges. On the cost side, our agencies have largely taken steps necessary to align their labor and service costs with their revenue and have done an exceptional job of managing their non-labor general operating expenses.
The area that will continue to take some time to bring into alignment is occupancy costs. While we are making progress, given the long-term nature of leases and the embedded increases inherent in most leases, this area will continue to take some work.
On the business front, new business activity is improving and our agencies are winning far more pitches than we are losing and at this point, spending levels from our existing clients is best described as generally stable with a few exceptions to the positive, which are mostly in the United States, and a few exceptions to the negative, which are mostly in Europe.