Omnicom Group Inc. (OMC)

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Omnicom Group Inc. (OMC)

Q4 2009 Earnings Call

February 10, 2010 8:30 am ET


John Wren – President, Chief Executive Officer

Randall Weisenburger – Executive Vice President, Chief Financial Officer


William Bird – Bank of America Merrill Lynch

Alexia Quadrani – J.P. Morgan

Daniel Salmon – BMO Capital Markets

Jason Helfstein – Oppenheimer

Brian Shipman – Jefferies & Co.

Meggan Friedman – William Blair

[Tim Nolan – Macquarie]

Mathew Walker – Nomura

James Dix – Wedbush Morgan Securities

Craig Huber – Access 342

Peter Stabler – Credit Suisse



Welcome to the Omnicom fourth quarter 2009 earnings release conference call. (Operator Instructions) At this time I would now like to introduce you to today’s conference call host, Executive Vice President and Chief Financial Officer of Omnicom Group, Mr. Randall Weisenburger.

Randall Weisenburger

Thank you all for taking the time to listen to our fourth quarter 2009 earnings call. We hope everyone’s had a chance to review our earnings release. We’ve posted to our website both the press release and a presentation covering the information that we will present this morning. This call is also being simulcast and will archived on our website.

Before we start, I’ve been asked to remind everyone to read the forward-looking statements and other information that is included on Page 1 of our investor presentation and to point out that certain of the statements made today may constitute forward-looking statements and that these statements are present expectations and actual events or results may differ materially.

We’re going to begin the call with some brief remarks from John Wren, and then following John’s remarks, we’ll review our financial performance for the quarter, and then at the end, both John and I will happy to take questions.

John Wren

Good morning and thank you for joining our call this morning. Overall, fourth quarter results were in line with our expectations. Results in the quarter improved when compared to the previous three quarters but still reflect the reductions in annual advertising and marketing spending initiated by clients in the first and second quarters of last year.

As economies improve, we believe the worst of the recession and its impact is behind us. While not all of our clients have finalized their budgets for 2010, we anticipate that many clients will at least modestly increase spending in the second half of this year.

Turning to our performance and what we expect, we’ve always placed a premium on strong operating management and we’ve held our agency leaders to very high standards. At an operating level, we’ve challenged our agency leaders to carefully manage costs and to adjust their offerings to better meet the needs of their clients.

Across the business, our agencies have effectively managed their cost structures over the past year. While continued cost control is going to be required, we feel good about our individual agencies’ ability now to focus on growing their businesses over the next 12 months.

In 2009 we also did an excellent job in strengthening and improving our balance sheet and capital structure. Together with careful management, we’re now in a very strong position to deploy our capital and grow our business via investing in challenge, investing in start ups and acquisitions and utilization of our free cash flow.

Over the past 12 months we continued to heavily invest in management training and development as we believe that strong managers and leaders are key strategic advantages in our business. In 2010 we’ll make additional investments by expanding many of our programs including our Omnicom University to emerging markets.

In the digital space, as many of you know, we have a dual strategy of building strong capabilities inside our existing agencies and adding new specialty skill sets.

First, we believe that a clear path for success in the future will be to continue to integrate these skills around our traditional businesses and make them adapt as quickly as possible to the changing media environment.

Second, we plan to expand our portfolio of specialized digital properties and we should be making some targeted acquisitions and funding a few start ups as we get into the beginning of the year.

Also in 2009 as I said, we enhanced our capital structure and we reduced the debt on our balance sheet. Going forward, we expect to invest our free cash differently this year back to acquisitions, an increase in dividends and a resumption of our share buy back program.

As you know, we’ve always followed a very disciplined acquisition strategy. Our focus is to target companies that fill specific strategic needs and in 2010 we expect to be more aggressive than we’ve been in the last 12 months. I especially focus on the extension of our geographic portfolio as we look at opportunities around the world.

You might in fourth quarter we acquired control over a long standing affiliate partner in the Middle East, Impact DBBO. Impact has 13 offices in seven countries and should enhance our offering in that region.

Finally, as has been widely reported, the company ended its relationship with Chrysler. But excluding Chrysler, net new business for the quarter exceeded $900 million so our companies are performing well when given the opportunity to win new business.

Before I turn it back to Randy, I just want to mention that given the severity of this recession, I’m very proud of our managers and employees and what they were able to accomplish in 2009 and I think at this point we’re poised as the market improves to grow our businesses again.

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