Omnicom Group Inc. (OMC)
Q1 2010 Earnings Call
April 20, 2010 8:30 AM EST
Randall Weisenburger – EVP and CFO
John Wren – President and CEO
John Janedis – Wells Fargo Securities
Jason Helfstein – Oppenheimer & Co.
Alexia Quadrani – JPMorgan
James Dix – Wedbush
Craig Huber – Access 342
Tim Nolen (ph) – Macquarie
Meggan Friedman – William Blair
Ben Swinburne – Morgan Stanley
Peter Stabler – Credit Suisse
Previous Statements by OMC
» Omnicom Group Inc. Q4 2009 Earnings Call Transcript
» Omnicom Q3 2009 Earnings Call Transcript
» Omnicom Group Inc. Q2 2009 Earnings Call Transcript
At this time, I would like to now introduce you to today’s conference call host, Executive Vice President, Chief Financial Officer of Omnicom Group, Mr. Randall Weisenburger. Please go ahead.
Thanks Sean. Good morning and thank you all for taking the time to listen to our first quarter 2010 earnings call. We hope everyone’s had a chance to review our earnings release. We have posted to our website both the press release and a presentation covering the information that we are going to present this morning. This call is also being simulcast and it 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 one 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 are going to begin the call with some brief remarks from John Wren, and then following John’s remarks, I will review the financial performance for the quarter in a little more detail, and then both John and I will be happy to take questions at the end.
Good morning. Thank you for joining our call this morning. We are very happy to announce positive year-over-year growth for the first quarter. Overall revenue increased 6.3% to $2.92 billion. This includes organic revenue growth of 2.1%, which exceeded our expectations for the quarter.
As we discussed in our last call, the general business environment continues to stabilize and improve. And as we look across, as we look at individual countries and regions, we are cautiously optimistic about continued global recovery, although we expect significant variation by region.
Turning to our performance, revenue growth was driven by a number of factors, including cycling on some easier year-over-year comps for some of our businesses. First, we are starting to see a rebound in some of the hardest hit areas from the downturn. Areas such as CRM and PR showed fairly strong organic growth as did our media business. Recruiting continues to be one area of note that has not yet rebounded and Randy will take you some of the specifics in a few minutes when he gets back on the call.
Geographically, we saw a continued strong growth in developing markets, the Middle East, Africa, Asia, and South America. We are also pleasantly surprised by the US growth where organic growth was 5.1% in the quarter. This leaves Europe where performance remains weak and the outlook is still somewhat unclear.
On the cost front, we continued to keep a close eye on costs and have asked our agencies to remain mindful of the potential risk to the economy, especially in some of our European markets where it’s expensive to adjust staffing levels. Our other real estate and operating costs will take a little longer to fully absorb but barring any downturns in the economy, we expect some of these pressures begin to ease as we get in the second half of the year.
At the same time, our agencies are now increasingly focused on taking advantage of growth opportunities, both through new business efforts as well as growing our existing client accounts. Many of our agencies have adjusted their offerings to respond to the difficult environment, economic environment, and are now more and more flexible and better able to serve the diverse needs of their clients.
Turning to the balance sheet, at the end of the year, last year, we said that in 2010, we intended to use our strong balance sheet to increase our dividend, buyback stocks, and make strategic acquisitions. And as you all know, we increased our dividend by 33% in February and also completed $250 million in stock buybacks during the quarter.
Finally, our business is built on the strength of our management teams and the talented professionals around the world. They have worked extremely hard to help us navigate through last year and I am confident that we are positioned well for the coming year and beyond.
I will now turn this back to Randy, and then we will take your questions afterwards.
Thanks John. The short summary is the first quarter was a very positive start to the New Year. And while results varied somewhat by business type and geography, which I will cover in a more detail later, on the whole our businesses experienced solid sequential improvement from the fourth quarter and performed ahead of our expectation.
Versus the first quarter of 2009, the year-over-year revenue increased 6.3% to $2.92 billion. Operating income increased 3% to $291 million. That resulted in an operating income or EBIT margin of about 10%, down 30 basis points versus last year, and an EBITDA margin of 12.1%, down about 20 basis points from last year, which was a little bit ahead of the negative 30 basis points that we had expected.