Omnicom Group (OMC)
Q1 2011 Earnings Call
April 19, 2011 8:30 am ET
Randall Weisenburger - Chief Financial Officer and Executive Vice President
John Wren - Chief Executive Officer, President and Director
Daniel Salmon - BMO Capital Markets U.S.
Craig Huber -
Michael Nathanson - Nomura Securities Co. Ltd.
William Bird - Lazard Capital Markets LLC
Meggan Friedman - William Blair & Company L.L.C.
Alexia Quadrani - JP Morgan Chase & Co
James Dix - Wedbush Securities Inc.
John Janedis - UBS Investment Bank
Matthew Chesler - Deutsche Bank AG
Previous Statements by OMC
» Omnicom Group's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Omnicom Group Inc. Q1 2010 Earnings Call Transcript
» Omnicom Group Inc. Q4 2009 Earnings Call Transcript
Thank you for taking the time to listen to our first quarter 2011 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'll present this morning. This call is also being simulcast and will be archived on our website.
Before we start, I've been asked to remind everyone to read the forward-looking statements and the other information that's 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 our present expectations, and actual events or results may differ materially.
I'd also like to remind you that during the course of this earnings call, we will discuss some non-GAAP measures in talking about Omnicom's performance. You can find a reconciliation of those measures to the nearest comparable GAAP measures in the presentation accompanying this call.
We're going to begin the call with some brief remarks from John Wren. Following John's remarks, we'll review our financial performance for the quarter, and then both John and I will be happy to take questions.
Thank you, Randy. Good morning, everyone. We're pleased with our operating results for the first quarter. These results build on the progress we made during 2010 and also show the strengthening of our business over the last year.
This morning, in particular, I want to highlight several areas. First, organic growth. Organic growth in the quarter was up 5.2% over the same period in 2010. This represents the fifth consecutive quarter of positive growth and the last quarter where we face comparisons to the Chrysler business. Excluding its effect, organic growth would have been 6.8%. Second, we completed the Clemenger acquisition in early February. This is one of a series of strategic acquisitions in markets such as Columbia, Russia, India and China that will help us deepen and expand our presence in Asia and developing markets. In addition, our acquisitions of Communispace, Voce and Fanscape help us to expand our digital capabilities in consumer insights, analytics and social media. Each of these acquisitions meets the test of strategic fit and price, and each represents an investment in what we believe are some of the best companies in their respective disciplines and markets.
As many of you know, in March, we announced that we have made significant progress in digital through new strategic partnerships with Microsoft, Yahoo! and AOL. This come on the heels of our Google partnership announced in 2010. Each of these partnerships is designed to leverage our skills in areas of brand building, storytelling and creative, with our partner's technological skills, platforms and reach. Our goal with each of these partnerships is to continue to build the strongest competencies for our agencies and deliver innovative and effective tools and ideas to our clients worldwide.
Lastly, we continue to make progress towards our goal of returning margins to 2007 levels by 2012. Late last year, we embarked on a review of all of our businesses with the goal of improving margins while also investing in our best growth opportunities. We also challenged each of our companies to identify opportunities to improve margins while continuing to drive growth.
I'm happy to report that we made substantial progress disposing and of reorganizing non-strategic and underperforming businesses in our portfolio. Total annual revenue for businesses disposed of to date is approximately $120 million. During the quarter, we did incur charges affecting the P&L as a result of these repositioning activities. We also recognized the gain in connection with the completion of our acquisition of a majority interest in Clemenger. Randy will walk you through these items and their implications on the quarter in more detail during his part of the presentation. Although we are not finished with our review of all the companies in our portfolio, we do not expect to incur significant charges for the remainder of the year.
Taken together, these actions demonstrate a focus on executing our core strategies of building our presence in key markets outside the United States, improving our digital competencies and driving margin improvement without hampering growth.
Turning to an analysis of revenue by region. In the U.S., we continue to see strong organic growth of 4.1% versus the first quarter of last year and 6.8% excluding Chrysler. As I noted in February, we expect growth for the year to return to more historic levels as we face more difficult year-over-year comps. With that said though, we expect to see solid growth in the U.S. market, as employment and business fundamentals continue to improve.