Omnicom Group 10-Q 2022-03-31

___________________________________________________________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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Commission File Number: 1-10551

OMNICOM GROUP INC.

(Exact name of registrant as specified in its charter)

New York			13-1514814
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)
280 Park Avenue, New York, NY			10017
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (212) 415-3600

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbols			Name of each exchange on which registered
Common Stock, $0.15 Par Value			OMC			New York Stock Exchange
0.800% Senior Notes due 2027			OMC/27			New York Stock Exchange
1.400% Senior Notes due 2031			OMC/31			New York Stock Exchange
2.250% Senior Notes due 2033			OMC/33			New York Stock Exchange

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☑			Accelerated filer			☐			Non-accelerated filer			☐
Smaller reporting company			☐									Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

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As of April 13, 2022, there were 205,732,684 shares of Omnicom Group Inc. Common Stock outstanding.

OMNICOM GROUP INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022

TABLE OF CONTENTS

PART I.			FINANCIAL INFORMATION			Page
Item 1.			Financial Statements
			Consolidated Balance Sheets - March 31, 2022 and December 31, 2021			1
			Consolidated Statements of Income - Three Months Ended March 31, 2022 and 2021			2
			Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 2022 and 2021			3
			Consolidated Statements of Equity - Three Months Ended March 31, 2022 and 2021			4
			Consolidated Statements of Cash Flows - Three Months Ended March 31, 2022 and 2021			5
			Notes to Consolidated Financial Statements			6
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			24
Item 4.			Controls and Procedures			24
PART II.			OTHER INFORMATION
Item 1.			Legal Proceedings			25
Item 1A.			Risk Factors			25
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			25
Item 6.			Exhibits			26
SIGNATURES						26

FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements, including statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, from time to time, the Company or its representatives have made, or may make, forward-looking statements, orally or in writing. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial position, or otherwise, based on current beliefs of the Company’s management as well as assumptions made by, and information currently available to, the Company’s management. Forward-looking statements may be accompanied by words such as “aim,” “anticipate,” “believe,” “plan,” “could,” “should,” “would,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project” or similar words, phrases or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include: the impact of the war in Ukraine; adverse economic conditions, including those caused by the impact of the COVID-19 pandemic, severe and sustained inflation in countries that comprise our major markets, supply chain issues affecting the distribution of our clients’ products; international, national or local economic conditions that could adversely affect the Company or its clients; losses on media purchases and production costs incurred on behalf of clients; reductions in client spending, a slowdown in client payments and a deterioration or a disruption in the credit markets; the ability to attract new clients and retain existing clients in the manner anticipated; changes in client advertising, marketing and corporate communications requirements; failure to manage potential conflicts of interest between or among clients; unanticipated changes relating to competitive factors in the advertising, marketing and corporate communications industries; the ability to hire and retain key personnel; currency exchange rate fluctuations; reliance on information technology systems; changes in legislation or governmental regulations affecting the Company or its clients; risks associated with assumptions the Company makes in connection with its critical accounting estimates and legal proceedings; and the Company’s international operations, which are subject to the risks of currency repatriation restrictions, social or political conditions and regulatory environment. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that may affect the Company’s business, including those described in Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 and in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report. Except as required under applicable law, the Company does not assume any obligation to update these forward-looking statements.

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PART I. FINANCIAL INFORMATION

OMNICOM GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions)

			March 31, 2022						December 31, 2021
			(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents			$	3,925.5					$	5,316.8
Short-term investments			92.7						—
Accounts receivable, net of allowance for doubtful accounts of $21.0 and $21.7			7,071.6						8,472.5
Work in process			1,316.8						1,201.0
Other current assets			990.9						919.2
Total Current Assets			13,397.5						15,909.5
Property and Equipment at cost, less accumulated depreciation of $1,178.2 and $1,165.7			970.6						992.1
Operating Lease Right-Of-Use Assets			1,204.3						1,202.9
Equity Method Investments			77.6						76.3
Goodwill			9,951.9						9,738.6
Intangible Assets, net of accumulated amortization of $821.7 and $856.5			333.0						298.0
Other Assets			210.8						204.4
TOTAL ASSETS			$	26,145.7					$	28,421.8
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable			$	9,899.6					$	11,897.2
Customer advances			1,463.8						1,644.5
Short-term debt			12.4						9.6
Taxes payable			328.5						263.3
Other current liabilities			2,472.9						2,411.6
Total Current Liabilities			14,177.2						16,226.2
Long-Term Liabilities			960.0						961.5
Long-Term Liability - Operating Leases			950.1						952.1
Long-Term Debt			5,646.4						5,685.7
Deferred Tax Liabilities			458.1						477.3
Commitments and Contingent Liabilities (Note 11)
Temporary Equity - Redeemable Noncontrolling Interests			405.3						345.3
Equity:
Shareholders’ Equity:
Preferred stock			—						—
Common stock			44.6						44.6
Additional paid-in capital			584.5						622.0
Retained earnings			9,027.3						8,998.8
Accumulated other comprehensive income (loss)			(1,222.6)						(1,252.3)
Treasury stock, at cost			(5,434.1)						(5,142.9)
Total Shareholders’ Equity			2,999.7						3,270.2
Noncontrolling interests			548.9						503.5
Total Equity			3,548.6						3,773.7
TOTAL LIABILITIES AND EQUITY			$	26,145.7					$	28,421.8

The accompanying notes to the consolidated financial statements are an integral part of these statements.

OMNICOM GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In millions, except per share amounts)

									Three Months Ended March 31,
															2022						2021
Revenue															$	3,410.3					$	3,426.9
Operating Expenses:
Salary and service costs															2,491.8						2,545.0
Occupancy and other costs															300.2						291.6
Charges arising from the effects of the war in Ukraine															113.4						—
Cost of services															2,905.4						2,836.6
Selling, general and administrative expenses															96.7						71.6
Depreciation and amortization															55.2						53.3
															3,057.3						2,961.5
Operating Profit															353.0						465.4
Interest Expense															51.0						53.8
Interest Income															8.2						6.3
Income Before Income Taxes and Loss From Equity Method Investments															310.2						417.9
Income Tax Expense															115.5						111.9
Loss From Equity Method Investments															(0.1)						—
Net Income															194.6						306.0
Net Income Attributed To Noncontrolling Interests															20.8						18.2
Net Income - Omnicom Group Inc.															$	173.8					$	287.8
Net Income Per Share - Omnicom Group Inc.:
Basic															$0.83						$1.33
Diluted															$0.83						$1.33

The accompanying notes to the consolidated financial statements are an integral part of these statements.

OMNICOM GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In millions)

									Three Months Ended March 31,
															2022						2021
Net Income															$	194.6					$	306.0
Other Comprehensive Income (Loss):
Cash flow hedge:
Amortization of loss included in interest expense															1.4						1.4
Income tax effect															(0.4)						(0.4)
															1.0						1.0
Defined benefit pension plans and postemployment arrangements:
Amortization of prior service cost															1.0						1.2
Amortization of actuarial losses															1.6						3.3
Income tax effect															(1.3)						(1.8)
															1.3						2.7
Foreign currency translation adjustment															28.1						(46.9)
Other Comprehensive Income (Loss)															30.4						(43.2)
Comprehensive Income															225.0						262.8
Comprehensive Income Attributed To Noncontrolling Interests															21.5						7.4
Comprehensive Income - Omnicom Group Inc.															$	203.5					$	255.4

The accompanying notes to the consolidated financial statements are an integral part of these statements.

OMNICOM GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In millions, except per share amounts)

									Three Months Ended March 31,
															2022						2021
Common Stock, shares issued															297.2						297.2
Common Stock, par value															$	44.6					$	44.6
Additional Paid-in Capital:
Beginning Balance															622.0						747.8
Net change in noncontrolling interests															(5.6)						1.0
Change in temporary equity															(57.8)						(2.8)
Share-based compensation															20.0						20.8
Stock issued, share-based compensation															5.9						2.9
Ending Balance															584.5						769.7
Retained Earnings:
Beginning Balance															8,998.8						8,190.6
Net income															173.8						287.8
Common stock dividends declared															(145.3)						(150.9)
Ending Balance															9,027.3						8,327.5
Accumulated Other Comprehensive Income (Loss):
Beginning Balance															(1,252.3)						(1,213.8)
Other comprehensive income (loss)															29.7						(32.4)
Ending Balance															(1,222.6)						(1,246.2)
Treasury Stock:
Beginning Balance															(5,142.9)						(4,684.8)
Stock issued, share-based compensation															9.1						1.1
Common stock repurchased															(300.3)						(0.7)
Ending Balance															(5,434.1)						(4,684.4)
Shareholders’ Equity															2,999.7						3,211.2
Noncontrolling Interests:
Beginning Balance															503.5						492.5
Net income															20.8						18.2
Other comprehensive income (loss)															0.7						(10.8)
Dividends to noncontrolling interests															(14.0)						(13.6)
Net change in noncontrolling interests															(9.9)						(5.8)
Increase in noncontrolling interests from business combinations															47.8						—
Ending Balance															548.9						480.5
Total Equity															$	3,548.6					$	3,691.7
Dividends Declared Per Common Share															$0.70						$0.70

The accompanying notes to the consolidated financial statements are an integral part of these statements.

OMNICOM GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

			Three Months Ended March 31,
			2022						2021
Cash Flows from Operating Activities:
Net income			$	194.6					$	306.0
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of right-of-use assets			35.8						33.4
Amortization of intangible assets			19.4						19.9
Amortization of net deferred gain on interest rate swaps			1.4						(1.3)
Share-based compensation			20.0						20.8
Non-cash charges related to the effects of the war in Ukraine			65.8						—
Other, net			2.7						3.8
Use of operating capital			(884.2)						(843.5)
Net Cash Used In Operating Activities			(544.5)						(460.9)
Cash Flows from Investing Activities:
Capital expenditures			(23.2)						(12.4)
Acquisition of businesses and interests in affiliates, net of cash acquired			(246.6)						—
Purchase of short-term investments			(92.7)						—
Other, net			0.7						1.6
Net Cash Used In Investing Activities			(361.8)						(10.8)
Cash Flows from Financing Activities:
Change in short-term debt			2.4						2.2
Dividends paid to common shareholders			(147.4)						(140.1)
Repurchases of common stock			(300.3)						(0.7)
Proceeds from stock plans			13.5						3.4
Acquisition of additional noncontrolling interests			(6.3)						(2.2)
Dividends paid to noncontrolling interest shareholders			(14.0)						(13.6)
Payment of contingent purchase price obligations			(6.0)						(6.9)
Other, net			(18.2)						(17.8)
Net Cash Used In Financing Activities			(476.3)						(175.7)
Effect of foreign exchange rate changes on cash and cash equivalents			(8.7)						(55.8)
Net Decrease in Cash and Cash Equivalents			(1,391.3)						(703.2)
Cash and Cash Equivalents at the Beginning of Period			5,316.8						5,600.5
Cash and Cash Equivalents at the End of Period			$	3,925.5					$	4,897.3

The accompanying notes to the consolidated financial statements are an integral part of these statements.

OMNICOM GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Presentation of Financial Statements

The terms “Omnicom,” “the Company,” “we,” “our” and “us” each refer to Omnicom Group Inc. and its subsidiaries, unless the context indicates otherwise. The accompanying unaudited consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP or GAAP, for interim financial information and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosure have been condensed or omitted.

In our opinion, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, in all material respects, of the information contained herein. These unaudited consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, or 2021 10-K. Results for the interim periods are not necessarily indicative of results that may be expected for the year.

Risks and Uncertainties

Global economic challenges, including the impact of the war in Ukraine, the COVID-19 pandemic, rising inflation and supply-chain disruptions could cause economic uncertainty and volatility. The impact of these issues on our business will vary by geographic market and discipline. We monitor economic conditions closely, as well as client revenue levels and other factors. In response to reductions in revenue, we can take actions to align our cost structure with changes in client demand and manage our working capital. However, there can be no assurance as to the effectiveness of our efforts to mitigate any impact of the current and future adverse economic conditions, reductions in client revenue, changes in client creditworthiness and other developments.

Impact of the War in Ukraine

We have historically conducted operations in Russia and Ukraine through local agencies in which we hold a majority stake. The minority partners in these agencies are local management, which report to the applicable network management.

During the first quarter of 2022, the war in Ukraine required us to suspend our business operations in Ukraine. The war resulted in the imposition of sanctions by the United States, the United Kingdom, and the European Union, that affect the cross-border operations of businesses operating in Russia. In addition, Russian regulators have imposed currency restrictions and regulations that created uncertainty regarding our ability to recover our investment in our operations in Russia, as well as our ability to exercise control over the operations. Also, many multinational companies, including many of our large clients, ceased or suspended their operations in Russia. Therefore, the ability to continue operations in Russia without additional funding, which we will not provide, is uncertain. As a result, we have sold, or committed to dispose of, all of our businesses in Russia. Accordingly, we recorded pretax charges of $113.4 million in the first quarter of 2022, primarily consisting of the net investment in our Russian businesses, and also including charges related to the suspension of operations in Ukraine.

Impact of the COVID-19 Pandemic - Update

Beginning in March 2020 and continuing through the first quarter of 2021, our business experienced the effects from reductions in client spending due to the economic impact related to the COVID-19 pandemic. While mixed by business and geography, the spending reductions impacted all our businesses and markets. Globally, the most impacted businesses were our Experiential discipline, especially in our event marketing businesses, and our Execution & Support discipline, primarily in field marketing. Most of our markets began to improve in April 2021, and the improvement continued through the first quarter of 2022 as clients substantially increased their spending on our services.

2. Revenue

Nature of our services

We provide an extensive range of advertising, marketing and corporate communications services through various client-centric networks that are organized to meet specific client objectives. Our networks and agencies provide a comprehensive range of services in the following fundamental disciplines: Advertising & Media, Precision Marketing, Commerce & Brand Consulting, Experiential, Execution & Support, Public Relations and Healthcare. Advertising & Media includes creative services across digital and traditional media, strategic media planning and buying, and data analytics services. Precision Marketing includes digital and direct marketing, digital transformation and data and analytics. Commerce & Brand Consulting services include brand consulting, strategy and research, and retail ecommerce. Experiential marketing services include live and digital events and experience design and execution. Execution & Support includes field marketing, sales support, digital and physical merchandising and point-of-sale, as well as other specialized marketing and custom communications services. Public relations services include corporate communications, crisis management, public affairs, and media and media relations services. Healthcare includes advertising and media services to global healthcare and pharmaceutical clients. At the core of all our services is the ability to create or develop a

client’s marketing or corporate communications message into content that can be delivered to a target audience across different communications mediums.

Revenue by discipline was (in millions):

									Three Months Ended March 31,
															2022						2021
Advertising & Media															$	1,769.4					$	2,003.7
Precision Marketing															336.1						269.5
Commerce & Brand Consulting															237.9						214.5
Experiential															142.5						88.4
Execution & Support															254.3						246.6
Public Relations															360.9						317.5
Healthcare															309.2						286.7
															$	3,410.3					$	3,426.9

Economic factors affecting our revenue

Global economic conditions have a direct impact on our revenue. Adverse economic conditions pose a risk that our clients may reduce, postpone or cancel spending for our services, which would impact our revenue.

Revenue in our principal geographic markets was (in millions):

									Three Months Ended March 31,
															2022						2021
Americas:
North America															$	1,839.0					$	1,972.5
Latin America															67.7						63.2
EMEA:
Europe															992.0						941.0
Middle East and Africa															81.9						50.2
Asia-Pacific															429.7						400.0
															$	3,410.3					$	3,426.9

The Americas is comprised of North America, which includes the United States, Canada and Puerto Rico, and Latin America, which includes South America and Mexico. EMEA is comprised of Europe, the Middle East and Africa. Asia-Pacific includes Australia, Greater China, India, Japan, Korea, New Zealand, Singapore and other Asian countries. Revenue in the United States for the three months ended March 31, 2022 and 2021 was $1,724.6 million and $1,868.1 million, respectively.

Contract assets and liabilities

Work in process includes contract assets, unbilled fees and costs, and media and production costs. Contract liabilities primarily consist of customer advances. Work in process and contract liabilities were (in millions):

			March 31, 2022						December 31, 2021						March 31, 2021
Work in process:
Contract assets and unbilled fees and costs			$	662.5					$	469.9					$	626.0
Media and production costs			654.3						731.1						512.7
			$	1,316.8					$	1,201.0					$	1,138.7
Contract liabilities:
Customer advances			$	1,463.8					$	1,644.5					$	1,278.0

Work in process represents accrued costs incurred on behalf of customers, including media and production costs, and fees and other third-party costs that have not yet been billed. Media and production costs are billed during the production process in accordance with the terms of the client contract. Contract assets primarily include incentive fees, which are not material and will be billed to clients in accordance with the terms of the client contract. Substantially all unbilled fees and costs will be billed within the next 30 days. Contract liabilities primarily represent advance billings to customers in accordance with the terms of the client contracts, primarily for the reimbursement of third-party costs that are generally incurred in the near term. There were no impairment losses to the contract assets recorded in the three months ended March 31, 2022 and 2021.

3. Net Income per Share

The computations of basic and diluted net income per share were (in millions, except per share amounts):

									Three Months Ended March 31,
															2022						2021
Net Income - Omnicom Group Inc.															$	173.8					$	287.8
Weighted Average Shares:
Basic															208.3						215.6
Dilutive stock options and restricted shares															1.5						1.2
Diluted															209.8						216.8
Anti-dilutive stock options and restricted shares															0.5						0.7
Net Income per Share - Omnicom Group Inc.:
Basic															$0.83						$1.33
Diluted															$0.83						$1.33

4. Goodwill and Intangible Assets

Goodwill and intangible assets were (in millions):

			March 31, 2022																		December 31, 2021
			Gross Carrying Value						Accumulated Amortization						Net Carrying Value						Gross Carrying Value						Accumulated Amortization						Net Carrying Value
Goodwill			$	10,466.6					$	(514.7)					$	9,951.9					$	10,259.6					$	(521.0)					$	9,738.6
Intangible assets:
Purchased and internally developed software			$	375.5					$	(314.6)					$	60.9					$	382.2					$	(318.7)					$	63.5
Customer related and other			779.2						(507.1)						272.1						772.3						(537.8)						234.5
			$	1,154.7					$	(821.7)					$	333.0					$	1,154.5					$	(856.5)					$	298.0

Changes in goodwill were (in millions):

						Three Months Ended March 31,
						2022						2021
January 1						$	9,738.6					$	9,609.7
Acquisitions						215.2						—
Noncontrolling interests in acquired businesses						47.8						—
Dispositions						(19.4)						—
Foreign currency translation						(30.3)						(68.2)
March 31						$	9,951.9					$	9,541.5

We evaluated the effects of the war in Ukraine and the geopolitical events in the region on our forecasted consolidated operating performance and concluded that we do not have a trigger event that would result in an update of our evaluation of goodwill for impairment that we performed in June 2021. We will continue to monitor these ongoing geopolitical events and evaluate the impact, if any, on our goodwill impairment test, which will be performed in June 2022.

5. Debt

Credit Facilities

We have a $2.5 billion multi-currency revolving credit facility, or Credit Facility, that matures on February 14, 2025. In addition, we have uncommitted credit lines aggregating $807.5 million and the ability to issue up to $2 billion of U.S. Dollar denominated commercial paper and issue up to the equivalent of $500 million in British Pounds or Euro under a Euro commercial paper program. These facilities provide additional liquidity sources for operating capital and general corporate purposes. At March 31, 2022, there were no borrowings under the Credit Facility or the uncommitted credit lines, and there were no outstanding commercial paper issuances.

The Credit Facility contains a financial covenant that requires us to maintain a Leverage Ratio of consolidated indebtedness to consolidated EBITDA (earnings before interest, taxes, depreciation, amortization and non-cash charges) of no more than 3.0 times for the most recently ended 12-month period. At March 31, 2022, we were in compliance with this covenant as our Leverage Ratio was 2.4 times. The Credit Facility does not limit our ability to declare or pay dividends or repurchase our common stock.

Short-Term Debt

At March 31, 2022 and December 31, 2021, short-term debt of $12.4 million and $9.6 million, respectively, represented bank overdrafts and short-term borrowings primarily of our international subsidiaries. Due to the short-term nature of this debt, carrying value approximates fair value.

Long-Term Debt

Long-term debt was (in millions):

			March 31, 2022						December 31, 2021
3.65% Senior Notes due 2024			$	750.0					$	750.0
3.60% Senior Notes due 2026			1,400.0						1,400.0
€500 million 0.80% Senior Notes due 2027			554.7						568.6
2.45% Senior Notes due 2030			600.0						600.0
4.20% Senior Notes due 2030			600.0						600.0
€500 million 1.40% Senior Notes due 2031			554.7						568.6
2.60% Senior Notes due 2031			800.0						800.0
£325 million 2.25% Senior Notes due 2033			426.5						439.8
			5,685.9						5,727.0
Unamortized discount			(10.2)						(10.8)
Unamortized debt issuance costs			(30.4)						(31.8)
Unamortized deferred gain from settlement of interest rate swaps			1.1						1.3
			$	5,646.4					$	5,685.7

Our 2.45% Senior Notes due 2030, 4.20% Senior Notes due 2030 and 2.60% Senior Notes due 2031 are senior unsecured obligations of Omnicom that rank equal in right of payment with all existing and future unsecured senior indebtedness.

Omnicom and its wholly owned finance subsidiary, Omnicom Capital Inc., or OCI, are co-obligors under our 3.65% Senior Notes due 2024 and 3.60% Senior Notes due 2026. These notes are a joint and several liability of Omnicom and OCI, and Omnicom unconditionally guarantees OCI’s obligations with respect to the notes. OCI provides funding for our operations by incurring debt and lending the proceeds to our operating subsidiaries. OCI’s assets primarily consist of cash and cash equivalents and intercompany loans made to our operating subsidiaries, and the related interest receivable. There are no restrictions on the ability of OCI or Omnicom to obtain funds from our subsidiaries through dividends, loans or advances. Such notes are senior unsecured obligations that rank equal in right of payment with all existing and future unsecured senior indebtedness.

Omnicom and OCI have, jointly and severally, fully and unconditionally guaranteed the obligations of Omnicom Finance Holdings plc, or OFH, a U.K.-based wholly owned subsidiary of Omnicom, with respect to the €500 million 0.80% Senior Notes due 2027 and the €500 million 1.40% Senior Notes due 2031, collectively the Euro Notes. OFH’s assets consist of its investments in several wholly owned finance companies that function as treasury centers, which provide funding for various operating companies in Europe, Brazil, Australia and other countries in the Asia-Pacific region. The finance companies’ assets consist of cash and cash equivalents and intercompany loans that they make or have made to the operating companies in their respective regions and the related interest receivable. There are no restrictions on the ability of Omnicom, OCI or OFH to obtain funds from their subsidiaries through dividends, loans or advances. The Euro Notes and the related guarantees are senior unsecured obligations that rank equal in right of payment with all existing and future unsecured senior indebtedness of OFH and each of Omnicom and OCI, respectively.

Omnicom has fully and unconditionally guaranteed the obligations of Omnicom Capital Holdings plc, or OCH, a U.K.-based wholly owned subsidiary of Omnicom, with respect to the £325 million 2.25% Senior Notes due 2033, or the Sterling Notes. OCH’s assets consist of its investments in several wholly owned finance companies that function as treasury centers, which provide funding for various operating companies in EMEA, Australia and other countries in the Asia-Pacific region. The finance companies’ assets consist of cash and cash equivalents and intercompany loans that they make or have made to the operating companies in their respective regions and the related interest receivable. There are no restrictions on the ability of Omnicom or OCH to obtain funds from their subsidiaries through dividends, loans or advances. The Sterling Notes and the related guarantee are senior unsecured obligations that rank equal in right of payment with all existing and future unsecured senior indebtedness of OCH and Omnicom, respectively.

6. Segment Reporting

Our branded agency networks operate in the advertising, marketing and corporate communications services industry, and are organized into agency networks, virtual client networks, regional reporting units and operating groups or practice areas. Our networks, virtual client networks and agencies increasingly share clients and provide clients with integrated services. The main economic components of each agency are employee compensation and related costs and direct service costs and occupancy and other costs which include rent and occupancy costs, technology costs and other overhead expenses. Therefore, given these similarities, we aggregate our six operating segments, which are our agency networks, into one reporting segment.

The agency networks' regional reporting units comprise three geographic regions: the Americas, EMEA and Asia-Pacific. The regional reporting units monitor the performance and are responsible for the agencies in their region. Agencies within the regional reporting units serve similar clients in similar industries and, in many cases, the same clients, and have similar economic characteristics.

Revenue and long-lived assets and goodwill by geographic region were (in millions):

			Americas						EMEA						Asia-Pacific
March 31, 2022
Revenue - Three months ended			$	1,906.7					$	1,073.9					$	429.7
Long-lived assets and goodwill			7,896.2						3,532.6						698.0
March 31, 2021
Revenue - Three months ended			$	2,035.7					$	991.2					$	400.0
Long-lived assets and goodwill			7,562.7						3,074.7						644.8

7. Income Taxes

Our effective tax rate for the three months ended March 31, 2022 increased period-over-period to 37.2% from 26.8%. The higher effective tax rate for 2022 was predominantly the result of the non-deductibility of the $113.4 million charges arising from the effects of the war in Ukraine, as well as an additional net charge of $4.8 million in connection with these charges. These charges were partially offset by the tax benefit arising from our share-based compensation awards.

At March 31, 2022, our unrecognized tax benefits were $163.5 million. Of this amount, approximately $157.9 million would affect our effective tax rate upon resolution of the uncertain tax positions.

8. Pension and Other Postemployment Benefits

Defined Benefit Pension Plans

The components of net periodic benefit expense were (in millions):

			Three Months Ended March 31,
			2022						2021
Service cost			$	0.8					$	1.4
Interest cost			1.0						0.8
Expected return on plan assets			(0.3)						(0.2)
Amortization of prior service cost			0.1						0.2
Amortization of actuarial losses			1.0						2.3
			$	2.6					$	4.5

We contributed $0.2 million to our defined benefit pension plans in each of the three months ended March 31, 2022 and 2021, respectively.

Postemployment Arrangements

The components of net periodic benefit expense were (in millions):

			Three Months Ended March 31,
			2022						2021
Service cost			$	1.1					$	1.2
Interest cost			0.7						0.5
Amortization of prior service cost			0.9						1.0
Amortization of actuarial losses			0.6						1.0
			$	3.3					$	3.7

9. Charges Arising from the Effects of the War in Ukraine

As discussed in Note 1, in the first quarter of 2022, we recorded pretax charges arising from the effects of the war in Ukraine of $113.4 million, which included cash charges of $47.6 million, primarily consisting of the loss on the disposition of the net investment in our Russian businesses, as well as impairment and other non-cash charges related to the suspension of operations in Ukraine.

10. Supplemental Cash Flow Data

The change in operating capital was (in millions):

			Three Months Ended March 31,
			2022						2021
(Increase) decrease in accounts receivable			$	1,142.2					$	1,095.5
(Increase) decrease in work in process and other current assets			(248.1)						(55.3)
Increase (decrease) in accounts payable			(1,755.4)						(1,953.8)
Increase (decrease) in customer advances, taxes payable and other current liabilities			12.2						63.0
Change in other assets and liabilities, net			(35.1)						7.1
Increase (decrease) in operating capital			$	(884.2)					$	(843.5)
Income taxes paid			$	49.9					$	42.7
Interest paid			$	14.1					$	5.3

Non-cash increase in lease liabilities (in millions):

			Three Months Ended March 31,
			2022						2021
Operating leases			$	76.3					$	38.7
Finance leases			$	17.0					$	11.7

11. Commitments and Contingent Liabilities

In the ordinary course of business, we are involved in various legal proceedings. We do not presently expect that these proceedings will have a material adverse effect on our results of operations or financial position.

12. Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss), net of income taxes were (in millions):

			Cash Flow Hedge						Defined Benefit Pension Plans and Postemployment Arrangements						Foreign Currency Translation						Total
			Three Months Ended March 31, 2022
January 1			$	(16.1)					$	(90.4)					$	(1,145.8)					$	(1,252.3)
Other comprehensive income (loss) before reclassifications			—						—						27.4						27.4
Reclassification from accumulated other comprehensive income (loss)			1.0						1.3						—						2.3
March 31			$	(15.1)					$	(89.1)					$	(1,118.4)					$	(1,222.6)

			Three Months Ended March 31, 2021
January 1			$	(20.1)					$	(123.2)					$	(1,070.5)					$	(1,213.8)
Other comprehensive income (loss) before reclassifications			—						—						(36.1)						(36.1)
Reclassification from accumulated other comprehensive income (loss)			1.0						2.7						—						3.7
March 31			$	(19.1)					$	(120.5)					$	(1,106.6)					$	(1,246.2)

13. Fair Value

Financial assets and liabilities measured at fair value on a recurring basis were (in millions):

			March 31, 2022
			Level 1						Level 2						Level 3						Total
Assets:
Cash and cash equivalents			$	3,925.5																	$	3,925.5
Short-term investments									$	92.7											92.7
Marketable equity investments			0.9																		0.9
Liabilities:
Contingent purchase price obligations															$	160.6					$	160.6

			December 31, 2021
			Level 1						Level 2						Level 3						Total
Assets:
Cash and cash equivalents			$	5,316.8																	$	5,316.8
Marketable equity investments			1.1																		1.1
Foreign currency derivative instruments									$	0.3											0.3
Liabilities:
Foreign currency derivatives									$	0.1											$	0.1
Contingent purchase price obligations															$	167.1					167.1

Changes in contingent purchase price obligations were (in millions):

			Three Months Ended March 31,
			2022						2021
January 1			$	167.1					$	71.9
Acquisitions			0.5						1.3
Revaluation and interest			0.2						0.4
Payments			(6.0)						(5.4)
Foreign currency translation			(1.2)						(0.5)
March 31			$	160.6					$	67.7

The carrying amount and fair value of our financial assets and liabilities were (in millions):

			March 31, 2022												December 31, 2021
			Carrying Amount						Fair Value						Carrying Amount						Fair Value
Assets:
Cash and cash equivalents			$	3,925.5					$	3,925.5					$	5,316.8					$	5,316.8
Short-term investments			92.7						92.7						—						—
Marketable equity securities			0.9						0.9						1.1						1.1
Non-marketable equity securities			5.6						5.6						6.5						6.5
Foreign currency derivatives			—						—						0.3						0.3
Liabilities:
Short-term debt			$	12.4					$	12.4					$	9.6					$	9.6
Foreign currency derivatives			—						—						0.1						0.1
Contingent purchase price obligations			160.6						160.6						167.1						167.1
Long-term debt			5,646.4						5,561.3						5,685.7						6,011.6

Short-term investments of $92.7 million at March 31, 2022 represent time deposits maturing at various dates within the year. These investments are classified as held-to-maturity securities because we have the positive intent and ability to hold until maturity. Held-to-maturity securities are carried at amortized cost, which approximates fair value. Fair value is based on observable interest rates for similar securities.

The estimated fair value of the foreign currency derivatives is determined using model-derived valuations, taking into consideration foreign currency rates and counterparty credit risk. The estimated fair value of the contingent purchase price obligations is calculated in accordance with the terms of each acquisition agreement and is discounted. The fair value of debt is based on quoted market prices.

14. New Accounting Standards

In October 2021, the FASB issued ASU 2021-08, Accounting for Contract Assets and Contract Liabilities From Contracts With Customers, or ASU 2021-08, that requires acquiring companies to apply ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination consistent with those recorded by the acquiring company. ASU 2021-08 is effective January 1, 2023, and early adoption is permitted. Contracts with customers in the advertising and marketing business are typically short duration contracts. To the extent we acquire companies in the advertising and marketing communications business, we do not expect this standard to have a material impact on our results of operations or financial position.

15. Subsequent Events

We have evaluated events subsequent to the balance sheet date and determined that there have not been any events that have occurred that would require additional adjustments to or disclosures in these consolidated financial statements.

EXECUTIVE SUMMARY

Risks and Uncertainties

Global economic challenges, including the impact of the war in Ukraine, the COVID-19 pandemic, rising inflation and supply-chain disruptions could cause economic uncertainty and volatility. The impact of these issues on our business will vary by geographic market and discipline. We monitor economic conditions closely, as well as client revenue levels and other factors. In response to reductions in revenue, we can take actions to align our cost structure with changes in client demand and manage our working capital. However, there can be no assurance as to the effectiveness of our efforts to mitigate any impact of the current and future adverse economic conditions, reductions in client revenue, changes in client creditworthiness and other developments.

Impact of the War in Ukraine

We have historically conducted operations in Russia and Ukraine through local agencies in which we hold a majority stake. The minority partners in these agencies are local management, which report to the applicable network management.

During the first quarter of 2022, the war in Ukraine required us to suspend our business operations in Ukraine. The war resulted in the imposition of sanctions by the United States, the United Kingdom, and the European Union, that affect the cross-border operations of businesses operating in Russia. In addition, Russian regulators have imposed currency restrictions and regulations that created uncertainty regarding our ability to recover our investment in our operations in Russia, as well as our ability to exercise control over the operations. Also, many multinational companies, including many of our large clients, ceased or suspended their operations in Russia. Therefore, the ability to continue operations in Russia without additional funding, which we will not provide, is uncertain. As a result, we have sold, or committed to dispose of, all of our businesses in Russia. Accordingly, we recorded pretax charges of $113.4 million in the first quarter of 2022, primarily consisting of the net investment in our Russian businesses, and also including charges related to the suspension of operations in Ukraine.

We evaluated the effects of the war in Ukraine and the geopolitical events in the region on our forecasted consolidated operating performance and concluded that we do not have a trigger event that would result in an update of our evaluation of goodwill for impairment that we performed in June 2021. We will continue to monitor these ongoing geopolitical events, evaluate available options to seek to mitigate further risk of loss and continue to evaluate the impact, if any, on our goodwill impairment test, which will be performed in June 2022.

Impact of COVID-19 Pandemic - Update

Beginning in March 2020 and continuing through the first quarter of 2021, our business experienced the effects from reductions in client spending due to the economic impact related to the COVID-19 pandemic. While mixed by business and geography, the spending reductions impacted all our businesses and markets. Globally, the most impacted businesses were our Experiential discipline, especially in our event marketing businesses, and our Execution & Support discipline, primarily in field marketing. Most of our markets began to improve year in April 2021, and the improvement continued through the first quarter of 2022 as clients substantially increased their spending on our services.

Results of Operations

Revenue for the three months ended March 31, 2022 decreased $16.6 million, or 0.5%, compared to the three months ended March 31, 2021. Organic growth increased revenue $408.0 million, or 11.9%, primarily reflecting increased client spending in all our disciplines and across all our geographic regions compared to the prior year period. The increase in organic revenue was offset by the reduction in acquisition revenue, net of disposition revenue of $339.6 million, or 9.9%, reflecting dispositions in the Advertising & Media discipline in the second quarter of 2021, and the negative impact of changes in foreign currency exchange rates of $85.0 million, or 2.5%.

We are a strategic holding company providing advertising, marketing and corporate communications services to clients through our branded networks and agencies around the world. On a global, pan-regional and local basis, our networks and agencies provide a comprehensive range of services in the following fundamental disciplines: Advertising & Media, Precision Marketing, Commerce & Brand Consulting, Experiential, Execution & Support, Public Relations and Healthcare. Advertising & Media include creative services across digital and traditional media, and strategic media planning and buying and data analytics services. Precision Marketing includes digital and direct marketing, digital transformation and data and analytics. Commerce & Brand Consulting services include brand consulting, strategy and research and retail ecommerce. Experiential marketing services include live and digital events and experience design and execution. Execution & Support includes field marketing, sales support, digital and physical merchandising and point-of-sale, as well as other specialized marketing and custom communications services. Public relations services include corporate communications, crisis management, public affairs and media and media relations services. Healthcare includes advertising and media services to global healthcare and pharmaceutical clients. Our business model was built and continues to evolve around our clients. While our networks and agencies operate under different names and frame their ideas in different disciplines, we organize our services around our clients. Our fundamental business principle is that our clients’ specific marketing requirements are the central focus of how we structure our service offerings and allocate our resources. This client-

centric business model requires that multiple agencies within Omnicom collaborate in formal and informal virtual client networks utilizing our key client matrix organization structure. This collaboration allows us to cut across our internal organizational structures to execute our clients’ marketing requirements in a consistent and comprehensive manner. We use our client-centric approach to grow our business by expanding our service offerings to existing clients, moving into new markets and obtaining new clients. In addition, we pursue selective acquisitions of complementary companies with strong entrepreneurial management teams that typically currently serve or could serve our existing clients.

Driven by our clients’ continuous demand for more effective and efficient marketing activities, we strive to provide an extensive range of advertising, marketing and corporate communications services through various client-centric networks that are organized to meet specific client objectives. These service offerings include, among others, advertising, brand consulting, content marketing, corporate social responsibility consulting, crisis communications, custom publishing, data analytics, database management, digital/direct marketing, digital transformation, entertainment marketing, experiential marketing, field marketing, financial/corporate business-to-business advertising, graphic arts/digital imaging, healthcare marketing and communications, in-store design, interactive marketing, investor relations, marketing research, media planning and buying, merchandising and point of sale, mobile marketing, multi-cultural marketing, non-profit marketing, organizational communications, package design, product placement, promotional marketing, public affairs, public relations, retail marketing, sales support, search engine marketing, shopper marketing, social media marketing and sports and event marketing.

We continually evaluate our portfolio of businesses to identify areas for investment and acquisition opportunities,

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We manage our exposure to foreign exchange rate risk and interest rate risk through various strategies, including the use of derivative financial instruments. We use forward foreign exchange contracts as economic hedges to manage the cash flow volatility arising from foreign exchange rate fluctuations. We do not use derivatives for trading or speculative purposes. Using derivatives exposes us to the risk that counterparties to the derivative contracts will fail to meet their contractual obligations. We manage that risk through careful selection and ongoing evaluation of the counterparty financial institutions based on specific minimum credit standards and other factors.

Our 2021 10-K provides a detailed discussion of the market risks affecting our operations. No material change has occurred in our market risks since the disclosure contained in our 2021 10-K.

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file with the SEC is recorded, processed, summarized and reported within applicable time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is accumulated and communicated to management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate to allow timely decisions regarding required disclosure. Management, including our CEO and CFO, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2022. Based on that evaluation, our CEO and CFO concluded that, as of March 31, 2022, our disclosure controls and procedures are effective to ensure that decisions can be made timely with respect to required disclosures, as well as ensuring that the recording, processing, summarization and reporting of information required to be included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 are appropriate.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Management, with the participation of our CEO, CFO and our agencies, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our CEO and CFO concluded that our internal control over financial reporting was effective as of March 31, 2022. There have not been any changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

KPMG LLP, an independent registered public accounting firm that audited our consolidated financial statements included in our 2021 10-K, has issued an attestation report on Omnicom’s internal control over financial reporting as of December 31, 2021, dated February 9, 2022.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we are involved in various legal proceedings. We do not presently expect that these proceedings will have a material adverse effect on our results of operations or financial position.