Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains 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:

adverse economic conditions, including those caused by geopolitical events, international hostilities, acts of terrorism, public health crises, high and sustained inflation in countries that comprise our major markets, high interest rates, and labor and 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 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 related to competitive factors in the advertising, marketing and corporate communications industries;
unanticipated changes to, or the ability to hire and retain key personnel;
currency exchange rate fluctuations;
reliance on information technology systems and risks related to cybersecurity incidents;
effective management of the risks, challenges and efficiencies presented by utilizing Artificial Intelligence (AI) technologies and related partnerships in our business;
changes in legislation or governmental regulations affecting the Company or its clients;
risks associated with assumptions the Company makes in connection with its acquisitions, critical accounting estimates and legal proceedings;
the Company’s international operations, which are subject to the risks of currency repatriation restrictions, social or political conditions and an evolving regulatory environment in high-growth markets and developing countries; and
risks related to our environmental, social and governance goals and initiatives, including impacts from regulators and other stakeholders, and the impact of factors outside of our control on such goals and initiatives.

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, 2023, or 2023 10-K, and in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report and in other documents filed from time to time with the Securities and Exchange Commission. Except as required under applicable law, the Company does not assume any obligation to update these forward-looking statements.

EXECUTIVE SUMMARY

The unaudited consolidated financial statements and related notes to the unaudited consolidated financial statements, including our critical accounting estimates, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this report, should be read in conjunction with our 2023 10-K. In the following tables, dollars are presented in millions, except share amounts.

Given our size and breadth, we manage our business by monitoring several financial indicators. The key performance indicators we focus on are revenue growth, operating income, and EBITA (defined as earnings before interest, income taxes and amortization of acquired intangible assets and internally developed strategic platform assets) and EBITA margin (defined as EBITA divided by revenue). We analyze revenue growth by reviewing the components and mix of the growth, including growth by principal regional market, practice area and marketing discipline, the impact from foreign currency exchange rate changes, growth from acquisitions, net of dispositions, and growth from our largest clients. Variability in operating expenses is analyzed in the following categories: cost of services, selling, general and administrative expenses, or SG&A, and depreciation and amortization.

Financial Performance

Worldwide revenue for the three months ended September 30, 2024 increased $304.5 million, or 8.5%, to $3,882.6 million, compared to $3,578.1 million in the prior year quarter. Worldwide organic revenue growth (defined below) increased revenue $231.3 million, or 6.5%, reflecting increased client spending across most of our disciplines, primarily driven by our Advertising & Media, Public Relations and Experiential disciplines. Our Public Relations discipline was helped by spending on the upcoming U.S. elections, and the Experiential discipline benefited from the Summer Olympics. Substantially all of our major geographic markets had positive organic growth compared to the prior year period. Changes in foreign exchange rates period-over-period reduced revenue $1.2 million, or 0.1%. Acquisition revenue, net of disposition revenue, increased revenue $74.4 million, or 2.1%, primarily related to the purchase of Flywheel Digital in January 2024 (see Note 4 to the unaudited consolidated financial statements).

Worldwide revenue for the nine months ended September 30, 2024 increased $735.6 million, or 6.9%, to $11,366.9 million, compared to $10,631.3 million in the prior year period. Worldwide organic revenue growth increased revenue $556.5 million, or 5.2%, reflecting increased client spending in our Advertising & Media, Precision Marketing, Experiential and Healthcare disciplines and in all of our major geographic markets compared to the prior year period. The Experiential discipline benefited from the Summer Olympics. Changes in foreign exchange rates period-over-period reduced revenue $41.3 million, or 0.4%. Acquisition revenue, net of disposition revenue, increased revenue $220.4 million, or 2.1%, primarily related to the purchase of Flywheel Digital in January 2024 (see Note 4 to the unaudited consolidated financial statements) and acquisition activity in the second half of 2023, partially offset by dispositions in the Execution & Support discipline in the first half of 2023.

The period-over-period increase in worldwide revenue across our geographic markets for the three months ended September 30, 2024, was: North America $170.8 million, or 8.6%, Latin America $0.3 million, or 0.3%, Europe $64.0 million, or 6.3%, the Middle East and Africa $11.7 million, or 22.7%, and Asia-Pacific $57.7 million, or 13.5%.

The period-over-period increase in worldwide revenue across our geographic markets for the nine months ended September 30, 2024, was: North America $454.5 million, or 7.7%, Latin America $44.6 million, or 17.3%, Europe $174.2 million, or 5.8%, the Middle East and Africa $9.4 million, or 4.7%, and Asia-Pacific $52.9 million, or 4.2%.

A summary of our consolidated results of operations period-over-period:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			$ Change		% Change		2024			2023			$ Change		% Change
Revenue	$	3,882.6		$	3,578.1		$	304.5	8.5	%	$	11,366.9		$	10,631.3		$	735.6	6.9	%
Operating Income2	$	600.1		$	560.8		$	39.3	7.0	%	$	1,589.3		$	1,458.0		$	131.3	9.0	%
Operating Margin2	15.5		%	15.7		%			(0.2)	%	14.0		%	13.7		%			0.3	%

Net Income - Omnicom Group Inc.2	$	385.9		$	371.9		$	14.0	3.8	%	$	1,032.6		$	965.7		$	66.9	6.9	%
Net Income per Share - Omnicom Group Inc.: Diluted2	$	1.95		$	1.86		$	0.09	4.8	%	$	5.19		$	4.78		$	0.41	8.6	%
Non-GAAP Measures:
EBITA1,2,3	$	622.3		$	576.5		$	45.8	7.9	%	$	1,654.5		$	1,503.2		$	151.3	10.1	%
EBITA Margin %1,2,3	16.0		%	16.1		%			(0.1)	%	14.6		%	14.1		%			0.5	%

Reconciliation of Non-GAAP Financial Measures on page 26.
For the nine months ended September 30, 2024, operating expenses included $57.8 million ($42.9 million after-tax) of repositioning costs, primarily related to severance, which reduced diluted net income per share- Omnicom Group Inc. by $0.22. There were no repositioning costs for the three months ended September 30, 2024. For the nine months ended September 30, 2023, operating expenses included real estate operating lease impairment charges, severance, and other exit costs of $191.5 million ($145.5 million after-tax) related to repositioning actions we took in the first and second quarters of 2023 to reduce our real estate requirements, rebalance our workforce, and consolidate operations in certain markets. In addition, in the second quarter of 2023, we recorded a gain of $78.8 million ($55.9 million after tax) on disposition of certain of our research businesses in the Execution & Support discipline. There were no repositioning costs for the three months ended September 30, 2023. The net impact of these actions reduced diluted net income per share- Omnicom Group Inc. by $0.44 (see Notes 10 and 11 to the unaudited consolidated financial statements).
Beginning with the three months ended March 31, 2024, EBITA is defined as earnings before interest, income taxes and amortization of acquired intangible assets and internally developed strategic platform assets. As a result, we reclassified the prior year period to be consistent with the revised definition, which reduced EBITA from previously reported amounts. We believe EBITA is useful in evaluating the impact of amortization of acquired intangible assets and internally developed strategic platform assets on operating performance and allows for comparability between reporting periods, the after-tax impact of which on diluted net income per share- Omnicom Group Inc. for the three and nine months ended September 30, 2024 was $0.08 and $0.24, respectively, and for the three and nine months ended September 30, 2023 was $0.06 and $0.17, respectively.

Our Business

Omnicom is a strategic holding company providing data-inspired, creative marketing and sales solutions to many of the largest global companies. Our portfolio of companies includes our global networks, BBDO, DDB, TBWA, Omnicom Media Group, the DAS Group of Companies, and the Communications Consultancy Network. All of our global networks integrate their service offerings with the Omnicom branded practice areas, including Omnicom Health Group, Omnicom Precision Marketing Group, Omnicom Commerce Group, Omnicom Advertising Collective, Omnicom Public Relations Group, Omnicom Brand Consulting Group, Flywheel Digital and Omnicom Production, a new practice area that brings together Omnicom's global production capabilities, as well as our Experiential businesses and Execution & Support businesses, which includes Omnicom Specialty Marketing Group.

On a global, pan-regional, and local basis, our networks, practice areas, and agencies provide a comprehensive range of solutions in the following fundamental disciplines: Advertising & Media, Precision Marketing, Public Relations, Healthcare, Branding & Retail Commerce, Experiential, and Execution & Support. Advertising & Media includes creative services across digital and traditional media, strategic media planning and buying, performance media, data analytics services, and Omnicom Production. Precision Marketing includes digital and direct marketing, digital transformation consulting, e-commerce operations, media execution, market intelligence and data and analytics. Public Relations services include corporate communications, crisis management, public affairs and media and media relations services. Healthcare includes corporate communications and advertising and media services to global healthcare and pharmaceutical companies. Branding & Retail Commerce services include brand and product consulting, strategy and research and retail marketing. Experiential marketing services include live and digital events and experience design and execution. Execution & Support includes field marketing, sales support, digital and physical merchandising, as well as other specialized marketing and custom communications services. Our geographic markets include the Americas, which includes North America and Latin America, Europe, the Middle East and Africa, or EMEA, and Asia-Pacific.

Our business model was built and continues to evolve around our clients. While our networks, practice areas 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 currently serve or could serve our existing clients. In addition to collaborating through our client service models, our agencies, practice areas and networks collaborate across internally developed technology platforms. Annalect and Omni, our proprietary data and analytics platforms, serve as the strategic resource for all of our agencies, practice areas and networks to share when developing client service strategies across our virtual networks. These platforms provide precision marketing and insights at scale across creative, media and other disciplines.

We believe generative AI will have a significant effect on how we provide services to our clients and how we enhance the productivity of our people. As with any new technology, we are working closely with our clients and technology partners to take advantage of the benefits of AI while being mindful of its limitations, risks, and privacy concerns. We are committed to responsible AI practices and collaboration to harness AI’s potential, while evaluating related risks, such as ethical considerations, public perception and reputational concerns, intellectual property protection, regulatory compliance, privacy and data security concerns and our ability to effectively adopt this new emerging technology. The rapidly developing nature of AI technology makes it difficult to assess the full impact on our business at this time.

As a provider of data-inspired, creative marketing and sales solutions, we operate in all major markets and have a large and diverse client base. For the twelve months ended September 30, 2024, our largest client accounted for 2.8% of our revenue, and our 100 largest clients, which represent many of the world’s major marketers, accounted for approximately 54.3% of our revenue. Our clients operate in virtually every sector of the global economy with no one industry representing more than 16% of our revenue for the nine months ended September 30, 2024. Although our revenue is generally balanced between the United States and international markets, and we have a large and diverse client base, we are not immune to general economic downturns.

Risks and Uncertainties

Global economic disruptions, including geopolitical events, international hostilities, acts of terrorism, public health crises, high and sustained inflation in countries that comprise our major markets, high interest rates, and labor and supply chain issues 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.

Revenue is typically lower in the first and third quarters and higher in the second and fourth quarters, reflecting client spending patterns during the year and additional project work that usually occurs in the fourth quarter. Certain global events targeted by major marketers for advertising expenditures, such as the FIFA World Cup and the Olympics, and certain national events, such as the U.S. election process, may affect our revenue period-over-period in certain businesses. Typically, these events do not have a significant impact on our revenue in any period.

CONSOLIDATED RESULTS OF OPERATIONS

The period-over-period change in results of operations:


	Three Months Ended September 30,									Nine Months Ended September 30,
	2024			2023			$ Change			2024			2023			$ Change
Revenue	$	3,882.6		$	3,578.1		$	304.5		$	11,366.9		$	10,631.3		$	735.6
Operating Expenses:
Salary and service costs	2,796.0			2,586.5			209.5			8,288.7			7,747.2			541.5
Occupancy and other costs	325.6			288.6			37.0			953.9			877.9			76.0
Real estate other repositioning costs2	—			—			—			57.8			191.5			(133.7)


Gain on disposition of subsidiary2	—			—			—			—			(78.8)			78.8
Cost of services	3,121.6			2,875.1			246.5			9,300.4			8,737.8			562.6
Selling, general and administrative expenses	99.5			89.8			9.7			295.8			278.1			17.7
Depreciation and amortization	61.4			52.4			9.0			181.4			157.4			24.0
Total operating expenses2	3,282.5			3,017.3			265.2			9,777.6			9,173.3			604.3
Operating Income2	600.1			560.8			39.3			1,589.3			1,458.0			131.3
Interest Expense	66.4			53.5			12.9			182.9			165.9			17.0
Interest Income	26.0			15.2			10.8			74.0			80.9			(6.9)
Income Before Income Taxes and Income From Equity Method Investments	559.7			522.5			37.2			1,480.4			1,373.0			107.4
Income Tax Expense	150.2			136.1			14.1			389.9			360.7			29.2
Income From Equity Method Investments	0.4			1.9			(1.5)			4.6			3.1			1.5
Net Income2	409.9			388.3			21.6			1,095.1			1,015.4			79.7
Net Income Attributed To Noncontrolling Interests	24.0			16.4			7.6			62.5			49.7			12.8
Net Income - Omnicom Group Inc.2	$	385.9		$	371.9		$	14.0		$	1,032.6		$	965.7		$	66.9
Net Income Per Share - Omnicom Group Inc.:2
Basic	$	1.97		$	1.88		$	0.09		$	5.25		$	4.84		$	0.41
Diluted	$	1.95		$	1.86		$	0.09		$	5.19		$	4.78		$	0.41

Revenue	$	3,882.6		$	3,578.1		$	304.5		$	11,366.9		$	10,631.3		$	735.6
Operating Margin %2	15.5		%	15.7		%				14.0		%	13.7		%
Non-GAAP Measures:1
EBITA2,3	$	622.3		$	576.5		$	45.8		$	1,654.5		$	1,503.2		$	151.3
EBITA Margin %2,3	16.0		%	16.1		%	(0.1)		%	14.6		%	14.1		%	0.5		%

Reconciliation of Non-GAAP Financial Measures on page 26.
For the nine months ended September 30, 2024, operating expenses included $57.8 million ($42.9 million after-tax) of repositioning costs, primarily related to severance, which reduced diluted net income per share- Omnicom Group Inc. by $0.22. There were no repositioning costs for the three months ended September 30, 2024. For the nine months ended September 30, 2023, operating expenses included real estate operating lease impairment charges, severance, and other exit costs of $191.5 million ($145.5 million after-tax) related to repositioning actions we took in the first and second quarters of 2023 to reduce our real estate requirements, rebalance our workforce, and consolidate operations in certain markets. In addition, in the second quarter of 2023, we recorded a gain of $78.8 million ($55.9 million after tax) on disposition of certain of our research businesses in the Execution & Support discipline. There were no repositioning costs for the three months ended September 30, 2023. The net impact of these actions reduced diluted net income per share- Omnicom Group Inc. by $0.44 (see Notes 10 and 11 to the unaudited consolidated financial statements).
Beginning with the three months ended March 31, 2024, EBITA is defined as earnings before interest, income taxes and amortization of acquired intangible assets and internally developed strategic platform assets. As a result, we reclassified the prior year period to be consistent with the revised definition, which reduced EBITA from previously reported amounts. We believe EBITA is useful in evaluating the impact of amortization of acquired intangible assets and internally developed strategic platform assets on operating performance and allows for comparability between reporting periods, the after-tax impact of which on diluted net income per share- Omnicom Group Inc. for the three and nine months ended September 30, 2024 was $0.08 and $0.24, respectively, and for the three and nine months ended September 30, 2023 was $0.06 and $0.17, respectively.

Revenue

The components of period-over-period revenue change in the United States (“Domestic”) and the remainder of the world (“International”):


	Total				Domestic				International
	$		%		$		%		$		%
Three months ended September 30, 2023	$	3,578.1			$	1,868.8			$	1,709.3
Components of revenue change:
Foreign exchange rate impact	(1.2)		(0.1)	%	—		—	%	(1.2)		(0.1)	%
Acquisition revenue, net of disposition revenue	74.4		2.1	%	50.1		2.7	%	24.3		1.4	%
Organic growth	231.3		6.5	%	120.8		6.5	%	110.5		6.5	%
Three months ended September 30, 2024	$	3,882.6	8.5	%	$	2,039.7	9.1	%	$	1,842.9	7.8	%


	Total				Domestic				International
	$		%		$		%		$		%
Nine months ended September 30, 2023	$	10,631.3			$	5,531.6			$	5,099.7
Components of revenue change:
Foreign exchange rate impact	(41.3)		(0.4)	%	—		—	%	(41.3)		(0.8)	%
Acquisition revenue, net of disposition revenue	220.4		2.1	%	150.8		2.7	%	69.6		1.4	%
Organic growth	556.5		5.2	%	316.6		5.7	%	239.9		4.7	%
Nine months ended September 30, 2024	$	11,366.9	6.9	%	$	5,999.0	8.4	%	$	5,367.9	5.3	%

The components and percentages are calculated as follows:

Foreign exchange rate impact is calculated by translating the current period’s local currency revenue using the prior period average exchange rates to derive current period constant currency revenue (in this case $3,883.8 million and $11,408.2 million for the Total column for the three and nine months ended September 30, 2024, respectively). The foreign exchange impact is the difference between the current period revenue in U.S. Dollars and the current period constant currency revenue ($3,882.6 million less $3,883.8 million and $11,366.9 million less $11,408.2 million for the Total column for the three and nine months ended September 30, 2024, respectively).
Acquisition revenue is calculated as if the acquisition occurred twelve months prior to the acquisition date by aggregating the comparable prior period revenue of acquisitions through the acquisition date. As a result, acquisition revenue excludes the positive or negative difference between our current period revenue subsequent to the acquisition date and the comparable prior period revenue and the positive or negative growth after the acquisition is attributed to organic growth. Disposition revenue is calculated as if the disposition occurred twelve months prior to the disposition date by aggregating the comparable prior period revenue of dispositions through the disposition date. The acquisition revenue and disposition revenue amounts are netted in the table.
Organic growth is calculated by subtracting the foreign exchange rate impact, and the acquisition revenue, net of disposition revenue components from total revenue growth.
The percentage change is calculated by dividing the individual component amount by the prior period revenue base of that component ($3,578.1 million and $10,631.3 million for the Total column for the three and nine months ended September 30, 2024, respectively).

Changes in the value of foreign currencies against the U.S. Dollar affect our results of operations and financial position. For the most part, because the revenue and expense of our foreign operations are both denominated in the same local currency, the economic impact on operating margin is minimized. Assuming exchange rates at October 11, 2024 remain unchanged, we expect the impact of changes in foreign exchange rates will increase revenue by 1.0% for the fourth quarter and be flat for the full year. Based on our acquisition and disposition activity to date, we expect that the net impact will increase revenue by 1.8% for the fourth quarter and 2.0% for the full year.

Revenue by Discipline

To monitor the changing needs of our clients and to further expand the scope of our services to key clients, we monitor revenue across a broad range of disciplines and group them into the following categories: Advertising & Media, Precision Marketing, Branding & Retail Commerce, Experiential, Execution & Support, Public Relations, and Healthcare.

The period-over-period change in revenue and organic growth by discipline:


	Three Months Ended September 30,
	2024				2023				2024 vs. 2023
	$		% of Revenue		$		% of Revenue		$ Change		% Organic Growth
Advertising & Media	$	2,083.7	53.7	%	$	1,909.2	53.4	%	$	174.5	9.4	%
Precision Marketing	461.0		11.9	%	383.7		10.7	%	77.3		0.8	%
Public Relations	414.4		10.6	%	392.4		11.0	%	22.0		4.3	%
Healthcare	338.7		8.7	%	341.8		9.5	%	(3.1)		(1.1)	%
Branding & Retail Commerce	199.0		5.1	%	211.6		5.9	%	(12.6)		(5.4)	%
Experiential	177.0		4.6	%	133.3		3.7	%	43.7		35.3	%
Execution & Support	208.8		5.4	%	206.1		5.8	%	2.7		0.3	%
Revenue	$	3,882.6			$	3,578.1			$	304.5	6.5	%


	Nine Months Ended September 30,
	2024				2023				2024 vs. 2023
	$		% of Revenue		$		% of Revenue		$ Change		% Organic Growth
Advertising & Media	$	6,037.3	53.1	%	$	5,597.2	52.6	%	$	440.1	8.1	%
Precision Marketing	1,338.0		11.8	%	1,112.7		10.5	%	225.3		2.1	%
Public Relations	1,222.9		10.8	%	1,161.5		10.9	%	61.4		1.4	%
Healthcare	1,015.4		8.8	%	1,009.5		9.6	%	5.9		1.0	%
Branding & Retail Commerce	598.5		5.3	%	631.7		5.9	%	(33.2)		(4.3)	%
Experiential	523.0		4.6	%	445.5		4.2	%	77.5		20.2	%
Execution & Support	631.8		5.6	%	673.2		6.3	%	(41.4)		(1.2)	%
Revenue	$	11,366.9			$	10,631.3			$	735.6	5.2	%

The period-over-period change in worldwide revenue for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, in our fundamental disciplines was: Advertising & Media increased $174.5 million, Precision Marketing increased $77.3 million, Public Relations increased $22.0 million, Healthcare decreased $3.1 million, Branding & Retail Commerce decreased $12.6 million, Experiential increased $43.7 million, and Execution & Support increased $2.7 million. Worldwide organic revenue growth increased revenue $231.3 million, or 6.5%, primarily reflecting increased client spending across most of our disciplines, primarily driven by Advertising & Media, led by Media, as well as Public Relations and Experiential disciplines compared to the prior year period. Our Public Relations discipline was helped by spending on the upcoming U.S. election cycle, and the Experiential discipline benefited from the Summer Olympics. The organic growth was partially offset by underperformance in our Branding & Retail Commerce discipline. Changes in foreign exchange rates period-over-period reduced revenue $1.2 million, or 0.1%. The decrease in revenue from foreign exchange translation was primarily related to the weakening of some currencies, including the Brazilian Real, against the U.S. Dollar, partially offset by the strengthening of the British Pound, Euro and Australian Dollar against the U.S. Dollar. Acquisition revenue, net of disposition revenue, increased revenue $74.4 million, or 2.1%, primarily related to the purchase of Flywheel Digital in January 2024, which is included in our Precision Marketing discipline.

The period-over-period change in worldwide revenue for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, in our fundamental disciplines was: Advertising & Media increased $440.1 million, Precision Marketing increased $225.3 million, Public Relations increased $61.4 million, Healthcare increased $5.9 million, Branding & Retail Commerce decreased $33.2 million, Experiential increased $77.5 million, and Execution & Support decreased $41.4 million. Worldwide organic revenue growth increased revenue $556.5 million, or 5.2%, primarily reflecting increased client spending in Advertising & Media, led by Media, as well as Experiential, Precision Marketing and Public Relations disciplines compared to the prior year period. The Experiential discipline benefited from the Summer Olympics. Organic growth was partially offset by underperformance in our Branding & Retail Commerce and Execution & Support disciplines. Changes in foreign exchange rates period-over-period reduced revenue $41.3 million, or 0.4%. The decrease in revenue from foreign exchange translation was primarily related to the weakening of several currencies, including the Japanese Yen and Brazilian Real, against the U.S. Dollar,

partially offset by the strengthening of the British Pound, Colombian Peso and the Euro against the U.S. Dollar. Acquisition revenue, net of disposition revenue, increased revenue $220.4 million, or 2.1%, primarily related to the purchase of Flywheel Digital in January 2024, which is included in our Precision Marketing discipline, and acquisition activity in the second half of 2023, partially offset by dispositions in our Execution & Support discipline in the first half of 2023.

In the normal course of business, our agencies both gain and lose business from clients each year due to a variety of factors. Under our client-centric approach, we seek to broaden our relationships with all of our clients. Our largest client represented 2.8% and 3.0% of revenue for the twelve months ended September 30, 2024 and 2023, respectively. Our ten largest and 100 largest clients represented 19.4% and 54.3% of revenue for the twelve months ended September 30, 2024, respectively, and 20.4% and 54.4% of revenue for the twelve months ended September 30, 2023, respectively.

Revenue by Geography

The period-over-period change in revenue and organic growth in our geographic markets:


	Three Months Ended September 30,
	2024				2023				2024 vs. 2023
	$		% of Revenue		$		% of Revenue		$ Change		% Organic Growth
Americas:
North America	$	2,154.0	55.4	%	$	1,983.2	55.4	%	$	170.8	6.2	%
Latin America	99.7		2.6	%	99.4		2.8	%	0.3		8.7	%
EMEA:
Europe	1,080.8		27.9	%	1,016.8		28.5	%	64.0		4.0	%
Middle East and Africa	63.3		1.6	%	51.6		1.4	%	11.7		24.8	%
Asia-Pacific	484.8		12.5	%	427.1		11.9	%	57.7		10.9	%
Revenue	$	3,882.6			$	3,578.1			$	304.5	6.5	%


	Nine Months Ended September 30,
	2024				2023				2024 vs. 2023
	$		% of Revenue		$		% of Revenue		$ Change		% Organic Growth
Americas:
North America	$	6,343.3	55.8	%	$	5,888.8	55.4	%	$	454.5	5.2	%
Latin America	302.6		2.7	%	258.0		2.4	%	44.6		17.8	%
EMEA:
Europe	3,188.5		28.1	%	3,014.3		28.3	%	174.2		4.3	%
Middle East and Africa	208.5		1.8	%	199.1		1.9	%	9.4		7.2	%
Asia-Pacific	1,324.0		11.6	%	1,271.1		12.0	%	52.9		4.6	%
Revenue	$	11,366.9			$	10,631.3			$	735.6	5.2	%

North America

In North America, organic revenue growth period-over-period for the three and nine months ended September 30, 2024 was primarily driven by strong performance in the United States, especially in the Advertising & Media discipline, led by our media business, and our Precision Marketing, Experiential, and Public Relations disciplines. Our Public Relations discipline was helped by spending on the upcoming U.S. election cycle, and the Experiential discipline benefited from the Summer Olympics. The organic growth was partially offset by underperformance in our Branding & Retail Commerce discipline. Acquisitions net of dispositions positively impacted revenue and were primarily related to the purchase of Flywheel Digital in January 2024 and acquisitions in the prior year in our Public Relations discipline. In the nine months ended September 30, 2024, the acquisition growth was partially offset by dispositions in the Execution & Support discipline in the first half of 2023.

Latin America

In Latin America, organic revenue growth for the three and nine months ended September 30, 2024 increased in substantially all our disciplines, led by Advertising & Media, and in substantially all countries in the region, compared to the prior year period. The weakening of several currencies, including the Brazilian Real, against the U.S. Dollar decreased revenue in the three and nine months ended September 30, 2024 compared to the same periods in 2023, partially offset by the strengthening of the Colombian Peso against the U.S. Dollar in the nine months ended September 30, 2024. Acquisitions positively impacted revenue and were primarily related to acquisition activity in our Advertising & Media discipline in the prior year and the purchase of Flywheel Digital in January 2024.

EMEA

In Europe, compared to the prior year period, organic revenue growth for the three months ended September 30, 2024 was driven by strong performance in our Advertising & Media discipline, led by our media business, and in our Experiential and Execution & Support disciplines, partially offset by under performance in our Precision Marketing, Branding & Retail Commerce and Public Relations disciplines. Foreign currency changes increased revenue for the three months ended September 30, 2024, primarily as a result of the strengthening of the British Pound and the Euro against the U.S. Dollar period-over-period. Acquisitions, net of dispositions for the three months ended September 30, 2024 positively impacted revenue and were primarily related to the purchase of Flywheel Digital in January 2024 and acquisition activity in our Advertising & Media discipline in the current and prior year.

In Europe, compared to the prior year period, organic revenue growth for the nine months ended September 30, 2024 was driven by strong performance in our Advertising & Media discipline, led by our media business, and in our Experiential and Execution & Support disciplines, partially offset by under performance in our Precision Marketing, Branding & Retail Commerce and Public Relations disciplines. Foreign currency changes increased revenue for the nine months ended September 30, 2024, primarily as a result of the strengthening of the British Pound and the Euro against the U.S. Dollar period-over-period. Acquisitions, net of dispositions for the nine months ended September 30, 2024, positively impacted revenue and were primarily related to the purchase of Flywheel Digital in January 2024 and acquisition activity in our Advertising & Media discipline in the current and prior year. In the nine months ended September 30, 2024, the increase from our acquisition activity was partially offset by the divestiture of our research businesses in the Execution & Support discipline in the first half of 2023.

In the U.K., organic revenue decreased by 0.2% period-over-period for the three months ended September 30, 2024. In Continental Europe, which includes the Euro Zone and the other European countries, organic growth for the three months ended September 30, 2024 of 6.8% was led by Italy, France, Spain and Germany and in most disciplines, partially offset by underperformance in our Branding & Retail Commerce and Precision Marketing disciplines.

In the U.K., organic revenue increased by 3.2% period-over-period for the nine months ended September 30, 2024 and was led by our Advertising & Media discipline, along with most of our other disciplines, but was partially offset by weakness in our Public Relations discipline. In Continental Europe, which includes the Euro Zone and the other European countries, organic growth of 5.0% for the nine months ended September 30, 2024 was led by Germany, Italy and Spain and in most disciplines, partially offset by underperformance in our Branding & Retail Commerce and Public Relations disciplines.

In the Middle East and Africa, for the three and nine months ended September 30, 2024, organic revenue increased period-over-period, driven by our Experiential and our Advertising & Media disciplines.

Asia-Pacific

In Asia-Pacific, organic revenue increased period-over-period for the three months ended September 30, 2024. Organic growth led by our Advertising & Media discipline was partially offset by underperformance in our Precision Marketing and Public Relations disciplines. Most markets in the region, especially Australia, India and China, had positive organic growth as compared to the prior year period. Foreign currency changes increased revenue for the three months ended September 30, 2024, primarily as a result of the strengthening of the Australian Dollar against the U.S. Dollar, partially offset by the weakening of the Japanese Yen against the U.S. Dollar period-over-period. Acquisition activity, including the purchase of Flywheel Digital in January 2024, increased revenue compared to the prior year periods.

In Asia-Pacific, organic revenue increased period-over-period for the nine months ended September 30, 2024. Organic growth in our Advertising & Media discipline was partially offset by underperformance in our Experiential discipline, which faced difficult comparisons to the prior year periods and in our Precision Marketing and Public Relations disciplines. Most markets in the region, especially Australia, India, Hong Kong, Philippines, China, Thailand and Korea, had positive organic growth as compared to the prior year period. Foreign currency changes decreased revenue for the nine months ended September 30, 2024, primarily as a result of the weakening of the Japanese Yen, Chinese Reminbi and Australian Dollar against the U.S. Dollar period-over-period. Acquisition activity, including the purchase of Flywheel Digital in January 2024, increased revenue compared to the prior year periods.

Revenue by Industry

Revenue by type of client industry sector:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Pharmaceuticals and Healthcare	16	%	16	%	16	%	16	%
Food and Beverage	15	%	15	%	15	%	15	%
Auto	12	%	12	%	11	%	12	%
Consumer Products	10	%	8	%	10	%	8	%
Technology	8	%	8	%	8	%	8	%
Financial Services	7	%	8	%	7	%	8	%
Travel and Entertainment	7	%	7	%	7	%	7	%
Retail	6	%	6	%	6	%	6	%
Telecommunications	4	%	4	%	3	%	4	%
Government	4	%	4	%	4	%	4	%
Services	3	%	2	%	3	%	2	%
Oil, Gas and Utilities	2	%	2	%	2	%	2	%
Not-for-Profit	1	%	1	%	1	%	1	%
Education	1	%	1	%	1	%	1	%
Other	4	%	6	%	6	%	6	%
Total	100	%	100	%	100	%	100	%

Operating Expenses

The period-over-period change in operating expenses:


	Three Months Ended September 30,
	2024				2023				2024 vs. 2023
	$		% of Revenue		$		% of Revenue		$ Change		% Change
Revenue	$	3,882.6			$	3,578.1			$	304.5	8.5	%
Operating Expenses:
Salary and service costs:
Salary and related costs	1,846.9		47.6	%	1,756.7		49.1	%	90.2		5.1	%
Third-party service costs	784.5		20.2	%	678.8		19.0	%	105.7		15.6	%
Third-party incidental costs	164.6		4.2	%	151.0		4.2	%	13.6		9.0	%
Total salary and service costs	2,796.0		72.0	%	2,586.5		72.3	%	209.5		8.1	%
Occupancy and other costs	325.6		8.4	%	288.6		8.1	%	37.0		12.8	%





Cost of services	3,121.6				2,875.1				246.5		8.6	%
Selling, general and administrative expenses	99.5		2.6	%	89.8		2.5	%	9.7		10.8	%
Depreciation and amortization	61.4		1.6	%	52.4		1.5	%	9.0		17.2	%
Total operating expenses	3,282.5		84.5	%	3,017.3		84.3	%	265.2		8.8	%
Operating Income	$	600.1	15.5	%	$	560.8	15.7	%	$	39.3	7.0	%


	Nine Months Ended September 30,
	2024				2023				2024 vs. 2023
	$		% of Revenue		$		% of Revenue		$ Change		% Change
Revenue	$	11,366.9			$	10,631.3			$	735.6	6.9	%
Operating Expenses:
Salary and service costs:
Salary and related costs	5,531.1		48.7	%	5,306.7		49.9	%	224.4		4.2	%
Third-party service costs	2,293.8		20.2	%	2,033.9		19.1	%	259.9		12.8	%
Third-party incidental costs	463.8		4.1	%	406.6		3.8	%	57.2		14.1	%
Total salary and service costs	8,288.7		72.9	%	7,747.2		72.9	%	541.5		7.0	%
Occupancy and other costs	953.9		8.4	%	877.9		8.3	%	76.0		8.7	%

Real estate and other repositioning costs	57.8		0.5	%	191.5		1.8	%	(133.7)		(69.8)	%

Gain on disposition of subsidiary	—		—	%	(78.8)		(0.7)	%	78.8

Cost of services	9,300.4				8,737.8				562.6		6.4	%
Selling, general and administrative expenses	295.8		2.6	%	278.1		2.6	%	17.7		6.4	%
Depreciation and amortization	181.4		1.6	%	157.4		1.5	%	24.0		15.2	%
Total operating expenses	9,777.6		86.0	%	9,173.3		86.3	%	604.3		6.6	%
Operating Income	$	1,589.3	14.0	%	$	1,458.0	13.7	%	$	131.3	9.0	%

We measure cost of services in two distinct categories: salary and service costs and occupancy and other costs. As a service business, salary and service costs make up the significant portion of our operating expenses and substantially all these costs comprise the essential components directly linked to the delivery of our services. Salary and service costs include employee compensation and benefits, freelance labor, third-party service costs, and third-party incidental costs. Third-party service costs include vendor costs when we act as principal in providing services to our clients. Third-party incidental costs that are required to be included in revenue primarily consist of client-related travel and incidental out-of-pocket costs that are billed back to the client directly at our cost. Occupancy and other costs consist of the indirect costs related to the delivery of our services, including office rent and other occupancy costs, equipment rent, technology costs, general office expenses and other expenses. Adverse and beneficial fluctuations in foreign currencies from period to period impact our results of operations and financial position when we translate our financial statements from local foreign currencies to the U.S. Dollar. However, substantially all of our foreign operations transact business in their local currency, mitigating the impact of changes in foreign currency exchange rates on our operating margin percentage. As a result, the changes in our operating expenses period-over-period from foreign currency translation were in line with the percentage impact from changes in foreign currencies on revenue for the three- and nine-month periods ended September 30, 2024.

Operating expenses for the three months ended September 30, 2024 increased $265.2 million, or 8.8%, to $3,282.5 million from $3,017.3 million, compared to the prior year period.

Operating expenses for the nine months ended September 30, 2024 increased $604.3 million, or 6.6%, to $9,777.6 million from $9,173.3 million, compared to the prior year period. Included in operating expenses for the nine-months ended September 30, 2024 is the impact of repositioning costs, primarily related to severance of $57.8 million. Included in operating expenses for the nine-months ended September 30, 2023 is the net impact of the gain on disposition of subsidiary in our Execution & Support discipline of $78.8 million and repositioning costs related to real estate and other exit charges and severance of $191.5 million incurred in the period (see Notes 10 and 11 to the unaudited financial statements).

Operating Expenses - Salary and Service Costs

Salary and service costs, which tend to fluctuate with changes in revenue, are comprised of salary and related costs, third-party service costs, and third-party incidental costs.

Salary and service costs for the three months ended September 30, 2024 increased $209.5 million, or 8.1%, to $2,796.0 million, compared to the prior year period. Salary and related costs for the three months ended September 30, 2024 increased $90.2 million, or 5.1%, to $1,846.9 million, primarily as a result of our acquisition of Flywheel Digital. These costs decreased as a percentage of revenue, primarily due to the reduction arising from our ongoing repositioning actions and global employee mix. Third-party service costs for the three months ended September 30, 2024 increased $105.7 million, or 15.6%, to $784.5 million, primarily as a result of organic growth in our Advertising & Media and Experiential disciplines. Third-party incidental costs for the three months ended September 30, 2024 increased $13.6 million, or 9.0%, to $164.6 million.

Salary and service costs for the nine months ended September 30, 2024 increased $541.5 million, or 7.0%, to $8,288.7 million, compared to the prior year period. Salary and related costs for the nine months ended September 30, 2024 increased $224.4 million, or 4.2%, to $5,531.1 million, primarily as a result of our acquisition of Flywheel Digital. These costs decreased as a

percentage of revenue, primarily due to the reduction arising from our ongoing repositioning actions. Third-party service costs for the nine months ended September 30, 2024 increased $259.9 million, or 12.8%, to $2,293.8 million, primarily as a result of organic growth in our Advertising & Media and Experiential disciplines. Third-party incidental costs for the nine months ended September 30, 2024, increased $57.2 million, or 14.1%, to $463.8 million.

Operating Expenses - Occupancy and Other Costs

Occupancy and other costs for the three and nine months ended September 30, 2024, which are less directly linked to changes in revenue than salary and service costs, increased by $37.0 million, or 12.8%, to $325.6 million and increased by $76.0 million, or 8.7%, to $953.9 million, respectively, primarily resulting from our acquisition activity. Increased office and other related costs were partially offset by lower rent expense in the periods.

Operating Expenses - Selling, General & Administrative Expenses

SG&A expenses primarily consist of third-party marketing costs, professional fees, compensation and benefits and occupancy and other costs of our corporate and executive offices, including group-wide finance and accounting, treasury, legal and governance, human resource oversight and similar costs. SG&A expenses increased for the three and nine months ended September 30, 2024 by $9.7 million and $17.7 million, respectively, compared to the same period in 2023, primarily due to professional fees related to strategic initiatives.

Operating Income

Operating income for the three months ended September 30, 2024 increased $39.3 million to $600.1 million, and operating margin decreased to 15.5% from 15.7% compared to the same period in 2023. EBITA increased $45.8 million to $622.3 million, and EBITA margin decreased to 16.0% from 16.1%.

Operating income for the nine months ended September 30, 2024 increased $131.3 million to $1,589.3 million, and operating margin increased to 14.0% from 13.7% compared to the same period in 2023. EBITA increased $151.3 million to $1,654.5 million, and EBITA margin increased to 14.6% from 14.1%. The effect of the repositioning actions in the nine months ended September 30, 2024 reduced operating income and EBITA by $57.8 million and decreased both operating margin and EBITA margin by 0.5%. The net effect of the real estate and other repositioning costs and the gain on disposition of subsidiaries in the nine months ended September 30, 2023 reduced both operating income and EBITA by $112.7 million, and reduced both operating margin and EBITA margin by 1.1%.

Net Interest Expense

Net interest expense for the three and nine months ended September 30, 2024 increased $2.1 million and $23.9 million period-over-period to $40.4 million and $108.9 million, respectively.

Interest expense on debt for the three and nine months ended September 30, 2024 increased $13.8 million and $19.2 million period-over-period to $61.6 million and $169.0 million, respectively, primarily related to the issuance in the first quarter of 2024 of €600 million 3.70% Senior Notes due 2032, or 2032 Notes, and the issuance in the third quarter of 2024 of $600 million 5.30% Senior Notes due 2034, or 2034 Notes. The net proceeds from the issuance of the 2034 Notes, along with available cash, will be used to fund the repayment of our $750 million 3.65% Senior Notes due November 1, 2024 (see Note 6 to the unaudited financial statements).

Interest income in the three months ended September 30, 2024 increased $10.8 million period-over-period to $26.0 million, principally due to higher cash balances from the issuance of the $600 million 2034 notes. Interest income in the nine months ended September 30, 2024 decreased $6.9 million period-over-period to $74.0 million.

Income Taxes

Our effective tax rate for the nine months ended September 30, 2024 was flat period-over-period at 26.3%. The effective tax rate for the nine months ended September 30, 2024 includes the favorable impact from the resolution of certain non-U.S. tax positions of $7.5 million. The effective tax rate for the nine months ended September 30, 2023 includes an increase of approximately $10.7 million in income tax expense related to a lower tax benefit in certain jurisdictions for the real estate and other repositioning costs in the period and an increase in the U.K. statutory tax rate, partially offset by approximately $10.0 million of favorable impacts from the resolution of certain non-U.S. tax positions.

Net Income and Net Income Per Share - Omnicom Group, Inc.

Net income - Omnicom Group Inc. in the three months ended September 30, 2024 increased $14.0 million to $385.9 million from $371.9 million. The period-over-period increase is due to the factors described above. Diluted net income per share - Omnicom Group Inc. increased to $1.95 in the three months ended September 30, 2024, from $1.86 in the three months ended September 30, 2023, due to the factors described above and the impact of the reduction in our weighted average common shares outstanding resulting from the repurchases of our common stock. For the three months ended September 30, 2024 and 2023, there were no repositioning costs.

Net income - Omnicom Group Inc. in the nine months ended September 30, 2024 increased $66.9 million to $1,032.6 million from $965.7 million. The period-over-period increase is due to the factors described above. Diluted net income per share - Omnicom Group Inc. increased to $5.19 in the nine months ended September 30, 2024, from $4.78 in the nine months ended September 30, 2023, due to the factors described above, and the impact of the reduction in our weighted average common shares outstanding resulting from the repurchases of our common stock. For the nine months ended September 30, 2024, the impact of repositioning costs reduced net income - Omnicom Group Inc. by $42.9 million and diluted net income per share - Omnicom Group Inc. by $0.22. For the nine months ended September 30, 2023, the net impact of the real estate other repositioning costs and gain on disposition of subsidiaries reduced net income - Omnicom Group Inc. by $89.6 million and diluted net income per share - Omnicom Group Inc. by $0.44.

NON-GAAP FINANCIAL MEASURES

We use certain non-GAAP financial measures in describing our performance. We use EBITA and EBITA Margin as additional operating performance measures, which excludes from operating income the non-cash amortization expense of acquired intangible assets and internally developed strategic platform assets. We believe EBITA and EBITA Margin are useful measures for investors to evaluate the performance of our business and allows for comparability between the periods presented. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP. Non-GAAP financial measures reported by us may not be comparable to similarly titled amounts reported by other companies.

Reconciliation of Non-GAAP Financial Measures

The following table reconciles the U.S. GAAP financial measure of Net Income- Omnicom Group Inc. to EBITDA, EBITA and EBITA Margin:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Net Income - Omnicom Group Inc.	$	385.9		$	371.9		$	1,032.6		$	965.7
Net Income Attributed To Noncontrolling Interests	24.0			16.4			62.5			49.7
Net Income	409.9			388.3			1,095.1			1,015.4
Income From Equity Method Investments	0.4			1.9			4.6			3.1
Income Tax Expense	150.2			136.1			389.9			360.7
Income Before Income Taxes and Income From Equity Method Investments	559.7			522.5			1,480.4			1,373.0
Interest Expense	66.4			53.5			182.9			165.9
Interest Income	26.0			15.2			74.0			80.9
Operating Income	600.1			560.8			1,589.3			1,458.0
Add back: Amortization of acquired intangible assets and internally developed strategic platform assets	22.2			15.7			65.2			45.2
Earnings before interest, taxes and amortization of intangible assets (“EBITA”)	$	622.3		$	576.5		$	1,654.5		$	1,503.2

Amortization of other purchased and internally developed software	4.3			4.6			13.4			13.7
Depreciation	34.9			32.1			102.8			98.5
EBITDA	$	661.5		$	613.2		$	1,770.7		$	1,615.4

Revenue	$	3,882.6		$	3,578.1		$	11,366.9		$	10,631.3

EBITA	$	622.3		$	576.5		$	1,654.5		$	1,503.2
EBITA Margin	16.0		%	16.1		%	14.6		%	14.1		%

LIQUIDITY AND CAPITAL RESOURCES

Cash Sources and Requirements

The primary sources of our short-term liquidity are net cash provided by operating activities and cash and cash equivalents. Additional liquidity sources include our $2.5 billion unsecured multi-currency revolving credit facility, or Credit Facility, terminating on June 2, 2028, 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. In addition, certain of our international subsidiaries have uncommitted credit lines that are guaranteed by Omnicom, aggregating $510.3 million. Our liquidity sources fund our non-discretionary cash requirements and our discretionary spending. The $600 million Delayed Draw Term Loan Agreement automatically terminated on July 15, 2024.

Working capital, which we define as current assets minus current liabilities, is our principal non-discretionary funding requirement. Our working capital requirement typically peaks during the second quarter of the year due to the timing of payments for incentive compensation, income taxes and contingent purchase price obligations. In addition, we have contractual obligations related to our long-term debt (principal and interest payments), recurring business operations, primarily related to lease obligations, and acquisition related obligations. Our principal discretionary cash spending includes dividend payments to common shareholders, capital expenditures, strategic acquisitions and repurchases of our common stock.

Cash and cash equivalents decreased $898.1 million from December 31, 2023. During the first nine months of 2024, we used $191.5 million of cash in operating activities, which included the use for operating capital of $1.6 billion, primarily related to our typical working capital cycle. Discretionary spending for the first nine months of 2024 was $1.9 billion, compared to $1.3 billion for the first nine months of 2023. Discretionary spending for the first nine months of 2024 was comprised of capital expenditures of $93.6 million, dividends paid to common shareholders of $416.0 million, dividends paid to shareholders of noncontrolling interests of $64.0 million, repurchases of our common stock, net of proceeds from vesting of restricted stock awards and related tax benefits and common stock sold to our employee stock purchase plan of $358.5 million, and the acquisition of businesses, net of cash acquired, primarily attributable to the acquisition of Flywheel Digital and acquisition of additional shares of noncontrolling interests, and payment of contingent purchase price obligations of $953.4 million. Discretionary spending was partially offset by the proceeds from financing activities of approximately $1.2 billion, which includes the issuance in the third quarter of 2024 of $600 million 5.30% Senior Notes due 2034, or 2034 Notes. The net proceeds from the issuance of the 2034 Notes, along with available cash, will be used to fund the repayment of our $750 million 3.65% Senior Notes due November 1, 2024 (see Note 6 to the unaudited financial statements).

Based on past performance and current expectations, we believe that net cash provided by operating activities and cash and cash equivalents will be sufficient to meet our non-discretionary cash requirements for the next twelve months. In addition, and over the longer term, our Credit Facility is available to fund our working capital and contractual obligations.

Cash Management

Our regional treasury centers in North America, Europe and Asia manage our cash and liquidity. Each day, operations with excess funds invest those funds with their regional treasury center. Likewise, operations that require funds borrow from their regional treasury center. Treasury centers with excess cash invest on a short-term basis with third parties, with maturities generally ranging from overnight to 90 days. Certain treasury centers have notional pooling arrangements that are used to manage their cash and set-off foreign exchange imbalances. The arrangements require each treasury center to have its own notional pool account and to maintain a notional positive account balance. Additionally, under the terms of the arrangement, set-off of foreign exchange positions are limited to the long and short positions within their own account. To the extent that our treasury centers require liquidity, they can issue up to a total of $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, or borrow under the Credit Facility, or the uncommitted credit lines. This process enables us to manage our debt more efficiently and utilize our cash more effectively, as well as manage our risk to foreign exchange rate imbalances. In countries where we either do not conduct treasury operations or it is not feasible for one of our treasury centers to fund net borrowing requirements on an intercompany basis, we arrange for local currency uncommitted credit lines. We have a policy governing counterparty credit risk with financial institutions that hold our cash and cash equivalents, and we have deposit limits for each institution. In countries where we conduct treasury operations, generally the counterparties are either branches or subsidiaries of institutions that are party to the Credit Facility. These institutions generally have credit ratings equal to or better than our credit ratings. In countries where we do not conduct treasury operations, all cash and cash equivalents are held by counterparties that meet specific minimum credit standards.

At September 30, 2024, our foreign subsidiaries held approximately $1.9 billion of our total cash and cash equivalents of $3.5 billion. Substantially all of the cash is available to us, net of any foreign withholding taxes payable upon repatriation to the United States.

At September 30, 2024, our net debt position, which we define as total debt, including short-term debt, less cash and cash equivalents, increased $2.2 billion to $3.4 billion from December 31, 2023. The increase in net debt primarily resulted from the use of cash of $191.5 million for operating activities, which included the use for operating capital of $1.6 billion, primarily related to

our typical working capital requirement during the period, discretionary spending of $1.9 billion, as discussed above, and the net decrease from foreign exchange rate changes on cash and cash equivalents and our foreign currency denominated debt of $38 million.

Components of net debt:


	September 30, 2024		December 31, 2023		September 30, 2023
Short-term debt	$	16.9	$	10.9	$	14.5
Long-term debt, including current portion	6,930.1		5,639.6		5,572.1
Total debt	6,947.0		5,650.5		5,586.6
Less:
Cash and cash equivalents	3,533.9		4,432.0		2,769.6

Net debt	$	3,413.1	$	1,218.5	$	2,817.0

Net debt is a Non-GAAP liquidity measure. This presentation, together with the comparable U.S. GAAP liquidity measures, reflects one of the key metrics used by us to assess our cash management. Non-GAAP liquidity measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP. Non-GAAP liquidity measures as reported by us may not be comparable to similarly titled amounts reported by other companies.

Debt Instruments and Related Covenants

On August 2, 2024, Omnicom issued $600 million 5.30% Senior Notes due 2034, or 2034 Notes. The net proceeds from the issuance, after deducting the underwriting discount and offering expenses, were $592.4 million. The net proceeds from the issuance, along with available cash, will be used to fund the repayment of our $750 million 3.65% Senior Notes due November 1, 2024.

On March 6, 2024, Omnicom Finance Holdings plc, or OFH, a U.K.-based wholly owned subsidiary of Omnicom, issued €600 million of the 2032 Notes. The net proceeds from the issuance, after deducting the underwriting discount and offering expenses, were $643.1 million and were used for general corporate purposes, including working capital expenditures, acquisitions and repurchases of our common stock.

The 2.45% Senior Notes due 2030, 4.20% Senior Notes due 2030, 2.60% Senior Notes due 2031 and 5.30% Senior Notes due 2034 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 the 3.65% Senior Notes due 2024 and the 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 OFH with respect to the €500 million 0.80% Senior Notes due 2027 and the €500 million 1.40% Senior Notes due 2031, and Omnicom has fully and unconditionally guaranteed the obligations of OFH with respect to the €600 million 3.70% 2032 Notes, collectively the Euro Notes. OFH’s assets consist of its investments in several wholly owned finance companies that function as treasury centers, providing funding for various operating companies in Europe, 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, as applicable.

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, providing 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.

The Credit Facility has 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 3.5 times for the most recently ended 12-month period. At September 30, 2024, we were in compliance with this covenant as our Leverage Ratio was 2.8 times. The Credit Facility does not limit our ability to declare or pay dividends or repurchase our common stock.

At September 30, 2024, our long-term and short-term debt was rated BBB+ and A2 by S&P and Baa1 and P2 by Moody’s. Our access to the commercial paper market and the cost of these borrowings are affected by market conditions and our credit ratings. The long-term debt indentures and Credit Facility do not contain provisions that require acceleration of cash payments in the event of a downgrade in our credit ratings.

Credit Markets and Availability of Credit

In light of the uncertainty of future economic conditions, we will continue to take actions available to us to respond to changing economic conditions, and we will continue to manage our discretionary expenditures. We will also continue to monitor and manage the level of credit made available to our clients. We believe that these actions, in addition to the availability of our Credit Facility, are sufficient to fund our near-term working capital needs and our discretionary spending. Information regarding our Credit Facility is provided in Note 6 to the unaudited consolidated financial statements.

We have the ability to fund our day-to-day liquidity, including working capital, by issuing commercial paper or borrowing under the Credit Facility. During the three months ended September 30, 2024, there were no drawings under the Credit Facility or the Term Loan Facility, and no commercial paper issuances.

We may issue commercial paper to fund our day-to-day liquidity when needed. However, disruptions in the credit markets may lead to periods of illiquidity in the commercial paper market and higher credit spreads. To mitigate any disruption in the credit markets and to fund our liquidity, we may borrow under the Credit Facility, or the uncommitted credit lines or access the capital markets if favorable conditions exist. We will continue to monitor closely our liquidity and conditions in the credit markets. We cannot predict with any certainty the impact on us of any disruptions in the credit markets. In such circumstances, we may need to obtain additional financing to fund our day-to-day working capital requirements. Such additional financing may not be available on favorable terms, or at all.

Credit Risk

We provide data-inspired, creative marketing and sales solutions to clients that operate in nearly every sector of the global economy, and we grant credit to qualified clients in the normal course of business. Due to the diversified nature of our client base, we do not believe that we are exposed to a concentration of credit risk, as our largest client represented 2.8% of revenue for the twelve months ended September 30, 2024. However, during periods of economic downturn, the credit profiles of our clients could change.

In the normal course of business, our agencies enter into contractual commitments with media providers and production companies on behalf of our clients at levels that can substantially exceed the revenue from our services. These commitments are included in accounts payable when the services are delivered by the media providers or production companies. If permitted by local law and the client agreement, many of our agencies purchase media and production services for our clients as an agent for a disclosed principal. In addition, while operating practices vary by country, media type and media vendor, in the United States and certain foreign markets, many of our agencies’ contracts with media and production providers specify that our agencies are not liable to the media and production providers under the theory of sequential liability until and to the extent we have been paid by our client for the media or production services.

Where purchases of media and production services are made by our agencies as a principal or are not subject to the theory of sequential liability, the risk of a material loss as a result of payment default by our clients could increase significantly, and such a loss could have a material adverse effect on our business, results of operations and financial position.

While we use various methods to manage the risk of payment default, including obtaining credit insurance, requiring payment in advance, mitigating the potential loss in the marketplace or negotiating with media providers, these may be insufficient, less available, or unavailable during a severe economic downturn.

CRITICAL ACCOUNTING ESTIMATES

For a more complete understanding of our accounting estimates and policies, the unaudited consolidated financial statements and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, readers are encouraged to consider this information together with our discussion of our critical accounting policies under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 10-K.

Acquisitions and Goodwill

We have made and expect to continue to make selective acquisitions. The evaluation of potential acquisitions is based on various factors, including specialized know-how, reputation, geographic coverage, competitive position and service offerings of the target businesses, as well as our experience and judgment.

Our acquisition strategy is focused on acquiring the expertise of an assembled workforce in order to continue to build upon the core capabilities of our various strategic business platforms and agency brands through the expansion of their geographic reach or their service capabilities to better serve our clients. Additional key factors we consider include the competitive position and specialized know-how of the acquisition targets. Accordingly, as is typical in most service businesses, a substantial portion of the assets we acquire are intangible assets primarily consisting of the know-how of the personnel, which is treated as part of goodwill and is not required to be valued separately under U.S. GAAP. For each acquisition, we undertake a detailed review to identify other intangible assets that are required to be valued separately. A significant portion of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well as trade names. In valuing these identified intangible assets, we typically use an income approach and consider comparable market participant measurements.

We will continue to evaluate goodwill for impairment at least annually at May 1 each year and whenever events or circumstances indicate the carrying value may not be recoverable. Under FASB ASC Topic 350, Intangibles - Goodwill and Other, we have the option of either assessing qualitative factors to determine whether it is more-likely-than-not that the carrying value of our reporting units exceeds their respective fair value (Step 0) or proceeding directly to the quantitative goodwill impairment test. While there were no trigger events that required us to perform a quantitative test, we performed the annual quantitative impairment test and compared the fair value of each of our reporting units to its respective carrying value, including goodwill. We identified our regional reporting units as components of our operating segments, which are our six global agency networks. The regional reporting units and practice areas monitor performance and are responsible for the agencies in their region. They report to the segment managers and facilitate the administrative and logistical requirements of our key client matrix organization structure for delivering services to clients in their regions. We have concluded that for each of our operating segments, their regional reporting units have similar economic characteristics and should be aggregated for purposes of testing goodwill for impairment at the operating segment level. Our conclusion was based on a detailed analysis of the aggregation criteria set forth in FASB ASC Topic 280, Segment Reporting, and in FASB ASC Topic 350. Consistent with our fundamental business strategy, the agencies within our regional reporting units serve similar clients in similar industries, and in many cases the same clients. In addition, the agencies within our regional reporting units have similar economic characteristics, and the employees share similar skill sets. 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 that are generally limited to personal computers, servers and off-the-shelf software and other overhead expenses. Finally, the expected benefits of our acquisitions are typically shared by multiple agencies in various regions as they work together to integrate the acquired agency into our virtual client network strategy.

Goodwill Impairment Review - Estimates and Assumptions

We use the following valuation methodologies to determine the fair value of our reporting units: (1) the income approach, which utilizes discounted expected future cash flows, (2) comparative market participant multiples for EBITDA (earnings before interest, taxes, depreciation and amortization) and (3) when available, consideration of recent and similar acquisition transactions.

In applying the income approach, we use estimates to derive the discounted expected cash flows (“DCF”) for each reporting unit that serves as the basis of our valuation. These estimates and assumptions include revenue growth and operating margin, EBITDA, tax rates, capital expenditures, weighted average cost of capital and related discount rates and expected long-term cash flow growth rates. All of these estimates and assumptions are affected by conditions specific to our businesses, economic conditions related to the industry we operate in, as well as conditions in the global economy. The assumptions that have the most significant effect on our valuations derived using a DCF methodology are: (1) the expected long-term growth rate of our reporting units' cash flows and (2) the weighted average cost of capital (“WACC”) for each reporting unit.

The long-term growth rate and WACC assumptions used in our evaluations:


	May 1, 2024	May 1, 2023
Long-Term Growth Rate	3.5%	3.5%
WACC	10.8% - 11.8%	11% - 11.4%

Long-term growth rate represents our estimate of the long-term growth rate for our industry and the geographic markets we operate in. For the past ten years, the average historical revenue growth rate of our reporting units and the Average Nominal GDP, or NGDP, growth of the countries comprising the major markets that account for substantially all of our revenue was approximately 3.6% and 4.7%, respectively. We considered this history when determining the long-term growth rates used in our annual impairment test at May 1, 2024. Included in the 10-year history is the full year 2020 that reflected the negative impact of the COVID-19 pandemic on the global economy and our revenue. We believe marketing expenditures over the long term have a high correlation to NGDP, notwithstanding the volatility of inflationary environments. Based on our past performance, we also believe that our growth rate can exceed NGDP growth in the short-term in the markets we operate in, which are similar across our reporting units. Accordingly, for our annual test as of May 1, 2024, we used an estimated long-term growth rate of 3.5%.

When performing the annual impairment test as of May 1, 2024 and estimating the future cash flows of our reporting units, we considered the current macroeconomic environment, as well as industry and market specific conditions in 2024. In the first half of 2024, our organic revenue increase was 4.6%, which excluded our net disposition activity and the impact from changes in foreign exchange rates.

The WACC is comprised of: (1) a risk-free rate of return, (2) a business risk index ascribed to us and to companies in our industry comparable to our reporting units based on a market derived variable that measures the volatility of the share price of equity securities relative to the volatility of the overall equity market, (3) an equity risk premium that is based on the rate of return on equity of publicly traded companies with business characteristics comparable to our reporting units, and (4) a current after-tax market rate of return on debt of companies with business characteristics similar to our reporting units, each weighted by the relative market value percentages of our equity and debt.

Our six reporting units vary in size with respect to revenue and the amount of debt allocated to them. These differences drive variations in fair value among our reporting units. In addition, these differences as well as differences in book value, including goodwill, cause variations in the amount by which fair value exceeds book value among the reporting units. The goodwill balances and debt vary by reporting unit primarily because our three legacy agency networks were acquired at the formation of Omnicom and were accounted for as a pooling of interests that did not result in any additional debt or goodwill being recorded. The remaining three agency networks were built through a combination of internal growth and acquisitions that were accounted for using the acquisition method and as a result, they have a relatively higher amount of goodwill and debt. Finally, the allocation of goodwill when components are transferred between reporting units is based on relative fair value at the time of transfer.

Goodwill Impairment Review - Conclusion

Based on the results of our impairment test, we concluded that our goodwill as of May 1, 2024 was not impaired, because the fair value of each of our reporting units was in excess of its respective net book value. For our reporting units with negative book value, we concluded that the fair value of their total assets was in excess of book value. The minimum decline in fair value that one of our reporting units would need to experience in order to fail the goodwill impairment test was approximately 48%. Notwithstanding our belief that the assumptions we used for WACC and long-term growth rate in our impairment testing were reasonable, we performed a sensitivity analysis for each reporting unit. The results of this sensitivity analysis on our impairment test as of May 1, 2024 revealed that if the WACC increased by 1% and/or the long-term growth rate decreased by 1%, the fair value of each of our reporting units would continue to be in excess of its respective net book value and would pass the impairment test.

We will continue to perform our impairment test at May 1 each year, unless events or circumstances trigger the need for an interim impairment test. The estimates used in our goodwill impairment test do not constitute forecasts or projections of future results of operations, but rather are estimates and assumptions based on historical results and assessments of macroeconomic factors affecting our reporting units as of the valuation date. We believe that our estimates and assumptions are reasonable, but they are subject to change from period to period. Actual results of operations and other factors will likely differ from the estimates used in our discounted cash flow valuation, and it is possible that differences could be significant. A change in the estimates we use could result in a decline in the estimated fair value of one or more of our reporting units from the amounts derived as of our latest valuation and could cause us to fail our goodwill impairment test if the estimated fair value for the reporting unit is less than the carrying value of the net assets of the reporting unit, including its goodwill. A large decline in estimated fair value of a reporting unit could result in a non-cash impairment charge and may have an adverse effect on our results of operations and financial condition.

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