Omnicom Group, the world’s second-largest ad holding company, reported losses for Q2. Revenues declined by 24.7% to $2.80 billion missing the estimate of $3.09 billion.
The takeaways:
- Q2 of 2019 recorded a net income of $370 million compared to a net loss of $24 million in 2020.
- Shares of Omnicom Group (NYSE:OMC) fell 6.8% to $54.66 after the company reported Q2 results.
- Earnings per share were down 45.24% year-over-year to $0.92, which were in line with the estimate of $0.92.
By the numbers: Like many other businesses in the media industry, Omnicom felt the negative impacts of COVID-19. The company cited the reduction in third-party service costs from clients, totaling $400 million, as the main driver behind the revenue decline.
- The firm also cut 6,100 jobs and scaled back its real estate space by one million square feet.
- The repositioning costs of these actions for the quarter were $278 million but it is expected to generate $500 million in annualised savings.
- Global organic revenues fell 23% across the board (US: 21%, UK: 24%, Europe: 29%, LATAM: 24% and Middle East & Africa: 39%).
The outlook:
- “We think the worst is behind us with Q2 being the low point for year-over-year revenue declines in 2020”. – John D. Wren, Omnicom CEO.
- “We’re not anticipating in the second half that there’s going to be a meaningful rebound [due to] an awful lot of uncertainty even with respect to live sports” – Philip Angelastro, Omnicom EVP and CFO
The ad industry has seen a severe drop in spending as a result of the lack of live sports. The remaining half of the year’s performance hangs in the balance as MLB & NFL look to kickstart their seasons again. Should they return without a hitch, Q3 promises a brighter outlook.
