Omnicom posts Q1 organic growth of over 3%, eyes major gains from Interpublic merger

Omnicom Group posted a 3.4% organic revenue growth in the first quarter of 2025, driven by gains in media, advertising, and precision marketing, even as broader economic uncertainties cast a shadow over the rest of the year.

The company reported a 1.6% overall revenue increase to $3.69 billion, while net income slipped nearly 10% to $287.7 million.

"Organic revenue growth for the first quarter was 3.4%. We are assessing the implications of economic and market events to determine how they will affect our clients and business for the remainder of 2025. While uncertainty has increased, one thing hasn’t changed and will always be true – Omnicom is a trusted partner for our clients, offering strategic advice to grow their sales while delivering flexibility, value and performance,” said John Wren, Chairman and Chief Executive Officer of Omnicom.

“I am confident that our diversified portfolio and strong balance sheet, together with our experienced leadership teams, will allow us to navigate this challenging economic environment. We are also very excited about the expected closing of the Interpublic acquisition in the second half of this year. It will give the combined company substantial opportunities for revenue growth and distinctive cost synergy potential to drive increased profitability, EPS growth, and free cash flow,” he added.

Revenue

Revenue in the first quarter of 2025 increased $59.9 million, or 1.6%, to $3,690.4 million. Worldwide revenue growth in the first quarter of 2025 compared to the first quarter of 2024 was led by an increase in organic revenue of $121.9 million, or 3.4%. Acquisition revenue, net of disposition revenue, reduced revenue by $2.8
million, or 0.1%. The impact of foreign currency translation reduced revenue by $59.2 million, or 1.6%. Organic growth by discipline in the first quarter of 2025 compared to the first quarter of 2024 was as follows:

7.2% for Media & Advertising, 5.8% for Precision Marketing, and 1.9% for Execution & Support, partially offset by declines of 4.5% for Public Relations, 3.2% for Healthcare, 1.5% for Experiential, and 10.0% for Branding & Retail Commerce. In the first quarter of 2025, we realigned the classification of certain services,
primarily within the Media & Advertising, Branding & Retail Commerce, Precision Marketing, and Public Relations disciplines. As a result, we reclassified the prior year periods to be consistent with the revised classifications.

Organic growth by region in the first quarter of 2025 compared to the first quarter of 2024 was as follows: 

4.6% for the United States, 1.7% for Euro Markets & Other Europe, 6.0% for Asia Pacific, and 14.8% for Latin America, partially offset by declines of 3.6% for Other North America, 0.7% for the United Kingdom, and 9.3% for the Middle East & Africa.

Expenses

Operating expenses increased $86.2 million, or 2.7%, to $3,237.8 million in the first quarter of 2025 compared to the first quarter of 2024. Included in operating expenses in the first quarter of 2025 are $33.8 million of costs related to the pending acquisition of The Interpublic Group of Companies, Inc. ("IPG"). Salary and service costs increased $53.7 million, or 2.0%, to $2,746.3 million. These costs tend to fluctuate with changes in revenue and are comprised of salary and related costs, which include employee compensation and benefits costs and freelance labor, third-party service costs, and third-party incidental costs. Salary and related costs decreased $66.8 million, or 3.6%, to $1,780.5 million, primarily due to the reduction arising from the repositioning actions in 2024 and global employee mix. Third-party service costs
include third-party supplier costs when we act as principal in providing services to the 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, which are billed back to the client directly at the cost. Third-party service costs
increased $98.6 million, or 14.1%, to $796.8 million, primarily as a result of organic growth in the Media & Advertising and Precision Marketing disciplines. Third-party incidental costs increased $21.9 million, or 14.9%, to $169.0 million, primarily as a result of organic growth. Occupancy and other costs, which are less directly linked to changes in revenue than salary and service costs, increased $0.5 million, or 0.2%, to $314.6 million. SG&A expenses increased $32.6 million, or 38.2%, to $117.9 million. Included in SG&A expenses in the first quarter of 2025 are $33.8 million of acquisition related costs.

Operating Income

Operating income decreased $26.3 million, or 5.5%, to $452.6 million in the first quarter of 2025 compared to the first quarter of 2024, and the related margin decreased to 12.3% from 13.2%. Acquisition related costs decreased operating margin by 0.9%.

Interest Expense, net

Net interest expense in the first quarter of 2025 increased $2.6 million to $29.4 million compared to the first quarter of 2024. Interest expense increased $5.3 million to $59.1 million, primarily due to a higher weighted average cost of debt in connection with the financing activity in 2024. Interest income increased primarily due to higher average cash balances.

Income Taxes

the effective tax rate for the first quarter of 2025 increased to 28.5% compared to 25.7% for the first quarter of 2024. The effective tax rate for 2025 increased primarily due to the non-deductibility of certain acquisition related costs in 2025.

Net Income – Omnicom Group Inc. and Diluted Net Income per Share

Net income - Omnicom Group Inc. for the first quarter of 2025 decreased $30.9 million, or 9.7%, to $287.7 million compared to the first quarter of 2024. Diluted shares outstanding for the first quarter of 2025 decreased 0.9% to 198.3 million from 200.1 million as a result of net share repurchases. Diluted net income per share of $1.45 decreased $0.14, or 8.8%, from $1.59. Non-GAAP Adjusted Net Income per Share -Diluted for the first quarter of 2025 increased $0.03, or 1.8%, to $1.70 from $1.67. Non-GAAP Adjusted Net Income per Share - Diluted for the first quarters of 2025 and 2024 excluded $16.1 million and $15.9 million, respectively, of after-tax amortization of acquired intangible assets and internally developed strategic platform assets. Non-GAAP Adjusted Net Income per Share - Diluted for the first quarter of 2025 also
excluded $32.7 million of after-tax acquisition related costs. We present Non-GAAP Adjusted Net Income per Share - Diluted to allow for comparability with the prior year period.

EBITA

EBITA decreased $26.0 million, or 5.2%, to $474.4 million in the first quarter of 2025 compared to the first quarter of 2024, and the related margin decreased to 12.9% from 13.8%. Adjusted EBITA increased $7.8 million, or 1.6%, to $508.2 million in the first quarter of 2025 compared to the first quarter of 2024, and the
related margin was unchanged at 13.8%. EBITA and Adjusted EBITA excluded amortization of acquired intangible assets and internally developed strategic platform assets of $21.8 million and $21.5 million in the first quarters of 2025 and 2024, respectively. Adjusted EBITA also excluded acquisition related costs of $33.8 million in the first quarter of 2025.

Risks and Uncertainties

Global economic conditions and disruptions, including geopolitical events, international hostilities, acts of terrorism, public health crises, inflation or stagflation, tariffs and other trade barriers, central bank interest rate policies in countries that comprise the major markets, labor and supply chain issues affecting the distribution of the clients’ products, or a disruption in the credit markets could cause economic uncertainty and volatility. The impact of these issues on the business will vary by geographic market and discipline. We monitor economic conditions and disruptions closely, as well as client revenue levels and other factors. In response to reductions in revenue, we can take actions to align the cost structure with changes in client demand and manage the working capital. However, there can be no assurance as to the effectiveness of the
efforts to mitigate any impact of the current and future adverse economic conditions and disruptions, reductions in client revenue, changes in client creditworthiness and other developments.