10 months ago| article
The holding company is seeing tailwinds from e-commerce, healthcare and media but remains cautious in its 2023 outlook
Feb 08, 2023 02:56:00 PM | Article | Alison Weissbrot Share -
Omnicom closed out 2022 with $14.29 billion in revenue and organic growth increasing 9.4% over 2021.
The strong results were led by large wins in its media business, continued momentum in precision marketing and strong growth in its healthcare business, CEO John Wren told investors on the Q4 and full year 2022 earnings call on Tuesday, 7 February.
The holding company ended Q4 with $3.8 billion in revenue and organic growth of 7.2% year over year, a performance which CEO John Wren described as “stronger than we expected.”
“We weren’t prepared to handle all the demand there was in December,” he said.
Precision marketing, which encompasses Omnicom’s data, analytics, technology and commerce agencies, grew 13.7% in 2022, fueled by growth in e-commerce and retail media. Wren stressed the importance of e-commerce to clients and pegged it as a continued growth area in 2023 and beyond, as it continues to merge with media budgets.
“Every media request for a bid for the last several years, you have to come and demonstrate to that potential client the strength of your e-commerce capabilities,” he said.
Big media wins including L’Oreal’s $1 billion U.S. account and Burberry’s global account fueled growth, as Omnicom’s advertising and media division grew 7.3% in 2022. The holding company expects wins landed in Q4 to start having a positive impact on its revenues in Q2 and through the second half of the year.
Omnicom’s U.S. business grew 8.7% year over year in 2022, while the UK grew 10.9% and Asia Pacific grew 14.1%. In Q4, the U.S. grew 5.6%, the UK grew 9.9% and Asia Pacific grew 18.2%, fueled by China’s reopening late last year.
2022 profit margins were 14.6%, down slightly from 15.4% in 2021, as expenses increased $114.3 million, or 0.9%, to $12.8 million. Omnicom continued to cycle through the disposition of its business in Russia, which incurred a $113 million charge to the company. Headcount also increased year over year, contributing to costs.
Omnicom is the second major holding company to report strong 2022 earnings, after Publicis posted organic revenue growth of 10% last week. Wren attributed performance in the sector as a result of holding company services becoming more relevant to clients as they deal with increased complexity in the marketing ecosystem.
Still, Omnicom remains cautious in its outlook for 2023 given ongoing macroeconomic uncertainties and rising interest rates, forecasting 3% to 5% growth.
“We’re not going to be overly optimistic in terms of our guidance at this point,” chief financial officer Phil Angelastro said.
New business is always a key priority for agencies, and Wren said that Omnicom has the right team in place to win in large pitches, citing three key hires made in the past year: chief marketing officer Kathleen Saxton, chief client officer Andrea Lennon and chief strategy officer Alex Hesz. Each were net new positions for the holding company as it looks to identify more enterprise-level clients that it can pitch and grow organically with across disciplines.
“I’m confident in the teams we have answering these briefs,” he said,”and our holistic approach responding to client business needs.”
Omnicom’s focus on growth with existing clients comes as they turn to it for more strategic work around business transformation – an opportunity to increase “share of wallet,” Wren said.
“We’re not only answering the brief that the clients are necessarily putting to us. We’re taking a look at their business, their sector and trying to be helpful as a partner to them,” he said.
With inflation still high, Omnicom has had “a lot more success than I would’ve hoped for” in getting clients to pay more for its services, or at the very least, significantly extending the length of their contracts. “In getting that in lieu of a price increase, we are able to add stability to our revenue base, so we are benefiting,” Wren said.
Most client sectors continue to invest but remain uncertain about the year ahead. Omnicom expects growth in the healthcare and auto sectors, specifically as supply chains unclog and vehicle makers shift their focus to EVs. It will “suffer and feel a little pain” due to recent mass-layoffs in tech, but the business has “planned accordingly,” Wren said.
“They'll reinvent themselves quickly, and I am happy to have them as clients even though they are facing challenges,” he added.
Back to the AI-enabled office
After nearly three years of remote and hybrid work, Omnicom is officially asking its employees to come back to the office at least three per week, a transition that will be completed by the end of the quarter.
Wren also responded optimistically to questions about AI and ChatGPT3, saying that Omnicom will “be embracing as quickly as we possibly can.”
“All of the automation we’re looking at enhances capabilities and makes the jobs easier for our best and brightest people, and it eliminates a lot of the otherwise mundane projects or activities that we also get paid for,” he said, “We think it's good for our smartest people, and therefore, it'll be good for the work they do on behalf of our clients.”
(This article first appeared on CampaignLive.com)