Omnicom Sees Q3 Organic Revenue Decline

CEO John Wren warns of 'uncertainty' in fourth quarter

Photo of John Wren and the Omnicom Group logo
John Wren, CEO of Omnicom, said the holding company faces a number of 'challenges and uncertainties' as it looks ahead to the fourth quarter. Omnicom Group
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Omnicom, which owns agencies such as TBWA, DDB, Hearts & Science and PHD, experienced an 11.7% drop in organic revenue during the third quarter of this year due to the economic impact of Covid-19.

During the second quarter of 2020, Omnicom’s organic revenue fell 23%.

“As we expected, the negative impact of Covid-19 on our business peaked in the second quarter, and we experienced significant improvements in the third quarter,” John Wren, CEO of Omnicom, said on the company’s quarterly earnings call today. “As anticipated, some of our clients’ industries that have been hit the hardest, such as travel and entertainment as well as our events businesses, continue to be challenged.”

Omnicom appears to be struggling more than some of its competitors. IPG recently reported an organic revenue dip of 3.7% during the third quarter, while Publicis Groupe’s fell 5.6%.

Despite the downturn, Wren said the agency managed to secure new business in the third quarter. He pointed to AARP naming BBDO its brand agency of record, and Cox Automotive choosing Hearts & Science as its media agency of record for the company’s Autotrader and Kelley Blue Book brands.

Additionally, Wren said Dieste, an Omnicom-owned agency based in Dallas, has been selected to handle multicultural advertising for Cheetos and Doritos.

“Normally, in periods like this, we’d expect new business activity to be relatively slow. But what we’ve found since the second quarter is that there has quite a bit of activity,” he said. “Most of it’s been pitched remotely. If you’d asked me in January if this was possible, I’d probably say no.”

Looking ahead, Wren said there are a number of “challenges and uncertainties” it faces in the fourth quarter. He listed the global trajectory of Covid-19, the outcome of the U.S. presidential election and the timing and effect of government stimulus programs around the world as factors that could have an impact on the company.

“All of these factors create greater uncertainty in our financial forecast, and a much lower level of visibility than we’ve experienced in the past, across our businesses,” he said.

Wren said the uncertainty could particularly have an impact on project-based work the company normally sees in the fourth quarter. Wren said this type of work typically accounts for roughly $200-250 million.

“I don’t think anybody can predict what’s going to happen with respect to that,” he said.

During the call, Phil Angelastro, Omnicom’s executive vice president and chief financial officer, said the holding company has eliminated more than 1 million square feet of real estate to cut costs.

“We think that’s going to be permanent,” he said.

Wren said that the voluntary salary reductions put in place in April due to the impact of Covid-19 will be phased out by the end of the year. While he said he “fundamentally” believes that Omnicom’s staffers will return to their offices eventually, noting that many of its employees based in China have already returned, he expects to see a “far more agile and flexible workforce” in the future.

“Things that we didn’t think we could do remotely, we actually can,” he said, noting that he may consider moving some “functions” out of cities like New York and into lower-cost areas. Wren did not specify what exactly he meant by “functions,” but said there are “no immediate plans” to begin such an undertaking.

@Minda_Smiley Minda Smiley is an agencies reporter at Adweek.