Omnicom Group Inc. 2026 Q3 Earnings Call

Please go ahead. Thank you for joining our third quarter 2026 earnings call.

With me today are John Wren, Chairman and Chief Executive Officer, and Phil Angelastro, Executive Vice President and Chief Financial Officer. On our website, omc.com, you will find a press release and a presentation covering the information that we will review today. An archive webcast will be available when today's call concludes. Before we start, I would like to remind everyone to read the forward-looking statements and non-GAAP financial and other information that we have included at the end of our investor presentation. Certain of the statements made today may constitute forward-looking statements. These represent our present expectations, and relevant factors that could cause actual results to differ materially are listed in our earnings materials and in our SEC filings, including our 2025 Form 10-K. During the course of today's call, we will also discuss certain non-GAAP measures.

You can find the reconciliation of these to the nearest comparable GAAP measures in the presentation materials. We will begin the call with an overview of our business from John, then Phil will review our financial results, and after our prepared remarks, we will open up the lines for your questions. I will now hand the call over to John.

Thank you, Greg. Good afternoon, everyone, and thank you for joining us today. I am pleased to share our third quarter results. As we approach the one-year anniversary of the Interpublic acquisition, we continue to deliver on the benefits of the combination. We have strengthened our competitive market position and commercial offerings and are realizing the anticipated transaction synergies, which is reflected in our financial results. Revenue, excluding assets held for sale, grew organically 7.2% in the third quarter. Organic growth for the nine months was 5.8%. Core adjusted EBITA margin was 18.2% in the quarter, an increase of 200 basis points versus the prior year, and our year-to-date margin of 17%, which is 210 basis points higher than the comparable level in 2025. Our margin expansion reflects strong business performance and cost synergy realization, offset by investments in our talent, operations, and platform.

Adjusted EPS in the quarter was $2.73 per share, an increase of 22% versus the prior year. Our strong financial results reflect the competitive advantages of the new Omnicom. We bring together key differentiators that drive client growth. First, Acxiom's trusted identity solution helps clients better understand their consumers. Second, our position as the largest media buyer gives us strength and scale to help clients achieve better commercial outcomes. Third, our data-informed creative leadership engages consumers and drives measurable results. Fourth, our connected capabilities model brings together media, creativity, production, and CRM to create personalized experiences across multiple channels. Lastly, Omni, our AI-powered platform, underpins it all. Together, these advantages connect the entire marketing ecosystem to drive greater value for our clients. We are also helping clients modernize their operations, get more value from their technology investments, and build a more intelligent enterprise.

Our capabilities in this area earned recognition in this quarter. Omnicom ranked first in every evaluated use case in Gartner's 2026 Critical Capabilities Report, including AI-driven marketing innovation, and was named a leader in its Magic Quadrant for global digital marketing agencies. We were also named a leader in the IDC MarketScape for worldwide AI-enabled Adobe Professional Services, recognizing our leadership in Adobe technology and AI-enabled services. Additionally, we announced a five-year strategic collaboration agreement with Amazon Web Services that will help clients modernize their marketing infrastructure and deploy AI at scale. Beyond these recognitions and partnerships, our connected capabilities model is translating into new business, strong client retention, and expanded relationships across our portfolio. We won several new assignments, including Novo Nordisk, U.S. Bank, L'Oréal, and CVS Health.

We extended our contract with Mercedes-Benz through the end of 2029, covering media, creative, social media, event and marketing activations, and PR. In sports marketing, where we manage $9.9 billion in sponsorships and talent and oversee one-third of global sports media investments, we secured a major integrated assignment for the 2028 Olympic Games in Los Angeles, spanning sponsorships, creative, and communications. Together, these wins, retentions, and expanded relationships show the growing demand for our services. We are extremely pleased with the progress in bringing Interpublic and Omnicom together. We are realizing the financial benefits of the combination and are on track to deliver $900 million in cost reduction synergies in 2026. At the same time, we are reinvesting in talent and technology to drive future growth. We have made significant platform investments that underpin our client solutions, connecting data, technology, and AI to enable smarter, faster, and more effective marketing.

Our portfolio of companies and operations have been streamlined with our connected capabilities model to simplify how we go to market. Our leadership and teams are in place, and our planned people actions are mostly behind us. We are recruiting in high-growth areas and continue to reskill our talent through certified training programs in Omni and AI. We have substantially completed our integration and outsourcing efforts in real estate and back office operations, and we are also realizing the benefits from procurement. Major progress has been made in divesting the businesses we identified as not core to our future. We expect to complete the remaining handful of dispositions in the near term. We have returned significant capital to shareholders through our $5 billion share repurchase plan. We have completed $3.2 billion of repurchases to date, with the remainder to be completed by April 27.

None of this would've been possible without the continued focus and commitment of our people across the company. They have delivered outstanding results for clients while helping us build a stronger and more connected organization. We are pleased that these efforts are reflected in our strong third quarter and year-to-date performance and remain confident in the opportunities ahead. Phil will now provide more color on our financial performance and updated guidance.

Phil? Thanks, John. I will start on slide 13, which presents what we call our core operations, which consists of our ongoing operating businesses, excluding dispositions that we have completed and assets held for sale that have not yet been disposed.

This slide also presents operating income and EBITDA on a non-GAAP adjusted basis, excluding severance and repositioning costs, acquisition integration costs, and a gain on the sale of businesses in Q3 2026. Looking at our core operations, total revenue increased $407 million or 7.3%, and adjusted EBITDA increased $191 million or 21.1%. The adjusted EBITDA margin increased 200 basis points to 18.2%.

Growth in EBITDA was driven by the realization of cost reduction synergies and growth in organic revenue, partially offset by strategic reinvestments in our business and our people, including the investments we've made in integrating and evolving our technology platforms, as well as enhancements of our agentic AI capabilities. Slide 14 reflects the same presentation on a year-to-date basis, where notably adjusted EBITDA increased $553 million or 23%, and the related margin increased 210 basis points to 17.0%. Let's turn to slide 15, which presents our third quarter consolidated reported results and the related non-GAAP adjusted amounts. Please note that because these are reported results, the 2025 presentation reflects the prior year results of Omnicom only and does not include Interpublic. The center columns for each period show the applicable non-GAAP adjustments.

In the third quarter of 2026, integration related costs were $40.4 million, which are recorded on the SG&A expense line. Severance and repositioning costs were $85 million and relate to real estate impairment charges recorded in Q3. And finally, a gain of $106.8 million on the sale of businesses in the third quarter of 2026. Below operating income, net interest expense increased to $104 million from $43 million in 2025, due primarily to the assumption of Interpublic's debt of approximately $3 billion. Interest expense increased by $72 million, primarily due to the Interpublic acquisition, as well as from refinancing activity we completed during the first quarter of 2026 and from commercial paper borrowings. Interest income increased by $11 million to $29 million, primarily due to higher average cash balances. Depreciation expense in the quarter was $47 million, and amortization expense was $120 million.