Omnicom Projects Double Digit Declines In Q2, Still Evaluating Layoffs

Like its competitors, Omnicom expects steep declines in the second quarter as the COVID-19 pandemic rages on.

“In the preliminary forecasts we looked at, the second quarter was the most traumatic,” said CEO John Wren on the company’s Q1 2020 earnings call Tuesday.

Omnicom also declined to give guidance for the rest of the year but expects the initial downturn to be steeper than the 2009 financial crisis, Chief Financial Officer Phil Angelastro said.

“We, like everybody else, don’t have enough information yet to really know what to expect in terms of when the businesses will come back,” he said.

Omnicom’s Q1 saw 0.3% organic growth to $258 million. CRM execution and support, which includes events and field marketing, was most impacted by government shutdowns, down 0.9% in the quarter. Meanwhile, healthcare was up 9.6%.

In the United States, which makes up more than half of Omnicom’s revenue, organic growth was up 1.7% to roughly $1.9 billion.

To brace for Q2 declines, Omnicom has laid off and furloughed staff, frozen salary increases, stopped hiring and reduced freelancers. Many senior leaders have taken voluntary pay cuts. The company has also taken advantage of government loan programs globally and stopped spending on business travel and awards.

Omnicom declined to break out what percentage of staff has been affected by these actions because the situation is “so fluid,” Wren said. The company will continue to evaluate its costs – 75% of which are salary and service related – and adjust staffing as necessary.

Some layoffs will be permanent based on agency discipline and the verticals they work with. Ongoing staff reductions will not be indiscriminate, said Angelastro.

“…Underperformers will be first on that list of terminations or furloughs if that action has to be taken,” he said. “We are certainly doing everything we can to keep those who we think are the best.”

Wren declined to share a cost savings goal for the year and called competitors “foolish” for doing so. “I’m not willing to announce a goal of the savings we’re going to achieve by decimating parts of our staff,” he said.

Tone of business

Omnicom’s clients have been impacted by the global crisis, but “it’s not all doom and gloom,” Wren said.

The healthcare and PR business remain solid. And in advertising and media, Omnicom is helping clients such as PepsiCo and AT&T repurpose messaging and media to stay connected with their employees and consumers.

Agencies with a larger share of clients in travel and entertainment, oil and gas, auto and nonessential retail have been more heavily impacted by cancellations. Those that skew toward pharma, healthcare, technology and telecom have performed better.

Omnicom is still winning new business, with PHD scooping up Diageo’s global media planning and buying account and Energy BBDO winning Bayer’s digestive health brands in the United States.

Omnicom employees’ ability to quickly pivot to working from home has been “the most fascinating and enlightening thing I’ve seen through this process,” Wren said. Agencies have been creative in overcoming production challenges, with one agency shooting a commercial with a drone to maintain social distancing.

Working from home has gone so well, in fact, that Wren expects to reduce real estate costs and shorten production timelines by leaning into remote work in the future.

“We have absolutely proven that our people can work from home,” he said.

Looking to the future, Wren has set up committees across advertising, media and PR to evaluate how the business will emerge changed from the crisis.

“I’m expecting some dramatic answers,” he said. “I think every aspect of our business is going to change.”

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