Omnicom Group (OMC) Q1 2012 Earnings Call April 17, 2012 8:30 am ET Executives Randall J. Weisenburger - Chief Financial Officer and Executive Vice President John D. Wren - Chief Executive Officer, President and Director Analysts Tim Nollen - Macquarie Research Alexia S. Quadrani - JP Morgan Chase & Co, Research Division Craig Huber Matthew Chesler - Deutsche Bank AG, Research Division Daniel Salmon - BMO Capital Markets U.S. James Dix - Wedbush Securities Inc., Research Division Brian W. Wieser - Pivotal Research Group LLC Anthony J. DiClemente - Barclays Capital, Research Division Peter Stabler - Wells Fargo Securities, LLC, Research Division Robert Fishman - Nomura Securities Co. Ltd., Research Division Presentation Operator
I'd also like to remind you that during the course of the call, we will discuss some non-GAAP measures in talking about Omnicom's performance. You can find the reconciliation of those measures to the nearest comparable GAAP measures in the presentation materials.We're going to begin the call with some brief remarks from John Wren. Following John's remarks, we'll review the financial performance for the quarter in more detail, and then both John and I will be happy to take questions. John D. Wren Good morning. I'm pleased to speak to you this morning about our latest business results, the progress we're making and my thoughts for the rest of the year. 2012 is off to a very good start. First quarter results were strong. Revenues exceeded our internal forecast, and we posted significant improvement in our operating margins. Looking at the balance of the year, we're cautiously optimistic on revenue. The region most at risk is Europe. Major economies outside Europe, I'm happy to say, seem to be improving at a steady pace. From the cost side, our determination to contain costs and drive operating efficiencies is working, and we are on track to achieve our margin objectives for 2012. Given an improving but fragile global economy, we at Omnicom are focused on the things we can control. We are continuing to make significant investments in people to broaden our capabilities and service offerings. We're also pursuing, as you know, a multi-pronged digital strategy built around the core idea that all of our agencies must have a strong digital talent and capabilities in order to compete in the future. As a result, we are helping and pushing our agencies where needed in order to accelerate the expansion of their digital expertise. To achieve our objectives, we're employing an open-source technology approach by partnering with technology leaders to ensure that we have access to the latest innovations and information in the marketplace. These partnerships allow us to integrate the most effective digital strategies within our clients' overall marketing plans. Now I'd like to turn my attention to the first quarter.
Organic growth for the first 3 months was a very strong 5.1%. Revenue growth in the quarter was driven by very positive results in developing markets, and solid performances in the U.S. and the U.K. This was balanced at the euro markets, which experienced only nominal growth. Our advertising business performed very well, while our PR businesses showed improvement for the first time in several quarters.Looking more closely at revenue by geography, we saw a continued strength in the U.S. with organic growth of 4.4%. U.S. growth was driven by strong results in brand advertising, media, and sports and event marketing and was offset by a decline in our healthcare specialty business. The U.K. experienced organic growth of 4.1%. While the U.K. growth slowed versus the fourth quarter, the market remains relatively favorable despite the broader challenges in Europe and our individual agencies are performing very well. Euro region growth overall was relatively flat, although the performance by market varied. Germany turned in a solid quarter, France was only slightly negative, and the Netherlands underperformed due primarily to the effects of a client loss. In the more troubled European markets, Greece and Ireland were negative for the quarter, while the southern European markets had positive growth. Outside the euro currency area, Russia and Turkey had very strong performances with double-digit growth. In the first quarter we again had strong performances across Asia, particularly Australia, China and Singapore. In Japan, we are happy to say that we had positive organic growth for the first time since the third quarter of 2010. We again experienced growth across almost all of our industry segments. Revenues during the quarter were particularly strong in auto, food and beverage, retail and technology, while only health care had a negative performance. Read the rest of this transcript for free on seekingalpha.com