The company posted $1.92 billion in revenue, up 9.7% over the same period in 2001, and net income of $187.3 million, up 9.2% after 2001 figures were adjusted to reflect accounting changes that took effect this year. Ignoring the accounting changes, last quarter's net was up 23.7%. Diluted earnings per share were $1, in line with forecasts.
Organic revenue growth-factoring out acquisitions and currency fluctuations-was 1.5% for the quarter, weaker than the organic rate of 3.7% in the first quarter and somewhat below analysts' expectations.
The quarter was affected by tough year-over-year comparisons to 2001, which should ease up in the second half, said Randall Weisenburger, exec VP-chief financial officer.
Omnicom did get good news from its new auditor, KPMG, which reviewed its transaction to spin off stakes in Internet shops into Seneca Investments LLC, an e-services holding company formed last year. Mr. Weisenburger said the auditor, which replaced Arthur Andersen in June, did not recommend any changes to the transaction.
Pressed by analysts, Mr. Weisenburger acknowledged that previously reported negotiations to buy two Seneca e-shops-Agency.com and Organic-are on hold. But he added Omnicom is still interested in acquiring the two shops, although it has no exclusive right and could be outbid by another interested suitor.
The Seneca transaction has been under scrutiny since a Wall Street Journal story in June raised questions about Omnicom's accounting practices, leading to a sharp drop in the stock's price. Omnicom's stock rallied after the earnings announcement, though it's far below its year's peak of $97.21 March 4 (see The AdMarket, P. 8).
Omnicom said advertising revenue-42.9% of the quarter's total-grew 9% vs. a year ago; customer relationship management revenue was up 15%; and specialty communications revenue rose 26.7%, thanks to health-care advertising and acquisitions in the category. Meanwhile, public relations revenue dropped 10.7%.
Omnicom raked in $1.2 billion in net new business during the quarter, a 16% improvement over the same period in 2001. President-CEO John Wren said the company remains focused on gaining share from existing clients and has succeeded in mitigating account losses by keeping several moving accounts, such as Charles Schwab & Co., within the holding company. Mr. Wren reaffirmed the company's 2002 growth target of 10% in earnings, earnings per share and revenue.
Omnicom raised its estimate for earnouts-the liability for future payments due for past acquisitions-to $418.2 million, including $399 million due through 2005, as of June 30. Omnicom had raised the earnout estimate to $394.1 million in July after estimating it at $250 million to $350 million as of June 1.
Analysts and investors were pleased that Omnicom revealed more data. Salomon Smith Barney's William Bird called it a "substantial improvement in financial disclosure." Analysts remain bullish on Omnicom, seeing it as the strong performer in a weak category.