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OMNICOM GROUP., INC.

(OMC)
  Report
Delayed Nyse  -  04:00 2022-10-07 pm EDT
64.99 USD   -1.23%
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OMNICOM GROUP INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

07/20/2022 | 06:16am EDT

EXECUTIVE SUMMARY


The unaudited consolidated financial statements and related notes to the
unaudited consolidated financial statements, including our critical accounting
policies, and the related Management's Discussion and Analysis of Financial
Condition and Results of Operations included in this report, should be read in
conjunction with our 2021 10-K.

Risks and Uncertainties


Global economic challenges, including the impact of the war in Ukraine, the
COVID-19 pandemic, rising inflation, and supply chain disruptions could cause
economic uncertainty and volatility. The impact of these issues on our business
will vary by geographic market and discipline. We monitor economic conditions
closely, as well as client revenue levels and other factors. In response to
reductions in revenue, we can take actions to align our cost structure with
changes in client demand and manage our working capital. However, there can be
no assurance as to the effectiveness of our efforts to mitigate any impact of
the current and future adverse economic conditions, reductions in client
revenue, changes in client creditworthiness and other developments.

Impact of the War in Ukraine


Historically, we conducted operations in Russia and Ukraine through local
agencies in which we held a majority stake. During the first quarter of 2022,
the war in Ukraine required us to suspend our business operations in Ukraine.
The war resulted in the imposition of sanctions by the United States, the United
Kingdom, and the European Union, that affected the cross-border operations of
businesses operating in Russia. In addition, Russian regulators imposed currency
restrictions and regulations. All of these actions created uncertainty regarding
our ability to recover our investment in our operations in Russia, as well as
our ability to exercise control over the operations. Therefore, the ability to
continue operations in Russia was uncertain. As a result, we sold, or committed
to dispose of, all of our businesses in Russia. Accordingly, in the first
quarter of 2022, we recorded pretax charges of $113.4 million, which primarily
consisted of the net investment in our Russian businesses, and included charges
related to the suspension of operations in Ukraine.

Impact of COVID-19 Pandemic - Update


Beginning in March 2020 and continuing through the first quarter of 2021, our
business experienced the effects from reductions in client spending due to the
economic impact related to the COVID-19 pandemic. While mixed by business and
geography, the spending reductions impacted all our businesses and markets.
Globally, the most impacted businesses were our Experiential discipline,
especially in our event marketing businesses, and our Execution & Support
discipline, primarily in field marketing. Most of our markets began to improve
in April 2021, and the improvement continued through the first six months of
2022.

Our Business

Revenue for the six months ended June 30, 2022 decreased $21.1 million, or 0.3%,
to $6,977.5 million, compared to $6,998.6 million in the six months ended
June 30, 2021. Organic growth increased revenue $811.8 million, or 11.6%,
primarily reflecting increased client spending in substantially all our
disciplines and across substantially all our geographic regions compared to the
prior year period. The increase in organic revenue was offset by a reduction in
acquisition revenue, net of disposition revenue of $579.4 million, or 8.3%,
reflecting dispositions in the Advertising & Media discipline in the second
quarter of 2021 and the disposition of our businesses in Russia in the first
quarter of 2022 (see Note 1 to the unaudited consolidated financial statements),
and the negative impact of changes in foreign currency exchange rates of $253.5
million, or 3.6%.

We are a strategic holding company providing advertising, marketing and
corporate communications services to clients through our branded networks and
agencies around the world. On a global, pan-regional and local basis, our
networks and agencies provide a comprehensive range of services in the following
fundamental disciplines: Advertising & Media, Precision Marketing, Commerce &
Brand Consulting, Experiential, Execution & Support, Public Relations and
Healthcare. Advertising & Media include creative services across digital and
traditional media, strategic media planning and buying, and data analytics
services. Precision Marketing includes digital and direct marketing, digital
transformation and data and analytics. Commerce & Brand Consulting services
include brand consulting, strategy and research, retail and ecommerce.
Experiential marketing services include live and digital events and experience
design and execution. Execution & Support includes field marketing, sales
support, digital and physical merchandising and point-of-sale, as well as other
specialized marketing and custom communications services. Public Relations
services include corporate communications, crisis management, public affairs and
media and media relations services. Healthcare includes advertising and media
services to global healthcare and pharmaceutical clients. Our business model was
built and continues to evolve around our clients. While our networks and
agencies operate under different names and frame their ideas in different
disciplines, we organize our services around our clients. Our fundamental
business principle is that our clients' specific marketing requirements are the
central focus of how we structure our service offerings and allocate our
resources. This client-centric business model requires that multiple agencies
within Omnicom collaborate in formal and informal virtual client networks
utilizing our key client matrix organization structure. This collaboration
allows us to cut across our internal organizational structures to execute our
clients' marketing requirements in a consistent and comprehensive manner. We use
our client-centric approach to grow our business by expanding our service
offerings to existing clients, moving into new markets and obtaining new
                                       14

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clients. In addition, we pursue selective acquisitions of complementary companies with strong entrepreneurial management teams that typically currently serve or could serve our existing clients.


Driven by our clients' continuous demand for more effective and efficient
marketing activities, we strive to provide an extensive range of advertising,
marketing and corporate communications services through various client-centric
networks that are organized to meet specific client objectives. These service
offerings include, among others, advertising, brand consulting, content
marketing, corporate social responsibility consulting, crisis communications,
custom publishing, data analytics, database management, digital/direct
marketing, digital transformation, entertainment marketing, experiential
marketing, field marketing, financial/corporate business-to-business
advertising, graphic arts/digital imaging, healthcare marketing and
communications, in-store design, interactive marketing, investor relations,
marketing research, media planning and buying, merchandising and point of sale,
mobile marketing, multi-cultural marketing, non-profit marketing, organizational
communications, package design, product placement, promotional marketing, public
affairs, public relations, retail marketing, sales support, search engine
marketing, shopper marketing, social media marketing and sports and event
marketing.

We continually evaluate our portfolio of businesses to identify areas for investment and acquisition opportunities, as well as to identify non-strategic or underperforming businesses for disposition.


As a leading global advertising, marketing and corporate communications company,
we operate in all major markets and have a large and diverse client base. For
the twelve months ended June 30, 2022, our largest client accounted for 2.9% of
our revenue and our 100 largest clients, which represent many of the world's
major marketers, accounted for approximately 53.1% of our revenue. Our clients
operate in virtually every sector of the global economy with no one industry
representing more than 16% of our revenue for the six months ended June 30,
2022. Although our revenue is generally balanced between the United States and
international markets, and we have a large and diverse client base, we are not
immune to general economic downturns.

Certain global events targeted by major marketers for advertising expenditures,
such as the FIFA World Cup and the Olympics, and certain national events, such
as the U.S. election process, may affect our revenue period-over-period in
certain businesses. Typically, these events do not have a significant impact on
our revenue in any period.

Global economic conditions have a direct impact on our business and financial
performance. Adverse global or regional economic conditions, such as those
arising from the war in Ukraine, the COVID-19 pandemic, severe and sustained
inflation in countries that comprise our major markets, and client supply chain
issues, pose a risk that our clients may reduce, postpone or cancel spending on
advertising, marketing and corporate communications services, which would reduce
the demand for our services. Revenue is typically lower in the first and third
quarters and higher in the second and fourth quarters, reflecting client
spending patterns during the year and additional project work that usually
occurs in the fourth quarter.

General marketing communications trends impact our business and industry and, on
balance, we believe that these effects are generally positive. These trends
include integrating traditional and non-traditional marketing channels, as well
as utilizing new communications technologies and emerging digital platforms, and
clients increasingly expanding the focus of their brand strategies from national
markets to pan-regional and global markets. As clients increase their demands
for marketing effectiveness and efficiency, many of them have made it a practice
to consolidate their business within one or a small number of service providers
in the pursuit of a single engagement covering all consumer touch points. We
have structured our business around these trends. Certain trends such as
increased spending on digital marketing platforms, and our key client matrix
organization structure approach to collaboration and integration of our services
and solutions provide a competitive advantage to our business, and we expect
this advantage to continue over the medium and long term.

Given our size and breadth, we manage our business by monitoring several
financial indicators. The key indicators that we focus on are revenue and
operating expenses. We analyze revenue growth by reviewing the components and
mix of the growth, including growth by principal regional market and marketing
discipline, the impact from foreign currency exchange rate changes, growth from
acquisitions, net of dispositions, and growth from our largest clients.
Operating expenses are comprised of cost of services, selling, general and
administrative expenses, or SG&A, and depreciation and amortization.

Results of Operations


Revenue for the quarter ended June 30, 2022 decreased slightly to $3,567.2
million, compared to $3,571.6 million in the prior year quarter. Organic growth
increased revenue $403.8 million, or 11.3%. The increase in organic growth was
offset by the changes in foreign exchange rates that reduced revenue $168.4
million, or 4.7%, and acquisition revenue, net of disposition revenue, that
reduced revenue $239.8 million, or 6.7%. The reduction in acquisition revenue,
net of disposition revenue, primarily reflects dispositions in the Advertising &
Media discipline in the second quarter of 2021 and the disposition of our
businesses in Russia in the first quarter of 2022. The change in revenue across
our principal regional markets was: North America increased $12.1 million, or
0.6%, Europe decreased $19.2 million, or 1.8%, Asia-Pacific decreased $19.4
million, or 4.3%, and Latin America increased $9.5 million, or 13.5%. In North
America, increases in organic revenue across all our disciplines, especially in
our Advertising & Media, Precision Marketing and Public Relations disciplines,
were partially offset by a reduction in acquisition revenue, net of disposition
revenue, primarily due to dispositions in the Advertising & Media discipline in
the second quarter of 2021. In Europe, organic revenue increased in
substantially all countries and in all disciplines, especially our Advertising &
Media discipline, which was led by our media business, our Experiential
discipline, as it continues to recover from the impact of the
                                       15

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pandemic, and our Precision Marketing discipline. The increase in organic
revenue was offset by the weakening of substantially all foreign currencies
against the U.S. Dollar, especially the British Pound and the Euro, as well as
the disposition of our businesses in Russia in the first quarter of 2022. In
Latin America, revenue increased due to organic growth in most countries in the
region, especially Brazil and Colombia, which was partially offset by negative
performance in Mexico. In Asia-Pacific, increased organic revenue growth in most
of our major markets in the region, particularly Australia, Japan and Korea, was
driven by our Advertising & Media discipline, which was led by our media
business. The increase in organic revenue was partially offset by negative
performance in Greater China, driven largely by a decrease in our Experiential
discipline caused by continued COVID-19 lock downs. The weakening of all
currencies in the region against the U.S. Dollar offset the increase in organic
revenue. The change in revenue in the second quarter of 2022 compared to the
second quarter of 2021 in our fundamental disciplines was: Advertising & Media
decreased $183.5 million, Precision Marketing increased $68.4 million, Commerce
& Brand Consulting increased $13.1 million, Experiential increased $30.6
million, Execution & Support decreased $0.4 million, Public Relations increased
$46.3 million and Healthcare increased $21.1 million.

Revenue for the six months ended June 30, 2022 decreased $21.1 million, or 0.3%,
to $6,977.5 million, compared to $6,998.6 million in the six months ended
June 30, 2021. Organic growth increased revenue $811.8 million, or 11.6%.
Changes in foreign exchange rates reduced revenue $253.5 million, or 3.6%, and
acquisition revenue, net of disposition revenue, reduced revenue $579.4 million,
or 8.3%. The reduction in acquisition revenue, net of disposition revenue,
primarily reflects dispositions in the Advertising & Media discipline in the
second quarter of 2021 and the disposition of our businesses in Russia in the
first quarter of 2022. The change in revenue across our principal markets was:
North America decreased $121.4 million, or 3.1%, Europe increased $31.8 million,
or 1.6%, Asia-Pacific increased $10.3 million, or 1.2%, and Latin America
increased $13.9 million, or 10.4%. In North America, increases in organic
revenue across all our disciplines, especially in our Advertising & Media,
Precision Marketing and Public Relations disciplines, were offset by a reduction
in acquisition revenue, net of disposition revenue, primarily due to
dispositions in the Advertising & Media discipline in the second quarter of
2021. In Europe, organic revenue increased in substantially all countries and in
all disciplines, especially our Advertising & Media discipline, which was led by
our media business, our Experiential discipline, as it continues to recover from
the impact of the pandemic, and our Precision Marketing and Public Relations
disciplines. The increase in organic revenue was substantially offset by the
weakening of most foreign currencies against the U.S. Dollar, especially the
British Pound and the Euro, as well as the disposition of our businesses in
Russia in the first quarter of 2022. In Latin America, revenue increased due to
organic growth in most countries in the region, especially Brazil and Colombia,
which was partially offset by negative performance in Mexico. In Asia-Pacific,
revenue increased due to organic revenue growth in most disciplines, especially
our Advertising & Media discipline, which was led by our media business, and in
most of our major markets in the region, particularly Australia, Japan and
Korea. The increase in organic revenue was partially offset by negative
performance in Greater China, driven largely by a decrease in our Experiential
discipline caused by continued COVID-19 lock downs and the weakening of most
currencies in the region against the U.S. Dollar. The change in revenue in the
six months of 2022 compared to the six months of 2021 in our fundamental
disciplines was as follows: Advertising & Media decreased $417.8 million,
Precision Marketing increased $135.1 million, Commerce & Brand Consulting
increased $36.4 million, Experiential increased $84.7 million, Execution &
Support increased $7.3 million, Public Relations increased $89.7 million and
Healthcare increased $43.5 million.

We measure cost of services in two distinct categories: salary and service costs
and occupancy and other costs. As a service business, salary and service costs
make up the significant portion of our operating expenses and substantially all
these costs comprise the essential components directly linked to the delivery of
our services. Salary and service costs include employee compensation and
benefits, freelance labor and third-party service costs, which include
third-party supplier costs when we act as principal in providing services to our
clients and client-related travel costs. Occupancy and other costs consist of
the indirect costs related to the delivery of our services, including office
rent and other occupancy costs, equipment rent, technology costs, general office
expenses and other expenses.

Operating expenses for the quarter ended June 30, 2022 increased $22.4 million,
or 0.7%, to $3,025.6 million period-over-period. Operating expenses in 2021 were
favorably impacted by the $50.5 million gain recorded in connection with the
dispositions in the Advertising & Media discipline. Salary and service costs,
which tend to fluctuate with changes in revenue, decreased $37.1 million, or
1.4%, compared to the quarter ended June 30, 2021 reflecting a decrease in
third-party service costs of $116.2 million, partially offset by an increase in
salary and related service costs of $79.1 million. Third-party service costs
decreased during the quarter primarily due to dispositions in the Advertising &
Media discipline in the second quarter of 2021 and the disposition of our
businesses in Russia in the first quarter of 2022. The increase in salary and
related service costs primarily resulted from the increase in organic revenue
and an increase in headcount, as well as an increase in travel and related costs
reflecting the continuing return to the office. Occupancy and other costs, which
are less directly linked to changes in revenue than salary and service costs,
decreased $0.9 million, or 0.3%, period-over-period, due to lower rent and other
occupancy costs, partially offset by an increase in office expenses and other
costs resulting from the return of our workforce to the office. All operating
expenses for the quarter ended June 30, 2022 were reduced as compared to the
prior year by the weakening of most foreign currencies, especially the British
Pound and Euro, against the U.S. Dollar. For the quarter ended June 30, 2022
compared to the prior year period, operating profit decreased $26.8 million to
$541.6 million, operating margin decreased to 15.2% from 15.9%, and EBITA margin
decreased
                                       16

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to 15.8% from 16.5%. Operating profit, operating margin and EBITA margin for
2021 were favorably impacted by the $50.5 million gain recorded in connection
with the dispositions in the Advertising & Media discipline.

Operating expenses for the six months ended June 30, 2022, increased $118.1
million, or 2.0%, to $6,082.9 million period-over-period. Operating expenses for
2022 reflect pretax charges arising from the effects of the war in Ukraine of
$113.4 million. Operating expenses in 2021 were favorably impacted by the $50.5
million gain recorded in connection with the dispositions in the Advertising &
Media discipline. Salary and service costs, which tend to fluctuate with changes
in revenue, decreased $90.3 million, or 1.8%, compared to the six months of
2021, reflecting a decrease in third-party service costs of $314.8 million,
partially offset by an increase in salary and related service costs of $224.5
million. Third-party service costs decreased during the period primarily due to
dispositions in the Advertising & Media discipline in the second quarter of 2021
and the disposition of our businesses in Russia in the first quarter of 2022.
The increase in salary and related service costs primarily resulted from the
increase in organic revenue and an increase in headcount, as well as an increase
in travel and related costs, reflecting the continuing return to the office.
Occupancy and other costs, which are less directly linked to changes in revenue
than salary and service costs, increased $7.7 million, or 1.3%,
period-over-period, primarily due to an increase in office expenses and other
costs resulting from the return of our workforce to the office, partially offset
by lower rent and other occupancy costs. All operating expenses for the six
months ended June 30, 2022 were reduced as compared to the prior year period by
the weakening of most foreign currencies, especially the British Pound and Euro,
against the U.S. Dollar. For the six months ended June 30, 2022 compared to the
prior year period, operating profit decreased $139.2 million to $894.6 million,
operating margin decreased to 12.8% from 14.8%, and EBITA margin decreased to
13.4% from 15.4%. Operating profit, operating margin and EBITA margin for 2022
were negatively impacted by the $113.4 million pretax charges arising from the
effects of the war in Ukraine. Operating profit, operating margin and EBITA
margin for 2021 were favorably impacted by the $50.5 million gain recorded in
connection with the dispositions in the Advertising & Media discipline.

SG&A expenses primarily consist of third-party marketing costs, professional
fees and compensation and benefits and occupancy and other costs of our
corporate and executive offices, including group-wide finance and accounting,
treasury, legal and governance, human resource oversight and similar costs. SG&A
expenses increased in the second quarter of 2022 and the six months ended
June 30, 2022 period-over-period primarily due to increased marketing costs and
professional fees.

Net interest expense in the second quarter of 2022 decreased $33.4 million
period-over-period to $40.1 million. Net interest expense in the six months of
2022 decreased $38.1 million period-over-period to $82.9 million. Interest
expense on debt in the second quarter of 2022 decreased $27.5 million to $47.2
million, and decreased $28.4 million to $94.2 million in the six months of 2022
compared to the prior year periods, primarily as a result of the benefit from
the early redemption in May 2021 of all the outstanding $1.25 billion principal
amount of 3.625% Senior Notes due 2022, or 2022 Notes, which was partially
offset by the issuance of $800 million 2.60% Senior Notes due 2031, or the 2031
Notes, in May 2021 and the issuance of £325 million 2.25% Senior Notes due 2033,
or the Sterling Notes, in November 2021. Interest expense for the second quarter
and six months of 2021 includes a loss of $26.6 million on the early redemption
of the 2022 Notes. Interest income in the second quarter of 2022 increased $4.3
million period-over-period to $11.1 million, and interest income in the six
months of 2022 increased $6.2 million period-over-period to $19.3 million,
reflecting higher interest rates.

Our effective tax rate for the six months ended June 30, 2022 increased
period-over-period to 30.6% from 25.8%. The higher effective tax rate for 2022
was predominantly the result of the non-deductibility of the $113.4 million
charges arising from the effects of the war in Ukraine, as well as an additional
net charge of $4.8 million in connection with these charges. These charges were
partially offset by the tax benefit arising from our share-based compensation
awards. The effective tax rate for the six months ended June 30, 2021 reflects a
nominal tax applied to the book gain on the disposition of subsidiary resulting
from the excess of tax over book basis. We expect our tax rate for the remainder
of the year to be approximately 26.5%, similar to the rate for the second
quarter.

Net income - Omnicom Group Inc. in the second quarter of 2022 increased slightly
to $348.4 million from $348.2 million in the second quarter of 2021. Net income
- Omnicom Group Inc. for the six months ended June 30, 2022 decreased $113.8
million to $522.2 million from $636.0 million for the six months ended June 30,
2021. Diluted net income per share - Omnicom Group Inc. for the second quarter
of 2022 increased $0.08 to $1.68, from $1.60 in the second quarter of 2021.
Diluted net income per share - Omnicom Group Inc. decreased to $2.51 in the six
months of 2022, from $2.93 in the six months of 2021. The period-over-period
change was due to the factors described above, as well as the impact of the
reduction in our weighted average common shares outstanding resulting from the
resumption of repurchases of our common stock during the year, net of shares
issued for restricted stock awards, stock option exercises and the employee
stock purchase plan. The impact of the after-tax charges arising from the
effects of the war in Ukraine reduced net income - Omnicom Group Inc. for the
six months ended June 30, 2022 by $118.2 million and diluted net income per
share - Omnicom Group Inc. by $0.56 per share.

The combined effect of the after-tax gain on the disposition of subsidiary and
the loss on the early redemption of the 2022 Notes increased net income -
Omnicom Group Inc. for the three and six months ended June 30, 2021 by $31.0
million and increased diluted net income per share - Omnicom Group Inc. by
$0.14.
                                       17

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RESULTS OF OPERATIONS - Second Quarter 2022 Compared to Second Quarter 2021 (in
millions):
                                                                       2022               2021
Revenue                                                            $ 3,567.2          $ 3,571.6
Operating Expenses:
Salary and service costs                                             2,566.0            2,603.1
Occupancy and other costs                                              293.0              293.9

Gain on disposition of subsidiary                                          -              (50.5)
Cost of services                                                     2,859.0            2,846.5
Selling, general and administrative expenses                           110.9              103.2
Depreciation and amortization                                           55.7               53.5
                                                                     3,025.6            3,003.2
Operating Profit                                                       541.6              568.4
Operating Margin %                                                      15.2  %            15.9  %
Interest Expense                                                        51.2               80.3
Interest Income                                                         11.1                6.8

Income Before Income Taxes and Income (Loss) From Equity Method Investments

                                                            501.5              494.9
Income Tax Expense                                                     133.1              123.2
Income (Loss) From Equity Method Investments                             1.6               (0.1)
Net Income                                                             370.0              371.6
Net Income Attributed To Noncontrolling Interests                       21.6               23.4
Net Income - Omnicom Group Inc.                                    $   348.4          $   348.2


Non-GAAP Financial Measures

We use EBITA and EBITA Margin as additional operating performance measures that
exclude the non-cash amortization expense of intangible assets, which primarily
consists of amortization of intangible assets arising from acquisitions. We
define EBITA as earnings before interest, taxes and amortization of intangible
assets, and EBITA Margin as EBITA divided by revenue. EBITA and EBITA Margin are
non-GAAP financial measures. We believe that EBITA and EBITA Margin are useful
measures for investors to evaluate the performance of our business. Non-GAAP
financial measures should not be considered in isolation from, or as a
substitute for, financial information presented in compliance with U.S. GAAP.
Non-GAAP financial measures reported by us may not be comparable to similarly
titled amounts reported by other companies.

The following table reconciles the U.S. GAAP financial measure of Net Income - Omnicom Group Inc. to EBITA and EBITA Margin for the periods presented (in millions):

                                                                        2022               2021
Net Income - Omnicom Group Inc.                                     $   348.4          $   348.2
Net Income Attributed To Noncontrolling Interests                        21.6               23.4
Net Income                                                              370.0              371.6
Income (Loss) From Equity Method Investments                              1.6               (0.1)
Income Tax Expense                                                      133.1              123.2
Income Before Income Taxes and Income (Loss) From Equity Method
Investments                                                             501.5              494.9
Interest Expense                                                         51.2               80.3
Interest Income                                                          11.1                6.8
Operating Profit                                                        541.6              568.4
Add back: Amortization of intangible assets                              20.8               21.2
Earnings before interest, taxes and amortization of intangible
assets ("EBITA")                                                    $   562.4          $   589.6

Revenue                                                             $ 3,567.2          $ 3,571.6
EBITA                                                               $   562.4          $   589.6
EBITA Margin %                                                           15.8  %            16.5  %



                                       18
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Revenue


Revenue for the quarter ended June 30, 2022 decreased slightly to $3,567.2
million, compared to $3,571.6 million in the prior year quarter. Organic growth
increased revenue $403.8 million, or 11.3%. The increase in organic growth was
offset by the changes in foreign exchange rates that reduced revenue $168.4
million, or 4.7%, and acquisition revenue, net of disposition revenue, that
reduced revenue $239.8 million, or 6.7%. The reduction in acquisition revenue,
net of disposition revenue, primarily reflects dispositions in the Advertising &
Media discipline in the second quarter of 2021 and the disposition of our
businesses in Russia in the first quarter of 2022. The change in revenue across
our principal regional markets was: North America increased $12.1 million, or
0.6%, Europe decreased $19.2 million, or 1.8%, Asia-Pacific decreased $19.4
million, or 4.3%, and Latin America increased $9.5 million, or 13.5%. In North
America, increases in organic revenue across all our disciplines, especially in
our Advertising & Media, Precision Marketing and Public Relations disciplines,
were partially offset by a reduction in acquisition revenue, net of disposition
revenue, primarily due to dispositions in the Advertising & Media discipline in
the second quarter of 2021. In Europe, organic revenue increased in
substantially all countries and in all disciplines, especially our Advertising &
Media discipline, which was led by our media business, our Experiential
discipline, as it continues to recover from the impact of the pandemic, and our
Precision Marketing discipline. The increase in organic revenue was offset by
the weakening of substantially all foreign currencies against the U.S. Dollar,
especially the British Pound and the Euro, as well as the disposition of our
businesses in Russia in the first quarter of 2022. In Latin America, revenue
increased due to organic growth in most countries in the region, especially
Brazil and Colombia, which was partially offset by negative performance in
Mexico. In Asia-Pacific, increased organic revenue growth in most of our major
markets in the region, particularly Australia, Japan and Korea, was driven by
our Advertising & Media discipline, which was led by our media business. The
increase in organic revenue was partially offset by negative performance in
Greater China, driven largely by a decrease in our Experiential discipline
caused by continued COVID-19 lock downs. The weakening of all currencies in the
region against the U.S. Dollar offset the increase in organic revenue. The
change in revenue in the second quarter of 2022 compared to the second quarter
of 2021 in our fundamental disciplines was: Advertising & Media decreased $183.5
million, Precision Marketing increased $68.4 million, Commerce & Brand
Consulting increased $13.1 million, Experiential increased $30.6 million,
Execution & Support decreased $0.4 million, Public Relations increased $46.3
million and Healthcare increased $21.1 million.

The components of revenue change for the second quarter of 2022 in the United
States ("Domestic") and the remainder of the world ("International") were (in
millions):
                                                 Total                             Domestic                           International
                                           $                 %                $                 %                  $                   %
June 30, 2021                         $ 3,571.6                          $ 1,840.7                          $     1,730.9
 Components of revenue change:
Foreign exchange rate impact             (168.4)           (4.7) %               -               -  %              (168.4)            (9.7) %
Acquisition revenue, net of
disposition revenue                      (239.8)           (6.7) %          (195.5)          (10.6) %               (44.3)            (2.6) %
Organic growth                            403.8            11.3  %           197.6            10.7  %               206.2             11.9  %
June 30, 2022                         $ 3,567.2            (0.1) %       $ 1,842.8             0.1  %       $     1,724.4             (0.4) %


The components and percentages are calculated as follows:
•Foreign exchange rate impact is calculated by translating the current period's
local currency revenue using the prior period average exchange rates to derive
current period constant currency revenue (in this case $3,735.6 million for the
Total column). The foreign exchange impact is the difference between the current
period revenue in U.S. Dollars and the current period constant currency revenue
($3,567.2 million less $3,735.6 million for the Total column).
•Acquisition revenue is calculated as if the acquisition occurred twelve months
prior to the acquisition date by aggregating the comparable prior period revenue
of acquisitions through the acquisition date. As a result, acquisition revenue
excludes the positive or negative difference between our current period revenue
subsequent to the acquisition date and the comparable prior period revenue and
the positive or negative growth after the acquisition is attributed to organic
growth. Disposition revenue is calculated as if the disposition occurred twelve
months prior to the disposition date by aggregating the comparable prior period
revenue of dispositions through the disposition date. The acquisition revenue
and disposition revenue amounts are netted in the table.
•Organic growth is calculated by subtracting the foreign exchange rate impact,
and the acquisition revenue, net of disposition revenue components from total
revenue growth.
•The percentage change is calculated by dividing the individual component amount
by the prior period revenue base of that component ($3,571.6 million for the
Total column).


                                       19
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Changes in the value of foreign currencies against the U.S. Dollar affect our
results of operations and financial position. For the most part, because the
revenue and expense of our foreign operations are both denominated in the same
local currency, the economic impact on operating margin is minimized. Assuming
exchange rates at July 15, 2022 remain unchanged, we expect the impact of
changes in foreign exchange rates to reduce revenue for the third quarter and
the full year by approximately 6% and 4.5%, respectively. In addition, based on
acquisition and disposition activity to date, including the disposition of our
businesses in Russia, we expect the effect of net acquisitions and dispositions
to reduce revenue in the third quarter and full year 2022 by approximately 1%
and 4.5%, respectively.

The change in revenue period-over-period and organic growth in the current period in our geographic markets were (in millions):

                                              Three Months Ended June 30,
                               2022            2021         $ Change       % Organic Growth
Americas:
North America              $   1,969.5      $ 1,957.4      $    12.1                 10.8  %
Latin America                     79.9           70.4            9.5                 14.0  %
EMEA:
Europe                         1,024.9        1,044.1          (19.2)                14.0  %
Middle East and Africa            64.9           52.3           12.6                 28.3  %
Asia-Pacific                     428.0          447.4          (19.4)                 4.7  %
                           $   3,567.2      $ 3,571.6      $    (4.4)                11.3  %


Revenue in Europe, which includes our primary markets of the United Kingdom, or
the U.K., and the Euro Zone, decreased $19.2 million for the second quarter of
2022, primarily resulting from the disposition of our businesses in Russia in
the first quarter of 2022. Revenue in the U.K., representing 10.8% of revenue,
increased $6.7 million. Revenue in Continental Europe, which comprises the Euro
Zone and the other European countries, representing 17.9% of revenue, decreased
$25.9 million. The increase in organic revenue in Europe, which is due to growth
in all disciplines and substantially all countries, was offset by the weakening
of most currencies in the region against the U.S. Dollar, especially the British
Pound and the Euro, and the disposition of our businesses in Russia in the first
quarter of 2022.

In the normal course of business, our agencies both gain and lose business from
clients each year due to a variety of factors. Under our client-centric
approach, we seek to broaden our relationships with all of our clients. For both
the twelve months ended June 30, 2022 and 2021, our largest client represented
2.9% of revenue. Our ten largest and 100 largest clients represented 21.0% and
53.1% of revenue for the twelve months ended June 30, 2022, respectively, and
21.8% and 54.6% of revenue for the twelve months ended June 30, 2021,
respectively.

To monitor the changing needs of our clients and to further expand the scope of
our services to key clients, we monitor revenue across a broad range of
disciplines and group them into the following categories: Advertising & Media,
Precision Marketing, Commerce & Brand Consulting, Experiential, Execution &
Support, Public Relations and Healthcare. The change in revenue
period-over-period and organic growth in the current period by discipline were
(in millions):
                                                                                           Three Months Ended June 30,
                                                            2022                                    2021                                  2022 vs. 2021
                                                                      % of                                    % of                                     % Organic
                                                   $                Revenue                $                Revenue               $ Change               Growth
Advertising & Media                           $ 1,831.0                 51.3  %       $ 2,014.5                 56.4  %       $      (183.5)                 8.2  %
Precision Marketing                               362.0                 10.2  %           293.6                  8.2  %                68.4                 21.0  %
Commerce & Brand Consulting                       234.6                  6.6  %           221.5                  6.2  %                13.1                 11.2  %
Experiential                                      154.6                  4.3  %           124.0                  3.5  %                30.6                 36.6  %
Execution & Support                               250.5                  7.0  %           250.9                  7.0  %                (0.4)                 9.3  %
Public Relations                                  392.2                 11.0  %           345.9                  9.7  %                46.3                 15.8  %
Healthcare                                        342.3                  9.6  %           321.2                  9.0  %                21.1                  9.2  %
                                              $ 3,567.2                               $ 3,571.6                               $        (4.4)                11.3  %


                                       20
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We provide services to clients that operate in various industry sectors. Revenue by sector was:

                                       Three Months Ended June 30,
                                             2022                 2021
Pharmaceuticals and Healthcare                          16  %      16  %
Food and Beverage                                       14  %      14  %
Technology                                              12  %      10  %
Auto                                                    10  %      10  %
Consumer Products                                        8  %       9  %
Financial Services                                       7  %       7  %
Travel and Entertainment                                 6  %       7  %
Retail                                                   7  %       7  %
Telecommunications                                       4  %       5  %
Government                                               3  %       3  %
Services                                                 2  %       2  %
Oil, Gas and Utilities                                   2  %       2  %
Not-for-Profit                                           1  %       1  %
Education                                                1  %       1  %
Other                                                    7  %       6  %
                                                       100  %     100  %


Operating Expenses

Operating expenses were (in millions):

                                                                                    Three Months Ended June 30,
                                                       2022                                   2021                                2022 vs. 2021
                                                                % of                                   % of                   $                    %
                                              $                Revenue               $                Revenue              Change               Change
Revenue                                  $ 3,567.2                              $ 3,571.6                              $       (4.4)               (0.1) %
Operating Expenses:
Salary and service costs:
Salary and related service costs           1,800.8                50.5  %         1,721.7                48.2  %               79.1                 4.6  %
Third-party service costs                    765.2                21.4  %           881.4                24.7  %             (116.2)              (13.2) %
                                           2,566.0                71.9  %         2,603.1                72.9  %              (37.1)               (1.4) %
Occupancy and other costs                    293.0                 8.2  %           293.9                 8.2  %               (0.9)               (0.3) %
Gain on disposition of subsidiary                -                   -  %           (50.5)               (1.4) %               50.5

  Cost of services                         2,859.0                                2,846.5                                      12.5                 0.4  %
Selling, general and administrative
expenses                                     110.9                 3.1  %           103.2                 2.9  %                7.7                 7.5 

%

Depreciation and amortization                 55.7                 1.6  %            53.5                 1.5  %                2.2                 4.1  %
                                           3,025.6                84.8  %         3,003.2                84.1  %               22.4                 0.7  %
Operating Profit                         $   541.6                15.2  %       $   568.4                15.9  %       $      (26.8)               (4.7) %


Operating expenses for the quarter ended June 30, 2022 increased $22.4 million,
or 0.7%, to $3,025.6 million period-over-period. Operating expenses in 2021 were
favorably impacted by the $50.5 million gain recorded in connection with the
dispositions in the Advertising & Media discipline. Salary and service costs,
which tend to fluctuate with changes in revenue, decreased $37.1 million, or
1.4%, compared to the quarter ended June 30, 2021 reflecting a decrease in
third-party service costs of $116.2 million, partially offset by an increase in
salary and related service costs of $79.1 million. Third-party service costs
decreased during the quarter primarily due to dispositions in the Advertising &
Media discipline in the second quarter of 2021 and the disposition of our
businesses in Russia in the first quarter of 2022. The increase in salary and
related service costs primarily resulted from the increase in organic revenue
and an increase in headcount, as well as an increase in travel and related costs
reflecting the continuing return to the office. Occupancy and other costs, which
are less directly linked to changes in revenue than salary and service costs,
decreased $0.9 million, or 0.3%, period-over-period, due to lower rent and other
occupancy costs, partially offset by an increase in office expenses and other
costs resulting from the return of our workforce to the office. All operating
expenses for the quarter ended June 30, 2022 were reduced as compared to the
prior year by the weakening of most foreign currencies, especially the British
Pound and Euro, against the U.S. Dollar. For the quarter ended June 30, 2022
compared to the prior year period, operating profit decreased $26.8 million to
$541.6 million, operating margin decreased to 15.2% from 15.9%, and EBITA margin
decreased
                                       21

--------------------------------------------------------------------------------

to 15.8% from 16.5%. Operating profit, operating margin and EBITA margin for
2021 were favorably impacted by the $50.5 million gain recorded in connection
with the dispositions in the Advertising & Media discipline.

Net Interest Expense


Net interest expense in the second quarter of 2022 decreased $33.4 million
period-over-period to $40.1 million. Interest expense on debt in the second
quarter of 2022 decreased $27.5 million period-over period to $47.2 million,
primarily as a result of the benefit from the early redemption in May 2021 of
all the outstanding 2022 Notes, which was partially offset by the issuance of
the 2031 Notes in May 2021 and the issuance of the Sterling Notes in November
2021. Interest expense for the second quarter of 2021 includes a loss of $26.6
million on the early redemption of the 2022 Notes. Interest income in the second
quarter of 2022 increased $4.3 million period-over-period to $11.1 million,
reflecting higher interest rates.

Income Taxes


Our effective tax rate for the second quarter of 2022 increased
period-over-period to 26.5% from 24.9%. The second quarter of 2021 reflects a
nominal tax applied to the book gain on the disposition of subsidiary resulting
from the excess of tax over book basis.

Net Income and Net Income Per Share - Omnicom Group Inc.


Net income - Omnicom Group Inc. in the second quarter of 2022 increased slightly
to $348.4 million from $348.2 million in the second quarter of 2021. Diluted net
income per share - Omnicom Group Inc. for the second quarter of 2022 increased
$0.08 to $1.68, from $1.60 in the second quarter of 2021, due to the factors
described above, as well as the impact of the reduction in our weighted average
common shares outstanding resulting from the resumption of repurchases of our
common stock during the quarter, net of shares issued for restricted stock
awards, stock option exercises and the employee stock purchase plan.

The combined effect of the after-tax gain on the disposition of subsidiary and
the loss on the early redemption of the 2022 Notes increased net income -
Omnicom Group Inc. for the second quarter of 2021 by $31.0 million and increased
diluted net income per share - Omnicom Group Inc. for the second quarter of 2021
by $0.14.
                                       22

--------------------------------------------------------------------------------

RESULTS OF OPERATIONS - Six Months of 2022 Compared to Six Months of 2021 (in
millions):
                                                                       2022               2021
Revenue                                                            $ 6,977.5          $ 6,998.6
Operating Expenses:
Salary and service costs                                             5,057.8            5,148.1
Occupancy and other costs                                              593.2              585.5
Charges arising from the effects of the war in Ukraine                 113.4                  -
Gain on disposition of subsidiary                                          -              (50.5)

Cost of services                                                     5,764.4            5,683.1
Selling, general and administrative expenses                           207.6              174.9
Depreciation and amortization                                          110.9              106.8
                                                                     6,082.9            5,964.8
Operating Profit                                                       894.6            1,033.8
Operating Margin %                                                      12.8  %            14.8  %
Interest Expense                                                       102.2              134.1
Interest Income                                                         19.3               13.1

Income Before Income Taxes and Income (Loss) From Equity Method Investments

                                                            811.7              912.8
Income Tax Expense                                                     248.6              235.2
Income (Loss) From Equity Method Investments                             1.5               (0.1)
Net Income                                                             564.6              677.5
Net Income Attributed To Noncontrolling Interests                       42.4               41.5
Net Income - Omnicom Group Inc.                                    $   522.2          $   636.0


Non-GAAP Financial Measures

We use EBITA and EBITA Margin as additional operating performance measures that
exclude the non-cash amortization expense of intangible assets, which primarily
consists of amortization of intangible assets arising from acquisitions. We
define EBITA as earnings before interest, taxes and amortization of intangible
assets, and EBITA Margin as EBITA divided by revenue. EBITA and EBITA Margin are
non-GAAP financial measures. We believe that EBITA and EBITA Margin are useful
measures for investors to evaluate the performance of our business. Non-GAAP
financial measures should not be considered in isolation from, or as a
substitute for, financial information presented in compliance with U.S. GAAP.
Non-GAAP financial measures reported by us may not be comparable to similarly
titled amounts reported by other companies.

The following table reconciles the U.S. GAAP financial measure of Net Income - Omnicom Group Inc. to EBITA and EBITA Margin for the periods presented (in millions):

                                                                        2022               2021
Net Income - Omnicom Group Inc.                                     $   522.2          $   636.0
Net Income Attributed To Noncontrolling Interests                        42.4               41.5
Net Income                                                              564.6              677.5
Income (Loss) From Equity Method Investments                              1.5               (0.1)
Income Tax Expense                                                      248.6              235.2
Income Before Income Taxes and Income (Loss) From Equity Method
Investments                                                             811.7              912.8
Interest Expense                                                        102.2              134.1
Interest Income                                                          19.3               13.1
Operating Profit                                                        894.6            1,033.8
Add back: Amortization of intangible assets                              40.2               41.1
Earnings before interest, taxes and amortization of intangible
assets ("EBITA")                                                    $   934.8          $ 1,074.9

Revenue                                                             $ 6,977.5          $ 6,998.6
EBITA                                                               $   934.8          $ 1,074.9
EBITA Margin %                                                           13.4  %            15.4  %



                                       23
--------------------------------------------------------------------------------

Revenue


Revenue for the six months ended June 30, 2022 decreased $21.1 million, or 0.3%,
to $6,977.5 million, compared to $6,998.6 million in the six months ended
June 30, 2021. Organic growth increased revenue $811.8 million, or 11.6%.
Changes in foreign exchange rates reduced revenue $253.5 million, or 3.6%, and
acquisition revenue, net of disposition revenue, reduced revenue $579.4 million,
or 8.3%. The reduction in acquisition revenue, net of disposition revenue,
primarily reflects dispositions in the Advertising & Media discipline in the
second quarter of 2021 and the disposition of our businesses in Russia in the
first quarter of 2022. The change in revenue across our principal markets was:
North America decreased $121.4 million, or 3.1%, Europe increased $31.8 million,
or 1.6%, Asia-Pacific increased $10.3 million, or 1.2%, and Latin America
increased $13.9 million, or 10.4%. In North America, increases in organic
revenue across all our disciplines, especially in our Advertising & Media,
Precision Marketing and Public Relations disciplines, were offset by a reduction
in acquisition revenue, net of disposition revenue, primarily due to
dispositions in the Advertising & Media discipline in the second quarter of
2021. In Europe, organic revenue increased in substantially all countries and in
all disciplines, especially our Advertising & Media discipline, which was led by
our media business, our Experiential discipline, as it continues to recover from
the impact of the pandemic, and our Precision Marketing and Public Relations
disciplines. The increase in organic revenue was substantially offset by the
weakening of most foreign currencies against the U.S. Dollar, especially the
British Pound and the Euro, as well as the disposition of our businesses in
Russia in the first quarter of 2022. In Latin America, revenue increased due to
organic growth in most countries in the region, especially Brazil and Colombia,
which was partially offset by negative performance in Mexico. In Asia-Pacific,
revenue increased due to organic revenue growth in most disciplines, especially
our Advertising & Media discipline, which was led by our media business, and in
most of our major markets in the region, particularly Australia, Japan and
Korea. The increase in organic revenue was partially offset by negative
performance in Greater China, driven largely by a decrease in our Experiential
discipline caused by continued COVID-19 lock downs and the weakening of most
currencies in the region against the U.S. Dollar. The change in revenue in the
six months of 2022 compared to the six months of 2021 in our fundamental
disciplines was as follows: Advertising & Media decreased $417.8 million,
Precision Marketing increased $135.1 million, Commerce & Brand Consulting
increased $36.4 million, Experiential increased $84.7 million, Execution &
Support increased $7.3 million, Public Relations increased $89.7 million and
Healthcare increased $43.5 million.

The components of revenue change for the six months of 2022 in the United States
("Domestic") and the remainder of the world ("International") were (in
millions):
                                                      Total                             Domestic                          International
                                                $                 %                $                 %                  $                   %
June 30, 2021                              $ 6,998.6                          $ 3,708.9                          $     3,289.7
 Components of revenue change:
Foreign exchange rate impact                  (253.5)           (3.6) %               -               -  %              (253.5)           (7.7) %
Acquisition revenue, net of disposition
revenue                                       (579.4)           (8.3) %          (537.2)          (14.5) %               (42.2)           (1.3) %
Organic growth                                 811.8            11.6  %           395.7            10.7  %               416.1            12.6  %
June 30, 2022                              $ 6,977.5            (0.3) %       $ 3,567.4            (3.8) %       $     3,410.1             3.7  %

The components and percentages are calculated as follows:


•Foreign exchange rate impact is calculated by translating the current period's
local currency revenue using the prior period average exchange rates to derive
current period constant currency revenue (in this case $7,231.0 million for the
Total column). The foreign exchange impact is the difference between the current
period revenue in U.S. Dollars and the current period constant currency revenue
($6,977.5 million less $7,231.0 million for the Total column).

•Acquisition revenue is calculated as if the acquisition occurred twelve months
prior to the acquisition date by aggregating the comparable prior period revenue
of acquisitions through the acquisition date. As a result, acquisition revenue
excludes the positive or negative difference between our current period revenue
subsequent to the acquisition date and the comparable prior period revenue and
the positive or negative growth after the acquisition is attributed to organic
growth. Disposition revenue is calculated as if the disposition occurred twelve
months prior to the disposition date by aggregating the comparable prior period
revenue of dispositions through the disposition date. The acquisition revenue
and disposition revenue amounts are netted in the table.

•Organic growth is calculated by subtracting the foreign exchange rate impact,
and the acquisition revenue, net of disposition revenue components from total
revenue growth.

•The percentage change is calculated by dividing the individual component amount
by the prior period revenue base of that component ($6,998.6 million for the
Total column).


                                       24
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The change in revenue period-over-period and organic growth in the current period in our geographic markets were (in millions):

                                             Six Months Ended June 30,
                              2022           2021         $ Change      % Organic Growth
Americas:
North America              $ 3,808.5      $ 3,929.9      $ (121.4)                10.7  %
Latin America                  147.6          133.7          13.9                 11.8  %
EMEA:
Europe                       2,016.9        1,985.1          31.8                 13.3  %
Middle East and Africa         146.8          102.5          44.3                 45.7  %
Asia-Pacific                   857.7          847.4          10.3                  7.7  %
                           $ 6,977.5      $ 6,998.6      $  (21.1)                11.6  %


Revenue in Europe, which includes our primary markets of the U.K. and the Euro
Zone, increased $31.8 million for the six months of 2022 as compared to the
prior year period. Revenue in the U.K., representing 11.1% of total revenue,
increased $38.9 million. Revenue in Continental Europe, which comprises the Euro
Zone and the other European countries, representing 17.8% of total revenue,
decreased $7.1 million. The increase in organic revenue in Europe, which is due
to growth in all disciplines and substantially all countries, was offset by the
weakening of most currencies in the region against the U.S. Dollar, especially
the British Pound and the Euro and the disposition of our businesses in Russia.

The change in revenue period-over-period and organic growth in the current period by discipline were (in millions):

                                                                                    Six Months Ended June 30,
                                                    2022                                    2021                                  2022 vs. 2021
                                                              % of                                    % of                                     % Organic
                                           $                Revenue                $                Revenue               $ Change               Growth
Advertising & Media                   $ 3,600.4                 51.6  %       $ 4,018.2                 57.4  %       $      (417.8)                 8.6  %
Precision Marketing                       698.1                 10.0  %           563.0                  8.1  %               135.1                 20.7  %
Commerce & Brand Consulting               472.5                  6.8  %           436.1                  6.2  %                36.4                 12.5  %
Experiential                              297.1                  4.3  %           212.4                  3.0  %                84.7                 49.7  %
Execution & Support                       504.8                  7.2  %           497.5                  7.1  %                 7.3                  7.8  %
Public Relations                          753.1                 10.8  %           663.4                  9.5  %                89.7                 14.9  %
Healthcare                                651.5                  9.3  %           608.0                  8.7  %                43.5                  8.5  %
                                      $ 6,977.5                               $ 6,998.6                               $       (21.1)                11.6  %

We provide services to clients that operate in various industry sectors. Revenue by sector was:

                                       Six Months Ended June 30,
                                            2022                2021
Pharmaceuticals and Healthcare                        16  %      16  %
Food and Beverage                                     14  %      14  %
Technology                                            12  %       9  %
Auto                                                  10  %      10  %
Consumer Products                                      8  %       8  %
Financial Services                                     7  %       7  %
Travel and Entertainment                               6  %       9  %
Retail                                                 6  %       7  %
Telecommunications                                     5  %       5  %
Services                                               2  %       2  %
Oil, Gas and Utilities                                 2  %       1  %
Not-for-Profit                                         1  %       1  %
Government                                             3  %       3  %
Education                                              1  %       1  %
Other                                                  7  %       7  %
                                                     100  %     100  %


                                       25
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Operating Expenses

Operating expenses were (in millions):

                                                                                          Six Months Ended June 30,
                                                           2022                                   2021                                 2022 vs. 2021
                                                                    % of                                   % of                   $                     %
                                                  $                Revenue               $                Revenue               Change                Change
Revenue                                      $ 6,977.5                              $ 6,998.6                              $       (21.1)                (0.3) %
Operating Expenses:
Salary and service costs:
Salary and related service costs               3,595.4                51.5  %         3,370.9                48.2  %               224.5                  6.7  %
Third-party service costs                      1,462.4                21.0  %         1,777.2                25.4  %              (314.8)               (17.7) %
                                               5,057.8                72.5  %         5,148.1                73.6  %               (90.3)                (1.8) %
Occupancy and other costs                        593.2                 8.5  %           585.5                 8.4  %                 7.7                  1.3  %
Charges arising from the effects of the war
in Ukraine                                       113.4                 1.6  %               -                   -  %               113.4                    -  %
Gain on sale of subsidiary                           -                   -  %           (50.5)               (0.7) %                50.5

  Cost of services                             5,764.4                                5,683.1                                       81.3                  1.4  %
Selling, general and administrative expenses     207.6                 3.0  %           174.9                 2.5  %                32.7                 18.7  %
Depreciation and amortization                    110.9                 1.6  %           106.8                 1.5  %                 4.1                  3.8  %
                                               6,082.9                87.2  %         5,964.8                85.2  %               118.1                  2.0  %
Operating Profit                             $   894.6                12.8  %       $ 1,033.8                14.8  %       $      (139.2)               (13.5) %


Operating expenses for the six months ended June 30, 2022, increased $118.1
million, or 2.0%, to $6,082.9 million period-over-period. Operating expenses for
2022 reflect pretax charges arising from the effects of the war in Ukraine of
$113.4 million. Operating expenses in 2021 were favorably impacted by the $50.5
million gain recorded in connection with the dispositions in the Advertising &
Media discipline. Salary and service costs, which tend to fluctuate with changes
in revenue, decreased $90.3 million, or 1.8%, compared to the six months of
2021, reflecting a decrease in third-party service costs of $314.8 million,
partially offset by an increase in salary and related service costs of $224.5
million. Third-party service costs decreased during the period primarily due to
dispositions in the Advertising & Media discipline in the second quarter of 2021
and the disposition of our businesses in Russia in the first quarter of 2022.
The increase in salary and related service costs primarily resulted from the
increase in organic revenue and an increase in headcount, as well as an increase
in travel and related costs, reflecting the continuing return to the office.
Occupancy and other costs, which are less directly linked to changes in revenue
than salary and service costs, increased $7.7 million, or 1.3%,
period-over-period, primarily due to an increase in office expenses and other
costs resulting from the return of our workforce to the office, partially offset
by lower rent and other occupancy costs. All operating expenses for the six
months ended June 30, 2022 were reduced as compared to the prior year period by
the weakening of most foreign currencies, especially the British Pound and Euro,
against the U.S. Dollar. For the six months ended June 30, 2022 compared to the
prior year period, operating profit decreased $139.2 million to $894.6 million,
operating margin decreased to 12.8% from 14.8%, and EBITA margin decreased to
13.4% from 15.4%. Operating profit, operating margin and EBITA margin for 2022
were negatively impacted by the $113.4 million pretax charges arising from the
effects of the war in Ukraine. Operating profit, operating margin and EBITA
margin for 2021 were favorably impacted by the $50.5 million gain recorded in
connection with the dispositions in the Advertising & Media discipline.

Net Interest Expense


Net interest expense in the six months of 2022 decreased $38.1 million
period-over-period to $82.9 million. Interest expense on debt in the six months
of 2022 decreased $28.4 million period-over-period to $94.2 million, primarily
as a result of the benefit from the early redemption in May 2021 of all the
outstanding 2022 Notes, which was partially offset by the issuance of the 2031
Notes in May 2021 and the issuance of the Sterling Notes in November 2021.
Interest expense for the six months of 2021 includes a loss of $26.6 million on
the early redemption of the 2022 Notes. Interest income in the six months of
2022 increased $6.2 million period-over-period to $19.3 million, reflecting
higher interest rates.

Income Taxes


Our effective tax rate for the six months ended June 30, 2022 increased
period-over-period to 30.6% from 25.8%. The higher effective tax rate for 2022
was predominantly the result of the non-deductibility of the $113.4 million
charges recorded in the first quarter of 2022 arising from the effects of the
war in Ukraine, as well as an additional net charge of $4.8 million in
connection with these charges. These charges were partially offset by the tax
benefit arising from our share-based compensation awards. The
                                       26

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effective tax rate for the six months ended June 30, 2021 reflects a nominal tax
applied to the book gain on the disposition of subsidiary resulting from the
excess of tax over book basis.

Net Income and Net Income Per Share - Omnicom Group Inc.


Net income - Omnicom Group Inc. in the six months of 2022 decreased $113.8
million to $522.2 million from $636.0 million in the six months of 2021. The
period-over-period decrease is due to the factors described above. Diluted net
income per share - Omnicom Group Inc. decreased to $2.51 in the six months of
2022, from $2.93 in the six months of 2021, due to the factors described above,
as well as the impact of the reduction in our weighted average common shares
outstanding resulting from the resumption of repurchases of our common stock
during the year, net of shares issued for restricted stock awards, stock option
exercises and the employee stock purchase plan. The impact of the after-tax
charges arising from the effects of the war in Ukraine reduced net income -
Omnicom Group Inc. for the six months ended June 30, 2022 by $118.2 million and
diluted net income per share - Omnicom Group Inc. by $0.56.

The combined effect of the after-tax gain on the disposition of subsidiary and
the loss on the early redemption of the 2022 Notes increased net income -
Omnicom Group Inc. for the six months ended June 30, 2021 by $31.0 million and
increased diluted net income per share - Omnicom Group Inc. by $0.14.

CRITICAL ACCOUNTING POLICIES

Acquisitions and Goodwill

We have made and expect to continue to make selective acquisitions. The evaluation of potential acquisitions is based on various factors, including specialized know-how, reputation, geographic coverage, competitive position and service offerings of the target businesses, as well as our experience and judgment.


Our acquisition strategy is focused on acquiring the expertise of an assembled
workforce in order to continue to build upon the core capabilities of our
various strategic business platforms and agency brands through the expansion of
their geographic reach or their service capabilities to better serve our
clients. Additional key factors we consider include the competitive position and
specialized know-how of the acquisition targets. Accordingly, as is typical in
most service businesses, a substantial portion of the assets we acquire are
intangible assets primarily consisting of the know-how of the personnel, which
is treated as part of goodwill and is not required to be valued separately under
U.S. GAAP. For each acquisition, we undertake a detailed review to identify
other intangible assets that are required to be valued separately. A significant
portion of the identifiable intangible assets acquired is derived from customer
relationships, including the related customer contracts, as well as trade names.
In valuing these identified intangible assets, we typically use an income
approach and consider comparable market participant measurements.

We evaluate goodwill for impairment at least annually at the end of the second
quarter of the year and whenever events or circumstances indicate the carrying
value may not be recoverable. Under FASB ASC Topic 350, Intangibles - Goodwill
and Other, we have the option of either assessing qualitative factors to
determine whether it is more-likely-than-not that the carrying value of our
reporting units exceeds their respective fair value (Step 0) or proceeding
directly to the quantitative goodwill impairment test. While there were no
trigger events that required us to perform a quantitative test, we performed the
annual quantitative impairment test and compared the fair value of each of our
reporting units to its respective carrying value, including goodwill. We
identified our regional reporting units as components of our operating segments,
which are our six global agency networks. The regional reporting units of each
agency network are responsible for the agencies in their region. They report to
the segment managers and facilitate the administrative and logistical
requirements of our key client matrix organization structure for delivering
services to clients in their regions. We have concluded that for each of our
operating segments, their regional reporting units have similar economic
characteristics and should be aggregated for purposes of testing goodwill for
impairment at the operating segment level. Our conclusion was based on a
detailed analysis of the aggregation criteria set forth in FASB ASC Topic 280,
Segment Reporting, and in FASB ASC Topic 350. Consistent with our fundamental
business strategy, the agencies within our regional reporting units serve
similar clients in similar industries, and in many cases the same clients. In
addition, the agencies within our regional reporting units have similar economic
characteristics and the employees share similar skill sets. The main economic
components of each agency are employee compensation and related costs and direct
service costs and occupancy and other costs, which include rent and occupancy
costs, technology costs that are generally limited to personal computers,
servers and off-the-shelf software and other overhead expenses. Finally, the
expected benefits of our acquisitions are typically shared by multiple agencies
in various regions as they work together to integrate the acquired agency into
our virtual client network strategy.

Goodwill Impairment Review - Estimates and Assumptions


We use the following valuation methodologies to determine the fair value of our
reporting units: (1) the income approach, which utilizes discounted expected
future cash flows, (2) comparative market participant multiples for EBITDA
(earnings before interest, taxes, depreciation and amortization) and (3) when
available, consideration of recent and similar acquisition transactions.

In applying the income approach, we use estimates to derive the discounted
expected cash flows ("DCF") for each reporting unit that serves as the basis of
our valuation. These estimates and assumptions include revenue growth and
operating margin, EBITDA, tax rates, capital expenditures, weighted average cost
of capital and related discount rates and expected long-term cash
                                       27

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flow growth rates. All of these estimates and assumptions are affected by conditions specific to our businesses, economic conditions related to the industry we operate in, as well as conditions in the global economy. The assumptions that have the most significant effect on our valuations derived using a DCF methodology are: (1) the expected long-term growth rate of our reporting units' cash flows and (2) the weighted average cost of capital ("WACC") for each reporting unit.

The assumptions used for the long-term growth rate and WACC in our evaluations as of June 30, 2022 and 2021 were:

                              2022               2021
Long-Term Growth Rate         3.5%               3.5%
WACC                     11.1% - 12.0%       9.8% - 10.4%


Long-term growth rate represents our estimate of the long-term growth rate for
our industry and the markets of the global economy we operate in. For the past
ten years, the average historical revenue growth rate of our reporting units and
the Average Nominal GDP, or NGDP, growth of the countries comprising the major
markets that account for substantially all of our revenue was approximately 3.6%
and 3.8%, respectively. We considered this history when determining the
long-term growth rates used in our annual impairment test at June 30, 2022, and
included in the 10-year history is the full year 2020 that reflected the
negative impact of the COVID-19 pandemic on the global economy and our revenue.
We believe marketing expenditures over the long term have a high correlation to
NGDP. Based on our past performance, we also believe that our growth rate can
exceed NGDP growth in the short-term, notwithstanding the current inflationary
environment, in the markets we operate in, which are similar across our
reporting units. Accordingly, for our annual test as of June 30, 2022, we used
an estimated long-term growth rate of 3.5%.

When performing the annual impairment test as of June 30, 2022 and estimating
the future cash flows of our reporting units, we considered the current
macroeconomic environment, as well as industry and market specific conditions at
mid-year 2022. In the first half of 2022, our organic revenue increase was
11.6%, which excluded our net disposition activity and the impact from changes
in foreign exchange rates.

The WACC is comprised of: (1) a risk-free rate of return, (2) a business risk
index ascribed to us and to companies in our industry comparable to our
reporting units based on a market derived variable that measures the volatility
of the share price of equity securities relative to the volatility of the
overall equity market, (3) an equity risk premium that is based on the rate of
return on equity of publicly traded companies with business characteristics
comparable to our reporting units, and (4) a current after-tax market rate of
return on debt of companies with business characteristics similar to our
reporting units, each weighted by the relative market value percentages of our
equity and debt.

Our six reporting units vary in size with respect to revenue and the amount of
debt allocated to them. These differences drive variations in fair value among
our reporting units. In addition, these differences as well as differences in
book value, including goodwill, cause variations in the amount by which fair
value exceeds book value among the reporting units. The reporting unit goodwill
balances and debt vary by reporting unit primarily because our three legacy
agency networks were acquired at the formation of Omnicom and were accounted for
as a pooling of interests that did not result in any additional debt or goodwill
being recorded. The remaining three agency networks were built through a
combination of internal growth and acquisitions that were accounted for using
the acquisition method and as a result, they have a relatively higher amount of
goodwill and debt. Finally, the allocation of goodwill when components are
transferred between reporting units is based on relative fair value at the time
of transfer.

Goodwill Impairment Review - Conclusion


Based on the results of our impairment test, we concluded that our goodwill at
June 30, 2022 was not impaired, because the fair value of each of our reporting
units was in excess of its respective net book value. For our reporting units
with negative book value, we concluded that the fair value of their total assets
was in excess of book value. The minimum decline in fair value that one of our
reporting units would need to experience in order to fail the goodwill
impairment test was approximately 46%. Notwithstanding our belief that the
assumptions we used for WACC and long-term growth rate in our impairment testing
were reasonable, we performed a sensitivity analysis for each of our reporting
units. The results of this sensitivity analysis on our impairment test as of
June 30, 2022 revealed that if the WACC increased by 1% and/or the long-term
growth rate decreased by 1%, the fair value of each of our reporting units would
continue to be in excess of its respective net book value and would pass the
impairment test.

We will continue to perform our impairment test at the end of the second quarter
of each year unless events or circumstances trigger the need for an interim
impairment test. The estimates used in our goodwill impairment test do not
constitute forecasts or projections of future results of operations, but rather
are estimates and assumptions based on historical results and assessments of
macroeconomic factors affecting our reporting units as of the valuation date. We
believe that our estimates and assumptions are reasonable, but they are subject
to change from period to period. Actual results of operations and other factors
will likely differ from the estimates used in our discounted cash flow
valuation, and it is possible that differences could be significant. A change in
the estimates we use could result in a decline in the estimated fair value of
one or more of our reporting units from the amounts derived as of our latest
valuation and could cause us to fail our goodwill impairment test if the
estimated fair value for the reporting unit is less than the carrying value of
the net assets of the reporting unit, including its goodwill. A large decline in
estimated fair
                                       28

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value of a reporting unit could result in a non-cash impairment charge and may have an adverse effect on our results of operations and financial condition.

NEW ACCOUNTING STANDARDS

Note 14 to the unaudited consolidated financial statements provides information regarding new accounting standards.

LIQUIDITY AND CAPITAL RESOURCES

Cash Sources and Requirements


Our primary short-term liquidity sources are our operating cash flow, cash and
cash equivalents and short-term investments. Additional liquidity sources
include our $2.5 billion multi-currency revolving credit facility, or Credit
Facility, maturing on February 14, 2025, uncommitted credit lines aggregating
$780.9 million, the ability to issue up to $2 billion of U.S. Dollar denominated
commercial paper and issue up to the equivalent of $500 million in British
Pounds or Euro under a Euro commercial paper program and access to the capital
markets. Our liquidity funds our non-discretionary cash requirements and our
discretionary spending.

Working capital is our principal non-discretionary funding requirement. Our
typical working capital cycle results in a short-term funding requirement that
normally peaks during the second quarter of the year due to the timing of
payments for incentive compensation, income taxes and contingent purchase price
obligations. In addition, we have contractual obligations related to our
long-term debt (principal and interest payments), recurring business operations,
primarily related to lease obligations, and acquisition related obligations. Our
principal discretionary cash spending includes dividend payments to common
shareholders, capital expenditures, strategic acquisitions and repurchases of
our common stock.

Cash and cash equivalents decreased $2,111.7 million from December 31, 2021.
During the first six months of 2022, we used $739.9 million of cash in operating
activities, which included the use for operating capital of $1,507.6 million,
primarily related to our typical working capital requirement during the period.
Our discretionary spending for the first six months of 2022 was $1,055.2 million
as compared to $487.3 million for the first six months of 2021. Discretionary
spending for the first six months of 2022 is comprised of capital expenditures
of $42.5 million, dividends paid to common shareholders of $293.6 million,
dividends paid to shareholders of noncontrolling interests of $37.7 million,
repurchases of our common stock, net of proceeds from stock option exercises and
related tax benefits and common stock sold to our employee stock purchase plan,
of $392.5 million, and net acquisition payments, including payment of contingent
purchase price obligations and acquisition of additional shares of
noncontrolling interests of $288.9 million. In addition, we purchased short-term
investments of $121.0 million, which reduced our cash and cash equivalents but
had no impact on our liquidity. The impact of foreign exchange rate changes
reduced cash and cash equivalents by $197.2 million.

Based on past performance and current expectations, we believe that our operating cash flow will be sufficient to meet our non-discretionary cash requirements for the next twelve months and that the availability of our Credit Facility will be sufficient to meet our long-term liquidity requirements.

Cash Management


Our regional treasury centers in North America, Europe and Asia manage our cash
and liquidity. Each day, operations with excess funds invest those funds with
their regional treasury center. Likewise, operations that require funds borrow
from their regional treasury center. Treasury centers with excess cash invest on
a short-term basis with third parties, generally with maturities ranging from
overnight to less than 90 days. In the first six months of 2022, we purchased
$121.0 million of short-term investments that mature at various times during the
year. Certain treasury centers have notional pooling arrangements that are used
to manage their cash and set-off foreign exchange imbalances. The arrangements
require each treasury center to have its own notional pool account and to
maintain a notional positive account balance. Additionally, under the terms of
the arrangement, set-off of foreign exchange positions are limited to the long
and short positions within their own account. To the extent that our treasury
centers require liquidity, they have the ability to issue up to a total of $2
billion of U.S. Dollar-denominated commercial paper and issue up to the
equivalent of $500 million in British Pounds or Euro under a Euro commercial
paper program, or borrow under the Credit Facility or the uncommitted credit
lines. This process enables us to manage our debt more efficiently and utilize
our cash more effectively, as well as manage our risk to foreign exchange rate
imbalances. In countries where we either do not conduct treasury operations or
it is not feasible for one of our treasury centers to fund net borrowing
requirements on an intercompany basis, we arrange for local currency uncommitted
credit lines. We have a policy governing counterparty credit risk with financial
institutions that hold our cash and cash equivalents and we have deposit limits
for each institution. In countries where we conduct treasury operations,
generally the counterparties are either branches or subsidiaries of institutions
that are party to the Credit Facility. These institutions generally have credit
ratings equal to or better than our credit ratings. In countries where we do not
conduct treasury operations, all cash and cash equivalents are held by
counterparties that meet specific minimum credit standards.

At June 30, 2022, our foreign subsidiaries held approximately $1.6 billion of
our total cash and cash equivalents of $3.2 billion. Most of the cash is
available to us, net of any foreign withholding taxes payable upon repatriation
to the United States.
                                       29

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At June 30, 2022, our net debt position, which we define as total debt,
including short-term debt, less cash and cash equivalents and short-term
investments increased $1,857.3 million to $2,235.8 million from December 31,
2021. The increase in net debt primarily resulted from the use of cash of
$1,507.6 million for operating capital principally related to our typical
working capital requirements during the period, and an increase in discretionary
expenditures for acquisition payments of $263.8 million and repurchases of our
common stock of $407.5 million.

The components of net debt were (in millions):

                               June 30, 2022       December 31, 2021       June 30, 2021
Short-term debt               $         12.3      $              9.6      $          9.3
Long-term debt                       5,548.5                 5,685.7             5,300.7
Total debt                           5,560.8                 5,695.3             5,310.0
Less:
  Cash and cash equivalents          3,205.1                 5,316.8             4,388.1
  Short-term investments               119.9                       -                   -
Net debt                      $      2,235.8      $            378.5      $        921.9


Net debt is a Non-GAAP liquidity measure. This presentation, together with the
comparable U.S. GAAP liquidity measures, reflects one of the key metrics used by
us to assess our cash management. Non-GAAP liquidity measures should not be
considered in isolation from, or as a substitute for, financial information
presented in compliance with U.S. GAAP. Non-GAAP liquidity measures as reported
by us may not be comparable to similarly titled amounts reported by other
companies.

Debt Instruments and Related Covenants


Our 2.45% Senior Notes due 2030, 4.20% Senior Notes due 2030 and 2.60% Senior
Notes due 2031 are senior unsecured obligations of Omnicom that rank equal in
right of payment with all existing and future unsecured senior indebtedness.

Omnicom and its wholly owned finance subsidiary, Omnicom Capital Inc., or OCI,
are co-obligors under our 3.65% Senior Notes due 2024 and 3.60% Senior Notes due
2026. These notes are a joint and several liability of Omnicom and OCI, and
Omnicom unconditionally guarantees OCI's obligations with respect to the notes.
OCI provides funding for our operations by incurring debt and lending the
proceeds to our operating subsidiaries. OCI's assets primarily consist of cash
and cash equivalents and intercompany loans made to our operating subsidiaries,
and the related interest receivable. There are no restrictions on the ability of
OCI or Omnicom to obtain funds from our subsidiaries through dividends, loans or
advances. Such notes are senior unsecured obligations that rank equal in right
of payment with all existing and future unsecured senior indebtedness.

Omnicom and OCI have, jointly and severally, fully and unconditionally
guaranteed the obligations of Omnicom Finance Holdings plc, or OFH, a U.K.-based
wholly owned subsidiary of Omnicom, with respect to the €500 million 0.80%
Senior Notes due 2027 and the €500 million 1.40% Senior Notes due 2031,
collectively the Euro Notes. OFH's assets consist of its investments in several
wholly owned finance companies that function as treasury centers, which provide
funding for various operating companies in Europe, Brazil, Australia and other
countries in the Asia-Pacific region. The finance companies' assets consist of
cash and cash equivalents and intercompany loans that they make or have made to
the operating companies in their respective regions and the related interest
receivable. There are no restrictions on the ability of Omnicom, OCI or OFH to
obtain funds from their subsidiaries through dividends, loans or advances. The
Euro Notes and the related guarantees are senior unsecured obligations that rank
equal in right of payment with all existing and future unsecured senior
indebtedness of OFH and each of Omnicom and OCI, respectively.

Omnicom has fully and unconditionally guaranteed the obligations of Omnicom
Capital Holdings plc, or OCH, a U.K.-based wholly owned subsidiary of Omnicom,
with respect to the £325 million 2.25% Senior Notes due 2033, or the Sterling
Notes. OCH's assets consist of its investments in several wholly owned finance
companies that function as treasury centers, which provide funding for various
operating companies in EMEA, Australia and other countries in the Asia-Pacific
region. The finance companies' assets consist of cash and cash equivalents and
intercompany loans that they make or have made to the operating companies in
their respective regions and the related interest receivable. There are no
restrictions on the ability of Omnicom or OCH to obtain funds from their
subsidiaries through dividends, loans or advances. The Sterling Notes and the
related guarantee are senior unsecured obligations that rank equal in right of
payment with all existing and future unsecured senior indebtedness of OCH and
Omnicom, respectively.

The Credit Facility contains a financial covenant that requires us to maintain a
Leverage Ratio of consolidated indebtedness to consolidated EBITDA (earnings
before interest, taxes, depreciation, amortization and non-cash charges) of no
more than 3.5 times for the most recently ended 12-month period. At June 30,
2022, we were in compliance with this covenant as our Leverage Ratio was 2.4
times. The Credit Facility does not limit our ability to declare or pay
dividends or repurchase our common stock.
                                       30

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Borrowings under the Credit Facility may use LIBOR as the benchmark interest
rate. The LIBOR benchmark rate is expected to be phased out by June 2023. We do
not expect that the discontinuation of the LIBOR rate will have a material
impact on our liquidity or results of operations.

At June 30, 2022, our long-term and short-term debt was rated BBB+ and A2 by S&P
and Baa1 and P2 by Moody's. Our access to the commercial paper market and the
cost of these borrowings are affected by market conditions and our credit
ratings. The long-term debt indentures and the Credit Facility do not contain
provisions that require acceleration of cash payments in the event of a
downgrade in our credit ratings.

Credit Markets and Availability of Credit


In light of the uncertainty of future economic conditions, we will continue to
take actions available to us to respond to changing economic conditions, and we
will continue to manage our discretionary expenditures. We will continue to
monitor and manage the level of credit made available to our clients. We believe
that these actions, in addition to the availability of our Credit Facility, are
sufficient to fund our near-term working capital needs and our discretionary
spending. Note 5 to the unaudited consolidated financial statements provides
information regarding our Credit Facility.

We have typically funded our day-to-day liquidity by issuing commercial paper.
Beginning in the third quarter of 2020 and continuing through the second quarter
of 2022, we substantially reduced our commercial paper issuances as compared to
prior years primarily as a result of our cash management during the recovery
from the pandemic. We did not issue commercial paper in each of the six months
ended June 30, 2022 and 2021. Additional liquidity sources include our Credit
Facility and the uncommitted credit lines.

We expect to resume issuing commercial paper to fund our day-to-day liquidity
when needed. However, disruptions in the credit markets may lead to periods of
illiquidity in the commercial paper market and higher credit spreads. To
mitigate any disruption in the credit markets and to fund our liquidity, we may
borrow under the Credit Facility or the uncommitted credit lines or access the
capital markets if favorable conditions exist. We will continue to monitor
closely our liquidity and conditions in the credit markets. We cannot predict
with any certainty the impact on us of any disruptions in the credit markets. In
such circumstances, we may need to obtain additional financing to fund our
day-to-day working capital requirements. Such additional financing may not be
available on favorable terms, or at all.

CREDIT RISK


We provide advertising, marketing and corporate communications services to
several thousand clients that operate in nearly every sector of the global
economy and we grant credit to qualified clients in the normal course of
business. Due to the diversified nature of our client base, we do not believe
that we are exposed to a concentration of credit risk as our largest client
represented 2.9% of revenue for both the twelve months ended June 30, 2022.
However, during periods of economic downturn, the credit profiles of our clients
could change.

In the normal course of business, our agencies enter into contractual
commitments with media providers and production companies on behalf of our
clients at levels that can substantially exceed the revenue from our services.
These commitments are included in accounts payable when the services are
delivered by the media providers or production companies. If permitted by local
law and the client agreement, many of our agencies purchase media and production
services for our clients as an agent for a disclosed principal. In addition,
while operating practices vary by country, media type and media vendor, in the
United States and certain foreign markets, many of our agencies' contracts with
media and production providers specify that our agencies are not liable to the
media and production providers under the theory of sequential liability until
and to the extent we have been paid by our client for the media or production
services.

Where purchases of media and production services are made by our agencies as a
principal or are not subject to the theory of sequential liability, the risk of
a material loss as a result of payment default by our clients could increase
significantly and such a loss could have a material adverse effect on our
business, results of operations and financial position.

In addition, our methods of managing the risk of payment default, including obtaining credit insurance, requiring payment in advance, mitigating the potential loss in the marketplace or negotiating with media providers, may be insufficient, less available, or unavailable during a severe economic downturn.

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