CREATIVE IS NOW 15 TO 16 PERCENT OF OMNICOM'S COMBINED BUSINESS

Adam Berlin

Analyst, Goldman Sachs

Morning, everyone. Hope you're all really enjoying the conference this week. Really delighted to have with us Phil Angelastro, the CFO of Omnicom. He was telling me he's been at Omnicom for nearly 30 years, so I'm sure he's done this a few times before. Maybe we can just start by reflecting on what it's been like since the deal closed with Interpublic Group. How happy are you with the progress that's been made since the acquisition? What's gone better than you thought? What's gone worse than you thought? Maybe we can start with that.

Phil Angelastro

CFO, Omnicom

Sure. It has been nine months or so since we closed the deal, and we spent probably the better part of almost a year planning for the integration. We certainly had a lot of familiarity with Interpublic Group's assets leading up to the transaction. We're quite pleased with how the integration has gone. In particular, I would say that the integrated media business has come together quite quickly and quite well, somewhat seamlessly, in bringing two very large global organizations together. We've certainly seen the benefits of that kind of from day one. The scale that we've achieved in that business in particular has been quite helpful for the business and our growth.

We're pleased with that. We're also pleased with the progress we've made with Omni and the integration with Interpublic Group's platform, Interact.

We've kind of taken the best of what both had to offer, integrated them together, and continued to make investments to evolve the platform itself. We've made quite a bit of progress in that area, including agentic AI, integrating Acxiom data and the Acxiom business into the Omni platform, as well as getting Acxiom and our integrated media business and our other businesses working together more closely. I think there's still a lot of work to be done there and progress to be made, but that was certainly one of our goals and one of the opportunities we viewed in the deal, was to get Acxiom more integrated into the business to drive growth. We're pleased with that. We're certainly also pleased with the progress we've made in terms of achieving the cost reduction synergy targets that we set out.

There's still a ways to go in the second half and beyond, but we made a lot of progress there. I think the biggest challenge we've faced has been in the advertising business in bringing together both Interpublic Group portfolio and the Omnicom portfolio. It was certainly not an integration challenge that we didn't anticipate, but we probably made the most changes in that business coming together on a global basis than any of our other businesses. We've gotten rid of or eliminated a number of brands. There's been a lot of activity in that business and a lot of challenges in bringing that together. I think we're largely through that process. There's still an evolution to come, but I think that's been our biggest challenge.

Adam Berlin

Analyst, Goldman Sachs

You mentioned the synergies program, which is a $1.5 billion of gross cost savings over the next couple of years. I think John, CEO, has said publicly they're trying to get the headcount to around 105,000 for the new organization. Can you give us an update on where we are at the moment, and how long you think it will take to get to that kind of-

Phil Angelastro

CFO, Omnicom

Sure

Adam Berlin

Analyst, Goldman Sachs

steady state?

Phil Angelastro

CFO, Omnicom

Mm-hmm. I think that was probably a number that was referenced in the press about right around when we announced and closed the deal, so say December of 2025. Obviously, a rough estimate of where we expect it to be, but we think that's a pretty good estimate in terms of what we're going to be able to achieve by the time we get to, say, post one year, by the end of the year 2026. That number includes, in addition to headcount reductions from synergies, largely due to duplicative corporate costs and duplicative regional management and other areas of opportunity when it comes to outsourcing and offshoring. There is also a component of that relates to the dispositions that we've been doing.

Not yet complete, but a lot of progress in that area, and we expect to be largely complete with that by the end of the year. The number that we had disclosed at the end of 2025, I think, was about 120,000 in headcount. It was probably a bigger number if you combined Omnicom and Interpublic Group, if you go back to 2024, just the nature of the business changes have been happening. But those headcount changes really have not impacted client-facing people very much at all. Except for if we lose a client or win a client here and there might be some shifts across our agencies. But in terms of a rough estimate, I think that's certainly one we're comfortable with. But we'll see what happens over the next few months here.

Adam Berlin

Analyst, Goldman Sachs

But that's broadly where you'd expect to be by the end of the year, once all the dispositions are completed. Yeah.

Phil Angelastro

CFO, Omnicom

Yeah. It's not going to be a perfect number, but I think that's a

Adam Berlin

Analyst, Goldman Sachs

Okay

Phil Angelastro

CFO, Omnicom

pretty good estimate.

Adam Berlin

Analyst, Goldman Sachs

Maybe we can talk a little bit about growth. At Q2, you upgraded your full year guidance for organic revenue growth to 4.5%-5%. This is a good year for agencies in the sense that we've got Olympics and World Cup, and there's midterm elections, and you have businesses in the political area. Is that making much of a contribution, or do you think that 4.5%-5% is a kind of more of a steady state of what you should be expecting to achieve in most years?

Phil Angelastro

CFO, Omnicom

I think the 4%- 5% is what we expect right now. I think we're typically somewhat conservative. We don't want to get ahead of our skis in terms of our expectations, especially given kind of the items that we can't control, the geopolitics of the day and some of the uncertainties that are out there. But we're certainly comfortable with the 4.5%- 5% for the year. We benefited certainly from the World Cup in our experiential businesses in the second quarter. We expect there'll be a little bit more benefit in the third quarter, not in the fourth. The U.S. national elections will help a little bit in the PR business in the second half, but not quite to the extent that a national election with a presidential election, as well, would benefit the business.

I'm not quite sure we have a number yet for how much of the annual estimate, the 4.5%- 5%, will be coming from those businesses, because there's still some time to play out here. But I think as we look into 2027, we don't see there being a dramatic downturn in terms of our growth rate and the possibilities. There's a long time between now and 2027, and we haven't done our planning process yet. But there are going to be some reductions year- on- year and some difficult headwinds in the experiential business and perhaps a little bit in PR. But there'll also be some other parts of the business that we expect will improve, especially in the area of probably our healthcare business.

They've had some challenges in 2026, and we've certainly got a great franchise when you bring together Omnicom and Interpublic Group's health businesses. So we have high expectations for them going forward.

Adam Berlin

Analyst, Goldman Sachs

The other thing that will affect 2027, I suppose, is where we end up with net new business during this year and then flows into next year. Do you want to give an overview of how you think the year's gone so far in terms of new business? Maybe we can talk a little bit about what happened with Pepsi-

Phil Angelastro

CFO, Omnicom

Sure

Adam Berlin

Analyst, Goldman Sachs

last week as well.

Phil Angelastro

CFO, Omnicom

Sure. New business has been quite robust the first half of the year, especially in the integrated media business. We've had a lot of wins. A lot of big brands either have joined the portfolio or we've grown our business with those brands during the year. The Pepsi situation is an unfortunate one, certainly a disappointment from our perspective. You can't sugarcoat it. We're doing a detailed deconstruction of how it happened and what we should've been doing differently to prevent it from happening.

We're not completed with that process, but we're going to learn some lessons from this and certainly we're going to take them very seriously. Not interested in excuses, but ultimately we want to do a root cause analysis, so that we can improve the business and our processes going forward. I think Pepsi's certainly a longstanding client.

We still have a relationship with them when it comes to PR and creative and some sports activation business. It's a great client, not a happy process that we've been through here, but we'll rebound from that. We don't think it's going to have a significant impact on the business going forward when we get to 2027 and our expectations. But there's still quite a bit of time between now and 2027. We'll be aggressively pursuing new business as we always do.

Adam Berlin

Analyst, Goldman Sachs

Does that open up some opportunities for you? Accounts you maybe couldn't have gone for in the past that now you can go after?

Phil Angelastro

CFO, Omnicom

I think it likely will. Coke and Pepsi is a unique competitive relationship, and I think we'll see what happens as this plays out. I think we would agree we're not likely to be as restricted as we once were.

Adam Berlin

Analyst, Goldman Sachs

With Coke specifically, you mean, or other?

Phil Angelastro

CFO, Omnicom

Just in the categories that Pepsi operates in general. Again, it's an existing client. We value the relationship. Certainly there'll be a little bit more flexibility in terms of what we pursue in the future.

Adam Berlin

Analyst, Goldman Sachs

As we sit here today, based on the new business over the last nine months, is it going to be much of a tailwind, headwind into next year, neutral, based on what you've won so far?

Phil Angelastro

CFO, Omnicom

I think net, we expect it to be a tailwind, a positive, not a headwind overall. But there's a lot of moving parts in what drives revenue growth. But the key to revenue growth ultimately is growing with your existing client base. And oftentimes new projects, new wins with existing clients don't get a lot of press. I think when you look at the overall portfolio, there's the big notable wins that show up in the press, and then there's a lot of other activity that drives revenue growth. And I think this year's been a good year, and we'd expect it to continue.

Adam Berlin

Analyst, Goldman Sachs

Okay. It seems from outside in looking at the data that is public, that Pepsi aside, you've actually been doing pretty well in media. There's been quite a few big wins in media.

Phil Angelastro

CFO, Omnicom

Yeah

Adam Berlin

Analyst, Goldman Sachs

Definitely up. But I think on the creative side, for the things, again, that have been in the press, there seems to have been quite a few losses, not that many wins on the creative side. Is that linked to these integration issues? One, as you mentioned at the beginning, that media's come together quite seamlessly and advertising hasn't. Does that create an opportunity for an improvement next year?

Phil Angelastro

CFO, Omnicom

Certainly. I think, I would kind of reiterate the point I just made about not every win shows up in the press or not every incremental bit of business and spend that an existing client shows up in the press necessarily, but it's incremental. Revenue, the same. But the business has been through a lot, as far as Omnicom advertising goes on a global basis. And I think as I had said earlier, we're largely done with the changes and the repositioning, if you will, of the business. More of an evolution to come with the new management team, given Troy's retirement. But we're optimistic about 2027 for that business and I think the new CEO recognizes, Andrew Robertson has been at Omnicom for many years. He certainly recognizes the key to the business is driving growth, and we expect to get back into that mode for sure.

Adam Berlin

Analyst, Goldman Sachs

A lot of the growth in the business this year is coming from your integrated media business, which is just over half of the core revenues now.

Phil Angelastro

CFO, Omnicom

Right.

Adam Berlin

Analyst, Goldman Sachs

That actually accelerated from high single digit in Q1 to double digit growth in Q2. Can you just talk a little bit about why that business is growing so quickly? What are the kind of underlying drivers? Is it client spending more, more products, new business? Maybe you can break that down a little bit.

Phil Angelastro

CFO, Omnicom

I think it's a little bit of all of that, but certainly in doing the deal, the scale that we were able to obtain by combining the two businesses has been quite beneficial. Ultimately what clients want is more for every media dollar spent. That's what we endeavor to give them. The business itself, it's not about media trading anymore. Ultimately, it's about delivering value to clients. It's very heavy data intelligence, data science driven.

I think we've got with the scale improves reach, the quality of the data improves and the measurability of the outcomes improves. When you can improve the solution for the client in all those areas, I think clients are ready to invest more.

Ultimately that drives more growth for the client and it drives more growth for Omnicom. So I think the solution is quite different, and quite compelling. I think we've seen the results of that so far this year.

Adam Berlin

Analyst, Goldman Sachs

You report a revenue number for media in terms of, so that's including the growth in the principal media buying that you do, which is a little different to some of the other agencies who give you kind of a net number, particularly say WPP gives you a net media number. Does that make much of a difference? If you did report differently, would that media business still be growing that fast? Or how material is that in terms of what we're seeing?

Phil Angelastro

CFO, Omnicom

I can't really comment on what other people report or don't report. We're the only U.S. public company in the group. But ultimately, we believe in measuring and managing all the costs in our P&L, not setting aside some of those costs and having people ignore them, if you will, and not manage them. We've always done it that way. We've been consistent in our reporting. In fact, the revenue growth is revenue growth.

I think the key from our perspective and how we manage the business is we don't overlook some very important items on the P&L that come with that revenue growth, and that's EBITDA growth and EPS growth, and our capital returns. So I think if you look at those numbers, we've had quite a good year so far, and we expect to continue to have quite a good year so far.

We don't obsess about this one number. Other people report it differently, but other people can certainly report revenue growth and do. I think if you want true comparability, you should look at the revenue growth not a number that is somewhat ill-defined as far as the net number.

Adam Berlin

Analyst, Goldman Sachs

Okay. Maybe we can talk a little bit about the advertising part of the business. That was the second largest component of the new segments. That actually got worse in the second quarter than the first quarter. It was a bit of surprise. Do you think there's a structural problem with creative advertising agencies? Can they still grow structurally or does AI make that more difficult? How do you see that playing out?

Phil Angelastro

CFO, Omnicom

They can certainly grow. We don't see it as a structural issue. We see it more as some of the challenges we faced with the integration. If you look through the entire portfolio of the advertising business, we've got a number of agencies, a number of regional agencies, and we operate in about 30-plus markets around the world. Quite a few of those agencies, the independent ones and the agencies in markets outside the U.S., have been growing. The formula is there. The execution probably needs to continue to improve, and we expect it to.

Structurally, we think the business is sound. It's a key part of our DNA. Creativity is not just the creative advertising agencies that creativity's important in. It's something that's important throughout all of Omnicom. But the creative agencies certainly can grow.

I think there may have been, or there may be a little bit of a mix shift in terms of clients spending more in certain areas and us benefiting from that and perhaps spending a little bit less than they traditionally had in advertising. But we definitely think the business can grow. It's certainly a smaller portion of the business now than it has been when you brought the two companies together, given some of the disposition activity that's occurred as well. We expect it to be about 15%-16% of the business going forward. But we certainly think it can grow in the future for sure.

Adam Berlin

Analyst, Goldman Sachs

One of the questions I get asked a lot when thinking about the agency space is that people assume that AI is going to enable some automation, which can allow you to do the same tasks with fewer people, but you charge revenues based on the number of people you employ, and you are reducing the number of people in the organization. So how do you grow revenues if you're not growing the number of employees, when your clients pay you based on the time that's being spent?

Phil Angelastro

CFO, Omnicom