Omnicom (OMC) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, Feb. 18, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — John Wren
• Executive Vice President and Chief Financial Officer — Phil Angelastro
• Senior Vice President, Investor Relations — Gregory Lundberg
• Chief Operating Officer — Paulo Juveienko

TAKEAWAYS

• Acquisition impact -- Results include Interpublic Group (NYSE: IPG) financials only for December; the deal closed 11/26/2025.
• Synergy guidance -- Management raised projected run-rate synergies over thirty months to $1.5 billion, doubling prior plans; $900 million savings targeted in 2026.
• Cost actions -- Severance, repositioning, and related charges totaled $1.1 billion; loss on planned dispositions was $543 million; acquisition costs were $107 million.
• Portfolio realignment -- Businesses representing $2.5 billion in annual revenue identified for sale or exit; $800 million of this has already been divested.
• Minority positions -- Omnicom Group (NYSE:OMC) will reduce control to minority stakes in smaller markets accounting for $700 million of annual revenue, retaining agency relationships for clients.
• Retained revenue base -- The go-forward portfolio, after accounting for planned divestitures, generated $23.1 billion in revenue for the twelve months ended 09/30/2025.
• Organic growth (retained) -- Excluding planned divestitures and assets held for sale, organic revenue growth for the quarter was approximately 4%.
• Adjusted profitability -- Adjusted operating income (EBIT) for the quarter was $876 million; EBITDA was $929 million with a 16.8% margin, up 10 basis points year over year.
• Interest expense forecast -- Net interest expense is projected to increase by $210 million in 2026 due to assumed debt and bond refinancing.
• Share repurchase authorization -- The Board approved a $5 billion buyback; a $2.5 billion accelerated share repurchase (ASR) was launched immediately, with total shares outstanding expected to decrease 9%-11% by year-end 2026.
• Dividend increase -- The quarterly dividend was raised by 15% to $0.80 per share prior to the acquisition close.
• Cash and liquidity -- Cash equivalents and short-term investments rose to $6.9 billion at year-end; liquidity includes a $3.5 billion undrawn revolving facility.
• Debt position -- Year-end outstanding debt was $9.1 billion, including $3.0 billion assumed from IPG; $1.4 billion in notes due April 2026 are classified as current liabilities.
• Combined base reference -- Pro forma LTM revenue for combined Omnicom Group and IPG was $26.3 billion, with combined adjusted EBITDA of $4.1 billion as of 09/30/2025.
• Planned disposals margin -- Businesses slated for sale or exit carried an approximate 10% EBITDA margin.
• Media segment weight -- Management expects media, including related precision marketing and commerce, to comprise a "mid-50%" percentage of total revenue after integration.
• Buyback effect on share count -- Weighted average shares outstanding are estimated to decline 7%-8% for 2026 due to repurchases.
• Omni platform integration -- The platform is being advanced through integration of Acxiom’s Real ID, Flywheel’s Commerce Cloud, and IPG’s Interact, with further capabilities set for 2026 launch.
• Client wins -- New and extended contracts were secured with brands such as American Express, Bayer, BBVA, PNY, Clarins, Mercedes, and NatWest.
• Strategy update event -- Further financial and operational guidance will be provided at the March 12 Investor Day.

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RISKS

• Phil Angelastro stated, "our PR business, excluding the acquisition, experienced negative growth due to the challenging prior year comps from national elections in the U.S."
• Performance was described as "challenged" for the branding and execution/support disciplines, and for the company’s operations in France, the Netherlands, and China.
• Net interest expense is projected to rise by $210 million in 2026, primarily from assumed IPG debt and refinancing activity.
• Phil Angelastro said, "the total and net leverage ratios for 2025 reflect the full assumption of IPG's debt but only one month of IPG's EBITDA. This results in distorted leverage ratios for the period when calculated directly from our reported financials."

SUMMARY

Omnicom Group (NYSE:OMC) initiated a major post-acquisition restructuring, targeting $1.5 billion in run-rate synergies—double initial projections—with a near-term focus on realizing $900 million in 2026. The company’s core, retained business generated $23.1 billion in LTM revenue, supported by 4% organic growth and a firm plan to divest $2.5 billion of lower-margin, nonstrategic operations. An immediate $2.5 billion ASR was launched as part of a $5 billion buyback, with management projecting a 9%-11% year-end reduction in shares outstanding and higher future net interest expense. High-value segments such as media, precision marketing, and commerce will command increased strategic emphasis, and management signaled further guidance at the upcoming Investor Day.

• Leadership indicated that media and related activities are expected to account for a mid-50% share of post-integration revenue, though final composition is still being determined.
• Realignment involves moving to minority stakes in smaller markets representing $700 million revenue, while maintaining service continuity for key clients.
• The Omni platform is being enhanced by unifying proprietary and acquired data and identity capabilities, with strong client anticipation for new features.
• Pro forma leverage metrics were qualified as temporarily distorted by the timing of integration, with covenant compliance maintained via pro forma adjustments.
• Leadership attributed recently secured client contracts to the combined entity’s data-driven offering, suggesting momentum for further enterprise-level business wins.

INDUSTRY GLOSSARY

• ASR (Accelerated Share Repurchase): A method of repurchasing shares rapidly via agreements with financial institutions, typically resulting in a reduced share count up front.
• Omni platform: Omnicom Group's unified data and technology suite for integrating media, creative, commerce, and analytics capabilities across its agencies.
• Acxiom Real ID: A proprietary identity resolution technology integrated into client data and campaign measurement solutions.
• Flywheel Commerce Cloud: An e-commerce and retail media platform acquired and now integrated as part of Omnicom Group’s strategic offering.

Full Conference Call Transcript

Operator: Good afternoon, and welcome everyone to the Omnicom Group Inc. Fourth Quarter and Full Year 2025 Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on the telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Gregory Lundberg, Senior Vice President, Investor Relations. Please go ahead.

Gregory Lundberg: Thank you for joining our fourth quarter and full year 2025 earnings call. With me today are John Wren, Chairman and Chief Executive Officer, and Phil Angelastro, Executive Vice President and Chief Financial Officer. On our website, omc.com, you will find a press release and a presentation covering the information that we will be reviewing today. An archived webcast will be available when today's call concludes. Before we start, I would like to remind everyone to read the forward-looking statements and non-GAAP financial and other information that we have included at the end of our investor presentation. Certain of the statements made today may constitute forward-looking statements.

These represent our present expectations and relevant factors that could cause actual results to differ materially are in our earnings materials and in our SEC filings, including our 2025 Form 10-Ks, which will be filed shortly. During the course of today's call, we will also discuss certain non-GAAP measures. You can find the reconciliation of these to the nearest comparable GAAP measures in the presentation materials. We will begin the call with an overview of our business from John. Then Phil will review our financial results. And after our prepared remarks, we will open the line for your questions. I will now hand the call over to John. Thank you, Greg, and good afternoon, everyone.

John Wren: Thank you for joining us today. It has been eleven weeks since we closed the acquisition of Interpublic, creating the world's leading marketing and sales company, and I am extremely encouraged by the momentum seen in such a short period of time. Today, I will start with the progress we have made to position the new Omnicom Group Inc. for sustained growth, and Phil will then cover our fourth quarter and full year 2025 results. Throughout our yearlong approval process, our integration teams created detailed road maps for how we would come together. That preparation allowed us to move more decisively and with strategic clarity on day one.

We announced our new connected capabilities organization and leadership team, bringing together the exceptional capabilities and talent to address our clients' growth priorities. We reinforced our enterprise-level client strategy through a newly formed growth and solutions team to drive new business and expanded our client success leaders group to grow our services to existing clients. We formed a combined platform organization and launched the next generation of Omni, integrating Acxiom's Real ID, Flywheel's Commerce Cloud, and Omni's proprietary data, as well as strengthening our talent and industry leadership in data identity and AI, and we began integrating our operations across real estate, IT shared services, and procurement among others, which will result in significant operational improvements and cost efficiencies.

Following the acquisition’s close, we began simplifying and realigning our portfolio to position Omnicom Group Inc. for stronger, sustainable growth and profitability. Our core focus is to deliver integrated services connecting media, creative content, commerce, consulting, data, and technology. These connected capabilities underpinned by Omni bring together high-growth strategic services that drive business outcomes for our clients. As part of our portfolio realignment, we have identified certain smaller markets as well as operations that are not strategic to our business that we plan to sell or exit. We will move from a majority to a minority-owned position in these smaller markets, which represent approximately $700 million in annual revenue.

These markets remain important to many of our clients, and through continued ownership in these agencies, we will provide the same level of service we have in the past. We identified nonstrategic or underperforming operations with approximately $2.5 billion in annual revenue that we plan to sell or exit. We have already sold or exited some of these businesses, representing annual revenue exceeding $800 million. We expect to execute the remaining sales and exits over the next twelve months. Our retained portfolio of businesses generated revenue of $23.1 billion for the twelve months ended 09/30/2025. This portfolio positions Omnicom Group Inc. to drive stronger growth and deliver measurable business outcomes for our clients.

Our integration planning enabled us to identify significantly greater synergies than we had initially communicated at the announcement of the Interpublic acquisition. We now expect our annual run-rate synergies to double from our initial estimate of $750 million to $1.5 billion over the next thirty months. We expect to achieve $900 million of these savings in 2026. The key areas for these synergies are as follows: $1.0 billion from reductions in labor cost through the elimination of duplicative corporate, network, and operational functions; streamlining our regional, country, and brand structure; and optimizing utilization by shifting to a more unified resourcing model, including accelerating outsourcing and offshoring.

Additionally, across every area of our business, we are evaluating and deploying automation and AI to improve how we service our clients and run our operations. $240 million of synergies related to real estate consolidation. And $260 million of synergies from G&A, IT, procurement, and other operational savings. Finally, as part of our capital allocation strategy, our Board of Directors authorized a $5 billion share repurchase program, and today, we are launching a $2.5 billion accelerated share repurchase program. Phil will provide more color on this ASR program during his remarks. We will also continue our historical use of cash for dividends and acquisitions. In December, we announced an increase to our quarterly dividends to $0.80 per share.

Our investments will focus on strategic tuck-in acquisitions and organic growth initiatives to maintain our leading positions in media, content, commerce, consulting, data, and AI. As we do this, our capital structure is strong, and our liquidity and balance sheet positions us to maintain our investment-grade credit rating. Our efforts across these areas are enabling us to move forward as a company with a clear mission: to help our clients drive enterprise growth in this new era of marketing defined by data-led AI transformation. More than ever, we are seeing brands ask for an enterprise-level partner that can orchestrate their marketing investments across platforms and optimize performance across the entire consumer journey from engagement to sales.

The new Omnicom Group Inc. delivers a five competitive advantage directly aligned to what our clients are asking for. We have the world's largest media ecosystem, unparalleled market leverage and intelligence. The deepest bench of award-winning creative talent that fuses human imagination with machine computing to deliver superior personalized content at scale. Connected commerce that transforms every consumer touch point into a driver of measurable sales growth for our clients. An enterprise transformation consultancy that can reengineer clients' marketing operations for speed, intelligence, and growth. And a gold standard data and identity solution that gives brands an unparalleled privacy-first understanding of their consumers.

Together, these advantages provide a competitive edge across every dimension of modern marketing and sales and will deliver strategic solutions that address our clients' most important growth priorities. As a nod to our strategic advantages, just yesterday, Forrester named Omnicom Group Inc. a leader in their commerce services wave evaluation. Omnicom Group Inc. showed a significant lead versus the competition, proving that our advantage in connected commerce is differentiated by spanning demand and loyalty across physical stores, online marketplaces, and direct-to-consumer experiences. The evaluation noted that clients praised Omnicom Group Inc.'s ability to operate as a single agency, providing them with access to a large pool of highly qualified talent.

Our strategic advantages are translating into client wins, is the ultimate validation of what we are building. We have secured new business and extended contracts with leading brands as American Express, Bayer, BBVA, PNY, Clarins, Mercedes, and NatWest. These client wins as well as the significant progress we have made as a new organization in a few short weeks are a direct result of our people's unwavering focus, commitment, and exceptional work during this pivotal period. I am extremely grateful to them for their efforts. Overall, I am very pleased with how we have executed as the new Omnicom Group Inc. This momentum positions us for strong growth in the years ahead.

I look forward to sharing more about our organization, strategy, and financial performance at our Investor Day on Thursday, March 12. With that, I will turn it over to Phil to walk through our quarterly and year-end financial results.

Gregory Lundberg: Phil?

Phil Angelastro: Thanks, John. Before reviewing our financial results,

Phil Angelastro: Please note that our fourth quarter and full year 2025 amounts include Interpublic results for only the month of December 2025. Since John already covered the first few slides, let us now look at an overview of our fourth quarter income statement on slide seven. The IPG acquisition closed just before Thanksgiving on 11/26/2025. Upon closing, and as John referred to, we immediately began the implementation of our strategic plan. We have separated the impact of several parts of the plan on this slide. We recorded severance and repositioning costs of $1.1 billion related to severance, real estate impairment charges, and contract exits.

We recorded a loss on planned dispositions of $543 million related to businesses that we are in the process of disposing that were recorded at their net realizable value. And we recorded acquisition-related costs of $107 million related to transaction and integration costs. Note that this does not include any potential gains on the sale of certain businesses in this group because we are not permitted to record gains on Omnicom Group Inc. assets until the transactions are completed. Additionally, any expected gains on the sale of IPG assets were included in the fair value adjustment recorded on the balance sheet at the closing date.

Excluding these amounts, adjusted operating income or EBIT in Q4 was $876 million and adjusted EBITDA was $929 million and a 16.8% margin, an increase of 10 basis points compared to last year. Net interest expense in 2025 increased primarily due to the IPG acquisition and the related exchange of IPG debt into Omnicom Group Inc. debt. Interest income increased slightly in the quarter. The tax rate on our non-GAAP adjusted Q4 pretax income was 25.8%, flat with the prior year non-GAAP adjusted tax rate of 26%. Our effective income tax rate on the reported operating loss was 12.7%, compared to a more typical reported tax rate of 26.4% in the prior year.

The lower tax rate this quarter reflects the impacts of the lower tax benefit associated with the charges I just discussed relating to severance, repositioning, the planned dispositions, the IPG acquisition-related costs, some of which are not deductible in certain jurisdictions. For planning purposes, we expect a similar tax rate of 26% for 2026. Non-GAAP adjusted net income per diluted share of $2.59 was based on weighted average shares outstanding of 233.8 million, which were up from last year due to shares issued for the IPG acquisition. Note, the additional shares issued for the acquisition were outstanding for one month. We closed out the year with 313.1 million shares outstanding as of 12/31/2025. Let us now move to revenue.

Given the size of the acquisition of IPG, and the scale of the implementation of our integration strategy across service lines, geographies, and our operating platforms, as well as our plans to reposition the business through disposing of certain parts of our portfolio, we have not included our usual organic revenue growth metrics in our slide deck. Had we calculated organic growth consistent with our prior practice, excluding planned dispositions and assets held for sale, organic growth in Q4 2025 would have been approximately 4%. Slides eight and nine show the breakdown of our revenue by discipline and by major markets. The primary driver of year-on-year growth resulted from the addition of IPG, effective December 1.

Foreign exchange changes increased our revenue in the quarter by approximately 2% and a little less than 1% for the year. We expect FX will continue to be positive in 2026, and assuming recent FX rates stay the same, will benefit our reported revenue for the year in excess of 2%. Regarding revenue by discipline, the Media business performed very well in Q4, as did the Experiential business. On the negative side, during the year, our PR business, excluding the acquisition, experienced negative growth due to the challenging prior year comps from national elections in the U.S. Additionally, although small, our branding and execution and support disciplines continue to be challenged in the current environment.

As John mentioned, we have moved quickly to integrate the IPG businesses into our connected capability organization through geographic and brand alignments. Given the scale of these integrations, as well as our strategy to reposition the portfolio, we do not plan to include our historical organic growth metrics slide in our 2026 quarterly presentations. With regards to the planned dispositions, approximately 40% of revenue to be disposed of relates to the execution and support experiential disciplines, and 25% relates to the advertising group, which is included in the Media and Advertising discipline. The balance of planned dispositions is spread across the rest of our disciplines.

Regarding revenue by region, our businesses in the U.S. had strong growth, led by media, as did our European markets and our businesses in the Middle East. And Latin America market was strong. Our businesses in France, the Netherlands, and China struggled in Q4. Slide 10 is our revenue weighted by industry sector. Given these numbers only include one month of IPG, and our portfolios are very similar, the comparisons to prior periods only show differences of a point or so in a few categories. Now please turn to slide 11 for our year-to-date free cash flow summary.

The increase relative to last year was driven by the improvement in Omnicom Group Inc.'s business over the course of the year and the addition of IPG in December 2025. Our free cash flow definition excludes changes in operating capital. However, our use of operating capital improved throughout the year and we were positive for the full year. You will note in the reconciliation on slide 18 that the change in operating capital was a positive of approximately $700 million, a significant improvement in the change in operating capital of over $900 million from 2024. Approximately $170 million of that improvement resulted from Omnicom Group Inc.'s businesses excluding IPG.

The balance reflected the timing of the IPG closing and positive working capital growth from IPG's businesses in the month of December 2025. For the year ended 2025, our primary uses of free cash flow included $550 million of cash paid for dividends to common shareholders, and another $83 million for dividends to noncontrolling interest shareholders. Dividend payments decreased due to an increase in share repurchases during the quarter. This excludes our recent 15% increase in the quarterly dividend to $0.80 per share, which was declared prior to the closing of the acquisition. Capital expenditures were $150 million, roughly in line with last year. Total net acquisition and disposition payments were actually a source of cash of $914 million.

This included $1.1 billion of net cash received from the IPG acquisition, which was partially offset by acquisition-related payments of approximately $186 million, including $117 million in payments for acquisitions of additional noncontrolling interests and payments of contingent purchase price obligations on acquisitions completed in prior periods. Finally, our share repurchase activity for the year was $708 million, excluding proceeds from stock plans of $27 million. As of Q3 2025, we had repurchased 312 million shares, and during Q4 we repurchased 396 million. Slide 12 is a summary of our credit, liquidity, and debt maturities. At the end of Q4 2025, the book value of our outstanding debt was $9.1 billion.

Legacy Omnicom Group Inc. debt was flat with last year, but we assumed approximately $3.0 billion of IPG debt. As you are aware, our $1.4 billion April 2026 notes are now classified as current on our balance sheet, and we will be addressing that maturity in the near term. As John mentioned, our Board approved a $5 billion share repurchase program, including a $2.5 billion accelerated share repurchase plan we initiated earlier today. We also plan to repurchase an additional $500 million to $1.0 billion of shares during the balance of 2026 as part of the share authorization program.

As a result, we estimate the reduction to our shares outstanding compared to the balance of shares outstanding at 12/31/2025 of 313.1 million shares will decline by approximately 9% to 11% by the end of 2026, with weighted average shares outstanding for the year estimated to be reduced by approximately 7% to 8%. Net interest expense is expected to increase by approximately $210 million in 2026 compared to 2025. The change is primarily driven by higher interest expense, including approximately $125 million from the addition of IPG's long-term debt, including $14 million of noncash interest expense resulting from the fair value adjustment to IPG's debt recorded as a result of the acquisition.

We are also estimating an increase of approximately $50 million to $55 million resulting from the refinancing of our $1.4 billion bond, which has a book effective interest rate of 4.07%, which is due in mid-April; incremental commercial paper borrowing is related to our share buyback program, including the ASR. Together, these items are estimated to increase interest expense by approximately $175 million to $180 million. In addition, interest income on net cash balances is expected to decrease by approximately $30 million, primarily due to lower forecasted short-term interest rates on invested cash.

In total, these factors result in a projected increase in net interest expense of approximately $210 million in 2026 compared to Omnicom Group Inc.'s prior year 2025 actual amount of $167 million. Please note that the total and net leverage ratios for 2025 reflect the full assumption of IPG's debt but only one month of IPG's EBITDA. This results in distorted leverage ratios for the period when calculated directly from our reported financials. However, at 12/31/2025, we were in compliance with the leverage ratio covenant in our credit facility, which makes pro forma adjustments for the acquisition.

Comparable calculation of our total debt to pro forma adjusted EBITDA would result in a total leverage ratio of 2.4 times for the full year ended 12/31/2025.

Operator: Lastly,

Phil Angelastro: Our cash equivalents and short-term investments at the end of the year were $6.9 billion, up $2.5 billion from last year, largely due to the IPG acquisition and the strong performance managing working capital and cash we just discussed. Our liquidity also includes an undrawn $3.5 billion revolving credit facility which backstops our $3.0 billion U.S. commercial paper program. Before I hand this call over to Q&A, I would like to take a moment to address a framework for how we plan to forecast for 2026. In the appendix on slides 22 to 24, we present combined Omnicom Group Inc. and Interpublic income statement data, based on each company's reported results for the last twelve-month period ended 09/30/2025.

These are the last four quarters in which both of us operated independently. We also used this combined methodology when we announced the transaction in December 2024. For the LTM 09/30/2025 period, combined revenue was $26.3 billion and combined adjusted EBITDA was $4.1 billion. These two numbers are very close to published analyst consensus estimates prior to the IPG closing for fiscal year 2025 on a combined basis. Because the combined presentation does not reflect our planned dispositions, we have used the estimated disposition revenue amounts on slide three to adjust the combined base which we plan to use for forecasting 2026. The adjusted total EBITDA margin for the businesses we plan to dispose of was approximately 10%.

Given the IPG acquisition recently closed, we have not yet completed our 2026 planning process. As a result, we will provide additional details on our expectations regarding revenue growth and EBITDA growth for 2026 at our Investor Day on March 12. In closing, we have accomplished a lot in the past year to position Omnicom Group Inc. for sustained future growth. As John said, we have great momentum across the company, including revenue initiatives and cost efficiency initiatives, and we are deploying these benefits through the share buyback program announced today. We understand that there is a lot of material to digest.

We look forward to updating you on these topics and some new ones at our Investor Day on March 12. I will now ask the operator to please open the lines up for questions and answers. Thank you.

Operator: Thank you. We will now begin the question-and-answer session. If you would like to withdraw your question, simply press star 1 again. We will take our first question from Steven Cahall at Wells Fargo.

Steven Cahall: So it sounds like you are going to talk more about organic growth at the Investor Day in a few weeks. But John, you know, you have just done a ton of work around the operation and bringing the connected capability together. A much bigger percentage of the business is now media, and it sounds like it is performing well. So I was wondering if you could give us any sense of what your expectations are in organic growth for the retained business this year.

Or if that is a little too specific, maybe you could at least give us a sense of how you would expect the media business to perform this year and how big within the overall business that one is. And then, Phil, for the color on the margins of the businesses that you are divesting. Is the right way to think about margins for this year that we back out those 10% margins that are being disposed of, and then we kind of layer on the synergy targets net of cost to achieve that you have given, and that is kind of the math we need to do to think about margins for the next two years. Thank you.

John Wren: Thanks for your question, Steve. We will certainly give you more color

Steven Cahall: On March 12 to the extent that we are done completing our review of the combined companies and the detailed plans. If I was guessing, which I probably do, I would think media

John Wren: Going forward will be

Steven Cahall: I would say, in

John Wren: Mid 50% of our revenue. Which is a change. It increases that segment of our organization.

Phil Angelastro: But that needs to be finalized, which you were doing in the coming weeks. Advertising will be again, same type of caution, but less than slightly less than 20% of our total revenue. But as I said, we are working through those areas as we speak. We did get some very early profit plans, but we have not had the time to go through and interrogate them the way we generally can before we have this call. So that is what we will be doing in the coming weeks as we prepare for that. Yeah. There were I just to clarify, Steve, that

Steven Cahall: The media reference I think includes what we would consider media-related or connected to media. So that percentage probably includes

Phil Angelastro: Precision as well as

Steven Cahall: You know, commerce, which is in our precision marketing category. So

Phil Angelastro: It is

Steven Cahall: It is the connected media component

Phil Angelastro: Of the business. With respect to the second question on margins for 2026, yes. Certainly, as I said in my prepared remarks, we will have some more detail and color on our expectations for '26 at the Investor Day, but I think your assumption is

Phil Angelastro: You know, certainly a good one to start with, and then we will get an update

Steven Cahall: At the meeting in March.

Phil Angelastro: Thank you.

Steven Cahall: Sure.

Operator: We will go next to David Karnovsky at JPMorgan.

David Karnovsky: Hi. Thank you. John, I know it is early in the integration, but can you speak a bit more to what the reception has been so far to the combined company offering both from existing clients and

Cameron McVeigh: Recent RFPs. And then Phil, you mentioned a 4% organic figure in the fourth quarter. Can you just clarify what this specifically refers to? And for the assets identified for sale, exit, or moving to minority, is this all going to assets held for sale immediately, or does it get spaced out? And then can you say anything about what the kind of organic growth of some of these agents or what these agencies were in aggregate? For what is moving? Thanks.

John Wren: Roger. I would say in all the major markets that we operate in, there has been a lot of enthusiasm on the part of the groups that we have combined, and the attitude and the optimism that is shared all the way down through our employee base about what position Omnicom Group Inc. is in, what capabilities we have when we join these two groups together, and the resources that we will have to pivot and change where necessary in making the correct investments to keep us a leadership position.

So across the board, it is far better than I fully expected because I always anticipate that there will be some negativity, but we have not seen any of that in any particular place in the group. I will leave the second question to Phil. Sure. So I will start with the

David Karnovsky: The businesses that we have identified as disposals and assets held for sale. So as you referred to, a portion of that

Paulo Juveienko: And as is referred to in the slide and in John's prepared remarks, a portion that relates to us intending to move from a majority position to a minority in certain smaller markets around the world. Those businesses are solid businesses. They service some of our important clients in certain of those markets. But we are really taking that action more for simplicity of the organization and managing the organization than underperformance or the businesses are not strategic to where we are headed in the future. We just do not need to be in all markets with subsidiaries that come with a lot of compliance requirements and other things.

So the organization, as a result, will become much more efficient, and we will still be able to provide the quality service that we need to for our important global clients that might have operations in those markets where we go from majority to minority. The rest of the businesses that we have targeted for disposals and or sales, essentially, are made up of either nonstrategic businesses or underperforming businesses. And as John had referred to, we have completed dispositions with about $800 million of revenue to date, and certainly, we are committed

John Wren: To

Paulo Juveienko: Completing those transactions during the next twelve months. And we made some good headway recently, an experiential business within the IPG portfolio, Jack Morton. That sale closed this week. So we have got a good head start on moving forward with the plans as far as assets held for sale go. And we will give a little more color and a little more update at the Investor Day. As far as organic goes, what we did and what I referred to in my prepared remarks was we did the calculation consistent with how we have always done it with one exception. We excluded the organic growth related to those companies that we intend to dispose of and sell.

And as a result of doing that, the calculation yielded a growth rate in the quarter of 4%. I would say, certainly because those businesses are either bulk of the businesses are either nonstrategic or underperforming, the organic growth rate related to those businesses is likely lower than what we achieved on the businesses that we intend to invest in going forward for the quarter. But the businesses where we see the most opportunity, the growth opportunity, and the investment opportunities, that is what yielded 4%. Okay.

Operator: We will move next to Thomas Yeh at Morgan Stanley.

Cameron McVeigh: Thanks so much. Yeah. Just, that was very helpful on the

Steven Cahall: 4% organic growth explanation. Just to put a finer point on that, that also excludes the incoming assets in terms of IPG, or is it pro forma for the both of them?

Cameron McVeigh: And if you could just add some color

Steven Cahall: On where you are seeing the areas contributing to that acceleration in growth beyond the upward bias that is being seen from the dispositions, that would be very helpful.

Paulo Juveienko: If you could just repeat the second part of that, Thomas. That would be helpful.

Cameron McVeigh: Yeah. Just in terms of the sequential acceleration

Steven Cahall: Beyond what you mentioned as the benefit associated with stripping out the planned dispositions. Maybe talking about just particular areas of strength in terms of media

Cameron McVeigh: And advertising, like, maybe talking about specific segments and contribution.

Steven Cahall: If you want to take that one. Yeah.

John Wren: Yeah. Well, the one month that we owned IPG was included in the calculation. We were not permitted because we did not own in September and October. Otherwise, we would have twelve months of IPG numbers. So it was twelve months of Omnicom Group Inc., one month of IPG. So that is in what became the calculation. The $2.5 billion in companies that we had that have annual revenue were a combination of both Omnicom Group Inc. companies. Well, they were primarily, believe it or not, in terms of the revenue size, Omnicom Group Inc. companies. And so the calculation basically excluded the pros and the cons, the pluses and the minuses from that group of companies.

Paulo Juveienko: And

John Wren: It turned out there were many things which would have contributed to a higher organic growth calculation, and a few that would have taken it in the other direction. But it was nothing material in the aggregate. I do not know if you want to add anything, Phil. Yeah. No. I

Paulo Juveienko: I think that is accurate. In terms of the other areas where we are focused and where we see the business headed, certainly, it is in the more strategic areas of media, precision marketing, commerce, data, and the holistic platform organization. We think there is an awful lot of opportunities for growth in those areas, and certainly incorporating our content solution and creative solution into that is a critical part of that solution. So those are the areas that we are certainly most interested in investing in.

In addition to that, certainly bringing together the healthcare businesses of both portfolios, we think, is going to be a very powerful selling opportunity for us going forward and a growth opportunity for us going forward. And

John Wren: You should not lose sight of the fact that we did not do this merger. It was an acquisition, but we treated it as a merger. I am looking at the short term. We were not looking at the short term at all. We were looking at strengthening those areas where we think are going to be important to clients well into the future and going to contribute to our income and revenue growth. And so it is all full steam ahead, but nothing was done because we were worried about the calculation of this month or that month in any manner, make, shape, or form.

Paulo Juveienko: Understood. Thank you.

John Wren: Hello?

Operator: Jason, please go ahead. Oh, okay. I just have one quick

John Wren: Oh, I do? You cannot hear me?

Paulo Juveienko: Yeah. We can hear you. Yeah. Yeah. Yeah. We can hear you, Jason.

Steven Cahall: Okay. Great.

Cameron McVeigh: Just had one clarifying question on the margins on the disposed businesses. Is that on the

Paulo Juveienko: $2.5 billion or is that on the $3.2 billion?

John Wren: So can I answer that? I can it is more or less on the $2.5 billion, I think. Yeah. And the remaining assets going to a plan to go to minority on, we are still going to collect a very healthy dividend of being a minority owner of those companies. So yeah. I think, Jason, that is the

Paulo Juveienko: The margin is the weighted margin from the entire group. So the 3.2. Oh, it is. I think okay. I think, yeah, in terms of the pieces, yeah, the larger groups it is probably lower than that average margin of 10, and the majority of the minority group is probably higher than the average of 10.

John Wren: Makes sense. Thank you.

Paulo Juveienko: Sure.

Operator: We will go next to Nicholas Langley at BNP Paribas.

John Wren: Hey, John. How you feeling? Questions for me, please. First on the Omni platform. You invited the next generation of Omni platform earlier this year. Could you share first the key feedback you have received from clients so far? Second, how the platform distinguish itself compared to peers and walled-garden solutions? And three, whether the platform is now considered complete

Michael Nathanson: Or if additional building blocks are still required. And secondly, on the margin trajectory, so regarding the cost synergies benefits you expect, do you plan to redeploy a portion of the $1.5 billion cost synergies into growth initiatives or should we assume the majority will flow directly through to the bottom line? Thank you.

John Wren: I will ask Paulo to answer the first question. And then we will tell you how we are going to reinvest

Steven Cahall: Sure. Hi, Nicholas. So with respect to the platform, so far,

John Wren: All of our clients are

Paulo Juveienko: Very excited about the capabilities that is currently available and the new capabilities that we will be launching, which will incorporate the capabilities across various platforms, including our legacy Omni platform, the legacy IPG Interact platform, Flywheel Commerce Cloud, which has already been part of the legacy Omnicom Group Inc. ecosystem, and then, of course, the really exciting part, which is all of this being underpinned by Acxiom and the Acxiom ID. So the response from existing clients and potential new clients has been overwhelming, to be honest. And everyone is very excited to get their hands on the platform when we formally launch it at the '1.

But all of the existing capabilities that the combination of those platforms have today have been driving outcomes for our clients on both sides of the IPG and Omnicom Group Inc. organizations.

Paulo Juveienko: So that is the second question. Regarding margin trajectory, I think certainly, we expect a substantial portion of the '26 benefit to flow through during the calendar year '26, and we will provide some additional detail at the Investor Day. And when we look out to the total for the three years, the expectation of the $1.5 billion of synergies, we are confident that we will achieve those synergies in terms of achieving the cost reductions associated with them over that period of time. But three years is a long time.

I think that there are certainly a number of initiatives that we are going to continue to pursue both on the cost front and on the revenue synergy and revenue growth front, and we have been pursuing those and planning for those pre-deal and have accelerated that now that the deal is closed. It is hard to say exactly how much of that will be reinvested in the business, but certainly, a lot may change over that three-year period in terms of what is happening in the market, what is happening with technology, what is happening in the industry, what is happening with our clients, and what they are most focused on in the future.

But certainly, we are going to continue to invest in our platforms and our businesses, and we do expect a substantial portion of the '26 benefit to flow through. And we do also expect to take the cost out in those out years of '27 and '28. And we will talk a little bit more about it at the March 12 meeting.

Michael Nathanson: You,

John Wren: Sure.

Paulo Juveienko: Thanks for joining us so late.

Operator: We will go next to Michael Davidson at MoffettNathanson.

John Wren: I just have two quick ones for you, Phil. One is $3.2 billion of disposals. Did I get it right that half of the revenues are legacy Omnicom Group Inc. and half is legacy IPG? Is that the right way to think about it, or did you mishear

Paulo Juveienko: I, you know, I think that there is certainly a mix. It is both businesses in our portfolio and in IPG's portfolio. In terms of the size of the revenue, as I indicated, there is about 40% of the businesses relate to the execution and support category. That includes the one experiential business that was in IPG's portfolio that we sold. The rest of that component is Omnicom Group Inc. businesses. And then I mentioned the advertising businesses that are in that group as well, about 25% of the number. That is probably distributed across both Omnicom Group Inc. and IPG.

And the rest of the businesses, I think, when you look at them, there is probably maybe it is an equal amount IPG and an equal amount Omnicom Group Inc. I think we were not necessarily focused on whether they were Omnicom Group Inc. businesses or IPG businesses. We were focused on the strategy, ultimately, where we wanted to invest and what businesses were underperforming and needed to we needed to exit from the portfolio longer term. So I think that gives you a little bit of perspective in terms of the numbers and the split.

But it certainly was not a focus of ours to determine we are going to exit businesses in the IPG portfolio that we inherited, or we are going to focus on reshaping the Omnicom Group Inc. portfolio. It is a combined business. And certainly, we were focused more on the businesses that we are keeping and the investments we were going to make and how we were going to provide for strategic growth going forward, that was first and foremost.

John Wren: Okay. And my second one is just a housekeeping one. Appreciate chart number four in the deck where you give us all the revenue and disposals. Could you try to help us just to give us a range of what the last twelve months would be

Cameron McVeigh: If it ended 12/31/25. So

John Wren: $23.1 is where you ended September, but if you could, knowing what you know, give us a sense of what the range would be, what the base would look like exiting '25 so we could help model

Paulo Juveienko: '26. Yeah. That approximates what the base would be if we had full-year numbers for both IPG and Omnicom Group Inc. And, as I indicated in my prepared remarks, that actually is pretty close both in terms of revenue and EBIT and EBITDA when you look at consensus analyst estimates for calendar year 2025. So even though there is no published set of numbers for Omnicom Group Inc. only for 2025 and IPG only for 2025, those LTM numbers are very close to what analyst estimates were and to what the numbers we believe would have been, except just have not been published that way.

I think there will be a pro forma done in accordance with the pro forma rules in the 10-K, but the pro forma rules are pretty specific in particular, and you need to show the or make an estimate of what the acquisition would have been or what the impact would have been on our numbers had the acquisition been completed as of 01/01/2024. Yeah. But any and all of those ways, the numbers are not very different than the combined numbers we have included in the back of this deck. And for our own internal planning purposes and forecasting purposes, that is the baseline that we believe is the most appropriate to use.

And that is ultimately how we are going to be looking at the business.

John Wren: Okay. Alright. Thanks, Phil. It is really helpful. Yeah. Bye. Thank you.

Operator: And we will take our next question from Tom Nolan at SSR.

John Wren: Hi. I am interested in the new

Steven Cahall: Corporate operating structure. If you could get a bit more color around the

Paulo Juveienko: Decision to create the new divisions that you announced back at the close of the deal.

Cameron McVeigh: So consolidating some of the creative agencies, keeping, and I think

Steven Cahall: All the media agencies separate, separate production unit, PR unit, etcetera. Just maybe a little discussion around why you organized things that way. And then connected capability that you are talking about,

Cameron McVeigh: Talk a bit, please, about what that encompasses. I get that it

Steven Cahall: Takes the Omni capabilities, feeds it through the media planning buying operations, but does that also go into all the other Omnicom Group Inc. divisions that you now laid out? Thanks. Sure. The structure that we concluded on largely was reflective of Omnicom Group Inc. structure

John Wren: Prior to the transaction. The media companies and I do not under maybe you need to clarify it for me whether you are talking about the groups or you are talking about the number of brands that we wound up with?

Paulo Juveienko: Yeah. Let me just try and clarify one thing for you, Steve, based on the terminology. So the connected capability reference is essentially in the by the way, I know they called you Tom, but sorry about that. I just did not want to forget.

John Wren: But anyway, the connected capability

Paulo Juveienko: Reference is really what we used to refer to as our practice areas and networks. So the IPG businesses were brought in and integrated into our Omnicom Group Inc. existing structure, as John had said. The connected capability terminology is what was new. We introduced that in the press release upon the closing of the deal. So certainly, the media business and businesses were integrated into Omnicom Media Group, and Omnicom Media Group runs their operation as one global group with multiple brands.

John Wren: The brands still exist,

Paulo Juveienko: But they run the operations as one combined, coordinated, integrated operation.

John Wren: And

Paulo Juveienko: We brought the IPG businesses into those connected capabilities across each of our major disciplines. So media, omnichannel advertising, precision marketing, PR, healthcare, etcetera. I am not sure if that clarifies the structure for you, but that is how we kind of looked at it. I do not know if you want to add to that, John.

John Wren: No. That is largely correct. I mean, just using media as an example, where there were six brands before the deal, there remain six brands. The operations and investments that we make and the type of deals we can accomplish on behalf of our clients, those are done as one group. And then culturally, as you go across the different groups or six brands, you will find differences which allow us to attract the best and brightest talent into the groups to where they will best fit and be in the best position to service our clients.

So the other area where there is probably the largest amount of change was in the media I mean, excuse me, in the advertising business where we went in with five global network brands and we decided that we would be best served by going forward with three brands. And those name changes and some other changes in terms of management, but anyone that was contributing prior to the deal and still contributing revenue is still working for us. Their business cards say something different. I do not know if that helps clarify it or not. That helps. Both the explanations you gave, both you gave, is great.

Paulo Juveienko: Thanks very much.

John Wren: Alright, Tim.

Operator: And we will move next to Craig Huber at Huber Research Partners.

Craig Huber: Great. Thank you. I have got a few questions. I will just do them one at a time to make it easier. I am looking at your slide five here where you have talked about you going from $750 million to $1.0 billion synergies over thirty months or so. The $1.0 billion number that are labor-related, can you touch on with AI out there, is that

Michael Nathanson: Capability

Craig Huber: Partly allowing you to take out more heads than you originally were planning? Maybe you can also touch on is any of this labor-related stuff, the billion that you are taking out, is it people that are of any significance, people that were directly related to the revenues of your company, or are they all back-office stuff? Because in the past, you have said it was not going to be related to revenue-generating folks. That is my first question.

John Wren: Yeah. Go ahead. So, Gretchen, I

Paulo Juveienko: I think the bulk of the labor-related synergies really relates to a number of things. AI is not necessarily the primary driver of how we looked at this. There were certainly some duplication of roles when you bring together two public companies. First off, a number of corporate roles both at Omnicom Group Inc. and IPG. Unfortunately, we had to make some difficult decisions because you could not keep two of everything. So there were certainly some headcount reductions related to that. There are also some regional organizations, corporate organizations within the practice areas of connected capabilities that were also duplicate roles which were certainly part of it.

Going into the deal, we expected there would be those areas to focus on. But really, we did not have a lot of data to do the due diligence on as we planned for the transaction and executed post close. Senior management of both IPG and Omnicom Group Inc. were involved in making the decisions, as John has referred to several times. The goal was to select the best player for the role, not necessarily to have a bias towards only selecting Omnicom Group Inc. folks, and we think we have been successful in achieving that.

But there are a number of other areas where we expect the labor synergies to come from, which are areas around nearshoring, offshoring, outsourcing, outsourcing in the areas of facility management, shared services, technology, etcetera. There are a lot of opportunities certainly for efficiencies that we expect to achieve. We had started on a number of these paths prior to the deal, but certainly, coming together with IPG, we are accelerating those efforts in all those areas. And we have accomplished quite a bit to date, and we expect to continue to make progress in those areas over '26 and beyond.

Craig Huber: Thank you for that. And my second question on AI, John, in the past, you have talked about if your clients end up being able to get services from you guys but less time involved because you are using AI out there to save time and money. In the past, you have thought that clients most likely would take those savings or plow it back into marketing through your company, so net-net, you would not be a loser, your company with AI out there. Is that still your position?

John Wren: Yeah. My position evolves every day as

Michael Nathanson: As that generative AI is evolving

John Wren: Constantly. The initial and I will ask Paulo to comment on this as well. What we are seeing today are efforts that we are testing with our clients. We are starting to utilize with certain other clients that are creating tools for our people which enhances their ability to do their job. That is one category of people. There are other categories where we believe there are technologies, or we are investing in them,

Michael Nathanson: Which will

John Wren: Allow us to eliminate certain positions that are done kind of manually today but can be done in an automated fashion with generative AI. And as we build out agentic capabilities and are able to connect

Michael Nathanson: The processes

John Wren: With how we interface with clients in agentic databases and everything, that will result in further savings. And those are all things we are exploring at the moment. Paulo is living this day to day, so I will ask him to add to my comments and what he is seeing. Sure. Hi, Craig. So

Paulo Juveienko: Look, I know the narrative is always about do we do the same with less, but the reality is that what AI and generative AI is allowing us to do is to do more than we have ever been able to do. And more importantly, it is allowing us to do things that we have not been able to do in the past. So just to give you some specifics around this, historically, creative teams would typically put two to three different concepts in front of our clients for a specific campaign. The reason is because it takes time. It takes a lot of effort to actually bring those concepts to life.

Today, with the use of the tools that John is talking about, with the agentic capabilities that we put in place, our teams can now test 20 concepts, can test 50 concepts. More importantly is that they can test them synthetically so that we can understand what the impact and value of that work could be. We can predict that before we even spend a single dollar on media. So we have a good sense and confidence level of what the outcome will be with the things that we are putting in front of consumers.

So I think the ability to do more and the ability to do more with a higher degree of confidence is really what is driving kind of the whole generative AI institution around us. It is not necessarily about how do we reduce the number of people around this. It is really about increasing the impact and output that we are driving for our clients.

Craig Huber: Understood. So you have

Michael Nathanson: Yeah. The other thing that is

John Wren: That is we are embracing this. Every employee, every group within the companies, we are not looking at this as a threat to our jobs, but embracing it as how we are going to be able to create a better product.

Craig Huber: But, John, is it too early to know if you do things more efficiently for the benefit of the client here? Those dollar savings here, is your position still you think your clients will plow that money back into marketing, etcetera, services through your company so you will not be a net loser? That is what I am trying to get to here.

John Wren: Yeah. No. I can understand that. There is a conclusion where you can see that is happening. There will be other clients that we are able to negotiate with as to performance goals. And the methodology in which our work gets judged and rewarded will change, and if our idea is generated lots of money, we will be expecting to get paid for that as well. You know, with all the hype and everything that is out there, and it will continue for a good long time, but you gave everybody in the world the same tools. What differentiates one group from another group?

It is that intellectual creative capability and the ability to source on a global basis those most likely to be influenced to buy your product, right? And what is going to be needed, what is going to motivate them to buy? We have all those tools, and we have them at such a scale that it is going to be very difficult for many competitors to catch up at this point for a good long while. So just think about it. You gave everybody doing your job and everybody you listen to on the phone call today the same tools. And what is going to differentiate one of you from the next one of you?

And that is why we are embracing it because we know how good we are and we know how deep our capabilities and skills go. And that is why I think we will be a winner in all of this.

Craig Huber: Great. Great. Thank you both.

Michael Nathanson: Thank you.

Operator: And that concludes today's question-and-answer session and today's conference

Paulo Juveienko: Call.

Operator: Thank you for your participation. You may now disconnect. And we are in a private post conference. All clear.

Michael Nathanson: Thanks. Have a day.

Operator: Uh-huh.

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