OMNICOM GROUP INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

ABSTRACT

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, severe and sustained inflation, rising interest rates, 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 the COVID-19 Pandemic – Update

Beginning in March 2020 and continuing through the first quarter of 2021, our
business was impacted by 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 nine months of 2022.

Our business

Revenue for the nine months ended September 30, 2022 decreased slightly to
$10,420.9 million, compared to $10,433.6 million in the nine months ended
September 30, 2021. Organic growth increased revenue $1,069.5 million, or 10.3%,
primarily reflecting increased client spending in all our disciplines and across
all our geographic markets compared to the prior year period. The increase in
organic revenue was offset by a reduction in acquisition revenue, net of
disposition revenue of $612.2 million, or 5.9%, 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 $470.0 million, or 4.5%.

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
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clients. In addition, we seek selective acquisitions of complementary companies with strong entrepreneurial management teams that generally currently serve or may serve our existing customers.

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 assess our portfolio of companies to identify areas of investment and acquisition opportunities, as well as to identify non-strategic or underperforming businesses for disposal.

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 September 30, 2022, our largest client accounted for
2.6% of our revenue, and our 100 largest clients, which represent many of the
world's major marketers, accounted for approximately 52.6% of our revenue. Our
clients operate in virtually every sector of the global economy with no one
industry representing more than 17% of our revenue for the nine months ended
September 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, rising interest rates,
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.

Operating results

Revenue for the quarter ended September 30, 2022 increased slightly to $3,443.4
million, compared to $3,435.0 million in the prior year quarter. Organic growth
increased revenue $257.7 million, or 7.5%. Changes in foreign exchange rates
reduced revenue $216.6 million, or 6.3%, and acquisition revenue, net of
disposition revenue, reduced revenue $32.7 million, or 1.0%. The reduction in
acquisition revenue, net of disposition revenue, primarily reflects the
disposition of our businesses in Russia in the first quarter of 2022. The change
in revenue across our geographic markets was: North America increased $147.2
million, or 8.1%, Europe decreased $116.1 million, or 11.3%, Asia-Pacific
decreased $31.4 million, or 6.9%, and Latin America increased $4.8 million, or
6.6%. In North America, the increase in revenue reflects organic revenue growth
across all our disciplines, especially in our Advertising & Media, Precision
Marketing and Public Relations disciplines. In Europe, organic revenue increased
in substantially all countries and disciplines, especially our Advertising &
Media discipline, which was led by our media business, and our Public Relations
and Precision Marketing disciplines. The increase in organic revenue was offset
by the weakening of substantially all foreign currencies in the region 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, organic revenue increased in most countries
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in the region, especially Brazil and Colombia. The increase in organic revenue
was partially offset by negative performance in Mexico and the weakening of all
currencies in the region against the U.S. Dollar. In Asia-Pacific, organic
revenue growth in most of our major markets in the region, particularly
Australia, India and Japan, was driven by our Advertising & Media discipline,
which was led by our media business, as well as our Execution & Support,
Commerce & Brand Consulting and Precision Marketing disciplines. The increase in
organic revenue was offset by the weakening of all currencies in the region
against the U.S. Dollar and negative performance in our Experiential discipline,
primarily caused by continued COVID-19 lock downs in China. The change in
revenue in the third quarter of 2022 compared to the third quarter of 2021 in
our fundamental disciplines was: Advertising & Media decreased $58.2 million,
Precision Marketing increased $51.6 million, Commerce & Brand Consulting
increased $8.3 million, Experiential decreased $9.6 million, Execution & Support
decreased $19.0 million, Public Relations increased $31.8 million and Healthcare
increased $3.5 million.

Revenue for the nine months ended September 30, 2022 decreased slightly to
$10,420.9 million, compared to $10,433.6 million in the prior year period.
Organic growth increased revenue $1,069.5 million, or 10.3%. Changes in foreign
exchange rates reduced revenue $470.0 million, or 4.5%, and acquisition revenue,
net of disposition revenue, reduced revenue $612.2 million, or 5.9%. 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 geographic markets was: North America increased
$25.8 million, or 0.4%, Europe decreased $84.4 million, or 2.8%, Asia-Pacific
decreased $21.1 million, or 1.6%, and Latin America increased $18.8 million, or
9.1%. In North America, increased organic revenue across all our disciplines,
especially in our Advertising & Media, Precision Marketing and Public Relations
disciplines, was substantially 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 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 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, organic revenue increased in most countries in the region,
especially Brazil and Colombia. The increase in organic revenue was partially
offset by negative performance in Mexico and the weakening of most currencies in
the region against the U.S. Dollar. In Asia-Pacific, organic revenue increased
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, India and Japan. The increase in organic revenue was
offset by the weakening of all currencies in the region against the U.S. Dollar
and negative performance in our Experiential discipline, primarily caused by
continued COVID-19 lock downs in China. The change in revenue in the nine months
of 2022 compared to the nine months of 2021 in our fundamental disciplines was
as follows: Advertising & Media decreased $476.0 million, Precision Marketing
increased $186.7 million, Commerce & Brand Consulting increased $44.7 million,
Experiential increased $75.1 million, Execution & Support decreased $11.7
million, Public Relations increased $121.5 million and Healthcare increased
$47.0 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. Adverse and beneficial fluctuations in foreign
currencies from period to period impact our results of operations and financial
position when we translate our financial statements from local foreign
currencies to the U.S. Dollar. However, substantially all of our foreign
operations transact business in their local currency mitigating the impact of
changes in foreign currency exchange rates on our operating margin percentage.

Operating expenses for the quarter ended September 30, 2022 increased slightly
to $2,897.4 million from $2,893.4 million period-over-period, despite the
weakening of most foreign currencies, especially the British Pound and Euro,
against the U.S. Dollar, which reduced operating expenses for the quarter ended
September 30, 2022 as compared to the prior year period. The reduction in
operating expenses due to the weakening of foreign currencies was in line with
the percentage impact on revenue. Salary and service costs, which tend to
fluctuate with changes in revenue, increased $14.3 million, compared to the
quarter ended September 30, 2021, reflecting an increase in salary and related
service costs of $18.8 million, partially offset by a decrease in third-party
service costs of $4.5 million. 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. Third-party service costs decreased during the
quarter, primarily due to the disposition of our businesses in Russia in the
first quarter of 2022. Occupancy and other costs, which are less directly linked
to changes in revenue than salary and service costs, decreased $4.5 million,
period-over-period, due to lower rent and other occupancy costs, partially
offset by an increase in general office expenses and other costs resulting from
the return of our workforce to the office. For the quarter ended September 30,
2022 compared to the prior year period, operating profit increased slightly to
$546.0 million, operating margin increased to 15.9% from 15.8%, and EBITA margin
increased to 16.4% from 16.3%.
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Operating expenses for the nine months ended September 30, 2022, increased
$122.1 million, or 1.4%, to $8,980.3 million period-over-period. Operating
expenses for 2022 reflect 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. The weakening of most foreign currencies,
especially the British Pound and Euro, against the U.S. Dollar reduced operating
expenses for the nine months ended September 30, 2022 as compared to the prior
year period, which was in-line with the percentage reduction from changes in
foreign currencies on revenue. Salary and service costs, which tend to fluctuate
with changes in revenue, decreased $76.0 million, compared to the nine months of
2021, reflecting a decrease in third-party service costs of $319.3 million,
partially offset by an increase in salary and related service costs of $243.3
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 $3.2 million, period-over-period,
primarily due to an increase in general office expenses and other costs
resulting from the return of our workforce to the office, partially offset by
lower rent and other occupancy costs. For the nine months ended September 30,
2022 compared to the prior year period, operating profit decreased $134.8
million to $1,440.6 million, operating margin decreased to 13.8% from 15.1%, and
EBITA margin decreased to 14.4% from 15.7%. Operating profit, operating margin
and EBITA margin for 2022 were negatively impacted by the $113.4 million 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 $24.1 million in the nine months of 2022 period-over-period,
primarily due to increased marketing costs and professional fees.

Net interest expense in the third quarter of 2022 decreased $14.6 million
period-over-period to $29.1 million, and in the nine months of 2022 decreased
$52.7 million period-over-period to $112.0 million. Interest expense in the
third quarter of 2022 increased $1.3 million period-over period to $52.0
million, primarily as a result of issuance the £325 million 2.25% Senior Notes
due 2033, or the Sterling Notes, in November 2021. Interest expense on debt in
the nine months of 2022 decreased $25.2 million period-over-period to $142.2
million, 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 the
$800 million 2.60% Senior Notes due 2031 in May 2021, and the issuance of the
Sterling Notes in November 2021. Interest expense for the nine months of 2021
includes a loss of $26.6 million on the early redemption of the 2022 Notes.
Interest income in the third quarter of 2022 increased $15.9 million
period-over-period to $22.9 million, and in the nine months of 2022, increased
$22.1 million period-over-period to $42.2 million, primarily as a result of
higher interest rates on cash balances and the purchase of short-term
investments.

Our effective tax rate for the nine months ended September 30, 2022 increased
period-over-period to 28.8% from 25.2%. 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 a related
additional net charge of $4.8 million. These charges were partially offset by
the tax benefit arising from our share-based compensation awards. The effective
tax rate for the nine months ended September 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 and a reduction in income tax expense of $11.7
million primarily related to the favorable settlements of uncertain tax
positions in certain jurisdictions.

Net income - Omnicom Group Inc. for the third quarter of 2022 increased to
$364.5 million from $355.6 million in the third quarter of 2021 and for the nine
months ended September 30, 2022 decreased $104.9 million to $886.7 million from
$991.6 million for the nine months ended September 30, 2021. Diluted net income
per share - Omnicom Group Inc. for the third quarter of 2022 increased $0.12 to
$1.77, from $1.65 in the third quarter of 2021 and decreased to $4.27 in the
nine months of 2022, from $4.58 in the nine months of 2021. The
period-over-period changes were due to the factors described above, as well as
the impact of the reduction in our weighted average common shares outstanding
resulting from 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
nine months ended September 30, 2022 by $118.2 million and diluted net income
per share - Omnicom Group Inc. by $0.57 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 nine months ended September 30, 2021 by $31.0 million
and increased diluted net income per share - Omnicom Group Inc. by $0.14.
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RESULTS OF OPERATIONS - Third Quarter 2022 Compared to Third Quarter 2021 (in
millions):
                                                                        2022               2021
Revenue                                                             $ 3,443.4          $ 3,435.0
Operating Expenses:
Salary and service costs                                              2,476.1            2,461.8
Occupancy and other costs                                               281.0              285.5

Cost of services                                                      2,757.1            2,747.3
Selling, general and administrative expenses                             86.4               95.0
Depreciation and amortization                                            53.9               51.1
                                                                      2,897.4            2,893.4
Operating Profit                                                        546.0              541.6
Operating Margin %                                                       15.9  %            15.8  %
Interest Expense                                                         52.0               50.7
Interest Income                                                          22.9                7.0

Income before income tax and investment income under the equity method

                                                             516.9              497.9
Income Tax Expense                                                      134.7              120.0
Income From Equity Method Investments                                     1.1                2.2
Net Income                                                              383.3              380.1
Net Income Attributed To Noncontrolling Interests                        18.8               24.5
Net Income - Omnicom Group Inc.                                     $   364.5          $   355.6


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 WE 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.                                     $   364.5          $   355.6
Net Income Attributed To Noncontrolling Interests                        18.8               24.5
Net Income                                                              383.3              380.1
Income From Equity Method Investments                                     1.1                2.2
Income Tax Expense                                                      134.7              120.0
Income Before Income Taxes and Income From Equity Method
Investments                                                             516.9              497.9
Interest Expense                                                         52.0               50.7
Interest Income                                                          22.9                7.0
Operating Profit                                                        546.0              541.6
Add back: Amortization of intangible assets                              20.1               18.7
Earnings before interest, taxes and amortization of intangible
assets ("EBITA")                                                    $   566.1          $   560.3

Revenue                                                             $ 3,443.4          $ 3,435.0
EBITA                                                               $   566.1          $   560.3
EBITA Margin %                                                           16.4  %            16.3  %



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Revenue

Revenue for the quarter ended September 30, 2022 increased slightly to $3,443.4
million, compared to $3,435.0 million in the prior year quarter. Organic growth
increased revenue $257.7 million, or 7.5%. Changes in foreign exchange rates
reduced revenue $216.6 million, or 6.3%, and acquisition revenue, net of
disposition revenue, reduced revenue $32.7 million, or 1.0%. The reduction in
acquisition revenue, net of disposition revenue, primarily reflects the
disposition of our businesses in Russia in the first quarter of 2022. The change
in revenue across our geographic markets was: North America increased $147.2
million, or 8.1%, Europe decreased $116.1 million, or 11.3%, Asia-Pacific
decreased $31.4 million, or 6.9%, and Latin America increased $4.8 million, or
6.6%. In North America, the increase in revenue reflects organic revenue growth
across all our disciplines, especially in our Advertising & Media, Precision
Marketing and Public Relations disciplines. In Europe, organic revenue increased
in substantially all countries and disciplines, especially our Advertising &
Media discipline, which was led by our media business, and our Public Relations
and Precision Marketing disciplines. The increase in organic revenue was offset
by the weakening of substantially all foreign currencies in the region 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, organic revenue increased in most countries in the region, especially
Brazil and Colombia. The increase in organic revenue was partially offset by
negative performance in Mexico and the weakening of all currencies in the region
against the U.S. Dollar. In Asia-Pacific, organic revenue growth in most of our
major markets in the region, particularly Australia, India and Japan, was driven
by our Advertising & Media discipline, which was led by our media business, as
well as our Execution & Support, Commerce & Brand Consulting, and Precision
Marketing disciplines. The increase in organic revenue was offset by the
weakening of all currencies in the region against the U.S. Dollar and negative
performance in our Experiential discipline, primarily caused by continued
COVID-19 lock downs in China. The change in revenue in the third quarter of 2022
compared to the third quarter of 2021 in our fundamental disciplines was:
Advertising & Media decreased $58.2 million, Precision Marketing increased $51.6
million, Commerce & Brand Consulting increased $8.3 million, Experiential
decreased $9.6 million, Execution & Support decreased $19.0 million, Public
Relations increased $31.8 million and Healthcare increased $3.5 million.

The components of revenue change for the third quarter of 2022 in the United
States ("Domestic") and the remainder of the world ("International") were (in
millions):
                                                 Total                            Domestic                           International
                                           $                 %                $                %                  $                   %
September 30, 2021                    $ 3,435.0                          $ 1,705.2                         $     1,729.8
 Components of revenue change:
Foreign exchange rate impact             (216.6)           (6.3) %               -              -  %              (216.6)           (12.5) %
Acquisition revenue, net of
disposition revenue                       (32.7)           (1.0) %            13.2            0.8  %               (45.9)            (2.7) %
Organic growth                            257.7             7.5  %           129.4            7.6  %               128.3              7.4  %
September 30, 2022                    $ 3,443.4             0.2  %       $ 1,847.8            8.4  %       $     1,595.6             (7.8) %


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 $3,660.0 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
($3,443.4 million less $3,660.0 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 ($3,435.0 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 October 12, 2022 remain unchanged, we expect the impact of
changes in foreign exchange rates to reduce revenue in the fourth quarter and
for the full year by approximately 6.5% and 5.25%, 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 fourth quarter and full year 2022 by
approximately 1.4% and 4.7%, respectively.

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

                                              Three Months Ended September 30,
                                   2022               2021         $ Change      % Organic Growth
Americas:
North America              $    1,969.0            $ 1,821.8      $  147.2                  7.6  %
Latin America                      77.3                 72.5           4.8                 13.1  %
EMEA:
Europe                            908.2              1,024.3        (116.1)                 8.1  %
Middle East and Africa             62.0                 58.1           3.9                 12.2  %
Asia-Pacific                      426.9                458.3         (31.4)                 4.4  %
                           $    3,443.4            $ 3,435.0      $    8.4                  7.5  %


Revenue in Europe, which includes our primary markets of the United Kingdom, or
the U.K., and the Euro Zone, decreased $116.1 million for the third 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 10.7% of revenue,
decreased $15.0 million. Revenue in Continental Europe, which comprises the Euro
Zone and the other European countries, representing 15.7% of revenue, decreased
$101.1 million. The organic revenue growth in Europe of 8.1% reflects organic
growth in all disciplines and substantially all countries. The organic revenue
growth 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. Our
largest client represented 2.6% and 3.1% of revenue for the twelve months ended
September 30, 2022 and 2021, respectively. Our ten largest and 100 largest
clients represented 19.4% and 52.6% of revenue for the twelve months ended
September 30, 2022, respectively, and 21.9% and 54.1% of revenue for the twelve
months ended September 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 September 30,
                                                               2022                                       2021                                 2022 vs. 2021
                                                                            % of                                    % of                                    % Organic
                                                      $                   Revenue                $                Revenue              $ Change               Growth
Advertising & Media                           $    1,762.4                    51.2  %       $ 1,820.6                 53.0  %       $      (58.2)                 5.9  %
Precision Marketing                                  361.0                    10.5  %           309.4                  9.0  %               51.6                 16.3  %
Commerce & Brand Consulting                          239.6                     6.9  %           231.3                  6.7  %                8.3                 11.1  %
Experiential                                         123.1                     3.6  %           132.7                  3.9  %               (9.6)                 2.3  %
Execution & Support                                  239.8                     7.0  %           258.8                  7.5  %              (19.0)                 3.9  %
Public Relations                                     391.2                    11.3  %           359.4                 10.5  %               31.8                 12.6  %
Healthcare                                           326.3                     9.5  %           322.8                  9.4  %                3.5                  5.0  %
                                              $    3,443.4                                  $ 3,435.0                               $        8.4                  7.5  %


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

                                       Three Months Ended September 30,
                                               2022                    2021
Pharmaceuticals and Healthcare                               18  %      16  %
Food and Beverage                                            14  %      14  %
Technology                                                   10  %      11  %
Auto                                                         10  %      10  %
Consumer Products                                             7  %       8  %
Financial Services                                            8  %       7  %
Travel and Entertainment                                      7  %       5  %
Retail                                                        6  %       7  %
Telecommunications                                            4  %       6  %
Government                                                    3  %       3  %
Services                                                      3  %       2  %
Oil, Gas and Utilities                                        2  %       2  %
Not-for-Profit                                                1  %       1  %
Education                                                     1  %       1  %
Other                                                         6  %       7  %
                                                            100  %     100  %


Operating Expenses

Operating expenses were (in millions):

                                                                                     Three Months Ended September 30,
                                                           2022                                       2021                               2022 vs. 2021
                                                                        % of                                   % of                   $                   %
                                                  $                    Revenue               $                Revenue              Change               Change
Revenue                                  $    3,443.4                                   $ 3,435.0                              $        8.4                0.2  %
Operating Expenses:
Salary and service costs:
Salary and related service costs              1,749.1                     50.8  %         1,730.3                50.4  %               18.8                1.1  %
Third-party service costs                       727.0                     21.1  %           731.5                21.3  %               (4.5)              (0.6) %
                                              2,476.1                     71.9  %         2,461.8                71.7  %               14.3                0.6  %
Occupancy and other costs                       281.0                      8.2  %           285.5                 8.3  %               (4.5)              (1.6) %

  Cost of services                            2,757.1                                     2,747.3                                       9.8                0.4  %
Selling, general and administrative
expenses                                         86.4                      2.5  %            95.0                 2.8  %               (8.6)              (9.1) %
Depreciation and amortization                    53.9                      1.6  %            51.1                 1.5  %                2.8                5.5  %
                                              2,897.4                     84.1  %         2,893.4                84.2  %                4.0                0.1  %
Operating Profit                         $      546.0                     15.9  %       $   541.6                15.8  %       $        4.4                0.8  %


Operating expenses for the quarter ended September 30, 2022 increased slightly
to $2,897.4 million from $2,893.4 million period-over-period, despite the
weakening of most foreign currencies, especially the British Pound and Euro,
against the U.S. Dollar, which reduced operating expenses for the quarter ended
September 30, 2022 as compared to the prior year period. The reduction in
operating expenses due to the weakening of foreign currencies was in line with
the percentage impact on revenue. Salary and service costs, which tend to
fluctuate with changes in revenue, increased $14.3 million, compared to the
quarter ended September 30, 2021, reflecting an increase in salary and related
service costs of $18.8 million, partially offset by a decrease in third-party
service costs of $4.5 million. 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. Third-party service costs decreased during the
quarter, primarily due to the disposition of our businesses in Russia in the
first quarter of 2022. Occupancy and other costs, which are less directly linked
to changes in revenue than salary and service costs, decreased $4.5 million,
period-over-period, due to lower rent and other occupancy costs, partially
offset by an increase in general office expenses and other costs resulting from
the return of our workforce to the office. For the quarter ended September 30,
2022 compared to the prior year period, operating profit increased slightly to
$546.0 million, operating margin increased to 15.9% from 15.8%, and EBITA margin
increased to 16.4% from 16.3%.
                                       21

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Net debit interest

Net interest expense in the third quarter of 2022 decreased $14.6 million
period-over-period to $29.1 million. Interest expense in the third quarter of
2022 increased $1.3 million period-over period to $52.0 million, primarily as a
result of the issuance of the Sterling Notes in November 2021. Interest income
in the third quarter of 2022 increased $15.9 million period-over-period to $22.9
million, primarily as a result of higher interest rates on cash balances and the
purchase of short-term investments.

Income taxes

Our effective tax rate for the third quarter of 2022 increased period over period from 24.1% to 26.1%. The third quarter of 2021 reflects a reduction in income tax expense of $11.7 million mainly related to the favorable settlement of uncertain tax positions in certain jurisdictions.

Net profit and net profit per share – Omnicom Group Inc.

Net income - Omnicom Group Inc. in the third quarter of 2022 increased to $364.5
million from $355.6 million in the third quarter of 2021. Diluted net income per
share - Omnicom Group Inc. for the third quarter of 2022 increased $0.12 to
$1.77, from $1.65 in the third 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 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 translation of our financial
statements from local currencies to the U.S. Dollar had a negative effect of
approximately 5% on our diluted net income per share for the three months ended
September 30, 2022 as compared to the prior year period, in-line with the
percentage reduction from changes in foreign currencies on our revenue.
                                       22

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

RESULTS OF OPERATIONS - Nine Months of 2022 Compared to Nine Months of 2021 (in
millions):
                                                                       2022                2021
Revenue                                                            $ 10,420.9          $ 10,433.6
Operating Expenses:
Salary and service costs                                              7,533.9             7,609.9
Occupancy and other costs                                               874.2               871.0
Charges arising from the effects of the war in Ukraine                  113.4                   -
Gain on disposition of subsidiary                                           -               (50.5)

Cost of services                                                      8,521.5             8,430.4
Selling, general and administrative expenses                            294.0               269.9
Depreciation and amortization                                           164.8               157.9
                                                                      8,980.3             8,858.2
Operating Profit                                                      1,440.6             1,575.4
Operating Margin %                                                       13.8  %             15.1  %
Interest Expense                                                        154.2               184.8
Interest Income                                                          42.2                20.1

Income before income tax and investment income under the equity method

                                                           1,328.6             1,410.7
Income Tax Expense                                                      383.3               355.1
Income From Equity Method Investments                                     2.6                 2.1
Net Income                                                              947.9             1,057.7
Net Income Attributed To Noncontrolling Interests                        61.2                66.1
Net Income - Omnicom Group Inc.                                    $    886.7          $    991.6


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 WE 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.                                     $    886.7          $    991.6
Net Income Attributed To Noncontrolling Interests                         61.2                66.1
Net Income                                                               947.9             1,057.7
Income From Equity Method Investments                                      2.6                 2.1
Income Tax Expense                                                       383.3               355.1
Income Before Income Taxes and Income From Equity Method
Investments                                                            1,328.6             1,410.7
Interest Expense                                                         154.2               184.8
Interest Income                                                           42.2                20.1
Operating Profit                                                       1,440.6             1,575.4
Add back: Amortization of intangible assets                               60.3                59.8
Earnings before interest, taxes and amortization of intangible
assets ("EBITA")                                                    $  1,500.9          $  1,635.2

Revenue                                                             $ 10,420.9          $ 10,433.6
EBITA                                                               $  1,500.9          $  1,635.2
EBITA Margin %                                                            14.4  %             15.7  %



                                       23
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Revenue

Revenue for the nine months ended September 30, 2022 decreased slightly to
$10,420.9 million, compared to $10,433.6 million in the prior year period.
Organic growth increased revenue $1,069.5 million, or 10.3%. Changes in foreign
exchange rates reduced revenue $470.0 million, or 4.5%, and acquisition revenue,
net of disposition revenue, reduced revenue $612.2 million, or 5.9%. 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 geographic markets was: North America increased
$25.8 million, or 0.4%, Europe decreased $84.4 million, or 2.8%, Asia-Pacific
decreased $21.1 million, or 1.6%, and Latin America increased $18.8 million, or
9.1%. In North America, increased organic revenue across all our disciplines,
especially in our Advertising & Media, Precision Marketing and Public Relations
disciplines, was substantially 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 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 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, organic revenue increased in most countries in the region,
especially Brazil and Colombia. The increase in organic revenue was partially
offset by negative performance in Mexico and the weakening of most currencies in
the region against the U.S. Dollar. In Asia-Pacific, organic revenue increased
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, India and Japan. The increase in organic revenue was
offset by the weakening of all currencies in the region against the U.S. Dollar
and negative performance in our Experiential discipline, primarily caused by
continued COVID-19 lock downs in China. The change in revenue in the nine months
of 2022 compared to the nine months of 2021 in our fundamental disciplines was
as follows: Advertising & Media decreased $476.0 million, Precision Marketing
increased $186.7 million, Commerce & Brand Consulting increased $44.7 million,
Experiential increased $75.1 million, Execution & Support decreased $11.7
million, Public Relations increased $121.5 million and Healthcare increased
$47.0 million.

The components of revenue change for the nine months of 2022 in the United
States ("Domestic") and the remainder of the world ("International") were (in
millions):
                                                       Total                             Domestic                          International
                                                 $                 %                $                 %                  $                   %
September 30, 2021                         $ 10,433.6                          $ 5,414.2                          $     5,019.4
 Components of revenue change:
Foreign exchange rate impact                   (470.0)           (4.5) %               -               -  %              (470.0)           (9.4) %
Acquisition revenue, net of disposition
revenue                                        (612.2)           (5.9) %          (524.1)           (9.7) %               (88.1)           (1.8) %
Organic growth                                1,069.5            10.3  %           525.1             9.7  %               544.4            10.8  %
September 30, 2022                         $ 10,420.9            (0.1) %       $ 5,415.2               -  %       $     5,005.7            (0.3) %

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 $10,890.9 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
($10,420.9 million less $10,890.9 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 ($10,433.6 million for the
Total column).


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

                                              Nine Months Ended September 30,
                                 2022               2021         $ Change      % Organic Growth
Americas:
North America              $    5,777.5         $  5,751.7      $   25.8                  9.7  %
Latin America                     224.9              206.1          18.8                 12.3  %
EMEA:
Europe                          2,925.1            3,009.5         (84.4)                11.5  %
Middle East and Africa            208.8              160.6          48.2                 33.5  %
Asia-Pacific                    1,284.6            1,305.7         (21.1)                 6.5  %
                           $   10,420.9         $ 10,433.6      $  (12.7)                10.3  %


Revenue in Europe, which includes our primary markets of the U.K. and the Euro
Zone, decreased $84.4 million for the nine months of 2022 as compared to the
prior year period. Revenue in the U.K., representing 11.0% of total revenue,
increased $23.9 million. Revenue in Continental Europe, which comprises the Euro
Zone and the other European countries, representing 17.1% of total revenue,
decreased $108.3 million. The organic revenue in Europe of 11.5% reflects growth
in all disciplines and substantially all countries. The organic revenue growth
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 period-over-period revenue change and current period organic growth by discipline were (in millions):

                                                                                  Nine Months Ended September 30,
                                                     2022                                     2021                                  2022 vs. 2021
                                                               % of                                     % of                                     % Organic
                                            $                Revenue                 $                Revenue               $ Change               Growth
Advertising & Media                   $  5,362.8                 51.5  %       $  5,838.8                 56.0  %       $      (476.0)                 7.8  %
Precision Marketing                      1,059.1                 10.2  %            872.4                  8.4  %               186.7                 19.1  %
Commerce & Brand Consulting                712.1                  6.8  %            667.4                  6.4  %                44.7                 12.0  %
Experiential                               420.2                  4.0  %            345.1                  3.3  %                75.1                 31.4  %
Execution & Support                        744.6                  7.1  %            756.3                  7.2  %               (11.7)                 6.5  %
Public Relations                         1,144.3                 11.0  %          1,022.8                  9.8  %               121.5                 14.1  %
Healthcare                                 977.8                  9.4  %            930.8                  8.9  %                47.0                  7.3  %
                                      $ 10,420.9                               $ 10,433.6                               $       (12.7)                10.3  %

We provide services to clients who operate in various industry sectors. Revenue by segment was:

                                       Nine Months Ended September 30,
                                               2022                   2021
Pharmaceuticals and Healthcare                              16  %      16  %
Food and Beverage                                           14  %      14  %
Technology                                                  11  %      10  %
Auto                                                        10  %      10  %
Consumer Products                                            8  %       8  %
Financial Services                                           7  %       7  %
Travel and Entertainment                                     7  %       8  %
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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Functionnary costs

Operating expenses were (in millions):

                                                                                        Nine Months Ended September 30,
                                                           2022                                    2021                                  2022 vs. 2021
                                                                     % of                                    % of                   $                     %
                                                   $                Revenue                $                Revenue               Change                Change
Revenue                                      $ 10,420.9                              $ 10,433.6                              $       (12.7)                (0.1) %
Operating Expenses:
Salary and service costs:
Salary and related service costs                5,344.5                51.3  %          5,101.2                48.9  %               243.3                  4.8  %
Third-party service costs                       2,189.4                21.0  %          2,508.7                24.0  %              (319.3)               (12.7) %
                                                7,533.9                72.3  %          7,609.9                72.9  %               (76.0)                (1.0) %
Occupancy and other costs                         874.2                 8.4  %            871.0                 8.3  %                 3.2                  0.4  %
Charges arising from the effects of the war
in Ukraine                                        113.4                 1.1  %                -                                      113.4
Gain on sale of subsidiary                            -                                   (50.5)               (0.5) %                50.5

  Cost of services                              8,521.5                                 8,430.4                                       91.1                  1.1  %
Selling, general and administrative expenses      294.0                 2.8  %            269.9                 2.6  %                24.1                  8.9  %
Depreciation and amortization                     164.8                 1.6  %            157.9                 1.5  %                 6.9                  4.4  %
                                                8,980.3                86.2  %          8,858.2                84.9  %               122.1                  1.4  %
Operating Profit                             $  1,440.6                13.8  %       $  1,575.4                15.1  %       $      (134.8)                (8.6) %


Operating expenses for the nine months ended September 30, 2022, increased
$122.1 million, or 1.4%, to $8,980.3 million period-over-period. Operating
expenses for 2022 reflect 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. The weakening of most foreign currencies,
especially the British Pound and Euro, against the U.S. Dollar reduced operating
expenses for the nine months ended September 30, 2022 as compared to the prior
year period, which was in-line with the percentage reduction from changes in
foreign currencies on revenue. Salary and service costs, which tend to fluctuate
with changes in revenue, decreased $76.0 million, compared to the nine months of
2021, reflecting a decrease in third-party service costs of $319.3 million,
partially offset by an increase in salary and related service costs of $243.3
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 $3.2 million, period-over-period,
primarily due to an increase in general office expenses and other costs
resulting from the return of our workforce to the office, partially offset by
lower rent and other occupancy costs. For the nine months ended September 30,
2022 compared to the prior year period, operating profit decreased $134.8
million to $1,440.6 million, operating margin decreased to 13.8% from 15.1%, and
EBITA margin decreased to 14.4% from 15.7%. Operating profit, operating margin
and EBITA margin for 2022 were negatively impacted by the $113.4 million 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 nine months of 2022 decreased $52.7 million
period-over-period to $112.0 million. Interest expense on debt in the nine
months of 2022 decreased $25.2 million period-over-period to $142.2 million,
primarily as a result of the benefit from the early redemption in May 2021 of
all the outstanding 2022 Notes, 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 nine months of 2021 includes a loss of $26.6 million on
the early redemption of the 2022 Notes. Interest income in the nine months of
2022 increased $22.1 million period-over-period to $42.2 million, reflecting
higher interest rates on cash balances and the purchase of short-term
investments.

Income taxes

Our effective tax rate for the nine months ended September 30, 2022 increased
period-over-period to 28.8% from 25.2%. 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 a related additional net charge of $4.8 million.
These charges were partially offset by the tax benefit arising from our
share-based compensation awards. The effective tax rate for the nine months
ended September 30, 2021 reflects a nominal tax applied to the book gain on the
disposition of subsidiary resulting
                                       26

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

from the excess of tax over book basis and a reduction in income tax expense of
$11.7 million primarily related to the favorable settlements of uncertain tax
positions in certain jurisdictions.

Net profit and net profit per share – Omnicom Group Inc.

Net income - Omnicom Group Inc. in the nine months of 2022 decreased $104.9
million to $886.7 million from $991.6 million in the nine 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 $4.27 in the nine months of
2022, from $4.58 in the nine months of 2021, due to the factors described above,
partially offset by the impact of the reduction in our weighted average common
shares outstanding resulting from the 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 nine months ended September 30, 2022 by $118.2 million and
diluted net income per share - Omnicom Group Inc. by $0.57.

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 nine months ended September 30, 2021 by $31.0 million
and increased diluted net income per share - Omnicom Group Inc. by $0.14.

CRITICAL ACCOUNTING METHODS

Purchases and Good will

We have made and expect to continue to make selective acquisitions. The evaluation of potential acquisitions is based on various factors, including the specialized expertise, reputation, geographic coverage, competitive position and service offerings of target companies, 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
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flow growth rate. All of these estimates and assumptions are affected by conditions specific to our business, economic conditions related to the industry in which we operate, 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 cash flows from our reporting units and (2) the weighted average cost of capital (“WACC”) for each reporting unit.

The assumptions used for the long-term growth rate and the WACC in our valuations at 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
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value of a reporting unit could result in a non-cash impairment charge and could adversely affect our results of operations and financial condition.

NEW ACCOUNTING STANDARDS

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

CASH AND CAPITAL RESOURCES

Cash sources and needs

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, with a termination date of February 14, 2025, 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. Certain of our international
subsidiaries have uncommitted credit lines aggregating $556.7 million, which are
guaranteed by Omnicom. 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 $2,118.3 million from December 31, 2021.
During the first nine months of 2022, we used $250.6 million of cash in
operating activities, which included the use for operating capital of $1,483.1
million, primarily related to our typical working capital requirement during the
period. Discretionary spending for the first nine months of 2022 was $1,382.3
million as compared to $866.6 million for the prior year period. Discretionary
spending for the first nine months of 2022 is comprised of capital expenditures
of $65.6 million, dividends paid to common shareholders of $437.7 million,
dividends paid to shareholders of noncontrolling interests of $62.9 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 $485.9 million, and net acquisition payments, including payment of contingent
purchase price obligations and acquisition of additional shares of
noncontrolling interests of $330.2 million. In addition, we purchased $94.9
million of short-term investments with original maturities ranging from 91 to
364 days, 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 $371.2 million.

Based on past performance and current expectations, we believe that our cash flow from operations 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 needs. .

Finance 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 2022, we purchased $94.9 million of
short-term investments. 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 September 30, 2022, our foreign subsidiaries held approximately $1.5 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.
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At September 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 $1,788.9 million to $2,167.4 million from December 31,
2021. The increase in net debt primarily resulted from the use of cash of $250.6
million for operating activities, which included the use for operating capital
of $1,483.1 million, primarily related to our typical working capital
requirement during the period, discretionary spending of $1,382.3 million (see
Cash Sources and Requirements above), and a reduction in cash and cash
equivalents of $371.2 million from the changes in foreign exchange rates,
partially offset by a reduction of long-term debt of approximately $240 million
attributed to the impact of foreign exchange rate changes.

The components of net debt were (in millions):

                                                            September 30,         December 31,          September 30,
                                                                 2022                 2021                  2021
Short-term debt                                             $      10.2          $        9.6          $       10.2
Long-term debt                                                  5,450.6               5,685.7               5,271.7
Total debt                                                      5,460.8               5,695.3               5,281.9
Less:
  Cash and cash equivalents                                     3,198.5               5,316.8               4,431.2
  Short-term investments                                           94.9                     -                     -
Net debt                                                    $   2,167.4          $      378.5          $      850.7


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 securities and related commitments

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, providing
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, providing 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
September 30, 2022, we were in compliance with this covenant as our Leverage
Ratio was 2.3 times. The Credit Facility does not limit our ability to declare
or pay dividends or repurchase our common stock.
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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 September 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 credit availability

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 third 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 nine months
ended September 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 2.6% and 3.1% of revenue for the twelve months ended September 30,
2022 and 2021, respectively. 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.

Additionally, our methods of managing the risk of default, including obtaining credit insurance, requiring prepayment, mitigating potential market losses or negotiating with suppliers of media, may be insufficient, less available or unavailable in the event of a severe economic downturn. .

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