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Flywheel acquisition boosts Omnicom’s sales in the first quarter

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Marketing holding company Omnicom closed the books on its fiscal first quarter with $3.6 billion in revenue, 5.4% more than the same time a year earlier.

A key factor behind the sales jump was the $835 billion purchase of Flywheel that the firm announced in November. Flywheel provides marketing services to thousands of e-commerce companies worldwide. Additionally, it offers a suite of software solutions for use cases such as managing online stores’ inventory and processing returned products.

Omnicom folded Flywheel into its precision marketing group, which grew its fee income by 4.3% year-over-year in the first quarter thanks to the acquisition-driven sales boost. That made the group Omnicom’s third-largest business behind its core advertising and experiential marketing practices, which reported 7% and 9.5% sales increases, respectively. The experiential marketing practice focuses on in-person customer experiences such as events.

Omnicom’s payroll and real-estate expenses both grew in the third quarter, yet its operating income surged 38.2% year-over-year. Increased operating costs usually have the opposite effect on a firm’s profitability. The reason behind the apparent jump in Omnicom’s operating income is that it launched a costly reorganization of its office network in the year-ago quarter which weighed on its profitability at the time. In other words, the firm’s bottom line didn’t increase unusually fast but merely returned to its usual growth level.

Omnicom CEO John Wren said in a prepared statement that “our industry-leading tools and platforms, combined with the strength of our operating leadership, has led to our excellent new business performance and, when combined with the new opportunities we are pursuing, give us great confidence in the future.”