Philip J. Angelastro
Executive Vice President and Chief Financial Officer at Omnicom Group
Thanks, John, and good afternoon. While the impact of the pandemic continues to be felt across the globe, that impact has continued to moderate significantly as evidenced by our continued growth in the third quarter.
Slide 3 shows our third quarter improvement across our income statement, where our revenue growth and expense control drove an 8% increase in operating profit. Our effective tax rate for the third quarter was 24.1%, down from our estimated effective rate for 2021 of between 26.5% and 27%. This was primarily due to the favorable settlement of uncertain tax positions in certain jurisdictions, the impact of which was approximately $10 million. These items positively impacted net income and diluted earnings per share, which was $1.65, up $0.20 or 13.8% versus Q3 of last year and up $0.33 versus the third quarter of 2019. So our growth continues on this important metric as well.
And finally, our $0.70 quarterly dividend, which was raised back in February, is 7.7% higher than last year. Let's now flip to Slide 4 and look at the quarter in more detail, beginning with revenues.
Our total revenue growth was 7.1%. Organic growth for the quarter was 11.5% or $367 million, which represents a significant improvement compared to Q3 of 2020 when the pandemic drove an organic revenue decline of 11.7%. The impact of foreign exchange rates increased our revenue by 1.6% in the quarter as the dollar continued to weaken against most of our larger currencies compared to the prior year.
If FX rates stay where they were on October 15, we expect foreign exchange to decrease our reported revenue by approximately 1% for the fourth quarter and increase our reported revenue by 2% for the full year. The impact on revenue from net acquisitions and dispositions decreased revenue by 5.9%. Based on transactions that have been completed through September 30, 2021, our estimate is the net impact of our acquisition and disposition activity for the balance of the year will decrease reported revenue by approximately 7% in the fourth quarter and by approximately 4% for the full year.
While we will continue our process of evaluating our portfolio of businesses as part of our strategic planning, as John has said regarding dispositions, we are substantially complete. If you turn to Slide 5, you can see our organic growth by discipline.
Advertising, our largest discipline at 53% of our total revenues, posted 8.6% organic growth with very strong performance from both our creative agencies and our media agencies. Please note that reported Advertising growth is down 0.4%, due primarily to the disposition of ICON in Q2 of 2021.
Our agencies focused on direct, digital and marketing transformation consulting services in our precision marketing discipline also posted strong organic growth at 24.3%. With the exception of the second quarter of 2020, this discipline has been a consistent grower for some time and has become a larger portion of our business each quarter.
CRM Commerce and Brand Consulting was up 18%, with our branding agencies leading the discipline's performance. CRM Experiential was up 50%. This business declined far more than our other disciplines in the third quarter of last year during the pandemic and has not yet recovered to pre-pandemic levels due to various global restrictions. However, this remains an important area for our clients, and we look forward to further growth as global economies continue lifting social distancing restrictions.
CRM Execution & Support was up 8.3%, reflecting a recovery in client spend compared to the prior year in our field marketing businesses, while our research businesses continued to lag. PR was up 10.5%. We have a positive outlook for the discipline, especially within our global agencies, as clients adjust to the new post pandemic realities.
And finally, our Healthcare discipline was up 6.6% organically. Healthcare was the only one of our service disciplines that had positive organic growth during the depths of the pandemic and continue to perform well.
Flipping to Slide 6, our revenue by region. The key takeaway is that all of our geographies again posted solid organic growth. This growth was driven by virtually every discipline within each region. Outside the U.S., where total organic growth was 16%. Double-digit growth in each region was led by Germany, the U.K., Canada and Australia. Our advertising, media and PR agencies performed well with double-digit growth, and our precision marketing agencies were sizable contributors and also posted strong double-digit growth.
In addition, experiential growth outside the U.S. was over 100% in total. In the U.S., we generated 7.7% organic growth, which was boosted by strong double-digit growth in our precision marketing and PR disciplines as well as solid growth at our health care agencies. Our advertising and experiential disciplines also grew in the U.S. but at a slower rate than the growth outside the U.S.
The last revenue view I'd like to share with you is by industry sector on Slide 7. The change in mix by sector in the portfolio was small on a year-to-date basis when compared to last year.
In summary, our revenue performance was very strong across the board on both a reported and organic basis and when analyzed by discipline, geography or industry sector.
Let's now turn to Slide 8 and look at our operating expenses. To make the analysis more relevant, we have also included a supplemental slide in the appendix that shows the 2021 amounts presented in constant dollars.
Beginning with our largest category, salary and service costs. These costs increased by 7.6% in total, and they tend to fluctuate with the change in revenue. We would also note that Q3 2020 salary and service cost amounts were reduced by reimbursements received from government programs of $68.7 million.
As we continue to look forward, we expect a healthy advertising and marketing spending outlook, and strong demand from our clients will necessitate an increase in staffing. The tight labor market will create challenges in the near term that we are confident our management teams will overcome.
Moving down the P&L. Third-party service costs, which fluctuate with changes in revenue, decreased 6.9% during the quarter due to our net disposition activity, primarily related to the disposition of ICON and partially offset by the organic growth in revenue as well as the effects of foreign currency exchange rate changes.
Occupancy and other costs, which are not directly linked to changes in revenue, were up 4.5% year-on-year or 2.9% when excluding foreign exchange rate translation impacts. As expected, these good results continue to reflect our efforts to reduce infrastructure costs and also benefited from a decrease in general office expenses as the majority of our staff continue to work remotely in Q3. SG&A expense levels were up 5.3% on a year-over-year basis or 4.2% when excluding foreign exchange rate translation impacts. We are beginning to see a return of travel and certain other addressable spend costs as pandemic-related government restrictions ease. However, based on our use of technology during the pandemic, we're developing practices, particularly with respect to travel, that we expect will allow us to continue to retain some of the benefits we achieved in reducing addressable spend during the pandemic.
Overall, we expect that the increase in addressable spend for the balance of the year will be mitigated in part by the benefits we will continue to achieve from a hybrid and agile workforce. As we think about our future expense levels, we certainly expect that some areas will increase in line with our business as activity picks up and life returns to normal. But at the same time, we will also continue to evaluate ways to improve efficiently throughout the organization by continuing to focus on real estate portfolio management, back-office services, procurement and IT services.
With the strong revenue growth we discussed earlier, coupled with good expense control, you can see a notable improvement in our operating profit on a year-over-year basis at the bottom of the slide, up 8% for the quarter and 60.1% year-to-date.
Growing our operating profit dollars remains one of our most important areas of focus. This strong growth in operating profit was also accompanied by improved margins, which you can see on Slide 9. For the third quarter, our operating profit margin was 15.8% as expressed in terms of our reported total revenues. We continue to see operating margin improvement year-over-year, resulting from the proactive management of our discretionary addressable spend cost categories, including a reduction in travel and related costs, reductions in certain costs of operating our offices given the continued remote work environment, as well as benefits from some of the repositioning actions taken back in the second quarter of 2020.
Lastly, on this slide, our reported EBITDA for the quarter was $560.3 million, up 7.4% for the quarter and 56.3% year-to-date. EBITDA margins also remained strong for the quarter and have expanded nicely year-to-date compared to last year, and we expect this strong performance to continue through the rest of this year.
Let's now turn to our cash flow performance on Slide 10, where you can see that in the first nine months of 2021, we generated $1.2 billion of free cash flow excluding changes in working capital, a $114 million or 10% increase versus the same period last year. There were no material year-over-year changes for capex or acquisitions as we continue to conservatively manage our cash.
While stock repurchases are down relative to pre-pandemic periods due to curtailment during the pandemic, we resumed our activity during the second and third quarters of this year, and we expect to continue in Q4 and beyond. You should not expect a change in our historical approach to capital allocation and the use of our free cash flow in the future. We will continue to pay an attractive dividend. We have indicated that we increased our focus on acquisition opportunities and are in the process of closing on several acquisitions. Importantly, our acquisition strategy is focusing on the faster-growing disciplines in our portfolio and driving future organic growth for the company. And we will use the balance of our free cash flow to repurchase our stock.
Our strong cash generation again enhanced our credit and liquidity, which you can see summarized on Slide 11. Our total debt was down about $500 million since this time last year as we eliminated the extra liquidity we added early on in the pandemic. We did this through the early retirement in Q2 of $1.25 billion of our 3.65% senior notes, which were due next year, partially replaced with the issuance of $800 million of 2.6% 10-year notes due in 2031.
As you can see in the slide, our maturities are well laddered with nothing due until late 2024 as we delevered to pre-pandemic levels. As for our debt ratios, due to our overall operating improvement versus Q3 of 2020 and our recent refinancing activity, we've reduced our total debt-to-EBITDA ratio to 2.2 times and our net debt-to-EBITDA ratio to 0.4 times.
I'll end our prepared remarks today on Slide 12, where you can see for the 12 months ending September 30, 2021, we generated a strong return on invested capital of 26.4% and a return on equity of 47%. Both metrics increased substantially over the 2020 levels. While these are just two points in time, it's important to remember our long-term track record of providing solid returns to shareholders through business execution and the resulting consistent allocation of capital to dividends, strategic acquisitions and share repurchases.
And that concludes our prepared remarks today. Operator, please open the lines up for questions and answers. Thank you.