Philip J. Angelastro
Executive Vice President and Chief Financial Officer at Omnicom Group
Thanks, John, and good afternoon. Thank you for taking the time to join us today. Our first quarter results were very strong. It's good to see the continued momentum, which resulted in growth across every one of our disciplines.
Before we go into the details, please turn to slide three, where I'd like to draw your attention to the fact that our operating profit and EPS were negatively impacted by the announcement of our withdrawal from Russia as well as charges related to the effects of the war in Ukraine on our agencies there. We have sold or are committed to dispose-off all of our businesses in Russia. And during the quarter, these actions resulted in a pretax charge of $113.4 million. As a result, operating profit of $353 million was down $112.4 million or 24.1% compared to Q1 of 2021. Our tax rate was elevated due to the non-deductibility of the charges plus an additional $4.8 million tax charge related to our withdrawal from Russia. Reported revenues were down slightly as strong organic growth of 11.9% was offset by the negative impact of foreign exchange rates and disposition revenue in excess of acquisition revenue.
Turning to slide four, which shows non-GAAP adjusted amounts. You can see after adjusting for the charge, our first quarter operating profit was $466.4 million, slightly above last year. And our operating profit margin was 13.7%, also slightly above last year. Amortization expense was flat year-over-year and as a result, non-GAAP adjusted EBITDA and EBITDA margin were flat with last year. As a reminder, last year's 15.4% operating profit margin included a gain from the sale of a subsidiary of $51 million, which was recorded in the second quarter. As John said, we are still comfortable with our guidance of 15.4% for the full year 2022.
Slide five shows the non-GAAP adjusted amount for net income of $292 million for the first quarter and diluted EPS of $1.39 per share, up 4.5%. We are pleased with this underlying performance and the strong organic growth across our businesses and geographies as well as work and travel environment that continues to normalize.
Let's now go into some more detail, beginning on slide six. Our organic growth was a strong 11.9% or $408 million. The impact of foreign exchange rates decreased our revenue by 2.5 percentage points. If rates stay where they were as of April 15, we estimate the impact of foreign exchange rates will reduce our revenue by approximately 3% in the second quarter and by 2% for the year. The impact on revenue from our net acquisitions and dispositions decreased revenue by 9.9%. This was consistent with our expectations and is primarily the result of disposition activity from Q2 of 2021 and our advertising and media discipline in the US, which we will cycle through after the second quarter. We expect this reduction from dispositions, including the disposition of our businesses in Russia to reduce our revenue by approximately 6.5% in the second quarter of 2022. And we expect acquisitions, net of dispositions, based on deals completed to-date to be approximately negative 4.5% for the full year.
Now let's look at the changes in our total revenues by business discipline on slide seven. Advertising and media, our largest category, posted 9% organic growth in the quarter with continued momentum in both our media and our creative agencies. Precision Marketing grew 20.3% organically in the quarter and is now approximately 10% of our total revenues, up 2 points from the first quarter of last year. Our strong growth is being led by demand for our capabilities in digital transformation, MarTech, data and analytics and activation. In particular, Credera continues to perform exceptionally well. Commerce and Brand Consulting was up 13.8%, led by our branding agencies and continued benefits from corporate spin-offs, brand architecture work and widespread focus on corporate reputation around DE&I and ESG issues.
We're also seeing increased demand from clients looking for retail media, e-commerce and DTC solutions. Experiential had organic growth of 68% compared to negative 33% in Q1 of 2021, reflecting an increase in the number of global in-person events. These events are important to our clients' brands because they engage with customers and build loyalty in unique ways. Results were especially strong in the Middle East. As we look forward this year, we expect growth to continue, but will likely be choppy by quarter as clients adjust to the post-COVID environment. Execution and support was up 6.3%, led by demand in field marketing and a pickup in physical retail activity. PR was up a very strong 14%, reflecting growth from both long-standing and new clients and a pickup in overall activity as clients adapt their post-pandemic positioning. Healthcare grew 7.7% with strong performance across our agencies.
Turning to slide eight. We saw strong organic growth rates in virtually every region and we're pleased that growth was solid within each of these regions and across all of our disciplines. In the US, our 10.6% organic growth was led by Precision Marketing, Advertising and Media and Public Relations. Outside of the US, growth was led by Europe and its growth was driven by advertising and media, experiential and PR. The Asia-Pacific region was also a key driver, as was the Middle East, which saw strong growth in experiential and advertising and media.
Looking at revenue by industry sector on slide nine. Relative to the first quarter of 2021, the broad distribution of our clients remained fairly stable. The only notable shifts were a 2-point increase in technology, offset by a reduction in revenue from clients in the travel and entertainment industry. But this change was largely driven by the disposition of a business that had a high concentration of clients in this industry in Q1 of 2021.
Let's move down the income statement now on slide 10 and review our operating expenses for the quarter. In total, our operating expense levels were down by 20 basis points year-over-year despite the significant pickup in our business activity and the continuation of our strategic investments in the business. When you look at operating expenses as a percentage of revenue, the year-over-year comparison is not comparable because the impact of dispositions made subsequent to Q1 of 2021. Salary-related service costs, our largest category increased by 8.8%, consistent with growth in our revenues, excluding dispositions and acquisitions. Adjusting 2021 for amounts related to acquisitions and dispositions, salary and related service costs were 53% of revenue, roughly the same level as this year. Third-party service costs were down $199 million or 22%. They decreased by approximately $315 million from dispositions and were offset by an increase of approximately $114 million from growth in our businesses. Adjusting 2021 for amounts related to acquisitions and dispositions third-party service costs were approximately 19% of revenue, similar to the level this year. Occupancy and other costs, which are less directly linked to changes in revenue were up 2.9% year-on-year due to an increasing number of people returning to the office, partially offset by lower rent and other occupancy costs as we continue to efficiently manage our real estate portfolio. The increase in SG&A expenses on a year-over-year basis was due primarily to a normalization of our business. At 2.8% of revenues this quarter, SG&A has been around this level for 12 months now and is in line with our pre-pandemic run rate.
There's one thing I would like to highlight regarding interest expense going forward. Please remember that our interest expense in Q2 of 2021 had a $26 million one-time charge related to the early redemption of our 3.625% notes. Our total interest expense that quarter was $80 million compared to just $51 million this quarter and $43 million net of interest income. We expect net interest expense for Q2 and the remainder of 2022 to approximate that run rate. We expect our tax rate for the remainder of the year to approximate 26.5% similar to our rate this quarter after adjusting for the charges arising from the effects of the war in Ukraine. Our diluted share count was down 3.2% primarily due to our share repurchase activity in the second half of 2021 and in the first quarter of 2022.
Let's now turn to slide 11 for our cash flow performance. We define free cash flow as net cash provided by operating activities, excluding changes in working capital, which are generally positive for us on an annual basis. Free cash flow of $340 million was down $43 million. Adjusting for the cash-related portion of the charges arising from the effects of the war in Ukraine of $48 million, free cash flow was flat year-on-year. Regarding our uses of cash, we used $147 million of cash to pay dividends to common shareholders and another $14 million for dividends to non-controlling interest shareholders. Our capital expenditures of $23 million were back to normalized levels. Acquisitions net of dispositions and other items were $259 million. As highlighted at the back of this presentation, this included the purchase of TA Digital and is aligned with our stated strategy of pursuing acquisitions in our faster-growing disciplines.
And lastly, our stock repurchases during the first quarter were $287 million net. This puts us on the way toward our historical annual range of $500 million to $600 million. This capital allocation mix may vary in emphasis as opportunities present themselves, but our overall approach and philosophy have not changed.
Slide 12 is an overview of our credit, liquidity and debt maturity schedule. There were no changes in our long-term debt outstanding during the quarter. As of March 31, our total leverage was 2.5 times. In addition to the $4 billion of cash and short-term investments on the balance sheet, we also have a $2 billion US commercial paper program backstopped by our $2.5 billion revolving credit facility.
I'll end my prepared remarks today on slide 13, which shows our strong return on invested capital of 26.4% for the 12 months ended March 31 and 41.7% return on equity. These returns are both extremely strong and are a reflection of our consistent operating performance and consistent approach to capital allocation.
At this point, operator, please open the lines for questions and answers. Thank you.