STGW - Earnings call transcript Q2 2021

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Operator

Good day, everyone, and welcome to today's MDC Partners Stagwell Global Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, today's call may be recorded. [Operator Instructions] It is now my pleasure to turn the call over to Michaela Pewarski, Vice President of Investor Relations. ahead. go Please

Michaela Pewarski

Officer, Marketing and conference Operator, to everyone. to and Welcome standalone Penn, call Thank provide from a Chairman and Chief for Frank quarter financial of results good the Stagwell second Chief an review Stagwell's Financial Lanuto. Leveton, Stagwell Executive and Partners followed MDC call President, by results Jay XXXX overview network-wide On our Officer, results, comments second the will today's first from Stagwell financial Mark you, of morning, Group. quarter discuss of of

Chief You session. Officer, will then be joined Greene, by Q&A Stagwell a Operating for Ryan

Before we that statements you contains begin remind forward-looking our prepared and non-GAAP like to following data. discussion I'd the financial remarks,

to uncertainties our are to SEC earnings guidance, Forward-looking Form about presentations, and the statements are company's referenced included and in the XX-K relating certain cautionary earnings statements release detailed in and slide subsequent the company, further those in subject filings. including

posted to For two your investor site, reference, our at presentations we've stagwellglobal.com. Web

We data. Chairman you explanations, Mark non-GAAP over to our presentations it of slide Executive and Chief start reconciliations press for financial morning's also turn releases Penn. to now call, I'd definitions, to to the like refer Officer, and And and this

Mark Penn

of This last results Thank of well. as supported that's Thank off-election on quarter joining separately, be outlining $XXX the net in of Legacy first turned legacy separate ready solid with come quarter, in Legacy XX% results from STGW, gate growth of top remain momentous year. out day a both Legacy and EBITDA was were growth cycle Legacy Legacy growing GAAP MDC and or during million from the organic Stagwell the our revenue up reported Legacy MDC all GAAP this week and XX% both both it's NASDAQ excellent as our $XXX thank and the combination, expected, up and I'll is time XX%. net of Stagwell even basis, releases XX%, last ticker, revenue, the basis. to up organic $XX and GAAP up $XXX shareholders you, the that pandemic for highest revenue happen. marketing to million, under last to adjusted new Adding depths results STGW. on employees Overall, the and closing vision you combination, the was XX% Good to adjusted and and and back numbers million, Stagwell million, of quarter trading and the and year a issued pandemic be us. the the second Michaela. XX% both for an XX% Stagwell two of These first the who EBITDA the growth up XX%. business delivered its our Stagwell on Stagwell. are on MDC XX% board. as Stagwell $XX growth year's up up MDC come Stagwell made last MDC legacy companies million, million, will beyond. morning and combination. was Legacy faster million, revenue, up Legacy have strong of MDC it than excellent even net and the for $XXX accelerated Legacy It's a X.X% you XXXX. of reported Legacy companies numbers year-over-year, reported from of continue growth was over comes impressive in revenue results across the for we growth increased subdued. for reporting first-half an GAAP tourism on revenue XX%, business was was XXXX. Stagwell GAAP organic $XXX showed XX% revenue year-over-year, $XXX the of million, rare though a the revenue of delivered expansion, and for travel in this climbed basis. company's history, well. its

delivered while million EBITDA, adjusted HX from XX% XXXX. MDC first-half, in delivered the from Legacy Stagwell million, year a Legacy XX% up $XXX For up $XX ago,

segments the an first-half have businesses XX% of seeing If to for spread agencies. the to This, adaptation adjusted $XXX XXXX, digital companies the and out grow billion, XX% behind GAAP LTM companies, revenue growth basis billion, revenue grow marketing revenue GAAP XX% of companies up results now a in you Legacy XX%. content digital-first saw the most long-term. to year-over-year, their and the of of up Stagwell in the turn, digital digital marketing grew high-growth that more combine expected combined revenue with revenue the we of commerce. combined important EBITDA digital million. mean helped businesses, basis, by spur in most or MDC, the on at online adjusted by $XXX The results its over the has the million from $X.XX the quarter. On XX% year-over-year million, first-half, These and if At the combined will of that $X.X digital come are in is combined, two $XXX sums two XX% XX% to and of appears net growth the year-over-year. up factor of year-over-year, delivered EBITDA pandemic

Another even factor is behind these research. expansion, the of numbers and online return,

numbers, a face expected Harris recovery a of has full strong delivering run $X rate for growth poll and significant XQ and as new areas, of having and streaming up. Brand these Despite ramped business, analyzing are some million, nevertheless, come saw SaaS-based its jumped Our to way the 'XX, and make is XXXX. sales Poll, XX% for zero which Platform, had still in studios which from Harris headwinds, year, OTT with movie The accurate success research theaters services to Hollywood pickup reopened movie services start content a production from election not research. until a a last and most

this to an in-person restarted. lodging, experiential as gradually Similarly, in year-over-year events grew in growth. quarter, travel Our uptick by network-wide investment XX% sectors clients and transportation, business contributed

their services remain publishing pre-pandemic travel-related below significantly and and experiential However, levels.

expect these heading election our agencies. up for also which consulting to expected midterm online is be political businesses year pick fundraising We into a and to banner XXXX,

basis. against recovered, GAAP revenue. to against expanded similarly by our has As high. EBITDA points, and Stagwell and business robust a by to year-over-year and margins Legacy XX.X% basis margins remained net workforce expanded a of XXX have returned net basis GAAP XX.X% and showed MDC XXX XX.X% adjusted on margins revenue, on XX.X% revenue Legacy points, basis,

Sidhu team continue myself, CFO, and along will Marketing is by Officer. will with our with to and as have will Stagwell Communications as management Officer, CCO, combined be the him work as Linder serve We Leveton, President Beth who Chief new Jay team of Lanuto as Ryan announced will and continue the Frank serve Brand Ryan to new Inc., Chief of will the Greene headed serve company,

We inclusion. XX operations, of Stephanie welcomed of also on culture and from Stephanie people years experience Howley and focus us and as collaboration, well lead operations more Officer. People than joins foster strategy. and in BCW, brings people Stagwell's diversity as a as will Chief She

creative certainly season, for which year Legacy $XX of XQ economic this been It activity, I've new capitalized a million, on particularly pitch a here. strong business given MDC agencies record agencies the new client terms a was was was as since net In number busy our the our positive quarter, recovery.

Pizza Facebook's Oculus, Netflix Representation USA MDC and Team Our Aspen Partners, at Party [Ph], United Lirika, new the up Team and million City, Network. $XX and Fetch $XXX the at Partners HubSpot, U.S. California Notable million run recent and business, Doner in Anomaly, include agencies at first net Legacy have [at Rewards, and Airlines, from LTM quarter. Kitchen Nano] Asian AmazonBasics in wins XXandSunny, Roku, across Allison Dental

shops YML, collaboration Champion Clover digital as consumer add and to clients, Edison's exciting across networks Our when and transform experience. assembly, exciting such agency of Rocket digital to theory, showcasing transformation media digital code at the continue Con mandate Network shop and an Mortgage, power

one Cannes only enlarge the user Lion received event, and XX in work awards Grand not data-driven insights. the recognized proves creativity, business preeminent cross they Festival, announced home the industry program best industry's want experience a created of target global previously cohort the at operational. Night is agencies of and capabilities affiliate The Swipe for quarter, year's of in-app to the to designed recognition. Our fully named Prix its Taking section prestigious also transformation network the F&B and XXandSunny will the Tinder. as designated on end capital. lies the A for We're program quickly its modern sticky culture program, thrive marketing its scale international of on list of the EVA We technology, annual the the and the several XX data digital moving of of source year and This target And M&A GALE, better pace agency market. investing awards contracts. for year, pre-vetted analytics also to activity. position for without with achieve won also which for out YML the us will Volvo of by network markets potential stand collective global agency serve a affiliates our affiliates

from we CEO experience global Growth talent the Bodenfors, continued team expansion lead will Toby his the front, F&B On Officer McCann recently Chief of Global as past out F&B's of of Toby welcomed WorldGroup. global Sweden. Forsman & as joined alongside Southgate

to freedom same while reduce best the hire in maximum talent creative grow. strategy expenses agencies remains Our company for the the new digital the back and office and providing

them our the to of We of and media addition brands. legacy invest maintaining will Stagwell take all go-to-market companies in bring the our companies. to created networks scale even while advantage with continue growing together newly expand We'll

reopen and to transactions We edge investing window will out digital the global cutting the for M&A network fill services.

connected the transform the company growth experiences compete can best the majors. story of new best in the in against creativity will tell with and and that a marketing We

to to and plan put flexible, rates advantage a on ever balance the on revolver million to In stronger Simultaneous low and refinancing the is great merger sheet lower million bonds annually. and with consistent cost interest capital a closing and days, structure, enhance revolver. in a plan our the bonds place save we This hoping the a long-term structure in $XX cost our are a $XXX capital million We synergies. simple, of of launch to of envision top off we coming $XX start. potential take Monday,

about to the a flag its variant did Of course, if the delta and put would it with potential marketing. I be slowdown economy out not and I remiss cautionary not

without under pace such off a and reflect numbers numbers setting believe $XXX the in management are at of period and now new much and reaffirming our no that million business, $XXX synergies, even on remains Consequently, impressive so out a the and parts world. these industry turn $XXX for. over synergies. other the developments I strong. and far our strategy the largely additional can States way a in concentrated to MDC adjusted the are we deliver for pressure These direct about pandemic is is time. combination. million these United new between in Leveton forma will coming than $XXX our assets seen President, some of and of short the which And we've recent the for However, underlying which effects business are million between it and exciting on execute the smaller the of Stagwell Jay where ability year this Inc. we believe pro legacy million it including of for strength comments guidance We for the We Stagwell we're basis EBITDA strong impact

Jay Leveton

and Stagwell with you company. Mark, the and a Leveton, everyone. to this serve good to be pleasure Thank in combined morning I'm you, in it's this of morning, President Inc. role Jay

have and vertical from certainly the and both XX XX closing With I services, hours globally. to in I'm at new but pitch every accountant, scale and lawyer has XX,XXX financial in businesses managing at and have here more not than to client in agencies Stagwell someone in marketing done time working companies, day. to these understand truly Stagwell. professional shoes. business specifically you way, relations a for these is be them market an walked do people or lead last the research firsthand results strong at in the it spent work the who combination years exciting QX same I've the public

is of the at team as I in I'm a year continuing became time. It nothing XXXX and time, lead moment to very and in $X now on every company earlier $XXX of Stagwell of helped from Mark period amount in Stagwell for accomplished that this what billion single corporate Mark $XXX us. are started that leaders a the an a those all pleased short million six last significant XXXX. of one the agency amount Group Inc. in business revenue for We our EBITDA company. Stagwell legacy million a journey, and executives with what new significant legacy Specifically is in watershed mentioned a

whether are largest many businesses, of excited their will is staying on of edge or are new value. growth. as challenges And starting companies to marketing careers, north cutting star It equips at we as they President Now, chapter. from industry. all assistant on the solve partner out In running the just this of opportunity us come to to in some my iconic Manager. Growth our XX,XXX Account creates my with Growth in Stagwell behalf business for shareholder our creates growth progress the an role MDC our clients. better of professionals Inc.

digital buying, fast segments offerings we lines are sell can of on brands, marketing, competitors our enhance a through collaboration. and influencer of significant we're service. products transformation, media businesses up digital of today. and digital to amount our continue These growth focused And revenue will focused in make our on digital while We analytics, data growing consolidating

Lanuto, across seamlessly with to reach positioned are ways these challenger work in clients. take in We of to to that achieve online. out for whether and influencers, Over to team of that independent offline by regulators, transaction to critical scale have the or help Coming space, for seeking drive strong I pandemic, over we review tell consumers, them to of played he investors line. you, that, advertising critical communicate their At with thank the it the the behalf or big the looking on this solutions will different I'd success. Frank? creative Frank objectives. for to marketers the best e-commerce them most I'd turn as Stagwell stakeholders, mutual end they're the new colleague him this CFO to my the day, would processes at are of business working scale is to sales together results, brands a financial important mandate personally With Stagwell and role getting finish like like one

Frank Lanuto

everyone. Thanks, Jay. Good morning

XXth, results of combination the As All the consolidated business Stagwell will combined Stagwell will to address earlier Group Marketing name quarter ended and completed results LLC the week, My financial disclosure previously MDC company's disclosed, Stagwell its the of will Inc. this the cover results discussion changed future Inc. morning and company. June and address for this pre-combination each

and Let history. delivered company's The me begin adjusted its with the MDC's results. highest company in record QX revenue growth EBITDA

during increased or quarter, As on the million XX% $XXX were XX% organic million, the accelerated Net organic revenue recovery an to revenue from past pandemic XX% basis. for quarter, $XXX to XX% excluding requests basis. an the on the grew

Lodging, biggest products, growth and remain also transportation, saw as saw uptick, from revenue sectors, more a sector show outlook. growth an clients. beverage Looking primarily standpoint, at and all rebounding it's across clients existing cautious we strong the slowly around the technology, travel our healthcare, global consumer client for clients organic by but with year-over-year food and driven improvements travel

improvement to gradual expect as as We second-half sector the the travel our the businesses throughout well year. see experiential of sequential

data digital versus Turning revenue to the in the revenue QX percentage posted our quarter analytics and B, prior to segments, media healthcare A, increased up revenue growth in each driven prior revenue relations. driven was versus increased our was our In in in prior and integrated as driven year, momentum in In all increases In data, and PR reportable experiential our PR XXXX. versus growth broad-based, driven our the created QX integrated year, growth in In other, QX as network QX increased revenue XX% business business. by segments XX% XX% strong businesses. and strong against by compared year, by for year, of digital double-digit network XX% prior by revenue and public

$XXX covenant second in quarter to prior record as up XX a in year. the reported compensation basis a company's compared year-over-year And XX the by led expenses in million adjusted improvements history. and Adjusted the was QX $XX smaller increased our XX% to to of Turning quarter driven costs million, adjusted and a for With million expanded to to during decrease over revenue, as the revenue. our basis respect EBITDA to the percentage highest EBITDA year stronger of XXX XX.X% XX% $XX costs, also XX% to margins points occupancy in well operating from ratio revenue a increase amount control basis EBITDA as trailing month XX.X% points to point approximately sequentially. our versus our XXX ago, increased EBITDA, as a

our cash we ended borrowings. to $XX of $XXX revolver sheet, with balance million quarter the against of Moving second million

Our we primarily flat obligations With ago, and total $XXX M&A acquisition million was leverage respect ratio X.X our our funded million businesses, down lowering to quarter, $XXX from during a $XX from related in year sequentially to times against times to million QX. second the digital X.X liabilities, QX. related approximately

major $XX We and lower an company through of additional continues of drove second a will cycle related the combination its a acquisition expect I year. quarter, $X now to months fund six the the tough strong million the MDC's in of That the results. through results. incurred quarter concludes political to ago. we've approximately discussion as against through CapEx, discuss end Stagwell the revenue no of year the expenditures liabilities. the expect to year With pre million comp despite our growth rest Stagwell respect

Stagwell's growth. growth and broad-based the continuing was as XX% and as advisory as reopened. Corporate television year XX% nearly research XX.X% benefit services the combined strong Poll SaaS organic as modest movie grew from shift net pandemic. streaming with is prior grew double and XX% entertainment as accelerated revenue Net its by portfolio election, from and in up is ramped content yes. demand Second was digital $XXX $XXX all show saw revenue off-cycle digits. a to million brand it its segments with affairs, research grew organic content year-over-year enterprise of the production XX% of Harris XXXX growing decline segment to Harris QX with growth. quarter theaters XX% which The broadly to and advocacy grew XX% revenue solid the from public platform, for a million digital digital marketing XXXX, segments well also about Communications, revenue The X% unexpected year-over-year, products. growing part

Turning excluding slower to EBITDA a earn-out revenue. prior year. increased in With costs from and XX% transaction operating million grew pace at to costs, for quarter the than accretion, EBITDA, our million expense to $XX respect second the $XX adjusted

expansion We with strong margins, XX.X, adjusted also in to margin year XXX versus EBITDA saw basis a points XX.X% the ago. expanding quarter

of equivalents Moving to the and second quarter and $XXX cash the sheet, we cash million, revolver. balance million $XX.X balance on with our ended

down X.X ratio and X.X from Our a total leverage was times, times X.X quarter. ago, times from last year

cost up in CapEx and quarter-end, products. We the $XX.X incurred million million new hires in acquisition digital from six-month in deferred million $X.X balance slightly the at $XX.X was in quarter. first investment related Our period to

million for be $X.XX for the our to forma to guidance, combination it billion, With focused is including if combined XXXX. the of a pro X, billion ended taking $XXX to completed XXXX, advantage estimated rate Stagwell were MDC we to for we an to seven-month the the complete, $XXX business notes. XX. period expect revenue between guidance moving be favorable for the for forma interest $XXX XXXX synergies. million and now million seven-month July Adjusted estimated MDC combination for the This ending our Now an company, $XXX are our basis, on Inc., senior effect million now January to XX, $X.XXX on giving basis, to same on EBITDA for pro includes as refinancing with environment on July XXXX, respect period, excluding estimated

redeem new of a process and we notes, thank In for notice to our intention very to bondholders given closing, our I expect all launch shortly. the have to issue to Committee want We combination Thank Operator, this Q&A. the you. open making as to reality, a contributed as for it work. now well all Partners hard Special who their for will we employees the up MDC

Operator

D.A. Tom We'll Instructions] our question from take first with White Davidson. [Operator

open. Your is line

Unidentified Analyst

now, competitive wondering this about it months, emergence line on for that? I the Inc. of if to landscape remarks pandemic. guys I an are and the past pandemic? is including Tom. ramifications look during volatility Hi, in Stagwell And I further Thanks does seen [Tevez] the may, few MDC course for your view further potential more, could our one question. of Delta was What if like? taking Is Legacy the [Ph] the your Thank you you the variant? hear over the of the different combination. we've down for [indiscernible] where the evolution prepared from the it via M&A you. desire And you mentioned elaborate your significantly Could on everything, following

Mark Penn

Sure.

say First, a I five-year the I really in it's habits. a is in don't think however, a you've competitive seen any of seeing, we're real would what to digital shift the what look, pandemic, But result three shift set. is, change as

so was the people towards from marketing online traditional fully accelerated. in, shifting away marketing think, or into marketing, conventional I trend And

As Zoom used I had it, but used saying, Instacart, it. but had nobody nobody was we we

use that up, I that XX%. now and -- believe, online all and have people that XX% these didn't use, they ecommerce things is or We and

our high-growth in landscape that of higher that the of favoring created competitive in gain the sense of we think, and market our I percentage to So, put more much the have now direction such we've -- digital together share because services. business and favorably services here shifts shifts, of ability only that our collection

in whether school; there'd March, be, impact commercial, of that is the May. those or did to think April, in date. put office, to cautionary. as we're seeing the any last you impact question like look down. businesses not commerce out it's of to in going I it and shut Obviously, want doesn't same It are like effect lots areas; Looks a Delta, obviously, terms going to to way I have said, not the direct

I unlikely. think that's

again, we flow, as global which additional step M&A. we think want one XX% see money look two of other serious, the But that in technology, that invest pockets. has effects. government, on as course, be our to we've started for at And said, that digital to new for that. I There'll if put certain stepped The think some invest. acquisitions headed may not are a operate, going peoples' there be continue in, economic out be to consistently broadening have there we're larger as slowdown. to I there's of have to that in could kind Right cash And And anything we I I and don't true current our the we point. that's our that marketing this get affiliate is to M&A, appropriate the it the services. also marketplace, stay get in program U.S. own to And is, countries, will in of times, do emerging areas to that goes And area. contracts. the it's revenue now, you we're in XX% we're at to limited but quite company some And down where important third really products. SaaS planning to leverage and to need obviously, comes three about question to marketplaces to when of continue to service

vital a as companies in invest to in continue the growth of the industry. part We

a I and being of a such part think vital being it's company successful.

Unidentified Analyst

Thank you.

Michaela Pewarski

Mark. lines, question chat. the have phone the a we for more through is there's no questions If This from

give an SaaS You've development? update on for Stagwell. your for products product you overall us Can important are mentioned plan how

Mark Penn

Well, day. we've I closed about been think for a

enables very is early how platform. on and in about really news a We're strongly predict will little the the been our showing platform, we're is, marketplace cookies. market qualified, without an target but very, which where understanding We're And which will and releases reliance is be what developed platform, which saying, by that above with which into we're out I've adoption, audiences the comm agencies influencer in very brand we're with construct to a So, market [Ph], nine profit, finishing consumer we've for and up pick Harris to which brand the which products. is covered. out, update, is fast an and and tool used you be about now getting second, the engagement qualified, in [queue]

put plan a more selling around So, group have here of to my products. have is and single pushing sales structure the put entrepreneurs who leadership, this, team, a additional are

going So, go of to with now that organizing to that in in is we're We're a the company, things next first one do market we're the process. of single step terms so we put four to or three of and development in on We're emphasis markets. We're expecting products. systematizing more our sales put expecting the the to more process, that realize plan.

Michaela Pewarski

Great. one There collaboration? the that the from integrating just your about chat, you more can deal network for understanding and the question talk please, plan is closed, incentivizing

Mark Penn

making collaboration, across the important half within MDC and creating incentives their created greater Yes, for a what did I to their years, extent to and an greater emphasis by network. groups really create think that a and compensation an stock-based of themselves And lot get networks creating of in creating part companies, incentive at the we've looking whole. a cross the been groups working very of companies organization for some also hard on that company, course, an culture. the for of emphasis Stagwell incentive was for of as for we for the A two last networks that on will a people both

been how will into coming Stagwell some in and organizing strengthen the the We media network, will leadership out will it what will that under networks, how be we plans billion can coming that but forward. which X that coherent I think have of team, also manages now some about media take really under brands, still go-to-market the be this we have legacy about days, have that

I So, think. we'll plans be announcing those

expect can shortly. announcements You

Michaela Pewarski

Great.

we I think the call. can all the chat. you from conclude Operator, the that's have questions that

Mark Penn

finish. We're going to

So, is wrap that to up? going

Michaela Pewarski

Mark for closing back comments. it some to We'll turn

Mark Penn

with provide expect the coming different I to just all that we'll going puzzle provide an same now areas incredible you at company transformed have will Conference thank last meetings with with by margins. as and we closed. We'll to technology-based leading you value Campus jigsaw one-on-one event get One our will follow to We Goldman I'm that call. the progress. service, the the Trade that Communacopia sorry forward. is and our for September be time, on this the will Center At want hope investor's for mission marketplace assets XXth, the slated do Sachs to incredible for market increased we followed this we've keep of a that marketing. Starting that full at introduction strong company. World company strong one investor a one updated week. returns, for you that time look to going We hosting growth creative liquidity, forward for during We're these full and we give

more or to a reach great receive please IR stagwellglobal.com. and you, information day. investor at to weekly For newsletter, Thank out our have

Stagwell (STGW) 5 Aug 212021 Q2 Earnings call transcript