STGW - Earnings call transcript Q4 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Michaela Pewarski

Good morning, everyone. Welcome to the Stagwell Inc. Webcast for the Fourth Quarter and Full Year 2021. On today’s webcast, Mark Penn, Chairman and Chief Executive Officer, will first provide an overview of Stagwell’s full year results, followed by a review of fourth quarter and full year financial results from our Chief Financial Officer, Frank Lanuto.

We will then take questions which you could submit through the chat function on the video webcast portal.

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

statements are statements included to our earnings those to Forward-looking slide referenced in in company, presentation the and are and uncertainties cautionary guidance, detailed subject relating the in release the about further earnings including as forma effect Unless on been January this be results pro discussed to had stated, full call giving results for the the otherwise combination, completed SEC X, filings. the combination XXXX. if historical will on company’s

reference, presentation stagwellglobal.com. at posted your For we an to our investor website

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

Mark Penn

and XXXX. and Good fourth company for Thank expected. is for Inc. quarter morning better demonstrate only the working is working, even Three first but than not us our results full network. and you, thank are year combined propelling that the factors Today’s to Stagwell discuss key merger faster you Michaela. results for joining

capabilities of First, of with concentration digital growing areas us our fastest the high the market. aligns

momentum larger markets leading Second, our our global $X.X positioned wins with of XXXX separating affiliates. impactful revenue collaboration us to a focus and we And bigger, our Today’s on scale and clients, exceed new acquisitions continued from are to through resonating is third, the more key network of GAAP the flexibility, integration billion. network. and results competitors well throughout us legacy and the target

collaboration, to we network more to full the of XXXX. technology many the some worth affiliates. result we experienced a international combination, largest through to accounts. with And X integrated our media in network to funnel. investments deliver refined and in markets year’s of data global is made with annual put service on XX structure across in solutions we created powerhouse drive go-to-market omni-channel each an incentives than Starting created place $XX outlook We to our numerous wins strategic of than an We leading the team million our revenue. strong moves a facilitate and scaled more solutions global Our of

uncapped We M&A both executed converted we and bonds, our our to our our provided structure. liabilities in plan reduced resulting all certainty major also increased We and legacy and agencies. rating ending net strengthen shares, optimize credit future by Further, transparency our material upgrades earn-outs. robust investors The created balance belief financed around that by by result leverage preference free diluting by credit capital refinanced of not deployment sheet with combination through execution efficiency is growth, is a that growth through frenetic for a of and operational shareholders. path Stagwell’s approach platform reflects flow. fueled capital and a lasting disciplined our cash organic is our truly strategic growth investment,

our moment I international take I the XXXX results to situation. detail, to in turn to a want Before address

what doing the of office person While than in has there. Russia, note Stagwell closing the less support I we we only in the what’s and in are which that the of XX are offices and can we all happening horror country watch to down. now in a Ukraine those no process

revenue billion. XXXX our $X.XX to year for $X.XX initial Turning grew pro exceeding billion guidance to on full XXXX results, GAAP record our to a $X.X X.X% forma basis, billion

offer. best believe the to services is our billion, the Our that XX.X% measure Net because revenue includes revenue with by pass-through growth. grew revenue XX.X% expenses year-over-year GAAP company’s we performance, we $X.XX of significant organic vary

by grew they an XX% XX.X% expected year-over-year, as growth XXXX was revenue XX% our impressive advocacy which lapped Excluding businesses, the revenue even growth. increased more elections, saw our with decline GAAP cyclical as and organic XXXX net

$XX growth year, adjusted the versus forma including million EBITDA, Our which for range an excluding has the synergies advocacy million. us represented This XX% continue exceeding of top $XXX and growth by a revenue. pro to line $XXX when EBITDA margin XX% million, to growth $XXX million not adjusted our and grow year-over-year initial to XX.X% net midpoint allowed that was guidance on of

Our were performance strong capabilities. robust revenue costs, continued margins which digital diligence and by were the around our a result of across outpaced growth

we which and expect than across all this are Growth As to even and our of higher data cash principle flow, media XX% more performance transformation, we converted our insights digital capabilities, our year. consumer and digital was to projected, capabilities, free broad-based EBITDA be which especially strategy.

grew scale. for Our than to being design our year-over-year, The by Instrument, largest marketing and platforms acceleration transforming GALE, during pandemic non-advocacy digital the Code clients applications Theory, budgets digital their and at agencies, and turning organic organically XX% engineering Stagwell at the as allocated YML. driven continued XX% their more businesses more and excellence transformation growth to of businesses, digital

and brand omni-channel XX% the technology. Our grew marketing more come organically in through ForwardPMX, by with fourth the back of on driven Assembly. data and delivering cutting-edge growth with quarter the momentum part in contract XXXX, agency, wins The creating performance consolidation large building of media in under the at a the than digital data powerhouse, scaled XX% capabilities Assembly year wins

more digital do has powerfully channels. generates resonating more increasingly complex. is from becomes revenue clients digital-first bigger larger And consolidate Stagwell its to competitively. of with offering The only it’s the provided creation the now as XX% partnerships media Assembly Network landscape Media not but service the looking than scale of so to to accounts,

with able earlier deals clients exclusive inventory our agency’s ad largest to been access to premium largest training our enhanced media the provided to for access giving and only platforms, platform buyers. strategic global commercial advertising innovations have and to the start We signing

and organically, clients include strategy XX record grew entertainment Group, businesses the the year strength of and biggest its had companies particular world. insights which excess the in Research XX% consumer at all National technology Our of with top a across in

and data years, content few for premier product content marketing strategy. NRG providing the and Over crucial become drive consultancy driven that streamers, analytics the innovation insights creators, big tech and optimization, has past

at the saw in similarly Harris demand Harris track brand services brand insights its against their brand clients as also sentiment its strong and We consumer by strategy platform, driven to for increased Poll which as Poll, well real-time growth allows competitors.

with path just of like Diageo to name creative innovation and Amazon growth assignments, transformation a Our new as to communications design, clients experiential, such and public strong its our creativity and Google capabilities which flagship recovery and leading year-over-year, strength with our creative is evolution, X% Nespresso, growth our in Dunkin across at with grew practices, business agencies, relations few. a at and forging Anomaly, and

and the communications creativity helped key Our to companies door open larger wins.

a business, three build new record the continue new we new to fourth $XX quarter. on strong million business quarters of net of Turning in business, to generating consecutive

XXXX, million During the $XX in announced soon won was ninth Company. more the of a we for multi-region X Technology Fortune media start Assembly at revenue than XXX Global that duties awarded each, to as with the contracts anticipate will annual we generate be year

game Fortune Games like We QHealth, significantly fantastic Novo LegalZoom also Labs, like Abbott our expanded high-quality Google, Johnson, Bowl. to Energy services. from Nothing during and customers omni-channel several Polestar, and & and We the with XXX Johnson X big Nordisk, clients blue NFL. our for clients Meta, than clients Dunkin, as new for Adidas ads Epic Stagwell demonstrated the technology slew and ran work Nike, to our as the well two the in ranging healthcare Apple, Amazon, Super Expedia, better relationships chip around

and MilkPep, numerous activations work Budweiser, did Groupon. Morgan, for Captain including we addition, client digital In

Netflix best also in We recognition. SABRE strong & continued named the to home agency categories third Fast world’s to Awards year this at short-listed. has for show for and the more. list PRovoke its most Observatory across work brought all morning, innovative were receive Company’s in work row and Budweiser for Partners Announced they title they Chipotle, industry been with companies which the for Allison in of just the went creative a Nike,

Stuff, transaction XXX% deliver agencies. in of to adjusted our deep acquire we complement and planning has which that Magazine capabilities investment offline excellence contracts. larger independent turned the acquisition recently We were in fastest digital the one to will debt win year region us to Assembly’s as to reducing flow investments an Campaign fund Agency X.Xx the as strong and LTM design the buying combination Media net media omni-channel transformation to quickly while media the was able digital year of the end. critical December, EBITDA network for agency brings we the cash the the our allowing these in XX% remaining completed at UK’s allowed Good in prestigious media and of expertise to In Europe, Also Year Our strategic The second largest the transformative UK, awarded sites Award. future. our had investing closed December, team well active growing Instrument, of

an investments We Stagwell product also leaders the Chief and proven Chief cloud, our This and January, emerging events, launched products marketing we support showcased technologies. augmented leveraging transformations CES. technology building live of of Lochner bringing digital Marketing made Roller SaaS Product In Managing and Officer, team in drive around for DaaS sporting tool as Elizabeth key which Abe suite are marketing marketing to the talent we our Matt lead have and innovation new on as Geiger in-house to we Director. reality for will at clients’ Officer, as

to we are us pleased very welcome its a take of new Stagwell liftoff in still team into the it’s marketing stages, to While phase leadership early cloud. the

to weighting adjusted have revenue, fourth higher half year. year $XXX Looking expect back and exceed strong to growth in XX% pass-through given are GAAP of XX% businesses Relative due of the revenue and forma single-digits amplified net to our costs advocacy weighted revenue be of businesses. and seasonality mid growth in significant we to expecting EBITDA and the by XX% is non-advocacy half to quarter to $XXX normal businesses, these net advocacy ahead, see expected pro the a third growth growth especially our the start excluding million which revenue by typically to when our an advocacy in back of which election to we net million, had strong XX% XXXX

with fund anticipate deleverage free our Stagwell fund to balance also Further which EBITDA. a year new to We X.Xx and flow investments deleveraging to plan to flexibility. flow, one-third net to continue use a capabilities in increased to and We debt one-third grow one-third cash LTM strengthen new sheet marketing capital and we versus M&A, the existing for continue adjusted presence XX% to to of XXXX. digital will provide expect target long-term keep this global of approximately cash our roughly strong cloud

Stagwell related allow and strong continuing is Media growth Network, have our our investments. to or is are also secular which the retention, issuance high for importantly, appreciation flagship growth We growth a to unique a advocacy seen by creative for to concentration, in exposure considering in dilution and offset competitors, wins has Unlike to understanding the the significant soar travel our wins plan business. which improvement in buybacks from agencies, new real driven our our a large we legacy growth. and and to in upside compensation industry, to to equity drive digital our notable to in Stagwell shift larger in story client allowing led the most recovery But is

Our to is for and labor challenging us helping XXXX. also talent positive a momentum during the retain attract a market, period successful better positioning for us

And of on what hearing year. we [Video our then put CFO, Lanuto have be these Frank rather details with additional performance. together or have said our a dry, missed some have calls Presentation] some from find will we video highlight you to If our I

Frank Lanuto

morning, Mark. Thanks everyone. Good

useful the forma increase provide $XXX took pleased of an XXX%. include combination January company’s information results if evaluate prior help you post million additional will with the first results. a QX the to supplemental or are for to XXXX. will was My million annual pro today to combined discussion forma be We as our our performance. combination same Revenue place $XXX have period today year us pro X, join GAAP which on discuss The results, QX and business results in versus of limited you comments supplemented for the will

of pass-through $X.XX full absence year, focus $XXX prior will $X.XX was forma the excluding revenue million the now million $XXX The the increase the prior versus was was in versus combined same period on $XXX Revenue of costs million million an increase billion for in a For revenue versus same XX%. the quarter in year political for the in million and the comments or my an of costs full year $XXX of or by period million the Net year $XXX XXX%. And the an period of million prior Adjusted $XXX for remainder the QX company period $XX cycle. prior was same in increase or EBITDA EBITDA of year QX driven increase of pro pass-through adjusted for the $XXX million the for results XX%. the an the prior or XX%. or million for fourth for principally full X.X% decrease or the year. the was or in of year,

was pass-through increased $XXX XX% million in Excluding costs up $XXX year. Net the advocacy, from revenue, revenue million excluding XX%. prior to

organic in Excluding up the was pass-through costs Ex-advocacy, the prior of of for $X.XX billion reportable year advocacy, quarter revenue basis, $X.XX increased our or prior principal increase We increase respectively. an revenue X.X%. revenue from $X.XX capabilities. our on billion revenue full revenue, an the revenue XX.X% revenue And year net by to and XX.X% Net XX%. increased XX.X%. both report XX%. full increased XX%. and increased segments billion net for excluding an and to year $X.XX our by increased the net in Ex-advocacy, year, or from the billion And

Mark his transformation, have we note performance remarks, into strategy, reclassified won’t media capabilities our discussed principle communications. than four the and in including capabilities details consumer other As and categories, here repeat and data, to creativity digital and I insights already principle our

We nature we as our of of with reflective revenue clients. to have it to most our of selected is the the me that let segments. turn our that, are services this And providing aggregation

Integrated XX% Communications largest and The in by million strength Network, of organic XX% and segment, million full wins. Agencies, for year in the Media Beginning driven $XXX million larger demand Network, by $XX The have revenue travel net and reportable $XX its We for and full digital pitches consisting as and services grew respectively, our by for three in or integrated or XX% digital, Agencies the with Network. and several million and segments million XX% organic and related business. QX Integrated and Media by respectively, Network the increased as driven $XX contract revenue wins year our contract well $XX net QX

was for Communications organic decreased our as year. Our in $XX net or or million, XXXX an full as expected by the year, segment revenue off-cycle X% election

Communications the XX% demand grew for full by strong advocacy, strategic Excluding for driven by the communications. year, segment

$XXX the $XXX ago, in EBITDA we fourth and expanded to our advocacy down X% for Turning an year. million cyclical our the of versus costs, million year EBITDA margins with excluding full our businesses, quarter Adjusted both XX.X%. a QX was margin

adjusted year Excluding advocacy adjusted EBITDA And full increased XX%, with margins of up XX.X%, XX.X%. million up a for from ago. year, of XX.X% margins with million versus was ago, XX%, $XXX a EBITDA $XXX the year

synergies of over Excluding or up $XX does XX.X% year. EBITDA we the to from not impact expect prior current target. advocacy, achieve the the any from adjusted our approximately include achieve, XX% to to with run-rate stated quarter cost in synergies We materially XX%, million increased for in rising margin period. the The pick to still significant EBITDA expect which more combination

company cash respectively, made Moving business total, the based X% offset with in in payments position NCI. by QX, acquire business. three M&A combination for design advocacy already non-controlling and of full not and entered quarter, deferred steps stock. for interests Concentric, our decline own UK, our allowed million also took excluding million to owned during excuse them already and total, leverage. $XX for transactions our We the Net kept C and did and quarter immaterially Targeted the with using quarter. The acquired transactions and agency a $X acquire additional increases manage balance and we to of business, cash redeemable digital revenue, or In the in us financial rose including to the previous in good year RNCI, estimates. stock Victory, and was interest improve stuff million company sheet, out UK $XX remaining not interest shareholders media and we healthcare line the acquisition subsidiaries me, the the DAC In approximately million digital and instrument, predominantly during full non-controlling new company in our remaining to related costs the in transformation a year of a our quarter. during in And Class interest a $XX.X CapEx

credit in liquidity, strong revolver revolving we $XXX year million discussed on against year and Moving million the facility. ended previously million of finished position. the drawn a to of Inclusive a our payments, our with we $XXX cash $XXX

ratio was Our year leverage total at X.XXx. end

increase Excluding M&A ‘XX, forma $XXX growth XX%, guidance to growth from of of as guiding defined EBITDA projected and to pro interest minority forma advocacy is net million to of our by company taxes, net other to to working cash quarter. revenue adjusted moving XXXX million. company and X.Xx ex adjusted revenue, estimates and prior fiscal EBITDA. pro obligations, is at CapEx, approximately in declined our X% changes $XXX of XX% will to flow XX% less CapEx XX% $XXX its XX%, the for the XX% And from net capital cash that the leverage in in adjusted and it revenue X.Xx forecasted XX% of distributions between million interest, EBITDA or free

based have from would any reflect of and undertaken significant does we impact macro Our not many that the I have the the XXXX. prevailing helped business in to accomplishing partners adverse Ukraine. outlook our like is conditions, thank in invasion In colleagues us on closing, and initiatives

via your the screen. Please for you. of it now at the will questions Thank We submit your Q&A. top open chat button

Michaela Pewarski

Frank. you, Thank

of company the The chat first Avi of year JPMorgan. end comes at out in the the we revolver by Steiner expect light question to from would have the XXXX? that be guidance In

Mark Penn

Frank?

Frank Lanuto

of in the on we XXXX. level that acquisitions depends make It

the although that point, might given have we this not at I options it’s So, on possible, acquisition definitive just would side. say

Michaela Pewarski

from next have And response? at business Sidoti, the success McGinnis question, the in landscape competitive Chris you given seen the the in combination, change a following

Mark Penn

I that little haven’t we I are have seen seen thought to Omnicom some areas made having a a of the a response success were, have – response. I acquisitions very I that bit of strong in. kinds

seen respond. So, I the have competition

are no ultimately, the large kind they be I that kind share, through acquisitions gain to assets make, pandemic. gaining continue think moving to and not rates an what share showing after the a XX% we way because the really digital we are. can’t of have forward Therefore, players showing are are we opportunity growth of the matter

Michaela Pewarski

And do the that trajectory question, as of business? a on follow-up the pandemic the growth think side passes, you the changes digital

Mark Penn

Well, I the X-year changed. of are seeing, very techniques. seeing acceleration think pandemic always all was been I permanently what digital And are it’s I of I to a kind of said transformation. have the we strong booking of business from X-year think continued that we thought digital

As you know, said we transformation. digital

pipelines strong. those think I are extremely

media. online We XX% also is in kind we of online book are About seeing very a our media. are of placement seeing online. strong media business And of

keep think a little of a of and again, all are I things also be are seeing think we the not coming don’t out pandemic, and over. but trends. any increasingly stopping research, surprised research show becomes longer strong stop maybe was bit of signs to more as of on more I term And I the complex, it of level these

Michaela Pewarski

the Ukraine as whether the directly speak Great. Eastern seeing Europe result Ukraine? the European to and Russia question of a and is exposure events slowdown clarification Can A the at more company Thanks on for its all company Europe, and tragic exposure. company’s from in Avi the a at in broader JPMorgan. follow-up

Mark Penn

obviously, we that properties significant in have Europe. I think

about North think We XX% I U.S., XX% America. are

is we rather overall increasing So, international than our something decreasing. are actually exposure markets to

in way. calling their exposure have Europe. limited seems Eastern of in that material marketing clients been see to pretty none have plans. changing up and We any don’t But again, affected We

Ukraine our beyond I And expanding this the think see I the impact is and point. don’t really in really terms that of in Russia. at it business

Michaela Pewarski

pending Arthur Research, in at more can Huber for detail your A election highly discuss question you the season? advocacy given Doug XXXX from contested outlook

Mark Penn

outlook continued strong for the Well, is growth.

having And cyclical to then new of happening I typically cycle. now bar, and the set as I new presidential And amount next growth certainly really and presidential activity the presidential I will know and be the and will of equal advocacy so high is the a think is will interest race likely really in going being here bar that midterms market. level. it at last yet model just midterms then House not of think through least next what’s really a the bar the set market, is presidential and This a is extremely a Senate, in is involvement. people the be think continue to race, race setting the next presidential new the close, a

Michaela Pewarski

Great. kind charge? you one Investor question explain for compensation stock please Frank, can the of based

Frank Lanuto

was to charge Media charge an proceeds that as were from the is Certainly, the Marketing actually issued during merger. from to the Group. company. of Stagwell that It the no part former though, that of It’s paid Stagwell important compensation that received the employees accounting shares taken in there exchange transition note the new but stock-based charge, was

So, issued. treatment there shares for no accounting additional the that’s it. But were

Michaela Pewarski

question from your the wage investor overall Another operating is inflation budget? how impacting line,

Mark Penn

we have we taken think forward. I into account move that as Again,

there is think wage pressure. I obviously

a are business. people We

however, there high the for demand services. I is think that

the to with and that short periods I in wage will there clients cost that is think pressure, of general relatively think I reflected increases So, of marketing. extent over time be

way us, significant any a think neutral affect I over So, or time. of it us will think more I in less but inflation period affect will

Michaela Pewarski

could leverage Another investor what you thinking? change that in to and X.Xx drove about to Xx question, the the please from talk adjustment target

Mark Penn

how both year the reviewed for and the growth previous we guidance see up targets, faster this along as I year. next going and I us look long-term curve think much that when ended I at

said, making level And And out new a third, general produce more And with or new return and to that plan allow about of use terms kind would I covenants think reflected, third of the that also paying we and what growing for effectively are to of I cash. about really X.X of faster capital. in have towards a would us a on right. target the commitments much will We X.X. a is leverage then going commitments third as jumps. greater – our to existing much with flexibility about reserve do that’s

growing think than generating I that’s I plan, and So, expected, the faster more… are why we revised because

Michaela Pewarski

line of the questions that on flow the how is about travel that just the and A business, meaningful is growth there? driving what business

Mark Penn

think that business, part mean expanded, I in from travel positive. recovery And to we a most were to games. the part. to – it rights online general business. We positive a move print large have an NFL mostly able travel screens, think X,XXX pick the able the screens a we digital is run are business. TV airport we up of not of with went channel, largely now rich TV, from airport also, good we and or really were CNN have advertising. I to that But It’s business period, I – during negative to our back

expand so And years. over see a think coming good the that’s I hope we business, to

Michaela Pewarski

And our that concludes questions.

So, Mark for I will to turn closing comment. it back

Mark Penn

who you. But we want are first one all really transition put the as to roll. hard in year year, as employees incredible thank created I one company. on Thank an the to company, we the this

and clients, balance I but much. improvement, we to being continued the and best margin of technology, growth the for all. going together that are talent success in right security best by And think between financial recognized successful success. we the to are and get manage I way are that’s bringing very you Thank of think which and

Stagwell (STGW) 8 Mar 222021 Q4 Earnings call transcript