STGW - Earnings call transcript Q1 2022

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Michaela Pewarski

00:00 Good morning, everyone. Welcome to the Stagwell Inc. Webcast for the First Quarter 2022. On today's webcast, Mark Penn, Chairman and Chief Executive Officer will first provide an overview of Stagwell's first quarter, followed by a full review of the financial results from our Chief Financial Officer, Frank Lanuto.

We will then take questions, which you can submit through the chat function on the video webcast portal. our following I'd and discussion data. begin you to non-GAAP we the that contains Before prepared like remarks, remind financial XX:XX forward-looking statements

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

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

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

Mark Penn

Good XX:XX for you to us XXXX. quarter joining Stagwell's for first discuss results and morning thank

growth our high research revenue from and long-term. and and our our faster services communications. of EBITDA based turn Stagwell for contracted growth creativity transformation media that quarter, as becoming clients for and continued came the and first the and the on company of XX% net growing combination digital the the insights, growth XX% data, economy transformation, more XX:XX strongly. positioning While We're essential growing marketing in marketing pyramid modern right over accelerating adjusted us and is more of We're digital to performance

and our are projections the for double-digit and legacy targets. holding many companies While long-term our growth X% guiding to strong expanding X% we growth, reaffirming are year

since the annual quarter exceeds contract tech Silicon Valley booked announcement of that exceeds in XX:XX big all industry expected of revenue. Our million most $XX our merger growth We of XXth recently the the and companies. reporting even competitors the this

relationships a average $X.X accounts. client revenue XX representing the continue top quarter of in increase net to bigger XX% in we $X Our XXXX, million million as quarter versus first win

total, the as quarter digital riding pass-through be EBITDA two boss we First and XX% first offer. last As will and a recently, Well, important business million we we business over quarters. my the $XX company record a a million, it to Nadella every surged trend in In revenue net is to we marketing Stagwell an XX:XX Net grew become grew quarter adjusted net at over company. will Microsoft million. new expenses, old XX% $XXX company had in revenue, up to new entering company services there every Satya opportunities" new our are era and become digital our will a believe said economy which which $XXX excludes million XX% $XXX also measure $XXX open because our "massive XX:XX GAAP and that organically for million. was

at the us quarters. rest which of kick growing. the third over really up year as over quarter, sets $XX advocacy, additional XX% under EBITDA. In just Excluding converted revenue net million for Let's also and were well our we a up, of advocacy XX:XX practices, this in took new million look year-over-year. This revenue our organically grew been $XXX and we net the in in fourth have adjusted how

platforms organically. experiences XX% companies, and engineer digital grew the consumer that transformation and digital ones Our design

for was Block. accounts demonstration our organically stellar assignments health XX:XX to our Apple, transformation tech and growing growth we prior from strategy agencies share. of film technology, companies XX% the Award legacy new the along year growing Our another List remarkable fastest transformation from Theory the above did and versus serviced companies on Gale capability, and is driven which this chains companies are a as Instrument, assignments with quarter on taking Microsoft Gale, also last the as grew the for over won the with year major previously grocery Consumer year streaming, XX:XX insights of had grow by YML, gaming, industry Agency across which work. marketing NRG for companies, and by and up Consumer period. strongly year well how milk as growth and showed from turn Amazon H&R Experience Year. digital XX%, major clients. and our last board approaches modern it pioneering care took A largest took work Google, coveted Code

new brand Harris also volumes as and This strong who the media Ink, of global is because brought our of XX:XX through and at business engagement for have play travel network its as lines on and quarter strong awareness, its our increasing recover organic advertising as Harris with there its attractive to to win, NFL in trends travel XX:XX prior XX% core. have its and online In leading secure media the company, digital business brought and access more data client clients. and network scale, than UK brand particular, into airports media in doubled the expansion technology acquisition we an business more digital-first We now, ease a our platform across and continued our investment Goodstuff, revenue companies more games. well. Lenovo, approach basis of which Poll. company momentum year media from recent performance terminal versus the first affiliate to saw reachTV were Our our wins the Not grew all media yet like numbers, reflected business and is as We're in of the robust. turning at remained

Polestar. Dunkin'. grew a in growth Anomaly, wins from win organically businesses the the relations X% in the Anomaly including a of back quarter communications quarter A-List. one strong the and seven of produced opportunities believe in creativity Age the a Health we've like EVs we unique year was and contract work Ad XX:XX in and Combined, double-digit creativity sector. top benefited developed by of listed Our advertising from the public years driven as another companies large the of from number agencies year, expertise creative which large half edge Bowl strong our in in coming and represent XX and cutting Super the and added spots Cue on agencies

effective tech at creativity Our services we the as forefront agencies remain marketing. the tech with stack required of required digital integrate -- their stock for

real largely estate goal in in footprint We with the completed collaboration We having costs XX% of our more subleased real focus estate our are consolidated consolidation continuing of down. in LA. both on real out of New continue the We've XX:XX work. to line, further of shrink the leases estate to and and York over keeping office trends

adjusted any more first of to synergies fully to $X.XX combination income Our generated quarter in start million our of XX.X%, and $XX EBITDA strong unadjusted half to basis. net representing major expect ahead expansion back basis It's earnings the year. grew ramp-up from we noting worth comes a points XX:XX resulted around on XXX post per an of nearly materially diluted Additionally, initiatives of this a share cost control expansion costs of that year-over-year. margin in we this

amortization equally on As our amortization tend extensive business, focus cash free keep profitability flow will -- our lower tax and we higher. we'll though growing to focus extensive to on continue our growing rate the through delivering

based the and digital larger achieves two was in perfectly even than of continued e-commerce increasing on affiliate and network both digital Our we very B&G This across global to member e-commerce contracts, first the additional with of achieves quarter, Poland specialist made network. April investments our goals. more work global an we the strategic is break a AIMs technology (ph). acquisition important As and expanding XXX New focus strategic footprint. company and offerings acquisition these which of into highly our Brand experts XX:XX during our Galaxy, marketing

to that our focus chain with a transformation and and converting establishes media offerings e-commerce on it a in revenue. digital First, growing directly sales connects

Stagwell agency XX:XX Doner access scale a Our scale outside Europe B&G the a in Network. the level gives and while the and join the the marketing in U.S. Canada, leading acquisition we're is new of was region Second, Dyversity multicultural Partners to us in larger which full second in in Communications, of assignments there. scaling process U.S.,

become of in to next On Stagwell Latin that global the and connect America Brazil, entered our Paulo hub region. stadium the a products the a Cloud, full in for groundwork XX:XX investment Stagwell lay team. expansion ARound distribution launch and expansion Sao which CES, proprietary marketers. of beta an for the services International After also best-in-class our with year chapter continue major our this primary we the front will begun product partnership will We outlook. DaaS will product We in the we baseball Marketing our beta have anchor our XX:XX called believe to augmented Turning for developed testing reality reviewing SaaS now the revolutionize at with league our testing, in-house experience. the

are full We for million. XX% excluding year revenue to when growth adjusted XX% XX%, reiterating EBITDA to and to $XXX with net $XXX our advocacy, XX% million of guidance

from currently the contributions guidance any EBITDA quarter. Our excludes in acquired businesses first

to free of the after not for it growth revise XX% quarter approximately full the the quarter is the continue given expect guidance smallest year. first generally seasonally to practice We flow our year. cash is It

company November our March program expect to M&A and previously As well share of line However, during our $XXX quarter, guidance. that approval it's from in I to quarter. in on Investor one DaaS capital to Class-A million in exceed a XX:XX meet and last and $XX are under discussed to clear XX% targeted products, We and announced stock. growth to through we targeting to prepared framework XXXX that organic was million addition $XXX are targets exceed repurchase of revenue growth are up last average Day, in which XX:XX by XX% of or positioned the open-window SaaS quarter We a significantly common we revenue organic our we repurchase all comfortable opportunistically effective of growth long-term first strong GAAP acquisitions, can our the Board discussed revenue with from and long-term and mentioned the of XX% now million periods XXXX. allocation repurchase shares

towards we back expect broadly payments, a to shares. flow of buying roughly As towards and one-thirds roughly deferred towards M&A cash deploy leverage reducing one-third free one-third investments new and reminder, roughly

would turn we discuss to in and our it we've quarter, to over share which plans after solid I reflected growth stakeholders. results our in to a the in another on the against for meantime, our win making future primary we In price digital our at-hand, increase we're As we'll share to appreciation. our era, eventually investment the confident will focus be With helping the that, to summarizing like Lanuto continue community will brief Frank financial continuing video task detail. visibility financial deliver XX:XX the profile clients to over investments with laid time, more out

reminder, we'll a portion after As Frank's via the the chat button. chat of take questions

the Presentation] roll Let's [Video video.

Frank Lanuto

XX:XX you Thanks, Mark. discuss Good have today morning, QX join everyone. us to results. pleased We're our to

the two company's million had occurred $XXX an January same $XXX supplemented of million limited in performance. As forma our supplemental in which a was combined was the And revenue, if increase case to QX prior XXXX. useful $XXX increase XXX%. today business help costs was an or the will or for $XX will year versus million year, XX:XX million forma pro adjusted $XXX an include quarters, versus combination for or with my results GAAP EBITDA comments the the XXX%. Net additional prior was prior million period in information the be $XXX versus for as discussion results, increase excluding The same of million will period, of period the results you for pass-through pro the prior QX XXX%. the of on Revenue X, with provide evaluate

sharply the segments quarter, all of million to revenue prior half $XXX growth Media Communications our for growth which principally the across remainder the by XX:XX driven Finally, XX:XX Gale, million focus common in Revenue capabilities, as time, XX% or led growth organic shareholders revenue $XX $X.XX. or XX% increase my to QX the NRG, increased pro Turning and or $XXX company's Ink million revenue will excluding net finally, to Agencies, at approximately $XXX Creativity from reportable transformation, $X.X our the $XX organically $XXX and at of revenue, an growth $XXX in share basis, & increased sequentially million increased driven Partners. Theory, Harris in or is income segment the organically in at Allison increased of year to by attributable largest or Assembly. XX% segment for categories And by NRG $XX our quarter. $XX And $XXX increase Strategy Ink from by revenue Instrument. to in Stagwell organically cyclically by of quarter combined driven earnings from in was perspective now principle strong at viewed Insights and period, comments the of the Harris. prior the million $XXX or $XX diluted and by million segments our Performance Media driven driven increased from increased respectively. pass-through and Anomaly, the the The Allison and by net million increased the XX%, of revenue Anomaly the an an million Net million expected respectively. XX%, And and from growth revenue or million year. from Ex-Advocacy, XX:XX on X% increased revenue, at or of $XX to to XX:XX Net per organically for was the increased X% resulting X% this of million and million million or revenue When growth digital from net revenue, driven Code cycle by million increased $XX increased to Consumer Theory, by XX% increase to costs, Partners. XX% XX% at fourth of by XX%. growth or net company. the the $XX.X Instrument. growth revenue an Net net net results Communications forma The and driven million Integrated & increased components increased million Network XX% million by versus $XXX Code and prior year, by Targeted million Targeted $XXX and XX%. to Victory Victory net the second across impact strongest of from And on XX:XX and costs. of principal broad-based Gale, by and revenue for and reportable increased political to the Turning quarter, ramp-up at and first our Assembly. and each in capabilities.

We expenses. continue operating control to effectively

initiatives We've the have sublet year expense in we As previously $X.X the expect and progress year-end million of also Principally quarter savings disclosed, for cost by of in with of approximately severance, made which million run certain that real the $X.X $X.X synergies savings a at charges we with terms $XX of taken part million successfully rate million. achieve during of anticipated approximately than in on rent estimated, full project a favorable of to generated transformation as end these QX. million more XXXX. the properties We and in total estate in previously resulting approximately our exited the $X.X quarter. XX:XX of during reduction

sheet. last XX.X%. from related our related $XXX to revenue in net to is increased or revenue X%. net million half ramp-up to million to increased the margin from increased increased of XX.X% period, the from XX-month EBITDA adjusted $XX to EBITDA adjusted prior of million from or period. $XXX over trailing to from the related over XX:XX million As Turning revenue $XX quarter cycle period. EBITDA And to a the an XX.X% increased $XXX margin quarter, the adjusted to XX.X%. for adjusted the XX% the prior the And The margin to result, year. EBITDA as XX.X% earlier, to increase I XX% million increased million which to EBITDA from net adjusted political expected XX:XX of stated in The second impact EBITDA or balance XX.X% prior finally, Ex-Advocacy, $XX the

the a we During service for in cash. $X.X million Dyversity, quarter, acquired full Canada agency located multi-cultural marketing in

their the put full CapEx, our cash during million against and marginally changed to expect revolver. from adjustments quarter, with million those companies from obligations drawn We finished million, or approximately Inclusive under million with related $XXX $XX previous options approximately a $XXX M&A acquisition million the $XXX $X.X of with and and we principally in $XXX CapEx earnout for quarter our for Our the estimates. approximately line XX:XX also the year, in net performance invested increasing interests. for million the $XXX in for non-controlling quarter million

our of leading those X.X times. company quarter net in decreased commerce New an impact leverage of $XX the obligations, consisting XX:XX million turning end and immaterial leverage ratio acquisition $XX a marketplace April, M&A approximately of combination company's and acquired the Excluding cash increase potential resulting the would to of times from times of Galaxy, cash Brand payment at million last scaled our leverage finally, future from The payments and X.XX Subsequently, And total quarter provider X.X an XX:XX to guidance. up total leverage a our X.X and initial times. of stock. solutions, be to and was in

As revenue Mark are XX% morning. $XXX XX% $XXX guidance ex-advocacy excluding to you. the remarks of of XX% growth of reiterating XX:XX our EBITDA noted, growth for organic That prepared Thank year our net and concludes to million adjusted XX% impact full previously we to this million acquisitions. with

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

A -Michaela Pewarski

some queue, in Great. we I'll it so questions have XX:XX And the kick off.

traditional at doing such platforms weakness Nathanson you the you're Michael media quite the in agencies What's MoffettNathanson. actually well. and talk about At why from companies? e-commerce time comes advertising question the first and are The Can guys seeing same disconnect?

Mark Penn

that? XX:XX repeat Can you

Michaela Pewarski

What's the platforms being weakness are seen traditional and disconnect? the advertising and media in e-commerce doing well. the At It's the same time, companies. XX:XX your -- agencies quite is

Mark Penn

the see it. in Yeah. -- he weakness don't -- the as don't describes really XX:XX see I I I mean,

our of -- then growth, look period growth respectable very four those see holding services. of companies see plus incredible capabilities, we're -- And organic actually with elements are the above seeing you is, certainly, of advertising, the digital a rates. growth among all the traditional think with X% the our I traditional when even there what pyramid and at capabilities you principle even above you

now, I of our is that we're though and faster the our creates a marketing more really is is larger pyramid, grow $XXX unification across of large the division access we're million and with division the $X million of much with because part media faster place of after couldn't over which over million seeing to the winning So growth $XXX and larger outlets now $XX course, all with top million acquisition a growth ability merger, and customers but $XX capabilities what really world, And that scale that's see and three to larger related. the billion instead what media are contracts and more media placements. digitally board, accounts, finding placements model the the previously of

a the has company with different lot how of gain radically share So that this do marketplace. a produced the can to merger within

Michaela Pewarski

XX:XX Stagwell have between companies quickly, but think to What's And quickly disconnect tech large that. growing who a the to as reported growing not I the quick add we follow-up so are? as

Mark Penn

by XX:XX to Well, share grow think that's I we're marketplace. this fact that explained able the in

digital with look people block kid for. we think at when what on that line are the with I new looking you us, are capabilities in the

who primarily old be. to And a, used to right the contracts old different we're offer. what's many of kind to from that right want are we new us the this people the of companies; services. targeting b, legacy along The can at than ad person contracts won contracts character with The And creativity legacy right quickly. so we in grow the used digital and have have were contracts want combine the to they time, the enabling to that's to have

Michaela Pewarski

an Macquarie. can comes for outlook versus driver question strong second you ad macroeconomic investments? The Nolan from overriding boost Is ad XX:XX your at figures inflation Tim the explain questionable clients the positive spending How all to positive and issues.

Mark Penn

or a It negative. doesn't the or look of by like size inflation like is positive increase It advertising may XX:XX contracts. nominally

overall strong So decrease economy at consumer the if saw economy. underneath the actually though, in you headwinds GDP, you a pretty the look headwinds the in

economy do kind so Stagwell, fuels strong the And work we really that that consumer Inc. at of

their just We straight and holding largest them the We in clients of have kind seen client programs or them. with clients, by not cutting two. plans away see nearly launching last expanded One or our program, one expanding back, week even their of media XX% buyers.

So pulling people the from we're back not economy. seeing consumer

Michaela Pewarski

the implies attributable and next your organic is impact guidance quarter the and to started from gate to the for in And question growth Fargo. from tougher seem transformation to much your back year. growth brick-and-mortar strong Despite And with XX:XX Steven comes year, of outlook of to Consumers like experiences. a Wells How that growth? comps? the ad see and at what's Have the Cahall slowing onward? of that remainder slowing this out second looks market be going e-commerce digital any what the in-person you reiterated

Mark Penn

such XX:XX growth. Again, we're the post Well, seeing e-commerce of network, within was -- such sales shift think there yes, normalizing, happening company but pandemic. a not as every understand are I there to there I digital What's a said, a is during an becoming our slowing really is, pandemic e-commerce is Satya really over company. was --

right car, and if digital is sales brick-and-mortar growth they've the continued split have into there channels they balanced after years in and to years to companies marketing the why in -- and to recognize and and are see that on hit forward if the brakes the and even they that's have areas. think you those their because that we a channels why have I with So business they stop hit have see are people if our online, sell of between digital catch digital right ecosystem up at that's red going didn't that to what have our even transformation can be they growth kind even light, those unabated transformation digital going brakes of a

Michaela Pewarski

please Frank. behind submitted. take quarter? is one Can an comment the outflows think working you question Great, capital the for the Thank quarter. you. on this We'll I was in investor that XX:XX

Frank Lanuto

XX:XX Sure.

overall, I think mostly it's timing.

and that ran is ran, we've working QX, had a and lot out, media several was of As grown of prepayments payments rapidly size managing has of where period pointed quite a we and our and business we media part had the then capital QX in media outflows.

you the from the then lesser that strong side your The some of balance use side, you and that all just of And point. a quarter So receivable place sheet. where the a from taking of on is the make to on also funded of growth QX QX. get liability -- really the see the in billings lot reset extent, payments, in right? Bonus payments taxes QX, it's

you have and a cycle. say, So normal the timing it's it. I would matter that's But overall,

Michaela Pewarski

comes the Maral you've seems going if from approach XX:XX question of to Assembly's see to you some Great. repositioned Lenovo business. the there talk The validating win forward? It you broader investments Can to any business your account. next Great with are at how implications how the and RBC. Kutgun about

Mark Penn

biggest shifted lot of less I conventional out the people to our media buys, these do a people through as of and is a bid more now I A of bit that that out and And creative the whole encompass of now out of trades, in new to lot millions that go that for hundreds are think world. saying go a days. little is I I do have little contracts think media, and observed, because my and well team. for media, XX:XX you division lot if are media dollars and a for is can a mostly media reconsider the nature implication used bid, I've got really out up opens bid of media is global

that well we and are that clients looking placement online their to We already for as placement media are there. shift extremely out us XX% positions see

Michaela Pewarski

see the Great. Kutgun. market the XX:XX changed Has M&A? A we from opportunities ahead with dislocation recent follow-up

Mark Penn

maybe hope I prices. bringing XX:XX down

services things the we're volatility I our terms acquire are strong to advantage are acquirers, right with going of There pay problems. network of were what what think goal we rates, willing balance to careful with helps play the that then management our right much faced are achieve others reasonable but is really Part that's think geographic and making, if the we have volatility our at pay of goal. really having volatility I to value come much and kind And achieve we very at we this the that to value and here into growth in higher -- that, for companies locations, potential I they market think financial other our when helps between we future balance. will and think prices can grow that profiles. and the us anything, those us our just right probably

Michaela Pewarski

XX:XX clients? a any Stagwell question JPMorgan. from Avi seeing Steiner Is its at And slowdown from

Mark Penn

it's live recanvased some like XX:XX up and pandemic. call clients say underlying know just through record up, taking everyone kind season. marketers a travel and to coming of things. a We before As going media economy the I We slowdown. the curtail this stop there see is very it's we We what season have I said when The year, before call, to if was anything. strong don't knows the any it consumer is into and be travel a this remains there that why is, big the Fed that's actions strong economy that see consumer going

And companies problems. that marketing supply so increasing kind have all Car companies in of are of the had sector.

a fall into companies consumers marketing kind so what And you pointed not models. marketing during take market of during that generates time, out to new many quite seeing. been what the new incorporated recently EVs where different stop demand going But think as season inflation. problems. facing. across XX:XX I whole , marketing same go are the I inflation. don't so which And kind out rolling that's about they're many of to It's, at have different may and an different have already we're account then course, I think kinds they of how we're into it's article into of that you And

feelings to to get that's economy. right just sentiment marketing here so triggered that's inflationary to kind and be of be a the whole And going an another going in consumer

Michaela Pewarski

question year. aggressive you be can exiting XX:XX below target Great. What on if an at times leverage X get is the your from buybacks you And will Leverage is this point, what your feel Investor. undervalued? be last to continues and stock

Mark Penn

to we target XX:XX I've is capable, that. reiterated stock which think that X. lower about the more of Originally, now – periods. X.X than say it sort open something model in place And target and the But windows of was open during in set we fact a moved and in have X.X. that out than program I I I'll Our of can a the I buybacks are no achieving we now. it, window do

Michaela Pewarski

Great. And a weekend. that And Thank concludes you, our XX:XX good everyone. call. have

Mark Penn

Thank you. XX:XX

Stagwell (STGW) 6 May 222022 Q1 Earnings call transcript