STGW - Earnings call transcript Q3 2024

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Ben Allanson

Good morning from Stagwell's global headquarters in 1 World Trade Center, New York. Welcome to Stagwell Inc.'s earnings webcast for the third quarter of 2024. My name is Ben Allanson, and I lead the Investor Relations function here at Stagwell. With me today are Mark Penn, Stagwell's Chairman and Chief Executive Officer; and Frank Lanuto, the Chief Financial Officer. Mark will provide a business update, and Frank will share a financial review. we the remarks, for prepared the will floor open Q&A. After to we statements that data. begin, Instructions] Before remind and I'd financial forward-looking [Operator include like you remarks the non-GAAP following

press guidance, financial including addressed for factors release our an website, and filings. earnings presentation and related And company, and Please deck CEO, investor and This and presentation in the like slide company's explanations about to uncertainties non-GAAP statements to resources. Forward-looking Mark provide call stagwellglobal.com/investors earnings our I'd reconciliations the that, are morning's of the release, refer over data. subject risk our those additional SEC with definitions, Penn. turn Chairman slide to to and to

Mark Penn

online, on strong call. report the we've our is you, pleased start the to new, launches that am quarter Stagwell digital products is are projects new principal our in, transformation growth contracts earnings coming though in platforms. only all traction Thank thank capabilities. joining as are gaining and some as Ben, growth and And X a now in we I that larger growth you reflects Marketing seeing strong in even to its this coming AI of particularly Underlying us won are it QX. Cloud everyone

addition, experiencing QX. advocacy a season, strong which In we're in will also peak

and the growth. quarter to third in believe we be We for The fourth poised returning are deliver results industry-leading show growth quarter to double-digit well us XXXX. will positioned

half. we more start full reaffirming to our a the are year, back accelerating the year are moderated guidance After today. into We

company major have with our this single by tech a XX%. expanded we our Our new global deal largest won with business to momentum companies quarter work as date and tech continued

relationships have come Our tech back strongly. company

driven our our manage to pitches. increasingly process. his We by to a great new team, business a our business million, business CMO, net I record. business for bringing and million, want LTM Ryan thank new new And of helping larger figure $XXX posted global another This by Linder, $XXX company new was of a pipeline led team

XX% a size above The increased approximately customer The is full wins relationship scale Stagwell as service million now XX%. company's continue year $X total with a top to number while our of $XX of XX the million wins we year-over-year, increased the capabilities. average

growth to in in numbers. million $XXX This revenue, XX% representing of and Turning is $XXX basic in XX% the X.X% third achieved by growth of in Marketing XX% and quarter. XX% the or the million net generated organic transformation We revenue the led the in We total growth growth best industry. growth Cloud. Stagwell growth advocacy, digital year-over-year, X%

solutions. invest came software $XXX cloud at growing quarter and EBITDA in million AI-based we of as this XQ, $XX adjusted in continue our even Our million in to OpEx

Stagwell is a company. tech company's tech

bringing that consumer applications, Code to are our and FAANG We every underestimate play deliver and almost about required interfaces AI of consumers the be Network marketing the to companies. in develop company. will tech the cannot Theory nontech that working will solutions businesses workflow by and role for reimagine usable and make for AI One

resources the While all recognizing single digital experiencing for get Agency its transformation have capabilities by Transformation our and just AI network. we of businesses era. others the seen digital ready opposite work bringing the have falter, XXXX Network of The here Code Business we help our and are strengthened Age's Ad the to won Theory outstanding transformation a businesses together into award, Year

and night of to Magic at forefront at we're helping We politics. voters example, both on For applying the NBC. CNN used Walls designed the and understand election AI built

a also an RealClear complex not questions breakthrough which with answer on communication. polling text, in polling the AI but is AI-to-consumer redesign recent just bot information, graphical will Our site of incorporates that information, with

You the we can with at doing are www.stagwell.ai. learn more about work AI

growing value year-over-year value million. by are has can brand expenditures. well, XX% Cloud on quarter sophisticated third Stagwell of net of organic and using analysts recently countries. is elements part as marketplace. of a in this BERA group the growth. shown $XX the tool The XX early it million, a ARR to a Key in of growth Marketers of net company SMC to this it deal major payments inked strong in lets their game revenue the with revenue $XX July a grew brand marketers to and reputation growth the ] representing that terms tool the addition XX% compute X-year $XX with expenditures and track marketing war predict justify research Marketing XX% enhanced in million, [ BERA.ai, financial marketing

Another February successfully and the contact its organizations' this political Wonder fundraising, season. and brands customer throughout product, cycle the "get by these year, out best-in-class Wonder increased has AI-powered support more by SMC have political out sent X text messaging Cave, during from is efforts. engagement. XXX%. also this and to text origins September number non-advocacy their by billion the been leveraged platform, sent our voter with messages than to From messages XXX Cave than more advocacy branching political brands helping organizations vote" been than More of

bringing nature and that experience continues unprecedented reality Eats with as strengthen it held We're to to augmented global event Uber global the more experience and sponsored fantasy our an Princess to network was for Rams, LA Cruises. the broadcast to continuing by our gain a of scaled sports stadiums achieve Around traction fans assignments.

achieve and presence with the back from agency am We and recently I based working can region. expand in a there, MENA acquired trip successful significant believe I actively we are our well-known a them to there. relations Consulum, government expansion in

& region nearly XXX the We also quarter XX% region's Bodenfors third grown and XXX% grew and people now year-over-year revenue expanded Forsman Assembly in have total there. and the year-to-date. has The in in

next kind itself year. expect this of repeat We growth to

expands creation capabilities acquisition LEADERS, the our influencer engagement and upgrades of include platform marketing an our Israeli taken platform. content and influencer have we steps offerings. social social and Other It agency

revenue Our to quarter election perform momentum end the date. of year-over-year continue extremely to the the advocacy well, grew quarter. Advocacy continuing in businesses XX% third the with past

we the to advocacy given as public the given surge for on outcome, affairs entire continue the that the campaigns primaries With sides. sector will and will in opportunities. XXXX, will likely legislative in history election XXXX expect grow election issue And biggest be need both

Stagwell we're with to centralize building of believe process this key and a used of strategy content We technological next will AI-based, better that the bringing We're of content. world Machine, to the Other elements a all Graph also integrated, in the differentiation include backbone development our AI-based be year we information our call what data fully conjunction consumers. the our new platform in for target ID in built Adobe. of

We ready be this next expect the X in months. to

we In addition the to now. and previous XX% year, the wins up over now at levels, our participating multiple pipeline coming right large record is pitches in are online,

clients, good work We the are for also seeing in marketplace more our for generally. work indicating being pitches a awarded environment major without

Frank continue quarter. will expenses, we hold at keeping XX% detail, expense As to our about the on comp-to-revenue this line

expanding management solid our stock as continued to buyback growth it see program, by have good industry position, enhanced and $XXX given another our continue and cost our million. undervalued We

era. in that This will both strategy the the and reflection, creative simply This assignments, we business and right stadium technology is needed believe, nascent. wisely continue winning pursued cutting-edge industry-leading and key experiences at assignments growth be new in technology segments us in a pursue attractive will have are and development marketing we is time AI technology advocacy our the time, challenger and deployment the the that to as makes combining company. to balance increasingly Our reflected same is brands over global in creativity that of like large grow what

things Lanuto, you to in of Officer, to our detail. hand our over financial I'll Frank Now Financial more through some results Chief walk

Frank Lanuto

for and joining Mark. quarter you, our to us third Good morning, results. Thank discuss everyone, you thank

reminder, you would conclude, prepared ask the if chat remarks after question please a function. to them like to free As through submit feel a

solid results third growth delivered with X principal our capabilities. financial in quarter all Stagwell of

as of period. to revenue an same For of over net we in an prior $XXX of and X% prior million, the period the XX% revenue $XXX million, compared the reported increase year the quarter, increase of

principal over in transformation million, to during by grew digital XX% accelerated the increasing capability. Turning X the $XXX prior Growth capabilities improvement period. revenue to in a QX. quarter, All

by size While and million Hollywood-based, communications by as growth of strength an of insights increase revenue, advocacy grew activities business and comparable compared also and posted travel, powered technology, the year. transformation. research increased our and Cave among among retail AI-driven well digital This an significant Consumer as in clients. strategy XX%, as in last and increased $XX to reported X% Stagwell as as Marketing Cloud growth well driven project customers. automotive health partially XX%, media-focused ex by in Wonder the was revenue, advocacy partially driven in XX% $XX care million period rebound gaming, new increase year-over-year,

increase among media consumer the a further Performance was clients year creativity advocacy sectors XX% period. of products business million $XXX delivered strength by businesses. well over And in supported were consumer the recent was and as growth increase revenue, prior in The to technology return an in data prior an and in the in as retail, technology. These million of communications sectors by X% results in strength delivered period. driven and and the over our by services revenue, driven and continued $XX growth growth by

Moving to operating expenses.

We as cost through largest incentives, points effective prior XX.X% of continued declined improve management. XXX Personnel revenue the our basis costs, a excluding single percentage period. expense, versus to by margins staffing net to

also progress expenses. with We made G&A

hubs consolidation regional estate centrally helped X% into costs real Continued year-over-year. to such approximately located reduce by

centralize million servicing we Our and of partially HR expenses also other OpEx annualized offset functions. reductions increased direct savings unbillable continue $XX and IT related cost These revenues in to contributed client higher by to shared through initiative accounting, services were and to as approximately activities. savings such

a $XXX period. net the in third quarter XX margin on with adjusted basis over million Stagwell the related revenue, a As EBITDA improvement prior points in result, an approximately of XX.X% of delivered

XX.X%. our adjusted $XX been our third quarter, investment margin million this Excluding of EBITDA have would quarter cloud approximately

Moving to the balance sheet.

million allocation to capital approximately by the strong year. of end We $XX from to maintain $XX approximately consideration to on $XX million to end to balance the quarter 'XX, DAC We the acquisitions. last position. on by of a acquisition of excluding recently our third focus million, track We remain reduced reduce the deferred completed financial obligations continue down

of future NCI of 'XX, reduced These will million. be million from quarter periods. income by EPS also DAC and NCI and balances to third in $XX reductions net to $X the approximately We end to down the accretive

quarter, $X.XX shares million XX.X or approximately at the an of This at we $X.XX million acquired per million. average repurchases During an approximately average price $XX share of to year-to-date for brings $XX million. approximately shares X our price

approximately $XX in had end Our quarter authorization million remaining buyback as of availability.

our in press the million November noted As repurchase extension size in authorized X, our and previously a $XXX approved of an increase Board program. release on the stock

may to we A Class up now $XXX of amended, in an aggregate million As back common buy stock.

strong capitalized $XX year-to-date improved in activity M&A our year-to-date, relative completed operations as acquisitions was while year. much Through cash and acquired in working X the for to Cash line deploying much for current period as smaller capital comparatively quarters principally improvements produce X flows the the we first CapEx to months we as relative year accretive targets. our software ago, versus of $X acquisitions million, We And by we make a X year quarter broadly X accelerated the last that with continue revenue Xx our same from approximately by in million last a simultaneously to driven Xx returns. 'XX, year. management. the

dispositions. portfolio potential explore evaluate continue We to also our and

in revolver our As cash ended and a a resulting drawings million, ratio we $XXX in of under the X.Xx. leverage million quarter result, of $XXX with

X%. affirming And between finally, growth Organic to is Adjusted be million. expected are advocacy to net between $XXX is revenue XXXX $XXX growth EBITDA million year as to revenue, expected guidance to excluding X%. be X% Organic our we is net expected be to follows. full X% to

$X.XX and approximately earnings share free expected deliver to conversion, flow be XX% to $X.XX. expect between is adjusted and cash We per

for back morning. now over the Ben to this concludes to of portion prepared our I call. That call Q&A the turn open the remarks will

Ben Allanson

[Operator Frank. Instructions] Lots questions Thanks, today digital of about transformation.

moving a question DT And over so unpack Can help And forward? Wells maybe as this of at quarter. nicely you a to do the in sustainable Fargo. some the it off kind with point Cahall improvement there? we'll of view Steve from you improved inflection kick

Mark Penn

that I Well, a seeing it's the I beginning inflection was think I as been sustainable And AI saying, as we're is what do in AI think, do view I've work people coming it coming. needed because to that to and was point arrive.

then the are interfaces points I to spread have arriving, that's build of contact make consumers. really and individual And to tech have to who accessible own who think their who ours it's many to first, AI AI. clients the to the think then at to accessible clients through clients websites going I make

I've that, said, going chips, now come the year we have of that build -- think to I think transformation said efficiency going applications. of the clouds digital were to is said to to as years to I be applications. getting they're year So and they in look, get I the I to And there's here. competition. many the And then they that what of went the We from they're

Ben Allanson

key little what sort greater Craig-Hallum. Kreyer some be might nice consistent over across in we A clients SMC, the of today may the And lot of well. quarter drive talk the goes growth SMC bit a other at what seen you has questions Jason resonating about across obviously some question of some XXXX. levers are? coming had years? have really as solutions SMC of Can with acceleration suite A maybe the about monetization from that the It here to which

Mark Penn

that of some a advanced the platforms. media on we're pickup think I seeing

advertising we we -- in now of of seen you the We've kind highlighted name think sponsors big kind I on. some saw -- what can because of I increase are in coming saw some around on of really product our see the screens. terms

sponsors, of new So big it's a big combination teams, experiences.

significant of technologies very reality to produce the a nascent initial grow that other into can of and be the next appear are that getting out there years business. we're over that phase that, that kind the couple we in of think the positive And of ahead that still in experiences really sponsors curve are of experience. from that feedback that, I terms augmented the

economic want a money product. the CMOs spend I pickup is should Why that to modeling think answer people that already and an a use can that getting we've on suite company. period. really BERA across sophisticated, the seen truly positive enthusiastic feedback. analysis is not but about CEOs It's major really think to We've any brand It ask: brand this? it a and of I seen sign tool, we're just payments for And long particularly a tracking question the tool incredible tools, I always on

to bolstered those also the going been over particularly by LEADERS platform we're have the run, long an and platform, the influencer -- there. we're Over communications pickup it's products, have that seeing has good

Brand in Our BERA research the that are clients. products with and already XXX and Quest Terminal

also our Cave delivering message targeted efficient And for Wonder marketing. platform text is remarkably platform a

build able messages. much platform experience we've of We billions season, political had up here. through and targeting the that data of through of believe also developing that that virtually text the of ahead to the also the messaging of there we been curve through because We've the means so experience which we're messages have any more it out those

think Cloud really is I Stagwell exciting a place. the So

the one that unique these us of ability to on and quickly are. think I you're to your that as this I was promise. them question. them And up hoping makes this ones products company, big areas features of and across kind marketing that hope have a as implement think really the challenger develop different one. we the don't seeing follow of answers incubation I it's tech I

Ben Allanson

at a investors she this GenAI riffing a a off just Needham, Martin have. goes I map. that And then questions is little of about -- kind lot Laura bit, over some road of the she question Maybe asked think

cost will kind revenue of more do you Over that upside? drive or take? say, GenAI next the your innovations lower What's think X years,

Mark Penn

-- question not transformation, because that there's no there of the we're is websites, us, just marketing but That of the for drive digital in revenue. will be business think apps. were going in that delivering I business delivering there were to

Now going to connections AI-based companies be between there's consumers. and

of transformation. be home language up, There bots. think, models various with ways. new to you think saw now There whole opens new robots. will a And unveil I be in sphere large will brands digital consumers that ways Elon communicate it Musk I

for new there same to will production a it AI, still it, advanced expect ads expect to uses production So make process, ad. why money. more anyway. the driver. to are It will expenses internal like creativity take It creativity XX% us make with core production I and that's the even less is which and storyboards differentiated images of be primarily for revenue I obviously, pass-through creating making and that a us, better it benefit

So cost that as to still the the will more the It's business, incredible professionals how work work, saw it creative, for work. only skilled interesting, thing has -- generate of so online survey more same high-level lower I cost transferred production involved.

that's use. on terms deploying production. it of So internal We're image it. I the We're We're in research. think it in deploying

And to run, move us long think real helpful, really of lot the where the takes of market way we benefit and AI and It marketing it real side in that's be help are transformation doesn't brands I digital the it's companies a pass-through being going consumers drudge AI to because the away. the image. interfaces the But I revenues to is areas but their away. a most in take work it lot going revenue the the opposite. does on importantly, for the develop think

Ben Allanson

significant of And the you of time talked Benchmark. looking maybe how we've at government maybe X which about X the as over about this Can talk portion government services, acquisition, something over that part next Consulum obviously, a Zgutowicz viewing business over Mark vision years? for that the from and well. Question is at kind has you're to

Mark Penn

Sure.

our related. of should XX% to be I think that business about XX% government

they marketing from now to to We're the In that business. proposals. the firms what developing do or not want and were for is learn government to all beginning last of business of of didn't developed go of firms I services be. were of one services. after the government unit, smaller go the months, it for all of our or need of complicated Code they can think lot our a X XX% to it the X We're a part over at financial aspects larger the originally we really I a that Theory, unit. the of have because history XX%

win really or I we of do that X-month Realistically, government it's But ones, take have work. gain for that kind positioned to the well but X to to are major kind to see of kind we will a No. as of couple awarded process? years of that X going the work. get us now a look infrastructure And that

Ben Allanson

of little talk gears about Jeff new Sinderen just Let's little at you some a about wins little about a are of we of bit a ramp see this from year? you XXXX through? kind of those some the Riley, of about start change he's can a it? wins. speak bit, How those well? these thing, and half over some wins bit B. second And a business as little recent would bit more revenue Van asked, thinking expect flowing When this to Is

Mark Penn

Sure.

of think the I undisclosed. some remain ones company tech

and announce major you've think wins in us both of Chevy with GM Adobe, major Cadillac. seen terms I with wins

win good I a Ferraro. think you've pretty seen in

stuff half quarter. -- of I second in December of really comes in on kind and some the of third the the the Adobe GM that think started those

that will all that on. full That things the through these these start would to $XX be And before a we come And pitches the I $XX decisions wins as on surprising we're million I All next started year. will, say, of out have of end year. the of million waiting in expect year year. number I think, next

Ben Allanson

stuff. Good

has new when their at given little currently that kind of win think for asked, Like playing off of have most all? a to be how to McVeigh that you CMO important if priorities shifted, seems Stagwell? bit. think pitch, Cameron a I what capability business

Mark Penn

the are in think number challenger. I us as interested CMOs one, think that I more

of -- an marketers. thousand our ANA visibility a our team recently at couple as Cannes I and of think to speaker keynote a coming I alternative out was with the

a in come has majors significantly. really credible alternative the And I to see general, flow I top our establishment in getting. we're think visibility that the that Just as can and up pitch

one? CMO, silver product. don't it individual a by a more a more will terms Is industry? of there's industry, vary it by single creative-interested In I there. luxury car any Is industry, performance an a think CMO? bullet Is it it marketing

and say which at and well can movers I award-winning now names skilled, research we look top, RFPs them content, are by Anomaly, look really I Donor, incredible, is that of is with creative social backed incredible, you XXandSunny, the shakers is research, solicited, What Forsman, have creation how creative, people and and And groups really all think those services, if at all backed by content things. business of we award-winning award-winning leaders. marketing are at and

more I data And bigger think digital media. that's and digital up. the where the across combined go the up, The is is all put second path quite and to countries. scale RFPs, to are top again, both then as we I scale and transformation, separately that companies CMOs now we out clients And third media transformation And GALE and names. Assembly those

X build professionalism these can and So both creativity and that design verticals experiences. these we're showing what mix is digital and a increased talent scale, across award-winning of

Ben Allanson

today, aware the maybe putting more. and end growth sure about make into the years. the one to of here, we've forward algorithm next in is on first But that. But want a I I moving I XXXX questions and the then the just one we of of as everyone Good got course well, is over last of of the to think few maybe look Instructions] sure of out stuff. make [Operator little forward to want all, key guidance obviously and kind X not bit we're

As growth look what does like? drivers the Stagwell, growth that and about the you of think algorithm

Mark Penn

year And service. to is transformation growth term. most period we've getting now health of our we tech important efficiency of think And which the the always through here long that should the that a back highest we're that the growth I in over. the digital thing went with I pullbacks, for and Well, said is because be think

growth seeing people very become have surprise. which But a think services, fact, more out majors nice some our valuable. the creative, creative I is services more of as some of We're lot a have in the moved creative in would think

think for to significant that pitches. and be obviously, us I that is should long Marketing going transformation over area think and the we're the are kind products add media resources data very all increasingly of developed. constant bigger once with Stagwell other growth achieve I go And in a to digital Cloud, to competitive run, high growth rates the

know at was growth I that don't So rates grow single-digit I would of but in faster kind digital grow creative the and fully of services somewhere the research media lower and if our answered, between. algorithm will kind always rates, at services

Ben Allanson

Good stuff.

you the us today of and call the welcoming for in Thank forward the joining end you end the the brings so and that of quarter questions to new the us, third look QX think I for for call. we everyone to to year. much for

Stagwell (STGW) 7 Nov 242024 Q3 Earnings call transcript