STGW - Earnings call transcript Q4 2024

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Ben Allanson

Good morning from Stagwell's offices in Florida. Welcome to Stagwell Inc.'s Fourth Quarter and Full Year 2024 Earnings Webcast. My name is Ben Allanson, and I lead the Investor Relations function here at Sage. With me today are Mark Penn, Stagwell Chairman and Chief Executive Officer; and Frank Lanuto, the Chief Financial Officer. Mark will provide a business update, and Frank will share our financial review.

we the remarks, for prepared the will floor open Q&A. After

through welcome function. to are the submit You questions chat

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

including Forward-looking statements subject uncertainties the release, risk and company's related earnings earnings addressed our presentation guidance, to in those factors slide about are to SEC company, the and filings.

press of definitions, website, stagwellglobal.com/investors with like and CEO, financial This our morning's presentation explanations And for additional provide Chairman deck reconciliations investor our release an to that, slide refer to non-GAAP call Please data. turn and and and over Penn. resources. I'd Mark the to

Mark Penn

ourselves you investments reach. accelerated in earnings you, was and for an transformation a in and thank us reestablished business made cycle strategic joining year digital our diligently and call. the the in expand for as Thank rapidly and fastest-growing industry, XXXX unprecedented our for worked geographical breakthrough election capabilities Ben, We to U.S. everyone Stagwell.

Stagwell's of The continuation of and a marked XXXX another we throughout beyond. QX the in period stage best-in-class saw year. growth for improving XXXX result trends the sets the work

the XX%, by These strong XX% which XX% revenue and net by year-over-year. were performance and revenue grew by XX%. media revenue continued quarter, by transformation, data, revenue momentum grew driven net revenue by which digital revenue net by we results in XX% grew During XX%, by by year-over-year and and

as our continue and cloud Adjusted solutions. EBITDA fourth $XXX invest to AI-based for the growing in was we quarter software million,

for XX.X% our bringing and in to made down strong stake. progress comp-to-revenue structure, also cost We our a record low ratio managing

the posted growth $X.XX Stagwell billion, of of XX% prior over For the full year, year. revenue

X XXX billion, revenue to versus $XXX X% growth bps and growth XXXX. of improvement million, representing Net was adjusted return due Stagwell's an breakthroughs. industry-leading XX% margin to $X.X in of of

tool in cutting-edge there's our We an visual road suggestions. for XX% into election lens does ability expertise saw created left creative AI saw for Google we of field business. relevant led transformation in contact in generative transformation campaign date, data polling a digital political Imagine and among a AI a tech growth digital First, acceleration and to customers RealClearPolitics, best the insight engineering offers fan phones quarter, deeper which trends and AI-powered that our unique of respond to anticipatory Code of trip, rebound collaboration and launched Theory within code with Pixel, end Gemini and ahead fourth followed by labs degenerative and by forever

interactive a Instagram The what adventure of This just post. with was we for Google highest-performing can AI Pixel's do is brands. case

do this As our XXXX, to Elon And do that. build can CES just Musk companies transformation at digital I discussed and is what in with it. AI January the year begin recognize are around applications agencies where early to ready

results were culmination of U.S. Second, spend. unprecedented an with ad the political election cycle strengthened the by

Our low over fourth candidates and raised contributions in dollar advocacy grew quarter. groups. Victory businesses and supported Targeted in political $XXX XX% XXX the million

fundraising out text printed and boat produced text power over best-in-class get the and scripts platform, sent support ads more X,XXX billion million contact nearly over messaging over wrote to pieces efforts. and supported created messages our organizations, voter ad film SKDK, XXX XX.X XXX mail, came and Wonder X and than sending political shoots. X,XXX organizations of advocacy

solid and midterms with XXXX optimistic all which in both primaries ahead to XXXX looking be the year While still a expect XXXX advocacy will year cycle, to due We a experience of seasons affairs the and headwinds anticipate an campaigns sides. records on it should this issue very advocacy cycle, and presidential in advocacy. in election federal uptick in public we remain lack to break

$XXX record business in Third, for quarter another figures million our than This brings with $XXX million, end the million excess company. as momentum new figure XXXX, in larger net larger third yet year $XXX figure of to trailing the new XXXX. This business posted $XXX is in consecutive we continued net new million. in business million our $XXX XX-month than

just companies. fourth Visa. The the with are results winning Target. wins in new this ever-larger wins announced show These wins led with leading work that world's with profile with we've the continue Lantus [ quarter ] by were and to year into seen And recently and today high breaking with we mandates the Starbucks MassMutual momentum

relationship. $XX top million customer now average is Our a

The ladder that and larger is climb scale, happening exactly now. assignments that and larger as thesis is we Stagwell we the will of is up to what

over million scales are our $XX are tech working of of out underscoring #X client that tech X clients of companies we a top and year to Our company's company. truly tech X

as million significant OpEx in enhance to software the to AI-based pay Cloud the Cloud Stagwell and our to beginning made we Stagwell quarter brings of consecutive full quarter, Fourth, fourth our marketers. solutions. third the fourth investments million. grow investments growth. These quarter, to year Market the delivered our revenue in In approximately XX% tools help double-digit Marketing off This $XX investment State are cloud $XX to growth invested the in

these understated margin long-term investments. by is our so And OpEx considerably

information are content the our are in we AI-based ID also with and data our conjunction graph integrated cusp Both Adobe. target a the centralize for development launch. machine, summer and on platform built We consumers, better fully in of strong to scheduled Sage made to progress launching

Stagwell also throughout in XXXX Finally, was transactions. M&A aggressive XX announcing

XXX% agency Console, East, as which than regarded head by in push our leaders and we more affairs public Our of XXX revenue the the growth more a agency, there. of our social led opportunities. in in a Israeli biggest region acquisition a move saw than people highly of Middle grown region count see we number was the to net in we've in

before by the of year first announcing close our that a intent continue acquire the the should push end strongly region quarter. in to Group, Create We to the close and deal

creative in our augmented agency. also acquisitions agency digital of We best-in-class WMP, Sidekick, with U.K. the a presence French a and experiential and Europe

with suite product. brand capability nice listening acquisitions we company multicultural AI-enabled while foothold with In SMT's increases and we the added ADK social standpoint, Pros, XX SaaS early announced markets a in acquire head count an From which offices Pipany to America, to through and monitoring And added XXXX, to Latin Asian PR we will expertise Brazilian the and experiential of our in agency. and X,XXX. Global, over social tracking and Team give strengthening addition products of AI-based media our a agreement of of our a us Brava in region and the

than opportunities billion that into. machine We there last revenue growth combined with is Stagwell the by organic have and because are it the that believe idea the is these company, $X.X X built, Stagwell's incredible years, an M&A the of investment we the network underappreciated expanding over investment afforded from today to more platform placed by grown community, acquisitions

of breakthroughs second half comfortably industry. result X the the that outstripped The was these

X% points total more competitor, growth organic Our our half stronger. second than growth basis net revenue basis with net while revenue almost stronger XXX was of of than nearest our XX% XXX

adjusted advantage blend take We're No has is XXXX and X Stagwell industry-leading to Goldilocks of will of changing issuing meaningful XXXX million capabilities, to into of X%, and million. total else of heading a net scale in industry new we're the year of our excited bring, uniquely growth positioned rapidly revenue geographical landscape. approximately for guidance size. $XXX EBITDA $XXX what confident

share $X.XX flow earnings adjusted to $X.XX. conversion of per cash Free of over XX% and

geographies. not look at important adding just new our to it's we I as think growth, organic total growth are aggressively but

And make we of year relative led this we the from our as are to But on transition, XX%, about teenager expect a guide ladder by the avoid organically on. any advocacy to to We'll next total growth non-advocate double-digit we of way grow of to still the scale. by confusion to digital transformation units. but range, off X.X% X.X% fall in growth now

and growth our this and future in the components political decline expect growth scale. our growth of continued total path the understanding at XXXX to we to acquisitions, growth to the and achieve understanding organic the of all Putting you when key our total X% is together, cycle look new of and unlimited

Financial of in financial our our more results Frank Officer, some Chief walk through Before detail. Lanuto,

shows wins some of driven a for share short innovations a that with video by to Adobe's you tool we wanted the scenes XXXX and work, AI across Firefly video network, new enhanced best transformational video from are innovative that how was AI-based combined work with just you our with let's The new I incredible outstanding The video testing. beta SAGA. for client and grow. showcases

[Presentation]

Frank Lanuto

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

function. through a year after question a to a if conclude, Stagwell reminder, fourth to feel them financial remarks ask breakthrough quarter the you chat please delivered submit capping results, free like would strong company. prepared As the for the

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

year, XX% well in our transformation billion. and among tech $XXX billion quarter, For XX% as XX% grew revenue growth revenue net performances million by the to revenue digital customers. strong advocacy grew $X.X led fourth the full $X.XX In grew of to as to X% businesses

at have digital AI for, We the been of number have that projects indicating are a digital transformation seen of the beginning work. of agencies an transformation uptick in wave new AI-driven our we selected that

$XXX XX% well an and advocacy growth the Cave, as customers. million messaging digital strength in XX% For Cloud transformation grew our prior by full platform Marketing to of driven Stagwell in significant increase communications of year, the fourth among the million. year, focused revenue text retail, over quarter technology $XX posted as Wonder our

to the the business revenue. accelerating period. by Data driven in $XX services The XX% to health and products grew continued XX% sectors. strength quarter, consumer million SMC prior revenue million the fourth Media in over year, and in reported was in growth full the care For with $XXX Performance growth

as more continued than revenue The which technology, the in grew strength QX XX%. third the sector's began quarter in in

XX%. the year-over-year to Communications XX% year, results business our existing quarter fourth sectors, delivered prior customers the the by with in businesses. technology automotive organic advocacy our For driven an over were new period. revenue revenue The the Creativity $XXX growth by full and increase grew wins retail, increase significant strength million, and in $XXX of of million a of and in

full and the grew over an in revenue prior X% strategy year, million year. year. compared the And quarter, $XX fourth For of consumer of XX% the reported to prior increase the $X.XX decrease to of revenue a billion, as insights

year, quarter political record-breaking a over million, season. the $XXX the a prior full fourth For Results for bolstered year. revenue was of and by in were full the decrease the X% year

prior the in cycle. an increase political over the Advocacy XX% revenue to fourth and million $XXX year-over-year rose quarter of XX%

increased XX% For revenue the over An prior in million. total the company political the increased year-over-year quarter cycle. full full year, X% increase advocacy advocacy, of to XX% and fourth for year. XX% the revenues excluding $XXX And

Moving to operating expenses.

We or of net the cost to excluding lower margins expense incentives, fourth the to declined quarter continue XX.X% basis period. largest single improve management. Personnel prior effective costs, through our versus in revenue XXX points

further we regional the quarter, fourth into We hub and actioned of also fourth cost million our quarter the $X made in throughout space progress consolidation initiatives annualized office savings savings through approximately our identified real estate the and on in model. 'XX. legacy In

real our This estate million. XX more annualized $XX synergies to than brings

and annualized technology We software identified centralization in million costs. $X additional the than and more savings also of actioned through

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

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

for investment, adjusted full the an EBITDA would on of Again, year, million, our year approximately adjusting a revenue, year. improvement came of basis cloud at representing prior points margin full the For net have margin been XXX in $XXX XX% XX%. over our

balance. Now moving to the

maintain capital We continue focus to on to financial strong a allocation position.

year-end transactions. XXXX ticked as XXXX, acquisitions. acquisitions approximately million, is added XX At continue of announced in DAC number with balance of DAC Our still we DAC year-end at larger that focus to balance a $XX $XXX but million our XXXX. less up the in structuring we Throughout it's levels quarter than fourth prudent the of line through on the balance and balance keeping appropriate

or of NCI $XX reduced approximately the shares $X.XX million. our repurchases at acquired approximately million million. down price billion an approximately full $XX year shares during to an And balances share at in We $XX for we This XX.X X million. price $XXX $X million quarter, approximately to average average brings year-over-year, of also per by

in really million improved targets. $XXX quarter for the line improvements by had was to with still year-end, management. operations is Cash $XX flows software full for capital availability. working of in remaining in as CapEx principally authorization buyback relative Our from our million capitalized XXXX, the $XX and million driven which year our

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

And finally, $XXX is expected noted, Total to as Adjusted guidance XXXX $XXX expected are full to to million growth issuing follows: be X%. net is revenue EBITDA Mark we year between be approximately million. as

the over We call. expect earnings and to remarks concludes of Ben deliver now back be will in to the to between open this XX% per to morning. conversion expected $X.XX I flow $X.XX. Q&A adjusted share cash turn excess is our free of call That and the portion prepared

Ben Allanson

Frank. Thank you,

total screen. the chat and growth. question in more about of about we've at number is our going well little of start the guidance year? change has to a philosophy change This received into as investors. moving you the just the revenue with go from Perhaps any start do sort via talking of you button If come questions, bit wallet top that of them could net to submit as a We're please about the why a have

Mark Penn

built up Well, the of people I in to and realized growth kind we grossly scale the we were here machine I have that think underestimating as we grow that industry. continue

industry you they very do our then capital in as the opposite. levels efficient at what are to at model been lower accretive where see deploying the to opposed has business We

see nonpolitical cylinders. for see next But with X.X% And really all you to led you the because by is very you firing digital organic a combine year that growth that strong picture organic have transformation. on X.X% have we're we growth to of

accounts than much bringing higher before. We in level new at are scaled a ever

new are -- network providing that into are expanding our opportunities. We doing new regions

this past XX% another to We're rounds XX% beginning to business. get the of government will to first add contracts that

So at I look of totality to it. think the people have

how strongest they I working. in is that had be in January organic stuff. very history growth think letting were at strong January that, to mode. growth the out a and figure company. had organic that January the going Good I still peak missing is we are of you the a But we've

Ben Allanson

led of transformation. analysts strong in of the a of X consecutive just maybe digital about in let Could little turn months we any transformation. you capabilities? in received me about changes we've said acceleration that growth Let's strong which transformation. rebound talk seen over digital course number a this really questions bit the nice One has digital really X to and obviously from last now particular, to really, A the sort quarters

Mark Penn

the in to AI. mode. companies clear And they're on to absolutely. to that very been that adopt breaking efficiency we clients competition scene and Well, at saying I have tech the think that going thought went into And I've now are AI mode is in which

set of all genic websites and will with in we the AI, designers companies to which to that be with up connection And the engineers, really help of to companies have particular, AI-based of now kind implement the are. website, are really log to consumers this how redoing and into will critical the a advertisements how to data the we you have on layer on the to you see information based you web will that understand of who construct when things and or influence knowing and that about both change combination

The of here world real. AI wonderful is

just chips. can't You build

people we're coming well-driven super centralized really AI going will I have interesting hope with Every out ones. to can't come company personalized display, Stage. digital that set are You applications. by a some incredible of I be those needs just Day think applications, we've early April, built at Investor being up teams some in which that the of transformation things an will set to

Ben Allanson

Fantastic.

year? how of environments in from the positioning Let's or is here. uptick Jason talk activity of at RF advantage maybe way ultimately you in changing How the a saw what little market? take how I in bit such -- question a versus last volume Stagwell's characterize -- mean you a to we RFP Craig-Hallum RFP today are Kreyer would particular

Mark Penn

We of participate continue busier generally RFPs ratio flows of has to those We our in RFPs. that above billion over XX%. don't win than been $X.X of XX% we were asked. ever did we about And have

RFPs. clearly out growing We are share of these

We billion in expect do RFPs the government and of $X.X put about various now to have in we not XXXX, experts contracts. counting ones government

for our We contracts which previously compete major contracts, these to millions for for now recruiting have major competitors. of HHS are scale to and begin which hundreds the hundreds those to done are dollars, only right and size of for

Ben Allanson

about is bit X beyond. moment. between was that? Matan industry everything in competitors a report good of December consolidate, the beginning that in players the the merger bad Stagwell going the stuff. potential for Maybe there the Little on larger you at Stagwell, that's Obviously, thoughts a the industry. Good asking, as your on at of in [indiscernible] and have might that XXXX some about

Mark Penn

need and the don't suggests there. another Omnicom It's for assets. to companies got is I that merger dealing logic weakness merger think it big strength. IPG be legacy marketing [indiscernible] that are that many with don't too a the of out a people fundamentally of too merger see Look, I of industrial

opportunities like dump the going people thousands of getting shift of that's to they a They growth future-oriented be in people, something latest the on us marketplace. to Stagwell, built rate up of to be don't back want thousands the technology. rid want to first but They're million with talent and on see on $XXX where pick provide who

an exciting place. in We're

now. right for to over have We company XXX,XXX applying people work our

as see digitally nimble, people see, to look want from we offer that at from the Starbucks wins to also And and Target, technology. can you more highest a of high-level position. you when What based, clients, that but that you level our combination creative shop. can is of Visa really think I So creativity think I

the we a As set into up a Stage. huge that why like up [indiscernible] really -- will the Stagwell somehow computer of coming I market set an first answer. idea opposed combined alternative That's be in because needed to the faceless, meaningless the place out

Ben Allanson

margin just see Morgan this do about McVeigh to but in do we Maybe we us is that things, long-term time? obviously, of stuff. when talk lot over margin a and Stanley. question here, our And investments kind products the Good you expect about at Cameron get the our a Great. where potentially? and trending

Mark Penn

I technology see in then significant definitely Look, think to to probably going see half to investments you're -- this these through going think I continue probably through year. of decline. next them significantly year you're And

we're think now machine, the media a I pieces complete putting across more ID the basics which we suite together. dedicating building of a were the verge now the which in the communications, salespeople the internally, products more that are is is suite to graph, now research, and complete and

So to about them XX% greater XX% you're they I what is seeing you're years, that have in our to see than take tend gross at that going think the products we off think margins about margin decline, embedded for really themselves, you're and probably to and real going as today. then look well. remember to have XX% X.X tech see as you I And on to that

Ben Allanson

we up. Absolutely. questions Two more wrap before

see we've couple begun to products just over what of the you into are the with talk a the about that bit second people. strong questions number momentum in of heading a excited from through of on Could maybe SMC, a Just 'XX? half coming little you XXXX, about

Mark Penn

now. sector communications the in excited really I'm

a very products. We competitive. suite It's have really complete of

which AI is which is profit, have the We earned, basis.

the has value And tremendous, marketing the and the media monitoring, for have agencies think, have cloud. for offerings and of influencer global we rest platform. We both now Stagwell I at the which an

ID in really data research suite will internally now of of thing, that think the with and ] a research on I you manage I how have have a and we're where I suite putting how Publicis content in vary of drive on media, product and now [ apply latest pieces addition think, to think first, you really very an thousands use a graph competitive -- of products. the test to barrel, we complete terms together And and of AI the them. we'll against media

incredibly think well. this It's So together together. is I coming coming

do really I we have from to think technology. to start, clients, to important was a invest but first get services in it tech felt central X,XXX continue to this group

think you're to Investor again going. going I Day these things where are see an

AR others our sponsors like experience And of and with let me anybody just way stadiums else. Uber is mention ahead at

Ben Allanson

see going Day. an this April our sneak question we're Can the be Obviously, month's give On this little the It Question holding for on able the of a investor. a something to Investor Day in to about coming a bit might last X. is you Day Investor time? a at will from us Investor up we be peek question, maybe virtual day. as to be

Mark Penn

Okay.

assistant, in old can creative B, of I be wants models. long-term the true A with the think sitting get I industry, a in more to wants is scale of main that nimble better fashion X ago here I with you have to thing company $X rid up it an for competitor nearly an want we is AI, adoption okay, revenue. the a we're that yourself, started industry and growth with billion ask years and investors profile?

questions, Investor The answer to at those yes, X Day.

applying to have both going latest streamlined at we're you're more a better, to services. you're and peek third, think technologies, get And Stagwell. the say, people to to at investing how why offer clients then I internally to aren't going more

I be going to think exciting. it's

not too I to is holding fruition. major think what promise the said, just is goldilocks around the for small, world not we really we're of that big, too right with that the the which be that clients we would is company, size, challenger showing coming

Ben Allanson

Please that eye invite days the April day. the about hope that's over information as of next for couple so the of you section as an Thank We you X today. you'll Investor end keep our for Perfect. additional for us Virtual Thank well for attending. on able join be an for Well, much very Q&A Day. much. with that, our to

Stagwell (STGW) 27 Feb 252024 Q4 Earnings call transcript