Stagwell (STGW) 7 Nov 24 2024 Q3 Earnings call transcript

In the recent earnings call for the third quarter of 2024, Stagwell Inc. showcased a strong financial performance, highlighting growth across all five of its principal capabilities. The company's focus on digital transformation, advocacy, and the Stagwell Marketing Cloud has been a significant driver of this success.

Digital Transformation: A Sustainable Inflection Point

Stagwell's digital transformation efforts have seen notable improvement, with the company's digital transformation revenue growing by 25% compared to the previous period. Mark Penn, Stagwell's CEO, expressed confidence in the sustainability of this growth, attributing it to the increasing demand for AI-driven interfaces and applications. He emphasized that this is just the beginning of a multi-year digital transformation process, with AI set to revolutionize consumer interactions and marketing strategies.

Stagwell Marketing Cloud: A Growth Engine

The Stagwell Marketing Cloud has been a standout performer, with revenue growing by 30% year-over-year. Key solutions like BERA, Wonder Cave, and the augmented reality experience for stadiums and sports broadcasts have resonated with clients, driving significant revenue growth. The acquisition of LEADERS, an Israeli social influencer and engagement agency, has further bolstered Stagwell's social content creation capabilities and influencer marketing platform offerings.

Government Services: Expansion and Opportunities

Stagwell is looking to expand its government services business, aiming for a 10-15% share of its overall revenue. The recent acquisition of Consulum, a government relations agency based in the MENA region, is part of this strategy. The company plans to develop a government services unit across all its marketing services, with a focus on winning major government contracts.

Financial Performance and Future Outlook

Stagwell reported a 15% increase in revenue for the third quarter, reaching $711 million. The company's net revenue grew by 8%, excluding advocacy growth. Stagwell's adjusted EBITDA for the quarter was $111 million, reflecting a 19.2% margin on net revenue. The company also announced plans to increase its stock repurchase program by $125 million, highlighting its confidence in its financial position and future growth prospects.

Investor and Analyst Questions

During the Q&A session, investors and analysts asked about the sustainability of digital transformation growth, the potential of Stagwell Marketing Cloud, and the company's expansion into government services. Mark Penn and Frank Lanuto, Stagwell's CFO, provided insights into the company's strategies and growth drivers, emphasizing the importance of digital transformation, AI, and data-driven marketing.

Conclusion

Stagwell Inc.'s third-quarter earnings call underscored a period of strong growth and innovation, driven by strategic investments in digital transformation, advocacy, and the Stagwell Marketing Cloud. The company's focus on AI, data-driven marketing, and expanding into new markets positions it well for continued growth and success in the coming years.