Stagwell (STGW) 2 Mar 232022 Q4 Earnings call transcript

Good morning from Stagwell’s headquarters at One World Trade Center in New York City, and welcome to Stagwell’s Inc.’s earnings webcast for Q4 and full year 2022. My name is Jason Reid, Chief Investment Officer at Stagwell. I’m here joined by Mark Penn, Stagwell’s Chairman and Chief Executive Officer; and Frank Lanuto, Chief Financial Officer. Mark will begin with a business update followed by a full financial review for Frank.

We will then proceed to a discussion with Barton Crockett for Rosenblatt Securities and open the floor for Q&A.

submit the to function. welcome are questions chat through You

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

combination, are those statements in addressed Unless release, the to Forward-looking otherwise company and earnings uncertainties include combination presentation SEC results periods will the January be earnings been for the risk about to as on webcast pro our guidance, historical to the company’s subject slide factors this prior giving discussed full X, effect on had stated, year completed to and related if full forma filings. XXXX. comparisons

of to our financial refer and presentation press data. an investor release and reconciliations additional slide deck Please examples, non-GAAP stagwellglobal.com/investors This definitions, morning’s website, resources. provide for and explanations

over Chairman turn CEO, And and Penn. I’ll with that, to our it Mark

Jason. strong growth, AI promised earnings debt products Thank grow services target. our industry-leading out flow, margin and and and share year-end expansion, closed and ratio and to you, we with record building the free as our game-changing a transform net business marketing, both cash below industry. per XXXX double-digit transform continue AR Stagwell significantly to record We

growth. the market six a consecutive economy XX% North rising line XX% offerings. on double marking revenue billion grew a In our of tempered research transformation also internationally, revenue hit and XXXX, twice double-digit growth QX, led by XX% This rates. focus achieving was and about we In as fast organic services, our media In and by strategic growth, digital expansion, Stagwell America. in headwinds achieved All as revenue, growth face in growth. Stagwell a interest basis, global On difficult record XX% in grew performance digits, by net of $X.X overall with a XX% this quarters organically. we

is cycle and EBITDA, million on ratio flow This costs net net to X.XX from reduced the of advocacy previous revenue EBITDA XX% and adjusted to significantly revenue placing conversion turn over this debt times below million down our ratio. We $X.XX free on labor our per of million. drove full to earnings overall [ph], share XX.X% our of benefited X.X $XXX we ratio the times December $XXX as our performance at of We cash debt controlled comp even-year for target delivered XX.X%. net net margin XX year and $XXX in generated delivered

to OpEx new level also product We that invested of this $X next products new to year year as – teams, we expand out of million $XX investment cloud in market. the we we’ll to million continue over and bring as or

adjusted topped We million. revenue out margin a on with revenue. the EBITDA QX $XXX XX.X% year Our closed on net

is to Stagwell achieving higher reaffirming in of XXXX organic double-digit our ex-Advocacy in growth organic the in advocacy target annual are XX% we cycle. XX%. and growth We consistent to XXXX target to the exceed and the growth even expect this years, of annual parts long-term business

on Cloud, are we Marketing and combination adjusted Recall that consistently delivering or cash creation EBITDA, of above of scale. all growth growth, the flow, plan. organic at self-funded EPS are Stagwell of our of the growth, acquisitions overall a that which is metrics the margin, Based on

cover take growing I’ll who remains my Our analysts of it, us. stock significantly undervalued. the for ask set word

of state too a economy. The too vibrant Stagwell remains headwinds hot, of cool despite the

in they work at early tech RFPs, But size back are the rates. the work resumption of which there right is stabilize we record slowdown in as are that holding companies as Some they staffing. no workforce. their expect full clients, in But especially their year coming

out cut can to a the administrative drive final well-managed two announcing over we of the envelope $XX margins. another push do. to the next to synergies contribute of close will later million Today, This this continue year. what round digital-first expanding years We company expenses deal-related we’re as

efforts by IT, the will coming beyond above new as we and online All streamline made possible the be HR, savings other systems real new now. These past centralized estate offerings. and

announcing to million. $XXX program doubling also a in from back the of stock million bought are We XXXX. We buyback $XXX X.X shares million

We the target X.X as setting leverage it long-term from are net X.X. lowering

back We paying prudent services or tech global our to purposes, augment debt supporting off our shareholders otherwise use three, flow for through making existing our reduction. to growth will continue investments our expand footprint, in three cash free and and investments our buying stock

$XX Epicenter a an drop Maru, year shopping; used share that DAC of reflecting Marketing Stagwell We SMC Galaxy and to company marketing third AI growing that company cash e-commerce XXXX. SaaS improve de valuation. Brand the Experience, million strategy is In flow deferred data scheduled continued our less this a including Platform, than The levels named media cash forward in uses reduce about reputation augments Stagwell our we free we in properties. minimis leading online XXXX, of People for to fully Cloud; gaining them to new part location is in XXXX, a New is and and within our that platform to bringing owned and of the to performance costs, research arena. acquisitions, acquisition in

was of was disproportionate and new to pitches. In record $X healthy a RFPs invited new $XXX net million, net XXXX increasingly competitors, charter. includes billion Stagwell we business Stagwell XXXX, business total $XX a QX million. to bringing alongside win global a

land expand at increasingly successful a and We’re client strategy. executing

in each achieved a major XX top annualized to client bringing QX. $X.X net of average record XX% Our million the top our revenue in million. growth contributed clients per $XX million for full up our year, QX, clients average client from in in XX $X.X business of We from

Hotel at experiential, food, transportation Forsman Instrument Oriental Mandarin Notable and Bodenfors global Joanna in & duties joint at for and gains beverage, [ph] the largest Group. win QX Technology, clients GALE, travel a and Cotopaxi group. drove wins include brand the Assembly this at between

Anomaly, Assembly, Lenovo inspire Light GALE, at at at Mexico Price Dropbox to T. Assembly and we on significant Donor at the full up accounts For year, [ph] YML. XXandSunny, AT&T Rowe picked Audible, and Bud at

us in we position favor will and in the working work of as for our Three frontier marketing. key long-term trends industry Stagwell at the are

First, together; XXX% consultancy media creative and grew our GALE XXXX. media in creative are coming

We’re Stagwell capability together pitches opening and two giving bringing disciplines major is two client disciplines generate new all across can long-standing agencies execute and media together of they plan our to campaigns. that – that This creative up relationships. scores so online

targeted oriented only companies across company, becoming every addressable Second, mediums. need based on a marketing is becoming market of not company. strategy consumers as our Performance to transformation media data Digital of digital XX%. service XX% but and those XX% also digital set high-growth services digital and grew a to are consumers data best consumer XX%, a our services and and grew And Businesses to company are insights services. XXXX. in grew

and as Users far of beginning engage every average with unveiled the called in of Cloud. ARound with augmented ramps. Third, technology virtual up reality every the stadium with sponsorship held first the to Stagwell snowball our the opening with take app LA for so vast We’ve Twins the reality aim in we sport wave to experience getting world. we the are of stadium ARound, sponsor each history developed fight largest XX as next an with Marketing our augmented ahead the potential Minnesota and minutes

professionals communications release. product technology large and our generative most profit just to PR pitch AI-based signed effective Additionally, PR agency right helps a that on the news

relations XXX% a Our in beta feedback. write Stagwell a recent out first of one release We’ll products came space. number competition it next based the product AI year. products, of than other Harris is the growing and nearly tech version Marketing in Cloud brand the Among terminal Profit draft more XXX at public per now. the refine news in on

XXXX, deployment the that perfect year, us will Desk, $X of competition which Studio Media of the positioned we to digital Stagwell we place our DaaS marketing. million place to with train our the our SaaS, in services significantly By media progressing best product, to expect to platform and to by SMC in advanced billion development be media building leveraging by in bottom and in services models. the continues Trade revolution direct and and $XXX XXXX. industry amidst We’re the next line, contribute

division situated with the from connected media while of is to competitors benefit transition. ideally struggle performance-based TV growth the Our

famous creating Adweek’s Ben commanding commercials, is online the in Affleck division on transformation research on Year. as publications Super to than advice fast, the more on takes our implementation, ever which more all while and advising need a X on premium top-rated creatives our Commercial Web in projects companies of behind an was digital complex marketplace the Our agile world. Agency And sophisticated ever uncertain XXXX anomaly an out turn Bowl

long-term our $XXX In line million targets. XX% XXXX, net to in EBITDA million organic we and expect $XXX in with deliver to growth to X.X%

We between to flow advocacy of that and range the and semi generate in $X.XX then to businesses again odd expect high-margin dormant XX% free our and in cash be to EPS. rates even years years. adjusted XX% to are $X.XX should growth add Remember that the

services to these guiding projections. have hedged in the believe in ex-Advocacy We’re difficult and once again a growth, double-digit economy we XX% for XX%

We higher. in which expect Cloud XXXX growth the advocacy, come to be a economy year to even accelerate together Stagwell Marketing

working. strategy Our is

traditional client double global We’re our competitors yet standing services, we’re we expanded are accelerated and scale, high-growth more growth not digital results than because through or generating of relationships of achieving still.

us Cloud experiences forefront and at with put the AR of We’re the Marketing Stagwell innovating AI and industry. the that

need will made review. deeper highlights. enjoy a film by But Lanuto first, short own Now our Frank XXXX’s company, a

[Video Presentation]

everyone. Good Mark. Thanks, morning,

us our QX year pleased results. you to today join to have discuss full We’re and

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acquisition-related XXX% ownership estimated redeemable XXXX, $XXX with $XX will lowered our And million, in our deferred to million We we after million. $XX our towards $XXX as compared we acquisition million cash at of our approximately and liabilities as which obligations of acquisition-related with payments lower non-controlling agencies. million of be will by obligations interests further under year-end consideration $XXX systematically move XXXX

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Jason, you. back over to Thank you.

Thank for prepared remarks our Frank. you, concludes That this morning.

now will Barton We’re research Q&A. questions to going for Crockett, Director from and turn at We Instructions] [Operator to senior prevent Rosenblatt Managing analyst good Securities.

have Center. floor us We’re Barton, live to here the One joining World yours. from pleased Barton is Trade

Okay.

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for to of about right year? How environment, you’re relative In does How your of things that now? full current kind can seeing terms trend? tell you the what do us the guidance look what

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the... And Okay.

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Okay. All right.

meaningful that driven Now around sentiment Having this I perspective switching part you is a that’s you get debate part is, what a around Microsoft of advertising. little gears bit some of been search your that on issue to impacting AI-driven this an to and from business. curious Google by search-based solved is and industry – do was

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Okay.

Barton. Thank you,

Great. Thank you.

call. to We questions move from will now the

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you in for And seeing from comes the worse either your of better at Steve valuations? in XXXX terms What question The deals? are next M&A deals in after outlook Wells doing environment or for Fargo. What’s XXXX? is eight Cahall

on comment that? to want you if Jason,

Sure.

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how mutant Next qualify, perhaps impede global macro the ops. and RFPs [indiscernible]. question market comes Please these quantify a for does from

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see You lot a you you alcohol. hotels; recent of at of the some clients. see And look

to it’s like a to mix going be continue that. So

any comments have do on? Mark you closing

you I you following No. thank all. for just want to Stagwell. Thank

to I think become too in we each year ignore the big marketplace.

As the XX% that win Bowl that grows with combination, to and and really and Super awards all of the double-digit kind transforming makes I in I they saw creative for resources force at our you. resources that transform grows first think the marketing of are that out grow, numbers continued competitors our the think, company grows, outpace you marketing. ability our to size of that our digital the performance with Thank

for everyone, conference to forward next quarter. you, joining Thank seeing call. look our and you concludes This us we