Q1 2024 Stagwell Inc Earnings Call

Ben Allanson: This morning's press release and the slide deck provide definitions, explanations, and reconciliations of non-GAAP financial data. And with that, I'd like to turn the call over to our Chairman and CEO, Mark Zgutowicz.

By definition explanations and reconciliations of non-GAAP financial data and with that I'd like to turn the call over to our chairman and CEO.

Mark John Zgutowicz: Thank you, Ben, and thank you to everyone joining us for our first quarter earnings call. On our Q4 call in February, I talked about our excitement and confidence for 2024, highlighting that we expect to return to growth in the first half of this. Several factors give us confidence, including the abatement of industry headwinds, such as tech restructuring activities, strong new business trends, a record-breaking political cycle, and our continued investments in digital innovation beginning to contribute to growth. Today, I'm pleased to share that these trends are beginning to play out exactly as we anticipated. Stagwell delivered $670 million in revenue in the first quarter.

Thank you Ben and thank you to everyone joining us for our first quarter earnings call.

Speaker Change: On our Q4 call in February I talked about our excitement and confidence in 2024, highlighting that we expect to return to growth in the first half of this year.

Speaker Change: Several factors give us confidence, including the abatement.

In our industry headwinds.

Speaker Change: Including the abatement of industry headwinds such as tech restructuring activities strong new business trends are record breaking political cycle and our continued investments in digital innovation beginning to contribute to growth.

Speaker Change: Today I am pleased to share that these trends are beginning to play out exactly as we anticipated.

Speaker Change: <unk> delivered $670 million of revenue in the first quarter.

Mark John Zgutowicz: These figures represent encouraging growth in revenue of 8%. Additionally, we continue to post record net new business figures for both the first quarter and last 12 months. Importantly, we delivered these growth figures while effectively managing our costs. Actions we took in 2023 helped us grow our adjusted EBITDA by 25% year-over-year to $90 million. These results are highly encouraging and give us the confidence to reiterate our full-year guidance today. We also draw confidence from gathering tailwinds.

Speaker Change: These figures represent encouraging growth in revenue of 8%.

Speaker Change: Additionally, we continue to post record net new business figures for both the first quarter and last 12 months importantly, we delivered these growth figures, while effectively managing our costs.

Speaker Change: Since we took in 2023 and helped US grow our adjusted EBITDA by 25% year over year to 90 million. These results are highly encouraging and gives us the confidence to reiterate our full year guidance today, we also draw confidence from gathering tailwind.

Mark John Zgutowicz: Advertising is once again growing. Our reputation is expanding, and we are participating in record numbers of new business pitches. AI will, within the year, create vast digital transformation opportunities, international work is proving a fertile area for expansion, and the advocacy season promises to be historic.

Speaker Change: Advertising is once again growing.

Speaker Change: Our reputation is expanding and we are participating and record new business pitches.

Speaker Change: AI will within the year creates vast digital transformation opportunities international work is proving a fertile area for expansion I think advocacy skus and promises to be historically.

Mark John Zgutowicz: This quarter's performance was driven by two double-digit growing capabilities. Performance, media, and data grew 13% in revenue and 12% in net revenue; advocacy showed 80% revenue growth to 54% in net revenue. Digital transformation led by double-digit growth gap returned to revenue growth, but it's still building up an expanded pipeline as tech companies are beginning to come back online and research is still overcoming the impact of last year's writer's strike. Continuing the trend from last year, we saw outsized year-over-year growth in our relationships with our largest, most impactful customers.

Speaker Change: This quarters performance was driven by two double digit growing capabilities performance media and data grew 13% in revenue and 12% in net revenue.

Speaker Change: Advocacy showed 80% revenue growth grew 54% net revenue increase.

Speaker Change: It'll transformation led by double digit growing gas returned to revenue growth, but it's still building up an expanded pipeline as tech companies are beginning to come back online and research still overcoming the impact of last year's writers strike.

Speaker Change: Continuing the trend from last year, we saw outsized year over year growth in our relationships with our largest most impactful customers in the first quarter, our top 100 customers now representing 50% of our total net revenue grew 25%.

Mark John Zgutowicz: In the first quarter, our top 100 customers, now representing 50% of our total net revenue, grew 25%. Geographically, we saw a return to growth in the United States, our largest market, with total revenue growth of 9% year-over-year. Our international businesses also continued their momentum with revenue growth of 7% in the quarter. Europe has been a major area of focus for us recently, and we opened our new regional headquarters, Blue Pin, in London just a few weeks ago.

Speaker Change: Graphically, we saw a return to growth in the United States, our largest market with total revenue growth, 9% year over year.

Speaker Change: Our international businesses also continued their momentum with revenue growth of 7% in the quarter.

Europe has been a major area of focus for US recently, and we opened our new regional headquarters in London, just a few weeks ago. This focus is translating into strong revenue momentum with EMEA region growing 14% year over year.

Mark John Zgutowicz: This focus is translating its strong revenue momentum, with EMEA reaching nearly 14% year-over-year. Turning to cost and profitability, as I mentioned previously, we delivered $90 million of adjusted EBITDA in the first quarter, 25% higher than the first quarter of last year, and representing a 17% margin, an improvement of 320 basis points year over year. This impressive figure is a direct consequence of the proactive steps we took last year to manage our costs. In 2023, we took staffing actions that resulted in $98 million of annualized savings.

Speaker Change: Turning to cost and profitability as I mentioned previously we delivered $90 million of adjusted EBITDA in the first quarter, 25% higher than the first quarter of last year, and representing a 17% margin an improvement of 320 basis points year over year.

Speaker Change: This impressive figure as a direct consequence of the proactive steps, we took last year to manage our costs. In 2023, we took staffing actions have resulted in $98 million of annualized savings.

Mark John Zgutowicz: As a result, our labor costs were 2% lower in the first quarter of 2024, helping to deliver a staffing-to-net-revenue ratio of 64.3%, an improvement of 270 basis points over the first quarter of last year. Also driving this margin improvement is a laser focus on managing our DNA expense. Despite our growing net revenue in the quarter, our total G&A expenses were almost exactly the same as in the same period last year.

As a result, our labor costs are 2% lower in the first quarter of 2020 for helping to deliver it staffing to net revenue ratio of 64, 3% an improvement of 270 basis points over the first quarter of last year.

Speaker Change: Also driving this margin improvement is a laser focus on managing our G&A expenses. Despite our growing net revenue in the quarter. Our total G&A expenses were almost exactly the same as in the same period last year, we're installing modern systems for back office, utilizing offshoring, and adding AI capabilities to streamline.

Mark John Zgutowicz: We're installing modern systems for back office, utilizing offshoring, and adding AI capabilities to streetlight operations. We've seen particularly strong growth in adjusted EBITDA from our performance, media, and data capabilities, growing 212%. Creativity and communication are growing 42%, a testament to the focus that all of Stagwell is placing on controlling our costs.

Speaker Change: Operations.

Speaker Change: Seem particularly strong growth in adjusted EBITDA from our performance media and data capability growing 212% and creativity and communications growing 42% a testament to the focus that all of that growth is placing on controlling our costs.

Mark John Zgutowicz: Net new business continues to break company records, giving us increased confidence in our full-year guidance. In the quarter, we delivered $66 million of net new business, a record for the first quarter for Stagwell. This brings our last 12-month net new business figure to $284 million, also a company record. Quarter after quarter, we've increased the LTM net new business figure to $212 million a year. Importantly, the size of our wings has grown impressively, and we continue to be invited to larger, global... In the first quarter, the average wind size increased 13% year-over-year.

Speaker Change: Net new business continues to bring company records, giving us increased confidence in our full year guidance in the quarter. We delivered 66 million of net new business a record for the first quarter for spectrum.

Mark John Zgutowicz: These net new business numbers were driven by some important wins, including Progo de Chao, The Star Tribune, Basel, and Wilson, as well as expansions for Target and L'Oreal. In Q1, Stagwell agencies captured over 70 of the top awards across major industry shows, including an array of Agency of the Year designations. Maybe 1-2% of the market, we are far exceeding that in terms of the district commission. These include four agencies featured on the NHA list, including Coder Theory being recognized as Business Transformation Agency of the Year.

Brings our last 12 month net new business figure to $284 million also a company record quarter after quarter, we've increased the LTM net new business figure of $212 million a year ago.

Speaker Change: Importantly, the size of our wings has grown and grown impressively.

Speaker Change: We continue to be a guidance larger global pitches.

Speaker Change: In the first quarter, the average wind sites increased 13% year over year.

Speaker Change: These net new business numbers were driven by some important wins, including a child, let's start for beauty fossil and Wilson as long as expansions with targeted l'oreal in Q1 of several agencies capture over 70 of the top rewards across major industry shows, including an array of agency of the year designation.

Speaker Change: Maybe 1% to 2% of the market.

Far exceeded that in terms of industry measure.

Speaker Change: These include for agencies to be turned on the AD age a list, including coated theory being recognized as business transformation agency of the year.

Mark John Zgutowicz: Gail Winning U.S. Advertising Agency of the Year by campaign Assemblyman named Media Agency of the Year, an exponent of the RFP Com Shop within Golden Void took home the Disruptive Agency of the Year crown. Our M&A program was active. We might not have gotten every deal we sought, but the net revenue in adjusted EBITDA from companies acquired in the fourth and first quarters exceeded the net revenue in adjusted EBITDA lost from consensual life debt disposition. We achieved this despite the initial outlay and acquisitions being only about 15% of the dispositions grossed per capita.

Speaker Change: Aylwin U S advertising agency to be Hereby campaign Assembly being named media agency of the year and exponent Dr. Kam Chocolate and Pulmicort took home the disruptive agency of the year crime or.

Speaker Change: Our M&A program was active but might not have gotten every deal and we saw that the net revenue and adjusted EBITDA of companies acquired in the fourth and first quarters exceeded the net revenue and adjusted EBITDA loss from consensus.

Speaker Change: Sure.

Speaker Change: We achieved this despite the initial outlay on acquisitions and only about 15% of the dispositions growth spurts.

Mark John Zgutowicz: This is concrete evidence that our M&A machine can be a major driver of value for investors moving forward. As I've discussed previously, we're exploring a further non-core disposition. I hope to have more color on that later in the year.

Speaker Change: This is a concrete evidence that our M&A machine can be a major driver of value for investors moving forward.

Speaker Change: As I've discussed previously we are exploring a further non core disposition hooked up more color on that later in the year.

Mark John Zgutowicz: In the first months of 2024, we made strong progress in expanding our global presence through acquisitions. We added the UK Digital Collective Sidekick and our first French-created agency, What's Next Partners. Just last month, shortly after the end of the first quarter, we announced the acquisition of PROSE, a digital-focused brand and marketing consultancy for Brazil, which significantly expands our Latin American presence. We're looking to become more competitive internationally by doubling our business outside of North America to 40% of net revenues over the coming years. Our current focus is Western Europe, the Middle East, and Asia.

Speaker Change: In the first months of 2020 before we made strong progress in expanding our global presence through acquisitions, we added butane digital collective sidekick and our first French Creative agency. What's next partners just last month's shortly after the end of the first quarter, we announced the acquisition of pros physical focused brand and marketing consultancy, Brazil with significant.

Speaker Change: We expense our Latin American presence, we're looking to become more competitive internationally by doubling our business outside of North America to 40% of net revenues over the coming years. Our current focus is a western Europe, the middle East and reach.

Mark John Zgutowicz: This quarter, we took steps to sharpen our capabilities in data, media, and AI through a combination of internal initiatives and external partnerships. In the first quarter, we maintained a strong investment of $14 million into the Stagwell Marketing Cloud, our AI-enabled suite of products for modern marketers. We're now working to bring our research products under the Harris Quest brand to market and expect to see sales growth in the back half of the year. SMC orchestrated its first software launch with Google Cloud as we deepen the partnership on GenAI and AppSlash here.

Speaker Change: This quarter, we took steps to sharpen our capabilities in data media and AI to a combination of internal initiatives and external partnerships in the first quarter, we maintained strong investment of $14 million into the stack low marketing cloud our AI enabled suite of products for modern marketers.

Speaker Change: We are working to bring our research products under the Paris Quest brand to market and expect to see sales growth.

Speaker Change: Half of the year.

Speaker Change: Obviously orchestrated its first software launch with Google cloud as we deepen our partnership on Gen AI announced last year.

Mark John Zgutowicz: At Google Cloud Next, we launched a data cleanroom solution on Google's platform that will provide our clients with a private and secure space to mix and match their first-party data with Stagwell's vast trove of data sources. We're also focused on growing AI leadership across our agency. One focus will be scaling best-in-class use cases, such as Yale's Enterprise Alchemy AI platform announced this quarter, which reduces the time spent on critical tasks across all disciplines in the agency to help Yale's almost 800 people work smarter, better, and faster. Leftfield Labs is incubating custom AI solutions to elevate the customer experience.

Speaker Change: At Google Cloud next we launched a data clean room solution on Google's platform that will provide our clients with a private institution space to mix and match their first party data with stable bass pro.

Speaker Change: Awesome.

Speaker Change: We're also focused on growing AI leadership across our agencies, one focus will be scale and best in class use cases, such as sales enterprise alchemy, AI platform announced this quarter, which reduces the private spat critical tasks across all disciplines in the agency <unk> almost 800 people work smarter better and faster lastly.

Speaker Change: Lapses incubating customer solutions to elevate the customer experience and our largest performance media Agency Assembly is set to announce a new AI solution later this month.

Mark John Zgutowicz: And our largest performance media agency, Assembly, is set to announce a new AI solution later this month. We are making significant progress in our Media Studios unit on building the last mile of the media chain, from planning, targeting, and audience creation, down to placement and media supply. On our last call, I announced we'd be building a Stagwell ID graph solution. Today, we are partnering with Nexen, a global unified advertising technology platform.

Speaker Change: We are making significant progress on our media studios units on building the last mile of the media chain from planning targeting an audience creation down to placement of supply.

Speaker Change: On our last call I announced with new building of stacked well IV solution. Today, we are partnering with Maxim a global unified advertising technology platform will have more to share on that partnership in the coming weeks as we rollout our new offerings in data.

Mark John Zgutowicz: You'll have more to share on that partnership in the coming weeks as we roll out our new offerings and data. In other parts of our business, we're preparing for Sport Beats this June at the Cannes Lions Festival, where we'll return for a second year with more brand sponsors and more athletes, including Joe Burrow, Juju Watkins, and Megan Rapinoe.

In other parts of our business, we are preparing for sport piece. This June at the Cannes Lions Festival, where will return for a second year with more brand sponsored some more athletes, including Joe burrow into.

Speaker Change: Watkins and wrap it up.

Mark John Zgutowicz: Sport Beats continues to benefit the company, increasing our exposure worldwide and leading to new business opportunities. Finally, we're excited, later this month, to host our definitive Future of News Summit in partnership with top publishers across the U.S., including Axios, Business Insider, New York Times, Politico, Wall Street Journal, Washington Post, The Trade Desk, and Advantis Media. Recognizing that fears around brand safety have made advertisers more cautious about advertising across news and opinion sites, we released a first-of-its-kind study for advertisers to better understand where and how they should be advertising across the news industry. It's been a busy quarter. We are never standing still.

<unk> continues to benefit the company, increasing our exposure worldwide and are leading to new business opportunities.

Speaker Change: Finally, we're excited later this month to host our definitive future of news summit in partnership with top publishers across the U S, including axioms business insider.

Speaker Change: Politico Wallstreet Journal, Washington, both the trade desk and add context media recognizing that fears around brand safety. It made advertisers more cautious about advertising across the region opinion sites. We released a first of its kind study for advertisers to better understand where and how they should be advertising in Boston.

Speaker Change: Okay.

Speaker Change: It's been a busy quarter.

Speaker Change: We are an ever expanding scale, we are marching forward to achieve our goal of offering everything from global full service platform self service wherever you look stack wells about bringing our partners along with us to the cutting edge marketing services, where I am.

Mark John Zgutowicz: We are marching forward to achieve our goal of offering everything from global full service to platform self-service. Wherever new looks, Stagwell is evolving, bringing our partners along with us to the cutting edge of marketing services. We're on the forefront of AI, of global performance marketing, of culturally relevant events, of advancing online advocacy campaigns, of the move to more social media and contact, and the combination, once again, of media and data. These efforts and a solid quarter of revenue growth give us confidence about the year ahead. Now I'll hand things over to Frank Lanuto, our Chief Financial Officer, to walk you through some of our financial results. Good morning. Frank.

Speaker Change: The core premise of globe.

Speaker Change: Performance marketing.

Culturally relevant events of advancing online advocacy campaigns of the move to more social media content and the combination once again with media.

These efforts on a solid quarter of revenue growth gives us confidence about the year ahead now.

Speaker Change: Now I'll hand things over to Franklin.

Franklin: Shall officer Watkins some of our financial results.

Franklin: Scott.

Frank P. Lanuto: Thank you, Mark. Good morning, everyone, and thank you for joining us to discuss our first quarter results. As a reminder, if you would like to ask a question after the prepared remarks conclude, please feel free to submit them through the chat box. The company returned to revenue growth during Q1, driven by strong performance in our media and advocacy businesses, improving market conditions in the U.S., and continued momentum in the international markets in which we operate. For the quarter, we reported revenue of $670 million, an increase of 80% as compared to the same period in the prior year. That revenue, excluding pass-through costs, increased 2% for the same period to $532 million.

Thank you Mark good morning, everyone and thank you for joining us to discuss our first quarter results. As a reminder, if you would like to ask a question. After the prepared remarks conclude please feel free to submit them through the chat function.

Scott: The company returned to revenue growth during Q1, driven by strong performance in our media advocacy businesses improving market conditions in the U S and continued momentum in the international markets in which we operate.

Scott: For the quarter, we reported revenue of $670 million, an increase of 8% as compared to the same period in the prior year.

Scott: Net revenues, excluding pass through costs increased 2% for the same period to $532 million.

Frank P. Lanuto: Building on the trend from 23, our largest customers continue to invest in their relationship with our agency. In the first quarter of 24, our top 100 customers, now representing 50% of our consolidated net revenue, grew 25% versus the prior period, our largest improvement in the last five quarters. The number of relationships also expanded, with the number of customers in our top 100 being serviced by more than one of our agencies increasing 12% year-over-year, providing further evidence that our strategy of delivering integrated services is working.

Scott: Building on the trend from 2003, our largest customers continue to invest in our relationship with our agencies in the first quarter of 'twenty four.

Scott: Top 100 customers now represented 50% of our consolidated net revenue grew 25% versus the prior period.

Scott: A larger improvement in the last five quarters.

Scott: The number of relationships also expanded with the number of customers in our top 100 being serviced by more than one of our agencies, increasing 12% year over year, providing further evidence that our strategy of delivering integrated services is working.

Frank P. Lanuto: Another positive signal was the occurrence of a deflection point, where period-over-period revenues from existing customers from growing relationships exceeded those from declining relationships. Our net new business performance for the quarter represented the fifth consecutive quarter of increasing trailing 12-month performance and set another high watermark of $284 million.

Scott: Another positive signal when the occurrence of an inflection point, where pure renewable period revenues with existing customers from growing relationships exceeded those from declining relationships.

Scott: Our net new business performance for the quarter represented the fifth consecutive quarter of <unk>.

Scott: <unk> trailing 12 months performance and set another high watermark of $284 million.

Frank P. Lanuto: We are tangibly benefiting from being invited to participate in larger global fisheries as the average size of our wins increases 13% year over year. The combined impact of NetNewBusiness and improving performance with existing clients leads us to reaffirm our guidance for the year. Turning to Revenue by Capability, the first quarter saw revenue growth in four of our five principal capabilities. Performance median data delivered $77 million in revenue, an increase of 13% over the prior year period. This performance was driven by a combination of new business wins and growth from existing customers. Particular areas of strength included transportation and lodging.

Scott: We are tangibly benefiting from being invited to participate in larger global pitches as the average size of our wins increased 13% year over year.

Scott: The combined impact of net new business and improving performance with existing clients leads us to reaffirm our guidance.

Scott: Turning to revenue by capability, the first quarter saw revenue growth in four of our five principal capabilities.

Scott: Performance of median data delivered $77 million from revenue an increase of 13% over the prior year period.

Scott: This performance was driven by a combination of new business wins and growth from existing customers.

Particular areas of strength included transportation and lodging.

Frank P. Lanuto: Consumer Products and the Financial Service. Creativity and Communications delivered $292 million in revenue, an increase of 11% over the prior period. We had strong growth from a number of consumer products customers, as well as clients in the technology, media, and communication sectors, which grew about 2% over the prior period. Digital transformation returned to growth in the first quarter, with revenue increasing to $196 million, a 6% improvement over the prior period, driven by strong performance in food and beverage, efficacy, and technology-based clients, which grew 20% period over period.

Scott: Consumer products and financial services sectors.

Scott: Creativity and communications delivered $292 million in revenue an increase of 11% over the prior period.

Scott: We had strong growth from a number of consumer products customers as long as clients and technology media and communications sectors, which grew about 2% over the prior year.

Scott: Digital transformation returned to growth in the first quarter with revenue increasing to $196 million or.

A 6% improvement over the prior period, driven by strong performance in food and beverage.

Scott: Efficacy and technology based clients, which grew 20% period over period.

Frank P. Lanuto: This growth was partially offset by softness in financials as we anniversary the regional banking crisis of early 2023. Consumer Insights and Strategy reported $46 million in revenue, a decline of 7% year-over-year. This is largely a consequence of customers within the entertainment sector increasing spending more slowly subsequent to the Hollywood actors and writers' strike late last year.

Scott: This growth was partially offset by softness in financials as we anniversary the regional bank prices from early 'twenty three.

Scott: Consumer insights from strategy reported $46 million of revenues a decline of 7% year over year.

Scott: This is largely a consequence of customers within the entertainment sector, increasing spending more slowly subsequent sort of Hollywood actors are minus five point last year.

Frank P. Lanuto: Stagwell Marketing Club hosted $60 million in revenue, an increase of 7% year over year. The suite of software products continues to be an investment priority for us. In the first quarter, we maintained our investment spending of approximately $14 million on the cloud as we continue to build an industry-leading suite of tech products for the modern market. Finally, advocacy is a significant contributor to the business mix in election years as we benefit from increased political fundraising and spending running up to the elections in November.

Scott: Shiloh marketing cloud hosted $60 million of revenue an increase of 7% year over year.

Scott: The suite of software products continues to be an investment priority for us in the first quarter, we maintained our investment spending.

Scott: <unk> $14 million into the cloud as we continue to build an industry, leading suite of tech products put a modern marketer.

Scott: Finally, Apple.

Scott: Because he is a significant contributor to the business mix in election years, as we benefit from increased political fund raising and spending running up to the elections in November.

Frank P. Lanuto: In the first quarter, advocacy revenue grew to $65 million, an increase of 80% over the prior period. Now turning to geographical breakdown, we saw continued strong revenue growth in our international businesses of 7%, led by exceptionally strong growth of 14% in the United Kingdom.

Scott: In the first quarter efficacy revenue grew to $65 million.

Scott: An increase of 80% over the prior period.

Scott: Now turning to the geographical breakdown, we saw continued strong revenue growth in our international business is a 7%.

Scott: This was led by exceptionally strong growth of 14% and the United Kingdom.

Frank P. Lanuto: In the U.S., our largest market, revenue increased 9% over the prior year. Turning to costs, management took decisive actions in 2003 to right-size our cost structure to better align with trending revenues. The results of these actions can clearly be seen in our first quarter results. In the first quarter, the company delivered $90 million in adjusted EBITDA, an increase of 25% over the prior period, and it also increased the related margin to $17.5 million, an improvement of nearly 320 basis points over the prior quarter. Staffing is our largest cost, and in 2023, we took actions that reduced annualized salaries and headcount by $98 million and 4%, respectively.

Scott: In the U S. Our largest market revenue increased 9% over the prior year.

Scott: Turning to cost management and took decisive actions in 'twenty three to right size, our cost structure to better align with trading revenue.

Scott: Results of these actions can clearly be seen in our first quarter results in the first quarter, the company delivered $90 million and adjusted EBITDA and.

Scott: An increase of 25% over the prior period and it will also increase the related margin to 17% an improvement of nearly 320 basis points over the prior quarter.

Scott: Staffing is our largest cost and in 'twenty three we took actions that reduced annualized salaries and head count by $98 million.

Scott: And 4% respectively.

Frank P. Lanuto: We benefited from the full effect of these successive actions during Q1 as labor costs were lowered by more than 2%, or $7 million, and the staffing cost to net revenue ratio was lowered to 64.3%, an improvement of 270 basis points versus the prior year and the lowest first quarter ratio since our merger. In addition to staffing, we also focus on efficiently managing our G&A costs. For the first quarter, our G&A expenses were just under $100 million, in line with the same period in 2023.

Scott: We benefited from the full effects of these successive actions during Q1 as labor costs were lower by more than 2% or $7 million and the staffing cost to net revenue ratio was lowered to 64, 3%.

Scott: Improvement of 270 basis points versus the prior year.

Scott: The lowest first quarter ratio since our merger.

Scott: In addition to staffing we also focus on efficiently managing our G&A costs.

Scott: First quarter <unk> expenses were just under $100 million inline.

Scott: In line with the same period in 2003.

Scott: This results in G&A as a percentage of net revenue ratio of 18, 8%.

Frank P. Lanuto: This results in G&A as a percentage of net revenue of 18.8%, an improvement of nearly 30 basis points versus the prior period. Our GNA costs are inclusive of certain unbillable expenses. These costs tend to grow in line with our net revenues. For both the first quarters of 23 and 24, our unbillable customer expenses as a percentage of net revenue remained stable at 6%.

Scott: Proven nearly 30 basis points versus the prior period.

Scott: Our G&A costs are inclusive of certain on billable expenses. These costs tend to grow in line with our relevance for both the first quarters of 23, and 24 are unknowable customer expenses as a percentage of net revenue remained stable at 6%.

Frank P. Lanuto: Adjusting G&A expenses to account for these unbillables, our G&A actually decreased by slightly more than $1 million the year over year, representing a 2% decline, excluding unbillables. The cumulative impact of our revenue growth and cost factors contributed to a strong and just and even performance during the pandemic and allowed us to maintain our strong investment in the Stagwell market. Excluding the $14 million of cloud investment in Q1, our first quarter adjusted EBITDA margin would have been approximately $19.9 billion.

Scott: Adjusting DNA expenses to account for these on the levels, our G&A actually decreased by slightly more than $1 million year over year, representing a 2% decline excluding our mills.

Scott: The cumulative impact of our revenue growth and cost actions contributed to the strong adjusted EBITDA performance during the quarter.

Scott: And allowed us to maintain our strong investment in the <unk> market.

Scott: Excluding the $14 million of cloud investment in Q1, our first quarter adjusted EBITDA margin would have been approximately 19, 9%.

Frank P. Lanuto: I'm moving to the balance. We continue to make efficient allocations of capital to maintain a strong financial position, starting with the Deferred Acquisition Consideration. We reduced our VAT obligations by approximately $65 million from the end of the first quarter last year to $101 million at the end of the first quarter in 24. We remain on track to reduce our VAT obligations to approximately $40 million by the end of the year. We also acquired 4 million shares during the quarter at an average price of $6.11 per share for approximately $25 million.

Scott: Now moving to the balance sheet.

Scott: We continue to make efficient allocation of capital to maintain a strong financial position.

Scott: Starting with deferred acquisition consideration, we reduced obligations approximately $65 million from the end of the first quarter last year to $101 million at the end of the first quarter and 24.

Scott: We remain on track to reduce our debt obligations to approximately $40 million by the end of the year.

Scott: We also acquired 4 million shares during the quarter at an average price of $6 11 per share for approximately $25 million our existing buyback authorization.

Frank P. Lanuto: Our existing buyback authorization as of quarter end now has $114 million in remaining availability. CapEx, capital expenditures on software per quarter, was $14 million, broadly in line with our target. As a result, we ended the quarter with cash of $130 million and drawings under our revolver of $182 million.

Scott: Water and now has $114 million in remaining availability.

Scott: Capex and capitalized software for the quarter was $14 million.

Scott: In line with our targets.

Scott: As a result, we ended the quarter with cash of $130 million and drawings under our revolver of $182 million.

Frank P. Lanuto: Our leverage ratio at quarter-end was three times. And finally, as highlighted by Mark in his remarks, we are reaffirming our full year 24 guidance as follows. Organic net revenue growth is expected to be between 5% to 7%. Organic net revenue excluding advocacy growth is expected to be 4% to 5%.

Scott: Our leverage ratio at quarter end was three times.

Scott: And finally as highlighted by market in his remarks, we are reaffirming our full year 'twenty for guidance as follows.

Scott: <unk> net revenue growth is expected to be between 5% to 7%.

Scott: Organic net revenue excluding advocacy growth is expected to be 4% to 5%.

Frank P. Lanuto: Adjusted ETH is expected to be between $400 million and $450 million. We expect to deliver approximately 50% of free cash flow conversion. And adjusted earnings per share is expected to be between 75 cents and 80 cents each.

Scott: Adjusted EBITDA is expected to be between 400 million to $460 million.

Scott: We expect to deliver approximately 50% free cash flow conversion.

Scott: And adjusted earnings per share is expected to be between 75 and <unk>.

Scott: Thanks.

Frank P. Lanuto: That concludes our prepared remarks for this morning. I will now turn the call back over to Ben Allanson to open the Q&A portion of the call. Thank you, Frank.

Scott: That concludes our prepared remarks for this morning, I will now turn the call back over to Ben Alison.

Ben Allanson: To open the Q&A portion of the call.

Ben Allanson: And just to remind you, if you have any questions, please submit them via the chat button at the top of the screen. We're going to start with a question here from Barbara Crockett at Rosenblatt. She says, Can you please walk us through what you see as the drivers of acceleration of organic net revenue growth over the balance of 2024, from the 2% report in Q1 to the 5% to 7% in the guide today? How much visibility do you have into this acceleration?

Ben Allanson: Thank you Frank and just to remind me if you have any questions. Please you should make them buy the Chapman.

Ben Allanson: St.

Mark John Zgutowicz: A really good checkout. Sure. Thank you, Martin, for that question. Look, I think as you analyze it, you can see international is moving along nicely. Advocacy is moving along nicely. Media is moving along nicely.

Ben Allanson: Good question hand from Barton Crockett erosion flat since kind of <unk>.

Ben Allanson: Please walk us through what you see as the drivers of the acceleration of organic net revenue growth for the balance of 2024 from the 2% reported in Q1, 5% and the guide today.

Barton Crockett: How much visibility you have into this acceleration getting steady state around where is that going to be one alternative.

Speaker Change: Got it.

Speaker Change: Sure. Thank you Martin for that question.

Speaker Change: Look I think as you analyze that you can see international is moving along nicely advocacy is way beyond nicely media is moving along nicely.

Mark John Zgutowicz: And the next thing to really come up and continue to, I think, grow is that digital transformation has room for growth. Look, media is firing on all cylinders already with double-digit growth. Our pipeline, when I look at our pipeline, is 50% higher than it was at this time last year. We are in a record number of new pitches of enhanced size given our enhanced reputation.

Speaker Change: And then next to really come up and continue to grow as digital transformation has has room for growth.

Speaker Change: Media is firing on all cylinders already with double digit growth.

Speaker Change: Our pipeline when I look at our pipeline is 50% higher than it was at this time last year, we are in a record number of new pitches.

Speaker Change: Enhanced size given the enhanced reputation.

Mark John Zgutowicz: Also, AI is beginning, I think, customers are beginning to get over the "let's take a look at it and start to implement the phase." So, I think that you're going to really see a good second quarter, and things will build to the third and fourth quarters because that's when advocacy and media in the holiday season tend to crescendo. So, I look at it as you're going to really kind of have to see strength building through the year as I think digital transformation will strengthen and media and advocacy will really take off in the second half. So that's how I see it developing and meeting the goal. How's your thought on digital transformation? A question here from Jason Kreyer and Craig Howard.

Speaker Change: Also AI is beginning I think customers are beginning to get over the lets take a look at it and start to implement the phase. So I think that youre going to really see.

Speaker Change: A good second quarter and things will build through the third and fourth quarters, because that's when advocacy and the media and the holiday season tend to a crescendo.

Speaker Change: So I look at it as youre going to really kind of half.

Speaker Change: <unk> strengths building through the year as I think digital transformation will strengthen.

Speaker Change: And media.

Speaker Change: Advocacy, we really take off in the second half of the year. So that's how I see it developing.

Speaker Change: Leading the call.

Speaker Change: And how is just on digital transformation question handful, Jason prior and Craig Hallum, He's asking about green shoots we're seeing in digital transformation and that kind of gives us confidence in our church <unk>.

Mark John Zgutowicz: He's asking about the green shoots we're seeing in digital transformation that kind of gives us confidence in our attempt to grow that. Yeah, we're seeing, I think, some of the companies that had cut back last year beginning to come back. We're seeing growth and, again, really AI. I mean, look, if you make the chips and then you have all the cloud, you need the applications.

Speaker Change: Yes, we're seeing and I think some of the companies.

Speaker Change: Had cut back last year are beginning to come back we're seeing growth.

Speaker Change: Then really AI.

Speaker Change: Okay.

Speaker Change: If you make the chips and then you have all the cloud in these new applications and I think that people are discovering new applications and we are in the AI application building business.

Mark John Zgutowicz: And I think that people are discovering the applications. And we are in the AI application building business. That is what we're doing. But I think first, customers had to be assured that their data would not go into the worldwide global data pot.

Speaker Change: That is what we're doing I think first customers has to be assured that their data would not go into the worldwide global global data part.

Mark John Zgutowicz: And I think that's why we put together the clean rooms for both internally and for our clients in order to provide that kind of confidence. And I think as customers get confidence that AI can be used safely and securely, you're just going to see this take off. We're going to go back to the biggest problem being finding engineers as opposed to this problem finding work, and I think that really should start to hit in the second half of the year.

Speaker Change: And I think that's why we put together the clean rooms for both internally and for our clients in order to provide that kind of confidence and I think as customers get confidence that AI can be used safely and securely youre just going to see this take off we're going to go back to the.

Speaker Change: The biggest problem being funded engineers as opposed to the biggest problems finding work and I think thats really should hit in the second half of the year. I think you can see that building and all of the tech companies in terms of what they're reporting.

Mark John Zgutowicz: I think you can see that building in all of the tech companies in terms of what they're reporting. Maybe just on the tech customers as well, and if that's the question here, just talking about tech coming back, some of the key trends we're seeing with technology customers and them sort of rebounding this year. Yeah, I mean, we're seeing them slowly. They're not back to full throttle yet.

Speaker Change: Maybe just on the tank customers as well and if Thats. The question, Dan just talked about tech coming back some of the key trends, we're seeing with technology customers and that sort of rebounding into shape.

Speaker Change: I mean, we're seeing them slowly.

Mark John Zgutowicz: I think they still have more to go. It is shaping up to be a year of competition. We show some increase. Again, our list of top clients would be a list of large-size tech companies. In many ways, we're a tech company's tech company, helping to develop AI front-ends, consumer interactions, and as well as to build new applications for our clients. But I think you're still seeing some caution on the side of those companies, but again, they are building out their programs to bring AI to the masses.

Speaker Change: They're not back to both Bravo, yet I think they still have more to go it is shaping up to be a year of competition. We've showed some increase in our list of top clients would be a list of large sized tech companies in many ways, where tech companies Tech company, helping to develop.

Speaker Change: Front end consumer interactions.

Speaker Change: As well as to build new applications for our clients, but I think we're still seeing some caution on the on the side of those companies, but again they are building out their programs. However to bring AI to the masses that is where we're going to benefit and I think at a certain point the floodgates will open here and there.

Mark John Zgutowicz: That is where we're going to benefit, and I think at a certain point the floodgates will open here and that that can't be too far away. Chipping gears a little bit, just onto the international side of things, a question from Mark Zgutowicz at Benchmark.

Speaker Change: That can't be too far away.

Mark John Zgutowicz: He says, with just about 12% of net revenue outside the U.S. and the U.K., how should we think about growth by geography being backed into our guidance or growth by geography moving forward? And he asks, is expansion to Asia-Pacific still a meaningful initiative for you to unlock the biggest global contract opportunities? I think you can see, when you go through our acquisitions, you can see clearly our strategy. A group of those acquisitions are frontiers of marketing, people like Movers and Shakers, people like Leftfield Labs, and AI.

Speaker Change: Shifting gears, a little bit just on the international side of things. It's a question for Mark CCAR, which benchmark essentially with just about 12% of net revenue outside the U S. Just in the U K, how should we think about APAC rose by geography being factored into our guidance of course by geography meeting fully financed as expansion to Asia.

Speaker Change: Shifting meaningful initiatives to unlock that value.

Speaker Change: It's closing the contract on the <unk>.

Speaker Change: You can see when you go through our acquisitions you can see clearly our strategy.

Speaker Change: A group of those acquisitions are frontiers of marketing.

Speaker Change: Listen Shakers to collect Westfield labs in AI.

Speaker Change: And the other group of acquisitions is clearly Brazil UK.

Mark John Zgutowicz: And the other group of acquisitions is clearly Brazil and the UK, and you're going to see a really more focus in Asia and the Mideast in the next few months. I think that you're going to see us build the global network that we need to win. Look, for the first time, we're in a $40 to $60 million pitch.

Speaker Change: You're going to see really more focus in Asia and the mid east.

Speaker Change: The next few months I think.

Speaker Change: We're going to see us build in the global network that we need to win both for the first time we're in.

Speaker Change: 40% to $60 million pitch people are looking at cyclone and CNI says.

Mark John Zgutowicz: People are looking at Stagwell and seeing us as the logical company taking on the majors at a growing scale. So we're going to complete the global network. We also think that, you know, we put together Bluefin, which is an office where we brought together 17 European agencies in London, and we can see the benefits, 14% growth, just beginning, frankly, because they used to get very small pitches because their services were fragmented. Now, it's almost like a shopping mall.

Speaker Change: The logical.

Speaker Change: Companies, taking on taking on the majors.

Speaker Change: Growing scale, so we're going to complete the global network. We also think that we've put together bluefin, which has an office, where we brought together 17 European agencies in London.

Speaker Change: We can see the benefits 14% growth just beginning frankly, because they used to get very small pitches. Because they are services were fragmented now it's almost like a shopping mall you could see advertising research media.

Mark John Zgutowicz: You can see advertising, research, media, a set of coordinated services, and they're getting more than a million dollars out of it. So while the European marketplace may not be a fast grower, our ability to grow market share in Europe, I think having put together our agencies and added a structure with James Townsend, a CEO, having brought in a whole marketing team, I think we have very good prospects. And that's what we're gonna do region by region until we have a complete functioning, you know, scaled global network. Great.

Speaker Change: A set of coordinated services and they're getting multi million dollar opportunities. So while the European marketplace may not be a high growth our ability to grow market share in Europe, I think have been put together our agencies, having added a structure where the James Townsend.

Speaker Change: <unk> has brought in a whole marketing team.

Speaker Change: I think we have very good prospects and that's what we're going to do a region by region until we have a complete functioning.

Speaker Change: Gail Global network here.

Speaker Change: Craig.

Mark John Zgutowicz: We'll just have a question on net-new business first, and then we'll shift to advocacy. A number of questions on that topic. But Laura Martin over at Medium says, 66 million net-new business wins in Q1. Very impressive.

Speaker Change: We'll just have a question on many business first and then we'll shift to advocacy number of questions on that topic, but seven Laura Martin Needham.

Craig Hallum: And she was $66 million of net new business wins in Q1 bearing pressure of up to $2 84 for.

Mark John Zgutowicz: Up to 284 for the full 8 for the trend in 12 months. What do you think is the normalized revenue growth rate for Stagwell? Like, you know, are we in the mid-single digits, kind of rich high-single digits?

Craig Hallum: The trailing 12 months.

Speaker Change: The thing is the normalized range a growth rate standpoint.

Speaker Change: In the mid single digits can reach high single digits.

Mark John Zgutowicz: What do we think? Well, look, I think that we'll see a little bit of, you know, what the Fed does today with our economy. But look, I think we're building back to our targets, right, of getting to 10 percent year-over-year growth. We know that we could have 15 percent, you know, in 2022. 2023, for a number of factors, was not the year we had planned, but a lot of those factors were exogenous. They were the fear of recession. They were media slowdowns, and they were strikes across photo and other industries. There was kind of some pullbacks.

Speaker Change: Well I think that.

Speaker Change: We've seen a little bit of.

Speaker Change: What the fed does today with our economy.

Speaker Change: I think we're building back to our targets right is getting to the 10% year over year growth, we know that we have 15%.

Speaker Change: In 2022 2023 for a number of factors was not the year, we had planned but a lot of those factors were exogenous. They fear of recession. They were media slowdowns, there were strikes across auto and other industries those pullbacks.

Speaker Change: Striving to get back to those to those numbers and I think this is a big transition for the year by the end of the year will have an expanded global network will help us grow marketing cloud.

Mark John Zgutowicz: You know, we're striving to get back to those numbers, and I think this is a big transition year. By the end of the year, we'll have an expanded global network. We'll have our Stagwell Marketing Cloud, you know, products, at least in research, I think, out that in full force. We'll have our media, you know, our ID graph that will extend our capabilities, I think, into, you know, deeper media services that will also open up, I think, more revenue opportunities.

Speaker Change: Products at least in the research I think outlet for US we'll have our media.

Speaker Change: I'd graph that will extend our capabilities into.

Speaker Change: Deeper media services that will also open up more revenue opportunities digital transformation will be in the circle of AI. So to me. This is a transition here back to the to that kind of growth that we believe is the long term target.

Mark John Zgutowicz: Digital transformation will be in the thick of AI. So to me, this is a transition year back to that kind of growth that we believe is the long-term target that the firm is capable of. Advocacy. A couple of questions on this. First up from Steve Cahall at Wells Fargo.

Speaker Change: It's capable of.

Mark John Zgutowicz: Did advocacy outperform your expectations on revenue, net revenue, and adjustability? With our side in Q1, we obviously didn't adjust the guidance today, but does that strengthen advocacy, as well as the new business talent we discussed, give you some more confidence in the ability to achieve the guidance? I think the strength of advocacy obviously gives us, you know, it's one of the elements that gives us confidence. I think advocacy was a little stronger than expected, particularly since there were no real primaries on each side.

Speaker Change: I guess couple of questions on my side first on a firm Steve Khail at Wells Fargo.

Steven Lee Cahall: Good advocacy outperforming our expectations.

Steven Lee Cahall: Revenue net revenue and adjusted EBITDA side in Q1, we don't see it as adjusted guidance to date, but does that strengthen efficacy as well as the new business challenges discussed give you some more confidence in the guidance range.

Steven Lee Cahall: I think the strength of adequacy, obviously gives us.

Speaker Change: As one of the elements that it gives us confidence I think advocacy was a little stronger.

Speaker Change: Than expected, particularly since there were no real primaries on each side.

Mark John Zgutowicz: And so when you see that kind of strength in advocacy and you look at it, well, you know, 2028 will probably be, I thought 2024 would be the record, but now I realize it will be 2028 because there will be, you know, no matter who wins, open Presidencies on both sides, and it will be double primaries. So I think that the building strength of this, given the fact that there are no primaries, essentially shows that this is going to be a record year. You can see it forming.

Speaker Change: So when you see that kind of strengthened and advocacy and you look at it well.

Speaker Change: 2028, there will probably be approximately 24 will be the record, but now I realize it will be 2028, because there will be.

Speaker Change: No matter who wins.

Speaker Change: President <unk> on both sides and it will be double primary so I think that the building strength of this given the fact that there are no primaries.

Speaker Change: Essentially shows that this is going to be a record year.

Speaker Change: See it forming people are really going to be 10.

Speaker Change: <unk> tends to really focus on those grades, particularly once the conventions get kicked off.

Mark John Zgutowicz: People are really going to intensely focus on this race, particularly once the conventions get kicked off. And even though there's a little bit of a lull now, advocacy is sticking out. People are planning for an incredible race.

Speaker Change: Even though there is a little bit of a loan now.

Speaker Change: Advocacy is the count people are planning on an incredible rates and I think the services. We provide will continue to diversify in the air.

Mark John Zgutowicz: And I think the services we provide will continue to diversify. Just sort of following up on advocacy, another question from Laura. She's asking because there's obviously some press speculation that some legal fees might cannibalize media spend and focus from the Trump campaign.

Speaker Change: Just following up on efficacy another question from lower I'm sure.

Speaker Change: She's asking.

Speaker Change: The press speculation that some legal fees might capitalize media spend and focus on the truck.

Speaker Change: Campaign.

Mark John Zgutowicz: Do you think that those legal structures might lower media spending and advocacy revenue in 2024 versus expectations, and how might that impact our business? We don't do fundraising for the Trump campaign, so it's not our focus is really on House and Senate races and super PACs that are not directly connected to the campaign, so that factor wouldn't come into us really either way. I think America's voice, her big race, and people, there used to be kind of no tradition of people getting involved and active. Used to be about only 1% that would contribute, and now it's hit around 10 to 12%, and I think you're going to see really strong participation. Those factors are not going to influence us one bit.

Speaker Change: Do you think those new constructions might lower than your spending on advocacy revenue in 'twenty four missed expectations and how many might that impact our business.

Speaker Change: We don't to fundraising for the Trump campaign.

Speaker Change: It's not our focus is really on.

Speaker Change: House and Senate races in Super packs that are that are not correctly the capex.

Speaker Change: That factor wouldn't come come into us.

Speaker Change: Really either way.

Speaker Change: Well look I think Americas cause a big race.

Speaker Change: And people there used to be kind of no tradition of people getting involved and active used to be a battle with 1% that would contribute.

Speaker Change: It hit around 10% to 12%.

Speaker Change: I think you're going to see really strong participation.

Speaker Change: Those factors are not correct.

Speaker Change: That's one way to do.

Speaker Change: Great.

Mark John Zgutowicz: Great. One question on growth rates, and then we're going to talk about AI a little bit, but a question from Cameron Faye and Morgan Stanley. Can you maybe discuss what drove some of the, and this may be for Frank as well, what drove some of the divergence in growth rates between gross and net revenue in the quarter, and how much of an impact performance media might have... It's less about performance media.

Speaker Change: One question on birth rates number that it took a little bit question for Mac on camera.

Speaker Change: Stanley.

Speaker Change: Can you discuss what drove some of the maybe for Frank as well what drove some of the divergence in growth rates between gross and net revenue in the quarter and how much of an impact what was media.

Mark John Zgutowicz: We have now acquired a number of companies that have, you know, more, that recognize more gap revenue versus net revenue. You look at, we acquired Team Epiphany, and Left Field Labs. Some of these new companies are more event-oriented. Some of the digital online fundraising also generates higher levels of gap revenue. So I think, you know, those two or three factors show this divergence.

Stanley: It's less about performance media, we have now acquired a number of comps.

Stanley: Companies that have.

Stanley: More that recognized more GAAP revenue versus net revenue you look at kind of what are you.

Stanley: We acquired <unk> Westfield bounce some of these new companies are more oriented some of the some of the digital online fundraising also generates higher levels of GAAP revenue.

Stanley: I think.

Stanley: To read those two or three factors drove this divergence.

Mark John Zgutowicz: You know, we talked about the gap revenue because, after all, it is evidence of economic activity. We're looking at how we're going to make money. The fact that those kinds of revenues change is a part of showing the building, you know, sequence of events here, and it's going to be quite favorable to Stagwell through the year. Shifting gears, AI. A question from Jeff Van Sinderen.

Stanley: We talked about the GAAP revenue because after all it is is evidence of economic activity.

Stanley: How we're going to make money back that that those kinds of revenues changed are part of showing kind of a building sequence of events here. So it's going to be quite favorable to <unk> through the year.

Stanley: Okay.

Mark John Zgutowicz: So two parts of this. One, can you talk about the latest you're seeing in terms of customer projects involving AI? And then the other part of it is, can you speak more about how we're using AI in our shared services platform and internally? Sure. We have about three to four hundred people internally. Well, just to go back and remember that we have the Stagwell Market Cloud, and we have a central innovation group. And that was one of the key principles in building Stagwell.

Stanley: Shifting gaze AI.

Stanley: From January on Synchrony, so to cost one can you talk about language youre seeing in terms of customer projects involving AI and then the other part of it is can you speak more about how are we using AI in our shared services platform and internally.

Stanley: So.

Stanley: Sure.

Speaker Change: We have about 3% to 400 people internally.

Stanley: Well just to go back to say remember that we have an established marketing cloud and we have a central innovation group and that that was one of the key principles in buildings Bagwell and as Frank pointed out already that are clear another $14 million higher that we were not investing heavily.

Mark John Zgutowicz: And, you know, as Frank pointed out, our $14 million would be higher if we were not investing heavily in AI and other tech products as a central innovation function. We've got about three or four hundred employees who are assigned to the central kind of AI Experimental. Right now, we're actually completing our survey of what everybody is looking for out of AI. Obviously, you know, on the word side, people are looking for lots of the ability to summarize information, the ability to help write things more clearly. And I think there's a lot of interest in text-to-video. Give me a picture of a dog in snow, kind of thing.

Stanley: And AI and other tech products.

Stanley: Innovation function.

Stanley: We've got three or 400 employees, who are signed onto the central.

Stanley: Experimental right now we're actually completing a survey of what everybody is looking for out of the AI obviously.

Stanley: On the award side.

Stanley: Relapses.

Stanley: The ability to summarize information ability to help to help write things more clearly and I think unless there is a lot of interest in X to video.

Stanley: Picture of a dog it's now.

Mark John Zgutowicz: And I think on the client end, clients want to make sure that before they dive into AI, they can be safe and secure. And that's why we are working on safety and security first. And then they want to understand, you know, we're seeing applications where shopping bots will make it just far easier for you to say things like, I'm having an office party; tell me what to buy. The whole ability for you to look through data sets and say, hey, can you bring up all the polling on presidential approval for the last five years?

Stanley: Kind of thing.

Stanley: On the client and clients want to make sure that the debt.

Stanley: <unk> dive into AI that can be safe and secure and Thats why we are working on safety and security.

Stanley: And then I want to understand.

Stanley: We're seeing applications, where shopping box what vintages are easier for you to say since I can have an office party and tell me what to buy.

Stanley: The whole ability for you to look through datasets and say hey can we bring up all the polling on the presidential approval for the last five years. These are unprecedented ways in which people can interact with technology.

Mark John Zgutowicz: These are unprecedented ways in which people can interact with technology and get a response that would have taken hours. So we think there's going to be an enormous amount of work in redoing virtually every website to be AI-enabled in order to provide that kind of confidence. That's where I think we're focusing a lot of our work with clients is exactly there. How does AI change your brand? After all, if you're going to effectively interact with a brand's AI, as much as you're going to see advertisements, that becomes an absolute critical part of how you market and establish your brand image.

Stanley: Get a response.

Stanley: It would've taken hours and hours.

Stanley: So we think theres going to be an enormous amount of work in redoing virtually every website AI enabled in order to provide that kind of confidence that's where I think we're focusing a lot of our work with clients is exactly there.

Stanley: Does it change your brand extra if you're going to effectively interact with our brands AI as much as you're going to see advertisements that becomes the absolute critical part of how you market and establish a brand image. That's why it really benefits us because we are used to really.

Mark John Zgutowicz: That's why I think it really benefits us because we're used to engineering and designing the last mile, that connection between the company and the customer. You're going to see that work explode. Just one final question on our side of things, and I think this one's for Frank, between your appetite to grow your media business and digital capabilities internationally, potential divestitures, and the DAC, what should we expect in terms of deleveraging by the end of 2024? I think three times it will be leveraged by the end of 2024. Yeah, we're at three times already.

Stanley: Engineering and designing the last mile that connection between the company and.

Stanley: And the customer.

Stanley: I think youre going to see that work explode.

Stanley: Great.

Speaker Change: One final question on also things that I think it's one is for Frank.

Frank: Between around trying to growing your media business.

Frank: Digital capabilities internationally and potential divestitures that what should we expect in terms of deleveraging by the end of 2023.

Frank: Three times leverage.

Frank: Yes, we are at three times now we expect to be somewhere in the mid twos by the end of the year I would say.

Frank: And that comes from stronger cash flows that we'll experience in the back half of the year.

Frank: It's steadily ramps up Q3, and then Q4 really drives a lot of cash and that will drive down the leverage ratio.

Frank P. Lanuto: We expect to be somewhere in the mid-twos by the end of the year. That comes from the stronger cash flows that we'll experience in the back half of the year. It steadily ramps up in Q3 and then Q4, really driving a lot of cash, and that will drive down the leverage ratio. Well, that brings us to a closed day on our first quarter earnings call. Thank you very much for joining us, and we hope you'll be able to join us in a few months' time for our second quarter.

Speaker Change: Alright, well that brings us to the close stay an optimist.

Speaker Change: Cool.

Speaker Change: Thank you very much for joining us and we hope you'll be able to join us in a few months time for our second quarter call.