Q1 2025 Stagwell Inc Earnings Call
Operator: Welcome to the first quarter 2025 earnings webcast.
Webcast My name is Ben Alison and I lead the Investor relations function here at Stag well with me today are Mark Penn.
Ben Allanson: My name is Ben Allanson, and I lead the investor relations function here at Stagwell.
Ben Allanson: With me today are Mark Penn, Stagwell's founder, chairman, and chief executive officer, and Franklin Lanuto, the chief financial officer. Mark will provide a business update and Frank will share a financial review.
Mark Penn: <unk> founder Chairman and Chief Executive Officer, and frankly, new to the Chief Financial Officer.
Ben Allanson: After the prepared remarks, we will open the floor for Q&A. You're welcome to submit questions through the chat function.
Mark Penn: Update, and Frank will share a financial review. After the prepared remarks, we will open the floor for Q&A. Your well to submit questions through the chat function.
Ben Allanson: Before we begin, I'd like to remind you that the following remarks include forward-looking statements and non-GAAP financial data. forward looking statements about the company, including those related to earnings guidance are subject to uncertainties and risk factors addressed in our earnings release slide presentation and the company's SEC filing.
Speaker Change: Before we begin, I'd like to remind you that the following remarks include forward looking statements and non-GAAP financial data.
Speaker Change: Forward-looking statements about the company, including those relates to earnings guidance, as subject to uncertainties and risk factors addressed in our earnings release, slide presentation, and the company's SEC filings.
Ben Allanson: please refer to our website stagwellglobal.com forward slash investors for an investor presentation and additional resources. This morning's press release and slide deck provide definitions, explanations and reconciliations of non GAP financial data.
Speaker Change: Please refer to our website, stagwellglobal.com forward slash investors for an investor presentation and additional resources.
Speaker Change: This morning's press release and slide-debt provide definitions, explanations and reconciliation of non-GAAP financial data. And with that, I'd like to turn the call over to our chairman, CEO , Mark Penn.
Mark Penn: And with that, I'd like to turn the call over to our Chairman and CEO Mark Thank you, Ben, on this really lovely day here at the World Trade Center. And thank you to everyone joining us for our earnings. Stagwell delivered strong results to start the year, firmly in line with our expectations, and with another record-breaking net new business quarter indicative of the strengthening position of Stagwell as the challenger network. While others in the industry are flailing about with endless reorganizations, behemoth mergers, and downsizing, Stagwell is on a steady course of growth, scale, and innovation. I have never been more bullish about the opportunities for Stagwell in this market.
Speaker Change: Thank you, Ben, on this really lovely day for the World Trade Center, and thank you to everyone joining us for our earnings call.
Speaker Change: Stagwell delivered strong results to start the year firmly in line with our expectations and with another record breaking net new business quarter, indicative of the strengthening position of Stagwell as the challenger network.
Speaker Change: Well, others in the industry are flailing about with endless reorganizations, behemoth mergers and downsizing. Stagwell is on a steady course of growth, scale and innovation. I have never been more bullish about the opportunities for Stagwell in this market.
Mark Penn: Despite the noise of Paris and the low point of the advocacy cycle this quarter, we achieved double digit net revenue growth, X advocacy of 15 percent in digital transformation, 10 percent in creativity, 45 percent in the Stagwell Marketing Cloud. We're taking share. We have built an enviable mix of best in class, creative, transformative digital capabilities and an innovative suite of tech solutions.
Speaker Change: Despite the noise of tariffs and the low point of the advocacy cycle this quarter, we achieved double-digit net revenue growth x advocacy of 15% in digital transformation, 10% in creativity, 45% in the Stagwell marketing cloud.
Speaker Change: We're taking share. We have built an envy of omics, a best in class, creative, transformative digital capabilities, and an innovative suite of tech solutions.
Mark Penn: I would strongly encourage you to visit Stagwell's investor website to watch the webcast of the Investor Day we held last month to learn more about our strategy to grow, scale, and innovate. Turning to our results, Stagwell delivered strong growth in four of five principal capabilities, posting 9% total net revenue growth, excluding advocacy in the first quarter. We have achieved this while generating $81 million in adjusted EBITDA and investing $17 million into our tech initiatives and carefully managing our labor costs. The comp to net revenue ratio for the first quarter was 65.3%, an improvement of 175 basis points over the same period in 2023, the last non-political year.
Speaker Change: I would strongly encourage you to visit Stagwell's Investor website to watch the webcast of the Investor Day we held last month to learn more about our strategy to grow scale and innovate.
Speaker Change: Turning to our results, Stagwell delivered strong growth in four of five principal capabilities posting 9% total net revenue growth, excluding advocacy in the first quarter. [inaudible]
Speaker Change: We have ensured this while generating $81 million in adjusted EBITDA and investing $17 million into our tech initiatives and carefully managing our labor costs.
Speaker Change: The Compton net revenue ratio for the first quarter was 65.3% and improvement of 175 basis points over the same period in 2023 the last non-political year.
Mark Penn: work has been done on implementing the AI tools that underpin the 80 to $100 million efficiency drive that we announced on investment We are on track to achieve $60 to $70 million in cost savings this year, and we'll update further on that progress in the second quarter call. Stagwell saw minimal impact from tariffs in the first quarter. We'll continue to monitor developments as the second quarter begins, but our business, which is particularly strong with tech companies, is not directly impacted, and customers have not signaled any intention to pull back spending. Tariff mania seems overblown to us at the moment.
Speaker Change: Work has been on on implementing the AI tools that under 10 to 80 do $100 million efficiency drive that we announced on Investor Day.
Speaker Change: We are on track to achieve $60 to $70 million in cost savings this year, and we'll update further on that progress in the second quarter call.
Speaker Change: Stagwell saw a minimal impact from Cairo in the first quarter. We'll continue to monitor developments as a second quarter begins, but our business, which is particularly strong with tech companies, is not directly impacted. [inaudible]
Speaker Change: and customers have not signaled any intention to pull back spending. Tariff Mania seems overblown to us at the moment.
Mark Penn: However, reputation risk is at the top of mind of many executives as they navigate the challenges that tariffs and thorny political issues bring. Our risk and reputation unit bringing together experts from across Stagwell's agency is uniquely positioned to help brands adopt their message in a rapidly evolving landscape and is winning major new assignments. The first quarter saw record net new business trends, a record in Stagwell's history. Stagwell posted $130 million in net new business for the quarter, almost double a year ago. This figure includes key wins with PayPal, Panera, CarMax, Celsius, and Hyatt. These results bring our trailing 12-month net new business to $446 million, more than $160 million higher than the same figure at the end of 0.224.
Speaker Change: However, reputation risk is at the top of mind of many executives as they navigate the challenges that tariffs and thorny political issues bring.
Speaker Change: Our Risk and Reputation Unit brings together experts from across Stagwell's agency, is uniquely positioned to help brands adapt their message in a rapidly evolving landscape and is winning major new assignments.
The first quarter saw a record net new business trend.
Speaker Change: a record in Stagwell's history. Stagwell posted $130 million in net new business for the quarter, almost double a year ago. This figure includes key wins with PayPal, Panara, Carmac, Shellsius, and Hyatt.
Speaker Change: These results bring our trailing 12 months net new business to $446 million, more than $160 million higher than the same figure at the end of 1Q24.
Mark Penn: These wins are highlighted by customers in the technology and retail industries, leading to strong growth in these verticals. In the first quarter, we saw technology customers increase their spend with us by 18%, and retail customers by 52%. The work for these new customers is just beginning, and will ramp throughout the year, particularly in the second half, giving us confidence in our guidance. We're already transforming brand positioning of many clients. Our agencies reintroduced Starbucks to the world at the Super Bowl and launched Visa's new global campaign at the Oscars. We're winning bigger assignments with bigger clients that offer great opportunities to expand the relationship across our core capabilities.
Speaker Change: These winds are highlighted by customers in the technology and retail industries leading to strong growth in these verticals. In the first quarter we saw technology customers increase their spend with us by 18% and retail customers by 52%.
Speaker Change: The work for these new customers is just beginning and will ramp throughout the year, particularly in the second half, giving us confidence in our guidance.
Speaker Change: We're already transforming brand positioning of many clients. Our agencies reintroduce Starbucks to the world at the Super Bowl and launch Visa's new global campaign at the Oscars.
Speaker Change: We went in bigger assignments, bigger clients that offer great opportunities to expand the relationship across our core capabilities.
Mark Penn: We now report organic growth annually as opposed to quarterly, but you can rest assured that this quarter saw a positive organic growth advocacy headlined by the digital transformation capability that had 15% growth, but no acquisitions or dispositions. Turning to scale, we have now fully reinvested the proceeds from the concentric life disposition into prudent M&A at accretive multiples. M&A will continue to be a key driver for us as we look to expand internationally and strengthen our capabilities while deploying capital wise.
Speaker Change: We now report organic growth annually for supposed quarterly, but you can arrest a short that this quarter's for a positive organic growth ex-patricacy, headlined by the digital transportation capability, that had 15% growth, but no acquisitions or disposition.
Speaker Change: Turning to scale, we have now fully reinvested the proceeds from the concentric life disposition into prudent M&A at accredit multiples. M&A will continue to be a key driver for us as we look to expand internationally and strengthen our capabilities while deploying capital
Mark Penn: We announced this week the acquisition of JetFuel to strengthen our experiential and shopper marketing capabilities. They've delivered outstanding experiences for a number of established brands like Walmart and Unilever, as well as amplifying the reach of emerging brands like Seaport Energy and Mr. Beast Beastable.
Speaker Change: We announced this week the acquisition of Jeff Fuel to strengthen our experiential and shop for marketing capabilities they've delivered outstanding experiences for a number of established
Speaker Change: like Walmart and Unilever, as well as amplifying their reach of emerging brands like C4 Energy and Mr. Beast Stables.
Mark Penn: Our recent acquisition of German media monitoring and analytics platform Unicepta is also off to a good start. It recently won significant multi-year business with the European Commission and the BBC.
Speaker Change: Our recent acquisition of German media monitoring and analytics platform UNICEFTA is also off to a good start. It recently won significant multi-year business with the European Commission and the BPC.
Mark Penn: In the Middle East, we completed the acquisition of the Create Group at the beginning of the second quarter, but the collaborative work with the Code & Theory Network started before the deal even closed. The partnership has already delivered transformative work for clients, including work for HSBC, Kandinas, and Abu Dhabi. The Middle East is a major growth market for us, and we saw net revenue grow by more than 250% year over year in the first quarter.
Speaker Change: In the Middle East, we completed the acquisition of the create group at the beginning of the second quarter, but the collaborative work with code and theory, the code and theory network started before the deal even closed. The partnership has already delivered transformative work for clients including work for HSDC,
Speaker Change: The Middle East is a major growth market for us, and we saw in that revenue growth by more than 250% year over year in the first quarter. We're also making progress in Asia, winning new mandates with Diagio, Jolly B and Princess Cruises.
Mark Penn: We're also making progress in Asia, winning new mandates with Diageo, Jollibee, and Princess Cruises. This push will only be strengthened by the addition of ADK Global, which we anticipate will close in the next couple of months.
Speaker Change: This push will only be strengthened by the addition of ADK Global, which we anticipate will close in the next couple of months.
Mark Penn: And we continue to lean into the sports business as a key differentiator. We added to our sports offering with the acquisition of Gold Rabbit in Q1 and the Around Augmented Reality Experience continues to gain traction, now providing its innovative experience to the athletics at their new home in Sacramento. This sports push aligns with our programming and time. where we will once again bring together athletes, marketers, and global leaders. This time is the official sports partner of the Lions Festival. We have inspirational athletes like Carmelo Anthony, Alex Rodriguez, Sue Bird, and Jordan Childs in our lineup.
Speaker Change: And we continue to lean into the sports business as a key differentiator. We add it to our sports offering with the acquisition sold rabbit and Q1 and the around augmented reality experience continues to gain traction.
Speaker Change: Now providing its innovative experience to the athletics edit of their new home in Sacramento.
This sports push, this sports push aligns with our programming and task.
Speaker Change: where we will once again bring together athletes, marketers, and global leaders.
Speaker Change: This time is the official sports partner of the Lions Festival. We have inspirational efforts like Femelo Anthony, Alex Rodriguez, Sue Bird, and Jordan Trials in our lineup. We'll look for more partner and programing announcements in the coming weeks.
Mark Penn: Look for more partner and programming announcements in the coming weeks.
Mark Penn: Lastly, we continue to be at the frontier of innovation as a tech company's tech. The Stagwell Marketing Cloud saw net revenue growth, excluding advocacy of 45% in the first quarter. We celebrated a number of wins, including with a large U.S. specialty insurance company. Quest Brands saw a particularly strong growth approaching 200% in the quarter as it incorporated recent acquisition, Bera.ai. Brands like Intel, Amazon, HP, Lenovo, and PayPal are increasingly trusting the Stagwell Marketing Cloud to provide tools to augment their marketing capabilities.
Speaker Change: Lastly, we continue to be at the frontier of innovation as a tech company's tech company.
Speaker Change: The Stagwell Marketing Cloud saw net revenue growth, excluding advocacy, of 45% in the first quarter. We celebrated a number of wins, including with a large U.S. specialty insurance company.
Speaker Change: Quest Brand saw a particularly strong growth approach of 200% in the quarter as an Incorporated Recent Acquisition Barra.A.I.
Speaker Change: brands like Intel, Amazon, HP, Lenovo, and PayPal are increasingly trusting the Stagwell marketing cloud to provide tools to augment their marketing capabilities.
Mark Penn: SMC will continue to be an investment priority for Stagwell in 2025. We invested approximately $17 million in the quarter to further strengthen our data, software, development, and sales efforts. However, we anticipate the investment cadence to decline throughout 2026 as the products reach greater maturity and gain additional traction.
Speaker Change: SMC will continue to be an investment priority for Stagwell in 2025. We invested approximately 17 million in the quarter to fertile strafe and our data, software, development and sales
Speaker Change: However, we anticipate the investment cadence to decline throughout 2026 that the products reach greater maturity and gain additional traction.
Mark Penn: AI continues to be front and center at Stagwell as we announce the appointment of John Cahan, a former Microsoft and IBM executive, as our Chief AI Officer at Investor Day. We continue to make progress with our internal tools like the Stagwell ID Graph, a proprietary customer ID platform already delivering outstanding impact for a global CPG client and a DTC retailer. We also announced on Investor Day that we're working with Palantir to test development advanced military-grade targeting to enhance the utilization of Stagwell's unique data set. And we anticipate the machine content management operating system we're developing with Adobe will begin integrating into workflows at Stagwell at the end of the summer.
AI continues to be front and center at Stagwell
Speaker Change: As we announce the appointment of John Kahan, former Microsoft and IBM Executive, as our Chief AI Officer and Investor Jack.
Speaker Change: We continue to make progress with our internal tools like the Stagwell ID Graph, a proprietary customer ID platform, already delivering outstanding impact for a global CPG client and a DTC
Speaker Change: We also announced that investor data that we're working with Palantir to test developing advanced military-grade targeting to enhance the utilization of Stagwell's unique data sets.
Speaker Change: and we anticipate the machine. Content management operating system we're developing with Adobe will begin integrating into workflows at Stagwell at the end of the summer.
Mark Penn: The completion of these two products will mark a major advance in the capabilities of our media and data business and its ability to compete with the other major. Our digital transformation capability, led by Code & Theory, grew net revenue 15% year-over-year in the first quarter, excluding EBITs. Code & Theory debuted its new Adobe Content Supply Chain solution at the Adobe Summit, driving personalization at scale with generative AI. We saw a tremendous interest in Code & Theory's capabilities at the event, drawing almost 700 demos and leads. Meanwhile, Leftfield Labs developed an interactive AI demo for the Qualcomm CEO's keynote speech at South by Southwest, showing how agentic AI can be integrated into everyday life with an on-device processing like AR glasses or wearables.
Speaker Change: The completion of these two products will mark a major advance in the capabilities of our media and data business and its ability to compete with the other majors.
Speaker Change: Art Digital Transformation Capability, Led by Coden Thierry, Drew Nat Revenue, 15% year-over-year in the first quarter, excluding happens.
Speaker Change: Code in theory, debuted its new Adobe content supply chain solution at the Adobe Summit driving personalization at scale with generative AI. We saw tremendous interest in coded theories capabilities at the event, growing almost 700 demos
Speaker Change: Meanwhile, Lefield Labs developed an interactive AI demo for the Qualcomm CEO's keynote speech at South by Southwest, showing how agentic AI can be integrated into every day of life with an on-device processing, like AR glasses or wearers.
Mark Penn: Our transformative work has not gone unnoticed in the industry. Just two weeks ago at the Webby Awards, Code & Theory, Kettle, and Left Field Labs received a total of four accolades for their work with NBC's election coverage, Elf Beauty, and Hasbro. These successes come on the back of Code of Theory being named Digital Innovation Agency of the Year by campaign. And the recognition is not just within our digital transformation capabilities. Four of our agencies were honored at the 2025 Ad Age Award last month. Anomaly in 72 landed on the prestigious A-list with Code named B2B Agency of the Year and Gale named Business Transformation Agency of the Year.
Speaker Change: Our transformative work has not gone unnoticed in the industry. Just two weeks ago at the Webby Awards, Code & Theory, Kettle, and Left Field Labs received a total of four accolades for their work with NBC's Election Coverage, Elk Beauty, and Hasbro.
Speaker Change: These successes come on the back of code of theory being named Digital Innovation Agency of the Year by Campaign
Speaker Change: And the recognition is not just within our digital transformation capabilities
Speaker Change: Four of our agencies were honored at the 2025 Ad Age Award last month, Namely in 72, landed on the prestigious A-List with code named B2B Agency of the Year and Gayle Name Business Transformation Agency of the Year.
Mark Penn: Stagwell's first quarter results are firmly in line with our expectations. Our new business trends give us a positive tailwind for the remainder of 2025, and we are reiterating our guidance today. The momentum in the Stagwell business is undeniable. We're providing the best services and tools at the intersection of creativity and technology. Our customers trust us to help transform the way they interact with their customers. Our capacity to deliver strong growth, expanding margins and MA and an MA engine needs to be appreciated by the street.
Speaker Change: Stagwell's first quarter results are firmly in line with our expectations
Speaker Change: Our new business trends give us a positive tailwind for the remainder of 2025, and we are reiterating our guidance today. The momentum in the Stagwell business is undeniable. We're providing the best services and tools at the intersection of creativity and technology.
Speaker Change: Our customers trust us to help transform the way they interact with their customers [inaudible]
Arcade capacity to deliver strong road
Speaker Change: expanding margins and MA and an MA engine needs to be appreciated by the street. I firmly believe that Stagwell has never been stronger and optimistic about Stagwell's trajectory and ability to reach $5 billion in revenue over the next five years.
Mark Penn: I firmly believe that Stagwell has never been stronger, and I'm optimistic about Stagwell's trajectory and ability to reach $5 billion in revenue over the next five years.
Frank Lanuto: Now I'd like to hand it over to Frank Lanuto, our Chief Financial Officer, to walk through some of our financial results in more detail. Frank. Thank you, Mark. Good morning, everyone. And thank you for joining us to discuss our first quarter results.
Speaker Change: Now I'd like to hand it over to Frank Leveton, our chief financial officer, to walk through some of our financial results in more detail Frank
Frank 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 function. Thank you.
Frank Lanuto: 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. Stagwell delivered solid first quarter financial results, which were in line with our expectations. For the quarter, we reported net revenue of $564 million, an increase of 6% over the prior period, excluding advocacy, which is outside the political cycle. Total net revenue grew 9%. In the first quarter, digital transformation net revenue grew 8% to $106 million. Excluding Advocacy, Net Revenue grew 15%. The continued resurgence in digital transformation was fueled by a 16% increase in revenue from technology clients, driven by expansions at Apple and Google, and a 28% increase in revenue from industrial clients.
Speaker Change: Stagwell delivered solid first quarter financial results, which were in mind with our expectations.
Speaker Change: For the quarter, we reported net revenue of 564 million, an increase of 6% over the prior period, excluding advocacy, which is outside the political cycle, total net revenue grew 9%.
Speaker Change: In the first quarter, digital transformation at revenue grew 8% to $106 million in the house.
Exploding Advocacy, Net Revenue Group, 15% [inaudible]
Speaker Change: The continued resurgence in digital transformation was fueled by a 16% increase in revenue from technology clients driven by expansions at Apple and Google and a 28% increase in revenue from industrial clients.
Frank Lanuto: Stagwell Marketing Cloud posted $63 million in net revenue in the quarter, an increase of 32% year over year, excluding advocacy, net revenue grew 45%. Performance was driven by the recent acquisitions of Bera.ai, Leaders and Unicef, as well as the strong performance at our Harris Quest brand, which grew more than 170% with existing clients due to recent significant platform enhancements. Creativity and Communications delivered $242 million in net revenue in a quarter, an increase of 7% over the prior period. Excluding Advocacy, net revenue grew 10%. The results were driven by strong performance with retail clients, which more than doubled the year over year, and by a 15% increase with technology clients, as we began to realize the impact from our record net new business.
Speaker Change: Stagwell Marketing Cloud posted $63 million in that revenue in the quarter, an increase of 32% year-over-year, excluding advocacy net revenue grew 45%.
Speaker Change: Performance was driven by the recent acquisitions of bera.ai, leaders, and unicep, as well as the strong performance at our Harris quest prep, which grew more than 170% with existing clients due to recent significant platform enhancements.
Speaker Change: Creativity and Communications delivered $242 million in net revenue in a quarter and increase a 7% over the prior period, excluding advocacy net revenue grew 10%.
Speaker Change: The results were driven by strong performance with retail clients which more than double the year over year and by a 15% increase with technology clients as we began to realize the impact from our record net new business lens.
Frank Lanuto: Consumer Insights and Strategy returned to growth in the first quarter posting $49 million in net revenue, an increase of 8% as compared to last year. The growth was led by a 23% year-over-year increase in revenue from technology clients and that almost doubling year-over-year revenue from financial sector clients, fueled by new business from Visa and JP Morgan. Finally, performance media and data reported $104 million in net revenue in the first quarter, a decline of 10% over the prior period. Growth in consumer products and retail clients was offset by a reduction in spend by a single customer in its strongest seasonal quarter as it currently revises its media strategy.
Speaker Change: Consumer Insights and Strategy, returned to growth in the first quarter, posting $49 million in that revenue.
an increase of 8% as compared to last year.
Speaker Change: The growth was led by a 23% year-over-year increase in revenue from technology clients and then almost doubling year-over-year revenue from financial sector clients fueled by new business from Visa and JP Morgan.
Speaker Change: Finally, performance media and data reported $104 million in net revenue in the first quarter, a decline of 10% over the prior period.
Frank Lanuto: We fully expect to see a strong sequential rebound in performance media and data results starting in Q2.
Speaker Change: We fully expect to see a strong sequential rebound in performance media and data's results starting in Q2.
Frank Lanuto: moving to operating expense. We continue to make progress against our goal of margin improvement through effective cost management. personnel costs, excluding incentives, our single largest expense landed at 65% in the first quarter, excluding advocacy, the ratio was 64.8%. 50 basis points lower than last year and 150 basis points lower than in 2023. We've also made further progress with our Targeted Cost Saving Initiative. In the first quarter, we actioned approximately four million dollars in annualized cost savings in connection with our real estate consolidation and shared services initiative. Our content supply chain initiative, which we introduced yesterday, is just getting underway.
Movin's Operating Expenses
Speaker Change: We continue to make progress against our goal of margin improvement to effective course management.
Speaker Change: Personal costs, excluding incentives, our single largest expense, landed at 65% in the first quarter, excluding advocacy, the ratio was 64.8%.
Speaker Change: 50 basis points lower than last year and 150 basis points lower than in 2023.
We've also made for the progress with our targeted co-saving initiatives.
Speaker Change: In the first quarter we actioned approximately $4 million in annualized cost savings in connection with our real estate consolidation and shared services initiatives.
Speaker Change: Our Contents Supply Chain Initiative, which we introduced at PIB yesterday, is just getting underway. We expect to take actions throughout 25, totaling $60 to $70 million in annualized cost savings.
Frank Lanuto: We expect to take actions throughout 2025, totaling $60 to $70 million in annualized cost savings, with the remaining $20 to $30 million being taken in 2026.
Speaker Change: with the remaining 20 to $30 million being taken in 2026.
Frank Lanuto: We expect to start providing updates on our progress with this initiative as early as the second quarter. Summarizing our operating results, we delivered $81 million in adjusted EBITDA in the first quarter with a margin of 14.3% on net revenue, an improvement of approximately 50 basis points over the same period in 2030, the last non-political year. Excluding our cloud investment of $17 million this quarter, our first quarter adjusted EBITDA margin would have been approximately 17.3%.
Speaker Change: We expect to start providing updates on our progress with this initiative as early as the second quarter earnings fall.
. . . .
Speaker Change: Summarizing our upgrading results, we delivered $81 million in adjusted EBITDA in the first quarter with a margin of 14.3% on that revenue. An improvement of approximately 50 basis points over the same period in 23, the last non-political year.
Speaker Change: excluding our cloud investment of $17 million this quarter, our first quarter adjusted a bit of margin would have been approximately 17.3%
Frank Lanuto: Now, moving to the balance sheet, we continue to focus on capital allocation to maintain a strong financial position. Our Deferred Acquisition Consideration Balance stands at $93 million at the end of the first quarter, $8 million lower than at the end of the same period last year, and approximately $73 million lower than at the end of the first quarter in 2023. We've also reduced our NCI balances by approximately 2 million year over year to $21 million. During the quarter, we acquired approximately 1 million of our shares at an average price of $6.07 per share for approximately $6 million.
Speaker Change: Now, moving to the balance sheet, we continue to focus on capital allocation to maintain a strong financial position.
Speaker Change: Our Deferred Acquisition Consideration Balance stands at $93 million at the end of the first quarter, $80 million lower than at the end of the same period last year, and approximately $73 million lower than at the end of the first quarter in 2023.
Speaker Change: We've also reduced our NCI balances by approximately 2 million year-over-year to $21 million and $20 million.
Speaker Change: During the quarter, we acquired approximately 1 million of our shares at an average price of $6.7 per share for approximately $6 million. Our buyback authorization, as of the end of the first quarter, had $164 million in remaining availability.
Frank Lanuto: Our buyback authorization, as of the end of the first quarter, had $164 million in remaining availability. CapEx and capitalized software for the quarter was $16 million, which is broadly in line with our target. As a result, we ended the quarter with $138 million in cash and drawings under our revolver of $375 million, resulting in a net leverage ratio of 3.3 times.
Speaker Change: CapEx and capitalized software for the quarter was $16 million, which is broadly in line with our targets.
Speaker Change: As a result, we ended the quarter with $138 million in cash and drawings under our revolver of $375 million, resulting in a net leverage ratio of 3.3 times.
Frank Lanuto: Since the end of the first quarter, we have taken two significant steps to simplify our capital structure and increase our financial flexibility. Early in the second quarter, we completed the refinancing of our revolving credit facility on improved terms. The revolver now has a capacity of $750 million, an increase of $110 million, reduced credit spreads, and an extended maturity date of April 2030. This is an important step for Stagwell, giving us increased financial flexibility as we pursue our growth strategy.
Speaker Change: Since the end of the first quarter, we have taken two significant steps to simplify our capital structure and increase our financial flexibility.
Speaker Change: Early in a second quarter, we completed the refinancing of our revolving credit facility on improved terms.
Speaker Change: The revolver now has a capacity of $750 million, an increase of $110 million, reduced credit spreads, and an extended maturity date of April 2030.
Speaker Change: This is an important step for us, Agwell, giving us increased financial flexibility as we pursue our growth strategy.
Frank Lanuto: And on April 2nd, as announced at our Investor Day, Stagwell converted all outstanding Class C shares to Class A common stock. Not only will this simplify our capital structure, but it will also lead to a step up in our tax basis, resulting in future tax savings.
Speaker Change: And on April 2nd, as announced that our investor day, Stagwell converted all outstanding
Speaker Change: Not only will this simplify our capital structure, but it will also lead to a step up in our tax basis. Resultant and future tax savings.
Frank Lanuto: And finally, as Mark noted, we are reiterating full year 2025 guidance as follows, total net revenue growth is expected to be approximately 8%. Adjusted EBITDA is expected to be between $410 to $460 million. We expect to deliver in excess of 45% free cash flow conversion. and adjusted earnings per share is expected to be between 75 cents and 88.
Speaker Change: And finally, as Mark noted, we are reiterating full year 2025 guidance as follows.
Total net revenue growth is expected to be approximately 8%
Speaker Change: Adjusted EBITDA is expected to be between $410 to $460 million. We expect to deliver in excess of 45% free cash flow conversions.
Speaker Change: And adjusted earnings per share is expected to be between $0.75 and $0.88.
Operator: That concludes our prepared remarks for this morning.
Ben Allanson: I will now turn the call back over to Ben to open the Q&A portion of the call. Ben. Thank you, Frank.
Speaker Change: That concludes our prepared remarks for this morning. I will now turn the call back over to Ben to open it to you in a portion of the call Ben
Ben Allanson: Just a reminder, if you do have any questions, please feel free to submit them via the chat button at the top of the screen.
Ben Alison: Thank you, Frank. Just a reminder, if you do have any questions, please feel free to submit them via the chat button at the top of the screen.
Mark Penn: Let's kick off with a question from Jason Cryer. And there have been a number of questions here about new wins in the quarter. He says, you have an impressive quarter of new wins. Can you provide some more color of why you're winning more, despite what feels like a more cautious macro? And if there are any specific verticals where we really feel like we're excelling.
Ben Alison: Let's go for the question from Jason Cry, so I have a number of questions here about new wins in the quarter. He says, you have an impressive quarter of new wins. Can you provide some more colour or why you are winning more despite what feels like a more cautious macro and if there are any specific verticals where you really feel like we are excelling
Mark Penn: Sure. Look, I think there are a number of trends coming together here. First, when it comes to technology, as I've previously predicted, the AI era really is here, getting increasing assignments to remake consumer experiences using AI. And I think the Code and Theory Network, which is now, I think, a rather complete network, headed by Dan Gardner, is really meeting the challenges that that clients are looking for and expanding its capabilities out. I think in terms of creative, what we what we really see is is that a lot of the other big agencies are going through so many reorganizations, mergers, what have you.
Ben Alison: AI era really is here, getting increasing the assignments to remake consumer experiences.
Ben Alison: using AI. And I think the Code and Theory Network, which is now, I think, a rather complete network, and headed by Dan Gardner, is really meeting the challenges.
that clients are looking for and expanding its capabilities out.
I think in terms of creative, what we've really seen.
Is that?
Ben Alison: A lot of the other big agencies are going through so many reorganizations, mergers, what have you, and they've deemphasized creative at a time when top slate creative is more important than ever.
Mark Penn: And they de-emphasize creative at a time when top flight creative is more important than ever, because these new tools give you the ability to make even greater, more interesting creative ads. And the whole kind of change from generation to generation requires a level of cultural knowledge that computers are never going to really fully understand. So I think we're seeing tremendous success. And again, I call out people at 72, Anomaly and Coleman Boy and Donor for just doing incredible work, F&B as well. Really working hard, I think, to produce top flight award winning creative, you know, as you see.
Ben Alison: Because these new tools gives you the ability to make even greater, more interesting.
creator ads, and the whole kind of...
Ben Alison: change from generation to generation requires a level of cultural knowledge that computers are never going to really fully understand. So I think we're seeing tremendous success. And again, I call out
Ben Alison: People at 72, Anomaly, and Coleman Goyne, donor for just doing incredible work, F&B as well, really working hard, I think, to produce top flight award winning creative.
Mark Penn: Our research is really, I think, you know, growing. We do 40,000 interviews a week, and the offerings that we there are a great combination of data and tremendous analysis. And our media continues to move along. And I really think we'll see a breakthrough in the second half, particularly as these new tools come through. So there's a convergence. The rest of the industry, you can see, is kind of flailing or involved in mergers. We've come up now to a a level of scale that is really being appreciated by the largest clients. You see the nature of our wins in places like Starbucks and Visa and the large scale tech.
Ben Alison: You know, as you see, our research is really, I think...
You know, growing, we do 40,000 interviews a week.
Ben Alison: and the offerings that we there are a great combination of data and tremendous analysis and our media Continues to move along and I really think we'll see a breakthrough in the second half Particularly as these new tools come through so there's a convergence
Ben Alison: The rest of the industry, you can see, is kind of flailing or involved in mergers. We've come up now to a level of scale that is really being appreciated by the largest clients. You see the nature of our wins in places like Starbucks and Visa and the large-scale tech companies.
Mark Penn: that are putting us, I think, in an entirely new market position. And that's why you see this kind of flood of business, which, of course, whatever is won in the first quarter really doesn't happen in the first quarter. It happens later in the year, come into Stagwell.
Ben Alison: that are putting us, I think, in an entirely new market position. And that's why you see this kind of flood of business, which of course, whatever's won in the first quarter really doesn't happen in the first quarter. It happens later in the year. Come into Stagwell right now.
Unknown Attendee: Let's let's keep going to someone on the net new business trends.
Mark Penn: And I get an interesting question from Laura Martin over at Needham. She goes, Are you getting new clients as a result of direct consolidation of some of the larger players? Or does your small size become almost a bit of a disadvantage as they scale up? I think it's I think it's sort of asking a question as we see consolidation amongst some of the larger whole codes. Is that leading to some of this new business stuff? I think all of these things are converging. We're at the right. We're at the right place at the right time.
Speaker Change: Let's keep going to some of the net new business trends and an interesting question from more of Martin over at Needham. She goes, are you getting new clients as a result of direct consolidation of some of the larger players, or does your small size become almost a bit of a disadvantage as they scale up?
Speaker Change: I'm quite sure I get her question. I think it's sort of asking questions as we see consolidation among some of the larger whole coast. Is that leading to some of this new business stuff? I think all of these things are converging. We're at the right, we're at the right place at the right time.
Mark Penn: And as you can see, a lot of the big holding companies are wondering, how do you remake your offering? You saw this huge consolidation in media offerings yesterday. You see the merger that's going on. You see those that are smaller than us, who didn't really adopt our strategy, really flailing because they can't handle the total needs of a client. We're just at the right size and scale.
Speaker Change: And as you can see, a lot of the big holding companies are wondering how do you remake your offering? You saw this huge consolidation, you know, in media offerings yesterday. You see the merger that's going on. You see those that are smaller than us who didn't really adopt our strategy.
Speaker Change: really flailing because they can't handle the total needs of a client. We're just at the right size and scale. What I've been telling people is Stadwell scales up. We're omniservice. We're going to be completely global. We're expanding our capabilities so that we can 100%
Mark Penn: What I've been telling people is Stagwell scales up. We're omniservice. We're going to be completely global. We're expanding our capabilities so that we can 100% compete against the majors in a nimble, tech-infused, and aggressive way. That is exactly what we're doing.
Speaker Change: to compete against the majors in a nimble, tech-infused and aggressive way. That is exactly what we're doing.
Mark Penn: And final question on net new business from Barton Crockett at Rosenblatt. Your quarterly net new net new wins nearly doubled year over year record, as you noted. When will that start to be reflected in some of the net revenue growth? I think you really look to see that come through in the second half of the year. I think I think in what you really see is all those wins in the first quarter couldn't possibly start in the first quarter. The first quarter is the reflection of the last half year's wins. And I think what you really see is particularly with the kinds of clients.
Speaker Change: And final question on any business from Barton Crockett at Rosenblatt, you're quarterly net new net new wins and lead double year over year record as you noted. When will that
from the NetRef Grouping
Speaker Change: I think you really look to see that come through in the second half of the year. I think what you really see is all those wins in the first quarter couldn't possibly start in the first quarter. The first quarter is the reflection of the last half year's wins.
Speaker Change: and I think what you really see is particularly with the kinds of clients, and I see our media two really three and four cues should be where you see those really come through.
Mark Penn: And I see our media to really three and four cube should be where you see those really come through.
Mark Penn: And maybe just on the media point of things, we had a question here again, from Bob, I'm just saying, can you provide a little bit more detail on what turns around that performance media and data and to give us a little bit of a drag in Q1? Yeah, it was a little bit of a drag in Q1, because they had in the in the last two years, a client that actually their season was Q1. And that client reduced their their spend with us, you know, which is more in line with a more typical Q1. And that's why we see the new clients that are coming on have a more typical pattern of Q3 and Q4 waiting into the season.
check it out.
Speaker Change: and maybe just on the media point of things. I had a question here again from Bachman to saying him, can you provide a little bit more detail of what turns around that performance media and data and TQ obviously a little bit of a drag and Q1, but yeah it was a little bit of a drag and Q1 because they had in the in the last two years a client that actually their season was Q1.
and that client reduced their spend with us.
Speaker Change: You know, which is more in line with the more typical Q1 and that's why we see the new clients that are coming on have a more typical pattern of Q3 and Q4 waiting.
Mark Penn: And I really expect that as I've said, we've got two major new technology offerings, the Stagwell ID graph, we're working on improving, you know, having really state of the industry targeting with Palantir and the content management system that we're developing with Adobe, those two things, when you add to our data and media, and the incredible unique data sets that we have, in terms of the Harris Poll, in terms of the people platform, in terms of what we've got an NRG in terms of entertainment habits, you add those unique data assets together with those two new products, we're going to have a whole new, strengthened and even more competitive offering, you know, beginning the second half of this year.
Speaker Change: into the season. And I really expect that as I've said, we've got two major new technology offerings.
The Stagwell ID Graph, and we're working on improving
Speaker Change: you know, having really state of the industry targeting with Palantir, and the content management system that we're developing with Adobe, those two things when you add to our data and media.
Speaker Change: and the incredible unique data sets that we have in terms of the Harris poll, in terms of the people.
Speaker Change: platform in terms of what we've got at NRG in terms of entertainment habits.
Speaker Change: We'll add those unique data assets together with those two new products. We're going to have a whole new
Stracin, and even more competitive offerings.
Unknown Attendee: Great.
Mark Penn: Another question here, and I thought a really interesting one, just go, can you talk a little bit about some of the new work we're doing for some technology customers? I think we had a couple of examples, we'll call on a few other guys. You know, how is how are their needs evolving at the moment? How is Stagwell kind of aligned, as we said, tech companies? Look, the truth of the matter is a lot of those assignments are confidential. But I think they all revolve around two letters AI. And I think what you're really seeing is that the tech companies are looking to how they can best utilize AI in consumer related experiences, and even in their contacts with their consumers to show that they're in the right place.
You know, beginning the second half of this year
Great
Speaker Change: Another question here, and I feel a really interesting one. Can you talk a little bit about some of the new work we're doing for some technology customers? I think we had a couple of examples with AllCon and a few other guys. How are their needs evolving at the moment and how has Stagwell kind of aligned those, as we said, tech company's tech company?
Speaker Change: Look, the truth of the matter is a lot of those assignments are confidential, but I think they all revolve around two letters, A-I.
Speaker Change: I think what you're really seeing is that the tech companies are looking to how they can best utilize AI in consumer related experiences and even in their contacts with their consumers.
Mark Penn: Look, this has gone from I think years of efficiency in the tech companies. to what I've predicted is the year of competition. AI is out there. And I think there's a massive competition among the big tech companies to get to consumers with lasting AI based experiences. And one of the places they turn to, whether it's for experiences, advice, marketing, or engineering, all of those aspects are the Stagwell companies, you know, headed, I think, by now the Code and Theory Network. Great.
Speaker Change: to show that they are the right place. Look, this has gone from, from, I think, fears of efficiency in the tech companies.
To what I predicted is the year of competition.
Speaker Change: A.I. is out there and I think there's a massive competition among the big tech companies to get to consumers with lasting A.I. based experiences.
Speaker Change: and one of the places they turn to, whether it's for experiences, advice, marketing, or engineering, all of those aspects, or it's those Stagwell companies, you know, headed, I think, by now, the Code of Theory Network.
Mark Penn: We've had a number of questions about tariffs, macro uncertainty and a number of other things. And I thought I'd read out one from from Wells Fargo. Have you seen any changes in client behavior in the midst of this more uncertain macro? And, you know, what are we seeing at the moment that gives us confidence in reiterating our Hoolian guide this year? Sure.
Speaker Change: Great. We've had a number of questions about Tarris, Matt Cornstead, and a number of those things. And I thought I'd read out one from Wells Fargoogs.
Speaker Change: Have you seen any changes in Climb Aver in the midst of this more uncertain macro and what are we seeing at the moment that gives us confidence in re-attrating our fully a guide this year?
Mark Penn: You know, I've been out there, if you look at my posts of comments to say, look, you have to put tariffs in proportion. Only about 11% of the US economy is imported, 10% tariff on 11% is only 1% of the economy. So I think to some extent, the media and others have exaggerated the total impact of tariffs. But of course, there can be differential effects in industries. The truth of the matter is, we have seen really minimal direct impacts on tariffs. We had one customer that primarily was an importer of foreign goods pulled back, but that was one out of thousands.
Speaker Change: Sure, you know, I've been out there, if you look at my posts and comments, to say, look, you have to put tariffs in proportion.
Speaker Change: Only about 11% of the U.S. economy is imported, 10% tariff on 11%, it's only 1% of the economy, so I think to some extent the media and others have exaggerated the total impact.
Speaker Change: of tariffs, but of course there couldn't be differential effects in industries.
Speaker Change: The truth of the matter is, we have seen really minimal direct impacts on tariffs.
Speaker Change: We had one customer that primarily was an importer of foreign goods.
Mark Penn: We've run two new campaigns, emphasizing for companies that their products were made right here in America. But net net, we're not on the direct firing line of tariffs, it seems. We've been through the pandemic, we've been through fear of recession. I've been through a lot of experiences. If there wasn't tariff mania in the paper, right now, I would not know that there's tariffs in the business. Now, that could change. I'll be the first person to say that. But I can only report on what we're seeing, which is that we're more on the secondary lines. If the economy goes down, of course, we'll be affected.
Speaker Change: Pulled back, but that was one out of thousands. We've run two new campaigns emphasizing for companies that their products were made right here in America.
But ne- ne-
Speaker Change: We're not on the direct firing line of tariffs it seems. Just don't, you know, we've been to the pandemic. We've been to fear of recession. We've been up into a lot of experiences. If it if there wasn't tariff many in the paper right now, I would not know that there's tariffs of the business. Now that could change.
Speaker Change: I will be the first person to say that, but I can only report on what we're seeing, which is that we may, we're more on the secondary lines. If the economy goes down, of course we'll be affected, but we're not on the front line. That's okay.
Mark Penn: But we're not on the front lines of tariffs.
Unknown Attendee: Just a reminder, any final questions, please do put them in the in the in the chat.
Speaker Change: Just a reminder, any final questions, please do put them in the chat, but a question about margins for a second, and obviously solid margins improvement over 2023 in the first quarter here. Can you talk a little bit about kind of as we think about the next five years, that margin profile, the margin, you know, the margin trajectory as we get to that sort of five year cycle? Sure.
Unknown Attendee: But a question about margins for a second. And obviously, good, solid margins improvement over 2023.
Mark Penn: In the first quarter here, can you talk a little bit about kind of, as we think about the next five years, that margin profile, the margin, you know, the margin trajectory as we get to that sort of five to five. Sure, I think you have to look at how are we going to in the long term, grow our margin beyond what it is. First, as you can see, we are aggressively looking to apply AI in the front office and to streamline the back office. And that's why we've announced this. What we've announced here is not cuts, but efficiencies, we believe can be made in the business using the latest tools of technology.
How are we going to, in the long term,
Speaker Change: to grow our margin beyond what it is. First, as you can see, we are aggressively looking to apply AI in the front office and to streamline the back office, and that's why we've announced this. What we've announced here is not cuts, but efficiencies. We believe can be made in the business.
using the latest tools of technology.
Mark Penn: Second, remember, the Stagwell Marketing Cloud itself is going to be instead of costing $17.25 million, we'll start to flip around in 2026. And most of those products have between 60 and 80% gross margins. And so we're really looking for those to be a margin booster. Third, I think we're, like much of the other industry, developing new tools and techniques within media to offer interesting services to clients in the media, both in terms of new data sources, and also in terms of, I wouldn't call it principle buying per se, but in terms of better leveraging media transactions to the benefit of clients.
Speaker Change: Second, remember, the Stagwell Marketing Cloud itself is going to be instead of...
Speaker Change: Costing $0.7 million a quarter, we'll start to flip around in 2026, and most of those products have between 60% and 80% gross margins. And so we're really looking for those to be a margin booster. Third, I think we're...
Speaker Change: like much of the other industry, developing new tools and techniques within media.
Speaker Change: to offer interesting services to clients in the media, both in terms of new data sources.
Speaker Change: and also in terms of, I wouldn't call it principle buying per se, but in terms of better leveraging media transactions to the benefit of clients.
Mark Penn: And I think those three or four areas all represent ways in which we look at the margins, being able to expand in the long term, particularly within, you know, particularly in kind of what I would see is years three to five of that five year plan.
Speaker Change: And I think those three or four areas all represent of ways in which we look at the margins being able to expand in the long term, particularly within, you know, particularly in kind of what I would see is your three to five of that five year.
Unknown Attendee: I think that brings an end to the questions for the quarter and I think it's been good insightful answers.
I think
Speaker Change: I think that brings them into the questions for the quarter and I think it's I think it's I think there's been good insight for Lancers I do want to remind everyone we have very busy schedule coming up in terms of investor investor engagement. Please do feel free to reach out if you're interested meeting with us at any upcoming conferences and then we will have our event sport beach at can as well. So once again, please reach out to IAR Stagwell Global dot com if you'd like to connect.
Operator: I do want to remind everyone we have a very busy schedule coming up in terms of investor engagement. Please do feel free to reach out if you're interested in meeting with us at any upcoming conferences and then we will have our events for BJACCAN as well.
Operator: So once again, please reach out to IR at stagwellglobal.com if you'd like to connect.
Operator: Thank you again for joining.
Mark Penn: And I just want to thank, I know many of employees and executives also tuned into this call and I want to thank them all for the hard work that you really see reflected in the results that we're showing here at Stagwell. Thank you.
Speaker Change: Thank you again for joining. And I just want to thank I know many of employees and executives also tune into this call and I want to thank them all for the hard work that you really see reflected in the results that we're showing here at Stagwell. Thank you.