Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stagwell Inc (STGW, Financial) reported a record-breaking $113 million in net new business for the quarter, significantly exceeding expectations.
- The company achieved 6% revenue growth in the second quarter, driven by strong performance in advocacy, creativity, and communications.
- Stagwell Inc (STGW) secured major wins with high-profile clients such as General Motors, Target, Macy's, Delta Airlines, and Zales.
- The company is expanding its global footprint, particularly in the Middle East, with new acquisitions and partnerships.
- Stagwell Inc (STGW) is making significant investments in AI and technology, enhancing its capabilities and positioning for future growth.
Negative Points
- Despite revenue growth, the company's net revenue, excluding pass-through costs, increased by only 2%, indicating potential margin pressures.
- The digital transformation segment posted modest growth of 2%, which is below the company's expectations for double-digit growth.
- General and administrative expenses increased by approximately $5 million, impacting the company's overall profitability.
- The consumer insights and strategy segment reported a 2% decline in revenue, reflecting challenges in that area.
- Stagwell Inc (STGW) is facing increased competition in the AI and cloud services space, which may require significant investment to maintain a competitive edge.
Q & A Highlights
Q: Can you talk a little bit about the changes in trends for new business wins? You've landed a record deal with 72 and Anomaly, saw a big uptick in larger wins this quarter. What do you think is driving Stagwell's success in some of these larger engagements?
A: Mark Penn, Chairman & CEO: Stagwell is being recognized as the challenger holding company. We've established our image and brand, and feedback from search consultants indicates that our combination of talent and technology is resonating in the marketplace. This has led to more consultants and brands approaching us with larger opportunities, aligning with our strategy as a challenger holding company.
Q: When do you see some of these big wins positively impacting the revenue trajectory? And how do you feel about some of the pipeline to more into potentially in the second half of the year?
A: Mark Penn, Chairman & CEO: Many wins came at the end of the quarter, such as the GM win on June 26. These will impact Q3, with more wins coming online by next month. Clients are eager to start once decisions are made, which should positively affect revenue soon.
Q: With regards to political ad spending and targeted victory fundraising, could you talk about whether we've seen increased activity recently given changes in the race dynamics?
A: Mark Penn, Chairman & CEO: We've seen 20% to 30% increases recently. Voter engagement has risen due to changes on the Democratic side, making the race competitive. This competitiveness drives increased spending and engagement.
Q: Can we talk about trends in Digital Transformation (DT) and project spend? What gives us confidence in acceleration in the back part of the year?
A: Mark Penn, Chairman & CEO: We're helping tech companies with AI consumer interactions. AI is a major tech expenditure, and brands are experimenting with its deployment. We expect significant digital transformation work to kick off, with some assignments already underway.
Q: What are tech clients saying about spending intentions in the second half of the year?
A: Mark Penn, Chairman & CEO: There's intense competition for AI and cloud services. Tech companies are spending significantly to gain competitive advantage, indicating robust spending intentions.
Q: What's your most promising SaaS or DaaS revenue opportunity over the next 12 months, and can we quantify this?
A: Mark Penn, Chairman & CEO: Our text messaging platform is gaining traction. We're focusing on research products, adding AI-based analysis, and rolling out new offerings. We recently acquired technology with significant revenue potential, enhancing our research capabilities.
Q: What gives us confidence in the inflection in organic revenue growth and acceleration in the second half? What are the key drivers?
A: Mark Penn, Chairman & CEO: Three key drivers: a flood of business wins at the end of Q2, media margin loaded in the back end, and political season activity. These factors support our confidence in organic growth acceleration.
Q: What are your intentions for Sport Beach in 2025, and how might you adjust investment in the event?
A: Mark Penn, Chairman & CEO: We'll review Sport Beach's future, as it has become a unique brand within our brand. It may expand beyond Cannes, showcasing our companies' marketing capabilities. We'll carefully develop it further.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
