CONTACT

Beth Sidhu, Chief Brand and Communications Officer, Stagwell
hello@stagwellglobal.com

Insights for the C-Suite

Enjoyed these insights? View more commentary from our global marketing, technology, and creative experts in Stagwell’s “C[x]O” series for the C-Suite. Click here to explore more.

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The Sky’s the Limit But Use Cases are the Target

At Google Next – and at several marketing and technology conference this year, including CES and SXSW – the clear challenge to attendees was the two-step from theoretical implementations of AI to hard use-cases that provide value to consumers (and reasons for investment). It’s no wonder companies in attendance debuted over 101 real-world use cases for generative AI, spanning applications to consumer experiences, back-end-operations, insights, and more.  

Some common themes emerged as to where AI is providing the most immediate value:  

• AI to accelerate the curation of essential business insights: AI21 Labs showcased how they use a BigQuery integration called Contextual Answers to allow users to query data across their businesses conversationally.  
• AI to put the power of storytelling in everyone’s fingertips. Google unveiled Google Vids, a new AI-powered video creation app in its Workspace suite that can do everything from generate a storyboard, piece together first drafts of videos from stock multimedia, and do voiceovers.  
• AI to bring real-time tracking to the customer experience: UPS is constructing a digital twin of its entire distribution network that will enable customers to see where their packages are at any time.

AI Will Mean a Rewriting of Every Customer Interface – Here’s Where to Begin

Artificial intelligence represents a quantum leap for creativity and productivity.  As a network on the beat of marketing, we know that AI’s rise will mean a rewriting of almost all customer interfaces as companies race to deliver consumers the personalized experiences they’ve desired since the dawn of the internet. At Google Next, Stagwell CTO Merrill Raman and Stagwell Marketing Cloud CTO Mansoor Basha emphasized that the first step brands should take to reap the benefits of AI should be assessing their organization’s data infrastructure to ensure it is primed for AI.  

Tactically, that may mean deep clean-up of existing first party data sources using data science best practices to get the information organized in a manner that AI can extract useful insights from. Or it may mean partnering with a third-party data provider who can supplement your view of existing and prospective consumers. 

AI Can Be the Bedrock for Trust, When Implemented Appropriately

As Left Field Labs CEO Sarah Mehler shared at Google Next: with growth in AI utilization, a critical question to consider is how do we build trust with audiences when considering AI implementation? Striking the right tone in AI-enabled communications is a primary step. And remember that communication that reflects cultural and demographic nuances is what ultimately resonates with audiences and builds trust in new systems. Well-practiced organizations will apply sentiment analysis to better understand the emotions of a user and provide appropriate responses (thus driving traction and building more successful outcomes).  

Attention to detail is also crucial for building trust in AI implementations. A “Chain of Verification” is one of several methods that can be employed to enhance the accuracy of information provided by AI systems. This process involves multiple steps to validate information before it is conveyed to the user. For instance, after our language model generates a response, we can employ a separate validation model to scrutinize the facts within that response. This secondary check helps to identify and correct any inaccuracies or ‘hallucinations’—instances where the model generates false or misleading information. By systematically verifying data through multiple layers, we can provide more reliable and trustworthy outputs. 

Wondering where to begin with AI implementation in your organization?

Email Beth Sidhu, Chief Brand and Communications Officer at Stagwell, to discuss how we can support your organization’s digital goals. 

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ATHLETES AS BRANDS; A NEW FANDOM HOOK?

Brandon Marshall, former 12-year NFL wide receiver and host of I AM ATHLETE, says today’s athletes are multi-hyphenate leaders – building businesses and nonprofits, and creating identities that go well beyond the field, court or track. For brands, this offers a major opportunity to write a new playbook for partnership that positions athletes as multi-dimensional ambassadors to reach consumers who are hungry for authentic connection. For Kalen Thornton, a former NFL player and current senior PepsiCo executive, the three things to consider are authenticity, connection and distinction. Authenticity is especially crucial in today’s marketing landscape; consumers appreciate genuine connection, and it can make or break whether they transition to long-term brand fans. If CMOs can build stronger partnerships with athletes that reflect that, they’re in a better place to activate athletes as brand storytellers – in turn creating fandom with customers.

Keeping up with Jarvises: The Race to Bots with Benefits

There were few explicit sessions in the advertising track at SXSW on AI –  but of those on the agenda, sessions like “Navigating Advertising Hype Cycles” made it clear marketers are over the buzz, and in the mood for clear use-cases. Here’s one to noodle on. Generative AI is ushering in subtle yet impactful changes in consumer interactions with products and services. The focus extends beyond convenience; whether stated or not, we are now in an arms race to create realistic versions of popular sci-fi bots like Iron Man’s Jarvis. In this “age of anticipation,” as Code and Theory Chairman Dan Gardner calls it, brands must stay ahead by developing or integrating with the best personal assistants available to link their consumer experiences to a broader ecosystem of value. Already, we’re seeing global brands like L’Oreal and Walmart take steps to infuse AI assistants into their brand proposition, whether by providing beauty advice or enhancing moments across the retail experience. Gardner emphasizes the imminent digital transformation of customer experiences, fueled by vast data and AI’s ability to anticipate needs rather than merely reacting. This is an opportunity for every sector, and one that requires keen collaboration between CEOs and their marketing and technology leaders.

“For too long, we’ve been looking at ‘personalization’ as the answer. That was just targeting. Now, we will begin to see industries disrupted by a reimagined approach to delivering value. We are finally at the point where AI plus data can anticipate customer behaviors. This will boost sales in the near term as well as build affinity in the future,” says Gardner.

Adulthood Canceled? Gen Z’s Mid-Life Crisis as an Experiential and Commerce Opportunity

The COVID-19 pandemic triggered seismic shifts in digital transformation, giving rise to entirely new consumer behaviors and sectors. For Gen Z, already wielding significant global purchasing power, the pandemic resulted in missed rite of passage moments, impacting independence and income security. 38% of Gen Z women feel like their lives were ‘canceled,’ and 61% of Gen Z say the pandemic has increased their feelings of loneliness, per Stagwell’s Harris Poll.

At SXSW, conversations in the advertising track like “Building Brands in the Unhappiness Era” converged around the opportunity to create positive and delightful experiences for consumers – a bulwark against the bad vibes COVID left behind. Whether that’s adopting a play-centric approach to brand expression or leaning into branded entertainment, the challenge and opportunity are clear: the most active purchasing group for the next decade is eager to make up for lost time. How will brands help them conquer this opportunity? Strategies that cultivate equity and fandom by incorporating community, connection, and experience into marketing will dominate.

Navigating the New Consumer “Political Brain”

In a polarized landscape, brands risk losing support if they enter politics improperly. Activating consumers’ “political brains” divides the base and diminishes brand support. Stagwell Chairman and CEO Mark Penn says:  “At best, politics splits this country 50–50. If you get involved in politics in any way, whatever your popularity is, it [gets] cut in half. For brands like targeting mass market consumers, you cannot win. You can only win if you’re a smaller niche brand that has a group of customers that would be very compatible with your values or political values, or you’ve expressed those values during a prolonged period of time, so they’re already baked into your brand.”

To insulate themselves, Chief Communications Officers must tread carefully, avoiding making consumers feel like they’re casting a vote with each purchase. They must seek, as well, counsel from perspectives across the political spectrum, acknowledging their consumers are diffuse in their ideology as well.

Beyond the ‘Shop’ Page; Will AI Transform E-Commerce?

“Brands are at a pivotal moment in time when it comes to e-commerce,” says Lauren Kushner, CEO, Kettle. “Many retailers had a booming few years followed by some softness in their conversion funnel and they are taking a hard look at how e-commerce can work harder for them. Enter tools and experiences powered by AI.”

AI is poised to elevate e-commerce by forcing brands to rethink their online interactions, moving beyond the push to a push-and-pull cycle with their customers. With tools and experiences powered by AI, brands can create contextualized and innovative online experiences that anticipate consumer needs. Hyper-personalized recommendations and streamlined purchase flows promise to forge more meaningful connections with brands and drive conversions.

Bring Community to Commerce

As Redscout CEO Ivan Kayser tells it, a modern approach to the marketing mix places community, advocacy, and content at its core. “We are just starting to dig through the rubble of the DTC reckoning, beginning to draw lessons from rule-breaking brands that are operating from a completely new playbook. Brands that are deepening value for and with their existing customers rather than focusing solely acquisition should be watched closely.” Per a new study from Assembly and Dotdash Meredith, unveiled at SoHo House at SXSW on Monday, communities provide marketers with the chance to talk, explore, and support the motivations and values that drive consumer behavior.

The balancing act moving forward is seeking strategies that genuinely benefit the business bottom line – while engaging customers in a manner that doesn’t scream transactional. While on the ground at SXSW, Kayser has been on the lookout for measurement approaches focusing on differentiation, consumer preference, and margin. And for brands that treat every aspect of the business as an expression of the brand, greatly expanding the opportunity to build fandom with each touchpoint. If you can advance short-term revenue goals while building a cohort of customers that will follow, and purchase with you, in the future, you can crack the fandom code. 

Follow Along

In the dynamic realm of SXSW, these trends provide a glimpse into the future, challenging marketers to adapt and innovate in the ever-changing landscape of commerce, culture, and consumer behavior. Follow along with Stagwell on LinkedIn, Twitter, and Instagram as SXSW continues.

Originally Released On

PRNewswire

CONTACT:

Sarah Arvizo
pr@stagwellglobal.com

Originally Released On

PRNewswire

CONTACT:

Jess Santini jess.santini@assemblyglobal.com

Contact:

hello@stagwellglobal.com

Originally released on

Revenue of $622 Million

Adjusted EBITDA of $72 million

First Quarter Results in line with Management Expectations

Reaffirms 2023 Full Year Guidance

Announces Share Repurchase Agreement for over 23.3 million Class A Shares in Stagwell Inc.

Aggregate Class A and Class C Shares reduced 8% to 267 million

New York, NY, May 9, 2023 (NASDAQ: STGW) – Stagwell Inc. (“Stagwell”) today announced financial results in line with internal expectations for the three months ended March 31, 2023.

FIRST QUARTER RESULTS:

• Revenue and EBITDA in line with management expectations
• Revenue of $622 million, a decrease of 3% versus the prior year period.
• First quarter net revenue of $522 million, a decrease of 1% versus the prior period.
• Organic net revenue decline of 3%, and excluding advocacy of 1%, versus the prior year period.
• On a two-year growth stack basis, organic net revenue growth of 21%
• First quarter net income attributable to Stagwell Inc. Common Shareholders of $0.4 million versus $13 million in the prior year period.
• First quarter Adjusted EBITDA of $72 million, a decrease of 29% versus the prior year period.
• First quarter Adjusted Earnings Per Share for Stagwell Inc. Common Shareholders of $0.13 versus $0.22 in the prior year period.
• Net new business wins of $53 million in the quarter and $212 million for the trailing twelve months. 

“Stagwell is stronger than ever today with the removal of an overhang on the stock and Q1 results in line with management’s expectations, allowing us to reaffirm guidance for another year of significant growth,” said Mark Penn, Chairman and CEO of Stagwell Inc. “This quarter is compared to Q1 2022 which had 24% of organic growth compared to 14% for the year. We expect to return to double-digit growth in the later quarters, especially given strong new business wins within the quarter and after the close. We are moving forward with the Stagwell Marketing Cloud and all investors are invited to try our generative A.I. product at www.PRProphet.ai.”

“We have additionally announced entry into a definitive agreement, approved unanimously by Stagwell’s independent and disinterested directors who were advised by outside counsel and advisers, to repurchase approximately 23.3 million shares of Stagwell Inc. Class A Stock from AlpInvest,” Penn added. “I believe this purchase will help create value for shareholders in the marketplace given our undervalued stock.”

Frank Lanuto, Chief Financial Officer, commented: “Coming off a record Q1 performance in 2022, the Company posted first quarter results in a challenging environment that were in line with management expectations. We are beginning to see positive signs, including strong new business wins, and improving client conditions, which give us confidence about the outlook for the remainder of the year.”

Financial Outlook

2023 financial guidance is as follows:

• Organic Net Revenue growth of 7.5% – 10%
• Organic Net Revenue growth ex-Advocacy of 10% – 14%
• Adjusted EBITDA of $450 million – $490 million
• Free Cash Flow Conversion of 50% – 60%
• Adjusted EPS of $0.90 – $1.05
• Guidance assumes no impact from foreign exchange, acquisitions or dispositions.

Stock Repurchase Program

In the first quarter, the Company repurchased approximately 2.6 million shares of Class A Common Stock at an average price of $6.91 per share for an aggregate value of approximately $18 million. The remaining value of shares permitted to be repurchased was approximately $180 million as of March 31, 2023.

Stock Repurchase Transaction

On May 9, 2023, Stagwell Inc. agreed to repurchase approximately 23.3 million shares from AlpInvest Partners at a share price of $6.43 which is a total value of approximately $150 million. As announced separately, Stagwell Media LP, a shareholder in Stagwell Inc., and AlpInvest are engaged in advanced negotiations to redeem AlpInvest’s remaining interests in Stagwell Media LP., subject to final documentation. Upon completion of these transactions, AlpInvest Partners will no longer be an investor in Stagwell Inc.

Conference Call

Management will host a video webcast and conference call on Tuesday, May 9, 2023, at 8:30 a.m. (ET) to discuss results for Stagwell Inc. for the three months ended March 31, 2023. The video webcast will be accessible at https://stgw.io/Q12023Earnings. An investor presentation has been posted on our website at www.stagwellglobal.com and may be referred to during the conference call.

A recording of the conference call will be accessible one hour after the call and available for ninety days at www.stagwellglobal.com.

Stagwell Inc.

Stagwell is the challenger network built to transform marketing. We deliver scaled creative performance for the world’s most ambitious brands, connecting culture-moving creativity with leading-edge technology to harmonize the art and science of marketing.  Led by entrepreneurs, our 13,000+ specialists in 34+ countries are unified under a single purpose: to drive effectiveness and improve business results for their clients. Join us at www.stagwellglobal.com.

Contacts

For Investors:

Ben Allanson

Ir@stagwellglobal.com

For Press:

Beth Sidhu

Pr@stagwellglobal.com

Non-GAAP Financial Measures

In addition to its reported results, Stagwell Inc. has included in this earnings release certain financial results that the Securities and Exchange Commission (SEC) defines as “non-GAAP Financial Measures.” Management believes that such non-GAAP financial measures, when read in conjunction with the Company’s reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company’s results. Such non-GAAP financial measures include the following:

(1) Organic Revenue: “Organic revenue growth” and “organic revenue decline” refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the partner firms that the Company has held throughout each of the comparable periods presented, and (b) “non-GAAP acquisitions (dispositions), net”. Non-GAAP acquisitions (dispositions), net consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or same period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year.

(2) Net New Business: Estimate of annualized revenue for new wins less annualized revenue for losses incurred in the period.

(3) Adjusted EBITDA: defined as Net income excluding non-operating income or expense to achieve operating income, plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items.

(4) Adjusted Diluted EPS is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income attributable to Class C shareholders, excluding amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, divided by (ii) (a) the per weighted average number of common shares outstanding plus (b) the weighted average number of Class C shares outstanding, (if dilutive). Other items includes restructuring costs, acquisition-related expenses, and non-recurring items, and subject to the anti-dilution rules.

(5) Free Cash Flow: defined as Adjusted EBITDA less capital expenditures, change in net working capital, cash taxes, interest, and distributions to minority interests, but excludes contingent M&A payments.

(6) Financial Guidance: The Company provides guidance on a non-GAAP basis as it cannot predict certain elements which are included in reported GAAP results.

Included in this earnings release are tables reconciling reported Stagwell Inc. results to arrive at certain of these non-GAAP financial measures.

This document contains forward-looking statements. within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s representatives may also make forward-looking statements orally or in writing from time to time. Statements in this document that are not historical facts, including, statements about the Company’s beliefs and expectations, future financial performance and future prospects, business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Forward-looking statements, which are generally denoted by words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “create,” “estimate,” “expect,” “focus,” “forecast,” “foresee,” “future,” “guidance,” “intend,” “look,” “may,” “opportunity,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” or the negative of such terms or other variations thereof and terms of similar substance used in connection with any discussion of current plans, estimates and projections are subject to change based on a number of factors, including those outlined in this section.

Forward-looking statements in this document are based on certain key expectations and assumptions made by the Company. Although the management of the Company believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. The material assumptions upon which such forward-looking statements are based include, among others, assumptions with respect to general business, economic and market conditions, the competitive environment, anticipated and unanticipated tax consequences and anticipated and unanticipated costs. These forward-looking statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:

• risks associated with international, national and regional unfavorable economic conditions that could affect the Company or its clients;
• the continued impact of the coronavirus pandemic (“COVID-19”), and evolving strains of COVID-19 on the economy and demand for the Company’s services, which may precipitate or exacerbate other risks and uncertainties;
• inflation and actions taken by central banks to counter inflation;
• the Company’s ability to attract new clients and retain existing clients;
• the impact of a reduction in client spending and changes in client advertising, marketing and corporate communications requirements;
• financial failure of the Company’s clients;
• the Company’s ability to retain and attract key employees;
• the Company’s ability to compete in the markets in which it operates;
• the Company’s ability to achieve its cost saving initiatives;
• the Company’s implementation of strategic initiatives;
• the Company’s ability to remain in compliance with its debt agreements and the Company’s ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to redeemable noncontrolling interests and deferred acquisition consideration;
• the Company’s ability to manage its growth effectively, including the successful completion and integration of acquisitions that complement and expand the Company’s business capabilities;
• the Company’s ability to develop products incorporating new technologies, including augmented reality, artificial intelligence, and virtual reality, and realize benefits from such products;
• an inability to realize expected benefits of the combination of the Company’s business with the business of MDC;
• adverse tax consequences in connection with the Transactions for the Company, its operations and its shareholders, that may differ from the expectations of the Company, including that future changes in tax law, potential increases to corporate tax rates in the United States and disagreements with the tax authorities on the Company’s determination of value and computations of its attributes may result in increased tax costs;
• the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Transactions;
• the Company’s unremediated material weaknesses in internal control over financial reporting and its ability to establish and maintain an effective system of internal control over financial reporting;
• the Company’s ability to protect client data from security incidents or cyberattacks;
• economic disruptions resulting from war and other geopolitical tensions (such as the ongoing military conflict between Russia and Ukraine), terrorist activities and natural disasters;
• stock price volatility; and
• foreign currency fluctuations.

Investors should carefully consider these risk factors, other risk factors described herein, and the additional risk factors outlined in more detail in our 2022 Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2023, and accessible on the SEC’s website at www.sec.gov, under the caption “Risk Factors,” and in the Company’s other SEC filings.