In the News
Stagwell Inc. Announces Third Quarter Revenue Growth Driven by MDC Merger
Originally released on
by Olivia Morley
Chairman & CEO, Stagwell
Stagwell Inc. (STGW) today announced strong revenue in the third quarter, driven by its recent MDC Partners merger and growth across most segments.
Stagwell’s total revenue reached $466.6 million in the third quarter ending September 30, up from $228.1 million in the same period last year, an increase of 104.6%. The company’s pro forma organic net revenue was up 22.8% in the third quarter.
The pro forma revenue calculation assumes that the company solidified its merger with MDC at the beginning of the year, instead of in August.
“The strength displayed across our businesses reinforced our conviction and the power of the new Stagwell platform, and makes one thing abundantly clear—the combination is working,” Stagwell Chairman and CEO Mark Penn said on an earnings call Wednesday.
Its merger with MDC fueled Stagwell’s ascent to being a prominent player in the agency ecosystem that can compete with major holding companies WPP, Omnicom Group, Interpublic Group of Companies, Dentsu, and Publicis Groupe. Well-known agencies under the Stagwell umbrella include 72andSunny, Assembly, Anomaly, Donar, Code and Theory, Media Kitchen and Crispin Porter Bogusky. The merger with MDC allowed Stagwell to work under a single P&L and leverage talent from across its expanding network.
This is the first quarter that Stagwell reported consolidated earnings. Stagwell and MDC finalized the merger on Aug. 2, and the company’s market cap now sits at $2.4 billion.
A single P&L model
Stagwell’s strategy hinges on global expansion and marrying its brands under a single P&L, made possible by the merger. It’s emphasizing the need for the industry to bring creative and digital together.
“While one could have done creative only, or one could have done digital only, to get to these larger accounts that the big four have a lock on, you really need to be able to show both, and you need to be able to show both synchronized well,” Penn told Adweek in an interview after the earnings call.
Stagwell’s digital business line contributed to its largest share of net revenue at 37%. The creative business line made up a close second at 34%.
New business wins across its agencies also drove revenue. The company reported 63.7 million in net new business wins in the third quarter, including high-profile accounts Fitbit, Hasbro, Groupon, Athleta and Aetna among others.
“We’re getting into larger pitches and winning larger combined assignments,” said Penn.
Stagwell saw growth that surpassed 2019 revenues across most of its brands in Q3. Its integrated agencies network and media network drove net revenue growth, up growing 20.9% and 30.9% year over year, respectively.
The Stagwell Media Network, which includes Assembly, MMI Agency, Media Kitchen, Grason, Gale, Multiview and Locaria manages $5.5 billion in media. Assembly, newly combined with ForwardPMX, makes up the largest share of the network.
“We reorganized the media department. I think that’s getting into significantly larger assignments and bigger pitches,” Penn said.
The company saw a loss in one segment, with net revenue across its communications network down by $3.2 million. Penn attributes the loss to an off year in the political cycle and expects the segment to rebound next year. With upcoming house and senate elections in 2022, he says industry experts are predicting record fundraising in the political space.
Investments in talent, tech, and global expansion
Stagwell avoided some of the hiring challenges that currently plague the industry.
Over the last six months, the company hired over 1,000 people with the help of its new central hiring database featuring over 250,000 applicants. Stagwell recruiters “report that the Stagwell combination has created an attractive place for marketing and advertising talent, especially relevant to competitors whose businesses and recruitment models are outdated,” Penn said on the earnings call.
Looking forward, Stagwell aims to expand its investment in technology, including software products. “We’re getting out M&A department in place, we’re beginning to review the first opportunities. We’re also going to be a player in having significant SaaS and DaaS products, and I’m beginning to turn to getting that organized in the way that I want that to be,” said Penn.
The company is also focused on expanding to global markets with an emphasis on Latin America, India and Asia. “I think that we are qualified for virtually any assignment in North America now. But we’re not qualified for any global assignment,” said Penn.
Stagwell plans to expand globally through its affiliate program and through targeted acquisition. The affiliate program includes 30 affiliates and Stagwell plans to grow the program to 50. Stagwell has also laid out $65 to $100 million dollars a year to facilitate its global expansion, Penn told Adweek.
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