Stagwell Reports End of 2023 Financial Results

Stagwell Inc. today announced financial results for the year ended December 31st, 2023.

Mark Penn, Chairman and CEO, said, "Despite a challenging year for marketing services and digital transformation - accentuated by our client mix - Stagwell grew share with some of our largest customers in 2023, took prudent steps to manage our costs, and invested in digital innovation to stay ahead of the future of marketing. In Q4 we returned to sequential net revenue growth, sold a non-core asset for significantly above our initial investment, and saw our tech company clients begin to re-engage." 

"2024 promises to be a year of growth and expanded margin as we go into the political season and our AI and AR products come to market – including inclusion of ARound into Major League Baseball's native Ballpark app.  We will be helping our clients transform with the three E's of AI – enabling stronger operations, adding efficiency to marketing and helping revolutionise their engagement with consumers."

Frank Lanuto, chief financial officer, commented, "Management faced ongoing macroeconomic headwinds during the fourth quarter and responded with decisive actions to align costs with revenues, resulting in an adjusted EBITDA margin of 17 percent. Through the end of fiscal 2023, we have delivered – ahead of schedule – the $30 million in synergies that we promised at the time of our merger in 2021 and are now well underway with our goal of achieving the incremental $35 million of cost savings we announced earlier this year. Our sale of ConcentricLife during the quarter resulted in a significant gain which drove net income, reduced our debt and lowered leverage at year end." 

Financial Outlook

• 2024 financial guidance is as follows:
• Organic Net Revenue growth of 5% to 7%
• Organic Net Revenue excluding Advocacy growth of 4% to 5%
• Adjusted EBITDA of $400 million to $450 million
• Free Cash Flow Conversion of approximately 50%
• Adjusted EPS of $0.75 - $0.88
• Guidance assumes no impact from foreign exchange, acquisitions or dispositions.

* The Company has excluded a quantitative reconciliation with respect to the Company's 2024 guidance under the 'unreasonable efforts' exception in Item 10(e)(1)(i)(B) of Regulation S-K. See "Non-GAAP Financial Measures" below for additional information.

Fourth Quarter and Full Year Highlights:

• Completed the sale of ConcentricLife to Accenture in Q4 for gross proceeds of $245 million, resulting in a taxable gain of $175 million
• Q4 net new business of $65 million; FY23 net new business of more than $270 million
• Q4 revenue of $655 million; FY23 revenue of $2,527 million, a decrease of 6% versus the prior year period
• Q4 net revenue of $551 million; FY23 net revenue of $2,147 million, a decrease of 3% versus the prior year period
• Q4 organic net revenue declined 7% versus the prior year period and 5% ex-Advocacy; FY23 organic net revenue declined 6% versus the prior year period and 4% ex-Advocacy
• Q4 net revenue from international increased 3%, led by an increase of 19% in the United Kingdom; FY23 net revenue from international increased 13%, led by increases of 17% in EMEA, and 5% in APAC
• Q4 net income of $46 million versus net loss of $43 million in the prior year period; FY23 net income of $42 million versus net income of $50 million in the prior year period
• Q4 Adjusted EBITDA of $95 million; FY23 Adjusted EBITDA of $360 million, a decrease of 20% versus the prior year period
• Q4 Adjusted EBITDA Margin of 17% on net revenue; FY23 Adjusted EBITDA Margin of 17% on net revenue
• Q4 earnings per share attributable to Stagwell Inc. common shareholders of $0.00; FY23 earnings per share attributable to Stagwell Inc. common shareholders of $0.00
• Q4 Adjusted earnings per share attributable to Stagwell Inc. common shareholders of $0.12; FY23 Adjusted earnings per share of $0.57

2022 Revised Consolidated Financial Statements

In connection with the preparation of the consolidated financial statements during 2023, the Company identified errors in the areas of income taxes as well as accumulated other comprehensive loss in its previously filed 2022 annual consolidated financial statements. As a result, the 2022 financial statements included herein have been revised to reflect the correction of the errors. The primary change to the 2022 income statement was an increase in tax expense of approximately $18 million compared to the previously filed 2022 financial statements. The Company's 2023 Form 10-K will include disclosure providing further details of the revision.

Video Webcast

Management will host a video webcast on Tuesday, February 27, 2024, at 8:30 a.m. (ET) to discuss results for Stagwell Inc. for the year ended December 31st, 2023. The video webcast will be accessible here. An investor presentation has been posted on the website and may be referred to during the webcast.

A recording of the webcast will be accessible one hour after the webcast and available for ninety days here.