Stagwell Reports Results for Q2 2023

Stagwell Inc. ('Stagwell') today announced financial results for the three and six months ended June 30th, 2023.

Second quarter and six months highlights: 

• Q2 revenue of $632 million, a decrease of 6% versus the prior year period; YTD revenue of $1,255 million, a decrease of 5% versus the prior year period
  
• Q2 net revenue of $539 million, a decrease of 3% versus the prior period; YTD net revenue of $1,061 million, a decrease of 2% versus the prior year period
• Q2 organic net revenue declined 5% versus the prior year period and 4% ex-Advocacy; YTD organic net revenue declined 4% versus the prior year period and 3% ex-Advocacy. This follows 16% organic net revenue growth in 2022
• Q2 net loss of $10 million versus net income of $25 million in the prior year period; YTD net loss of $15 million versus net income of $58 million in the prior year period
• Q2 net loss attributable to Stagwell Inc. common shareholders of $5 million versus net income of $10 million in the prior year period; YTD net loss attributable to Stagwell Inc. common shareholders of $4 million versus net income of $23 million in the prior year period
• Q2 Adjusted EBITDA of $91 million, a decrease of 18% versus the prior year period; YTD Adjusted EBITDA of $163 million, a decrease of 23% versus the prior year period
• Q2 Adjusted EBITDA Margin of 17% on net revenue; YTD Adjusted EBITDA Margin of 15% on net revenue
• Q2 loss per share attribute to Stagwell Inc. common shareholders of $0.04
• Q2 Adjusted earnings per share attributable to Stagwell Inc. common shareholders of $0.16; YTD Adjusted earnings per share of $0.29
• Q2 net new business of $75 million; YTD net new business of $128 million

"Stagwell posted sequential quarter-over-quarter improvements in revenue, EBITDA and margin, and our new business wins hit a quarter billion dollars in the last 12 months as they accelerated to record levels," said Mark Penn, chairman and CEO of Stagwell. "We remain bullish about H2 2023 and 2024 and we expect to see significant growth across all metrics throughout the rest of the year," he added. "It is clear, however, that our industry is facing headwinds caused by economic uncertainty and especially tech client reorganisations, the effects of which we believe are temporary."

"We are beginning to see a return to a more normal business environment, and the emergence of Generative AI is providing a runway for future work that we believe will explode in the next 12 to 18 months," Penn said. "We are already in the market with Generative AI products, and our Stagwell Marketing Cloud Group revenue was nearly $50 million this quarter as we push the frontiers of technology in marketing AI and AR."

Frank Lanuto, chief financial officer, commented, "Management responded appropriately, adjusting costs to align with our revenue structure as we continue to strengthen our balance sheet, cash flow generation, and initiatives to centralise our shared service platform, all of which will result in stronger margins over the next couple of quarters. We believe we are coming off the bottom of an economic and political cycle."

Financial Outlook

2023 financial guidance is as follows:

• Organic Net Revenue growth of 0% – 2%
• Adjusted EBITDA of $410 million – $440 million
• Free Cash Flow Conversion of 50% – 60%
• Adjusted EPS of $0.76 - $0.85
• Guidance assumes no impact from foreign exchange, acquisitions or dispositions.