Yahoo Finance Stagwell Inc. (NASDAQ:STGW) Q3 2023 Earnings Call Transcript
Stagwell Inc. (NASDAQ:STGW) Q3 2023 Earnings Call Transcript November 6, 2023
Ben Allanson: Good morning from Stagwell's offices in Miami, Florida. And welcome to Stagwell Inc's Earnings Webcast for Q3 2023. My name is Ben Allanson and I lead the Investor Relations function here at Stagwell. With me today are Mark Penn, Stagwell's Chairman and Chief Executive Officer, and Frank Lanuto, the Chief Financial Officer. Mark will provide a business update and Frank will share a financial review. After the prepared remarks, we will open the floor for Q&A. You're welcome to submit questions through the chat function. Before we begin, I'd like to remind you that the following remarks include forward-looking statements and non-GAAP financial data. Forward-looking statements about the company, including those related to earnings guidance, are subject to uncertainties and risk factors addressed in our earnings release, slide presentation and the company's SEC filings.
Please refer to our website, stagwellglobal.com/investors, for an investor presentation and additional resources. This morning's press release and slide deck provide definitions, explanations and reconciliations of non-GAAP financial data. And with that, I'd like to turn the call over to our Chairman and CEO, Mark Penn.
Mark Penn: Thank you, Ben. And thank you, everyone, joining us for our earnings call. Our company is emerging from a more challenging economic environment this year stronger and more nimble than ever and poised to return to growth. This quarter demonstrates that we have our costs under control as we invest in expanding our digital and global footprint. 2023 threw a number of curveballs at US – tech companies that engaged in mass firings and cutbacks, which adversely affected our digital transformation business; a banking crisis that knocked out the First Republic Bank, a significant client; a B2B recession as clients held back marketing and digital projects, fearing a recession that was always around the corner; rising interest rates; an auto strike that froze auto marketing; and a writers' strike in Hollywood that downed our entertainment research business.
Throughout this, we stayed on our mission, bringing costs in line, installing central data and information systems, expanding our presence and footprint in the industry, winning new business, and now just about all of those negative factors are in retreat, and we've returned to earning over $100 million of EBITDA a quarter, even in a low point of the political cycle. As we head into the end of the year, we believe we've reached a key inflection point for our business, and we expect to return to modest net growth, excluding advocacy in the fourth quarter and stronger growth in Q1 2024. We've already returned to growth in most areas of the business. 2024 offers a significant number of tailwinds that allow me to call the bottom here. First and foremost, we will have trimmed our costs to be well positioned to hold and expand our target 20% plus margin next year.
Tech companies are coming back and starting to spend again. AI offers a whole new class of digital transformation work. We have the engineers to implement. Fear of recession seems to be easing in favor of a soft landing. The political season will be a record one. The strikes are all ending. And digital spending, ad spending is expected to grow. Since our last earnings call, we've made significant progress to manage our costs and to advance our long term strategy. Cut a further $34 million of annualized costs from the business as we right-size our staffing cost structure as we look ahead to 2024 and announced a divestiture of ConcentricLife to Accenture for $245 million in cash. We also accelerated digital services through acquisitions, including Left Field Labs, a cutting edge digital transformation company, leveraging AI and AR to create truly innovative digital customer experiences, and Movers + Shakers, a disruptive creative agency renowned for its social and emerging platform capabilities.
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