Stagwell Inc. ((STGW)) has held its Q4 earnings call. Read on for the main highlights of the call.
Stagwell Inc.’s recent earnings call for Q4 2024 painted a picture of a robust year marked by impressive revenue growth, primarily fueled by the company’s Digital Transformation and Advocacy sectors. The firm celebrated record-breaking net new business and strategic mergers and acquisitions (M&A) expansions, although concerns were raised about a dip in Consumer Insights and Strategy and anticipated challenges in the Advocacy sector for the upcoming year.
Record Revenue Growth
Stagwell reported a remarkable 20% increase in revenue and a 14% rise in net revenue for Q4 2024. This growth was largely driven by the strong performance of its Digital Transformation and Performance Media and Data sectors, underscoring the company’s successful strategies in these areas.
Digital Transformation Success
The Digital Transformation sector saw a 22% increase in revenue for Q4 and a 13% increase for the full year. This success was bolstered by significant AI project wins, indicating a promising new wave of AI-driven work that could further enhance Stagwell’s market position.
Advocacy Business Boom
Advocacy revenue experienced a substantial 80% year-over-year increase in Q4, and a 46% rise compared to the previous political cycle. This growth was driven by unprecedented political ad spending, highlighting the sector’s critical role in Stagwell’s overall performance.
New Business Momentum
Stagwell posted $102 million in net new business for Q4, marking the third consecutive quarter where net new business figures exceeded $100 million. This momentum reflects the company’s strong market presence and ability to attract new clients.
Strategic M&A Acquisitions
In 2024, Stagwell announced 11 acquisitions, significantly expanding its presence in the Middle East, Europe, and Asia. These strategic moves have enhanced the company’s geographical reach and capabilities, positioning it for further growth.
Strong Adjusted EBITDA
The company reported an adjusted EBITDA of $123 million for Q4, with a margin of 19.6%. For the full year, adjusted EBITDA was $411 million, representing an 18% margin, showcasing Stagwell’s strong financial health.
Consumer Insights and Strategy Decline
Despite overall growth, the Consumer Insights and Strategy sector reported a 1% decrease in revenue for both Q4 and the full year, indicating a need for strategic adjustments in this area.
Expected Advocacy Headwinds in 2025
Stagwell anticipates a 30% decline in Advocacy revenue in 2025 due to the absence of a federal election cycle. This expected downturn highlights the cyclical nature of the sector and the challenges it faces in non-election years.
High Operating Expenses in Cloud Investments
The company invested $23 million in cloud and AI-based software solutions in Q4, impacting short-term margins. However, these investments are seen as crucial for long-term growth and competitiveness.
Forward-Looking Guidance
Looking ahead to 2025, Stagwell projects total net revenue growth of approximately 8% and an adjusted EBITDA between $410 million and $460 million. The company anticipates a free cash flow conversion rate exceeding 45% and adjusted earnings per share ranging from $0.75 to $0.88. While Advocacy revenue is expected to decline, non-Advocacy sectors are forecasted to experience organic growth, driven by double-digit growth in Digital Transformation units. Stagwell remains optimistic about future growth, supported by strategic investments and acquisitions.
In summary, Stagwell Inc.’s earnings call highlighted a year of significant achievements and strategic growth, despite some challenges. The company’s strong performance in Digital Transformation and Advocacy, coupled with strategic acquisitions, positions it well for continued success. However, potential headwinds in the Advocacy sector and a decline in Consumer Insights and Strategy warrant attention as the company navigates the coming year.