Stagwell (US:STGW)2023-05-14 07:08Financial Data and Key Metrics Changes - The company reported Q1 revenue of $622 million, a decline of 3% year-over-year, while net revenue, excluding pass-through costs, decreased by 0.9% to $522 million [80] - Adjusted EBITDA for the quarter was $72 million, which was in line with internal expectations, but net income attributable to common shareholders fell to $443,000 from $12.7 million in the prior year [55][28] - Earnings per share were negative $0.01, while adjusted EPS was positive $0.13 for the quarter [55] Business Line Data and Key Metrics Changes - Digital Transformation organic net revenue declined by 9%, primarily due to a cyclical decline in the Advocacy business, with a 3% decline when excluding Advocacy [52] - Consumer Insights & Strategy saw a 1% growth in organic net revenue, following a strong 56% growth in the prior year [53] - Performance Media & Data experienced a 5% growth in organic net revenue, driven by strong performance from Ink and Assembly businesses [81] Market Data and Key Metrics Changes - The tech industry, which constitutes 18% of net revenue, grew only 3% in Q1, a significant slowdown compared to the 32% growth in 2022 [45] - The finance and banking sector, making up about 6% of the business, declined by 3% in the quarter, although exposure to recent banking issues was limited [74] Company Strategy and Development Direction - The company plans to invest up to $20 million in Cloud development this year, focusing on building media studio products and enhancing capabilities [48] - A strategic combination of digital, creative, and media is being emphasized through the Brand Performance Network to disrupt competitors [8] - The company is committed to deploying AI tools across all agencies to enhance efficiency and drive growth [9] Management's Comments on Operating Environment and Future Outlook - Management views the decline in Digital Transformation as a temporary blip, expecting significant growth as clients adapt to new technologies [59][87] - The company reaffirms its full-year guidance for organic net revenue growth of 7.5% to 10% and adjusted EBITDA of $450 million to $490 million [57] - There is optimism regarding new business wins and industry recognition, which are expected to drive growth in the latter half of the year [43] Other Important Information - The company announced a share repurchase of over 23 million shares, reducing the number of shares outstanding by 8% to about 267 million [2] - Deferred acquisition consideration obligations increased slightly to $166 million but decreased year-over-year by 26% [16] - The company expanded its revolving credit agreement, raising the credit limit to $640 million from $500 million, providing additional borrowing capacity [17] Q&A Session Summary Question: How will generative AI impact your business moving forward? - The company is exploring various applications of generative AI across its network, believing it will be a key differentiator [20] Question: What does your net new business look like since the last reported figure? - The company reported $53 million in Q1 and an additional $40 million in new business wins in April, indicating strong client growth [62] Question: Can you explain the Cloud-related investments in the quarter? - The company is focusing on creating experiences that clients enjoy and will monetize, with plans to break out Cloud finances in the next quarter [25] Question: Why didn't you provide more specific guidance for the March quarter? - Management noted the high comparison to Q1 of the previous year and emphasized a more normal structure for the year as tech companies recover [100] Question: Can you discuss the share repurchase approach? - The share repurchase will not change the overall share increase, and management's holdings remain unchanged [101] Question: What areas are you most optimistic and cautious about in the near term? - Digital Transformation showed a slowdown but is expected to grow as clients seek generative AI solutions [96]