Earnings call transcript: Stagwell Q2 2025 results boost stock by 9.88%

In its Q2 2025 earnings report, Stagwell Inc. (STGW) reported earnings per share (EPS) of $0.17, meeting analyst expectations, while revenue surpassed forecasts slightly at $707 million against a projected $699.86 million. This modest revenue beat, coupled with strategic advancements, propelled the stock up by 9.88% in pre-market trading. According to InvestingPro data, the company has maintained profitability over the last twelve months, with revenue growing at 9.64% year-over-year.

Key Takeaways

• Stagwell’s revenue exceeded expectations by 1.02%.
• The stock surged 9.88% in pre-market trading.
• Strategic focus on AI and technology integration.
• Reaffirmed full-year guidance, signaling confidence.
• Expanded presence in the Asia Pacific market.

Company Performance

Stagwell’s performance in Q2 2025 demonstrates steady growth, with a net revenue increase of 8% year-over-year, reaching $598 million. The company’s focus on digital transformation and AI-driven tools has positioned it well within the technology sector, bolstering its competitive edge against peers.

Financial Highlights

• Revenue: $707 million, exceeding forecasts by 1.02%
• EPS: $0.17, meeting expectations
• Adjusted EBITDA: $93 million, with a 15.5% margin
• Cash Flow from Operations: $122 million

Earnings vs. Forecast

Stagwell’s Q2 2025 EPS of $0.17 was in line with forecasts, while revenue slightly exceeded expectations, posting a 1.02% surprise. This steady performance aligns with the company’s historical trends of meeting or slightly surpassing forecasts.

Market Reaction

The stock’s pre-market surge of 9.88% reflects investor optimism driven by the revenue beat and strategic initiatives in AI and technology. The stock’s movement from a last close of $5.16 to $5.67 indicates strong market confidence. With a market capitalization of $1.56 billion, InvestingPro analysis suggests the stock is currently undervalued based on its Fair Value model. Notably, management has been actively buying back shares, which could signal confidence in the company’s prospects. For deeper insights into Stagwell’s valuation and 8 additional exclusive ProTips, consider exploring InvestingPro’s comprehensive analysis.

Outlook & Guidance

Stagwell reaffirmed its full-year 2025 guidance, projecting net revenue growth of approximately 8% and adjusted EPS between $0.75 and $0.88. The company anticipates an acceleration in the second half of the year, driven by AI integration and technology efficiency. InvestingPro data shows the company maintains a beta of 1.52, indicating higher volatility than the broader market. While 4 analysts have revised their earnings expectations downward for the upcoming period, net income is still expected to grow this year.

Executive Commentary

CEO Mark Penn emphasized, "While digital transformation of other companies is lagging, ours is booming," highlighting the company’s robust position in AI-native marketing. CFO Ryan Green noted, "Cash has been a primary focus for us," underscoring the importance of financial stability amid expansion efforts.

Risks and Challenges

• High net leverage ratio, though targeted for reduction.
• Risks associated with global expansion and integration of ADK Global.
• Potential volatility in government contracts as a new revenue stream.
• Dependence on technology sector performance.
• Competitive pressures from larger tech companies.

Q&A

During the earnings call, analysts focused on Stagwell’s AI opportunities and the potential of government contracts as an emerging revenue stream. The company’s strategic focus on technological efficiency and global expansion were also key areas of interest.

Full transcript - Stagwell Inc (STGW) Q2 2025:

Ben Allison, Investor Relations Lead, Stagwell: Good morning from Stagwell’s offices in Washington DC. Welcome to Stagwell Link’s Second Quarter twenty twenty five Earnings Webcast. My name is Ben Allison, and I lead the Investor Relations function here at Stagwell. With me today are Mark Penn, Stagwell’s Chairman and Chief Executive Officer Ryan Green, the Chief Financial Officer and Frank Lunuto, EVP of Finance. Mark will provide a business update before Ryan and Frank share a financial review.

After the prepared remarks, we will open the floor for Q and 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, stagworldglobal.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 Bentley.

Mark Penn, Chairman and Chief Executive Officer, Stagwell: Thank you, Ben, And thank you for everyone joining us for our earnings call this morning. I’m pleased to report another set of strong results for the quarter, fully in line with our expectations. As we look forward, we expect to achieve our full year guidance on all metrics as growth accelerates, margins expand, leverage declines and cash flows continue to strengthen. Our net revenue grew at industry leading 8% and ex advocacy grew by 10%. On top of this growth, we achieved a swing of $122,000,000 of operating cash flow improvement, continued to expand our top client relationships and scooped up significant new business.

We expect growth to accelerate in the second half of the year as the economic outlook is positive, large new clients are coming online, and client churn typically drops off after the first half of the year. While digital transformation of other companies is lagging, ours is booming. While most of the others are struggling with new business, our pipeline is robust and growing. While others are cutting thousands of workers, we are picking up key talent from old coasts, including 10 major new executives for our media businesses with vast big client experience. Today, I’m pleased to announce the hiring of Yuslavi Samarja, who is joining us this fall from Omnicom’s Analect to work on our forward looking data strategy.

He joins a team of executives hired from companies including IBM, Accenture, and Microsoft. We’ll have more news on this soon. This is an incredible time of opportunity for Stagwell. In an industry of behemoths having trouble with their scale, we are just the right size to adapt to the coming revolution of AI. We’re investing about 20,000,000 a quarter of OpEx and adapting to new technologies and building state of the art offerings.

Discipline by discipline, we’re adopting AI, applying it to tasks that can be streamlined or reimagined. In media, we’re developing agents that deploy targeted media and will streamline our operation and costs. In communications, we have bots that assemble influencer campaigns, write press releases and pitch stories. In research, we’re already deploying dashboards that read and analyze survey data for our clients on the basis of simple prompts and questions. In our creative companies, we’re using AI to dream up and produce unique standout ads with incredible new special effects.

We are building and deploying in partnership with Adobe the Stagwell content supply chain management system and wrapping up all our tools and software into the machine, a central nervous system designed to connect data, people, teams, and software tools across the stag wall network. The machine addresses a clear client need, a single unified platform for accessing all our services. We’re all ready to begin beginning to roll out these systems and expect them to have fully deployed by early twenty twenty six. It will dramatically increase efficiency, adopt new ways of working, and likely reduce costs by about 15%. Nothing shows that our tech first approach is resonating more than growth among our top 25 customers.

Our top 25 in the second quarter generated over $175,000,000 in net revenue. That same cohort a year ago generated $140,000,000 an increase of 26% year on year. Our top 25 customers now average approximately $28,000,000 in annual net revenue. Our top 100 clients grew similarly in size. Historically, from 1980 to 02/2005, a company like ours would be judged solely by its total growth, with organic growth relevant only in the later stages of scale and maturity, and such scale accelerates organic opportunities.

Because of high quarterly variations, I suggested that analysts should look at our mix of organic growth annually, and we adopted total growth as our primary guidance metric. I still believe that, by the interest of transparency, we will continue to report all metrics each quarter. While we achieved our overall 10% ex accuracy growth this quarter, 20% of it or 2% was from purely organic growth. But as we saw last year, we have a cycle of lower organic growth in h one as that’s when clients churn and higher organic growth in h two when media and other clients tend to increase their spend. With new assignments from GM, Visa, Adobe, Target, we expect a similar pattern this year in which organic growth will again grow to high single and near double digits in h two.

We’re about three points ahead of last year in organic growth. Given that trend, we expect to hit the overall growth numbers and for most of it to be organic when the year is over and the dust has settled. Importantly, our digital transformation capability grew 12% ex accuracy with organic growth x accuracy of 7% in the quarter. This is a sharp contrast to the lagging performance seen in the larger digital transformation industry. Clients are beginning to incorporate AI in their consumer experiences, and the code and theory network is becoming a supplier of choice, having been named digital innovation agency of the year by campaign.

Our major tech clients grew 11% this quarter, and five of our top six clients are mega tech companies. People seem to tie our fortunes to tins to tariffs and other old economy measures. We are a tech company’s tech company and most affected by the ups and downs of that industry. Further evidence of AI being good for our business is reflected in at the Marketing Cloud grew 38% ex advocacy. In 2Q, in particular, the Harris Quest suite of research projects grew organically 100%.

As we look across our agencies, many are performing strongly. The second quarter saw our leading creative agency 72andSunny grow net revenues 19% year over year. Research firm NRG grew 13%. Media buying business Assembly grew 7% and digital transformation agency kettle growth 41%. Net new business was a standout once again.

We delivered a $117,000,000 in

Ben Allison, Investor Relations Lead, Stagwell: the quarter, the fifth consecutive period eclipsing the $100,000,000 mark and bringing our trailing twelve month figure to $451,000,000 Wins with Samsung, New Balance, ServiceNow,

Mark Penn, Chairman and Chief Executive Officer, Stagwell: and Volkswagen highlight the momentum as we continue to take share from legacy players. This quarter also saw our first wins in the newly formed government contracts division, which is beginning to come online with multiple pitches in the final stages. Allison Partners signed a three year agreement with Covered California to help state health insurance marketplace maximize the number of Californians enrolled in health insurance. We also delivered $93,000,000 in adjusted EBITDA in the quarter, representing a 16% margin, flat versus prior year. But excluding advocacy, our adjusted EBITDA increased more than 23% year over year to $80,000,000 Adjusting for our cloud investment of $18,000,000 this quarter, our second quarter margin would have been about 18.5%, representing a 300 basis point improvement from a year ago.

And our adjusted EPS also increased by more than 20% year over year to $0.17 The quarter also included the marketing effort, all the travel expenses of Sport Beach, our annual Cairns Lion Festival experience that brings together brands and world class athletes. This continues to be so successful that it’s becoming a business of its own as we create these experiences at different venues. Athletes like Serena Williams, Billie Jean King, Sir Mo Farah, Jordan Childs and Alex Rodriguez participated. Our focus on cash management is paying off. Through a combination of implementation of technology for greater cash visibility, greater oversight of our brands, and successful renegotiation of payment terms with vendors, we’ve seen our cash flow from operations improved by $122,000,000 year to date, setting us to achieve fully our goal of 45% free cash flow conversion at end of year.

We’re able to achieve a net leverage of 3.18 times, a significant improvement over the same point last year when leverage stood at 3.48 and putting us on course to finish the year with net leverage in the twos. This quarter, we invested in our stock repurchasing almost 10,000,000 shares at very attractive multiples. We also completed the acquisition of previously announced ADK Global in the second second quarter, giving us offices in 10 new Asia Pacific markets, aligning with our strategy of increasing global scale. Announced And we took steps to strengthen our shopper and retail marketing by acquiring Jet Fuel. M and A remains a key growth driver for Stagro moving forward, but we do expect to slow down our outside acquisitions through the rest of the year.

Our focus is on integrating the raft of companies acquired over the last eighteen months on scaling important technology initiatives to drive growth and efficiency. AI will most likely have the most direct impact on production of mass content, which is a relatively small part of our business as we tend to design premium content and develop the overall creative strategies. However, to reduce outside expenditures and stay current in production, we formally launched Unreasonable Studios, our award winning in house production and content creative company. It unites capabilities from multiple agencies into a centralized content production service. The team is already partnering with brands like Google, Starbucks, HOKA, Louis, Witton, and Marriott to deliver everything from generative tech driven content at scale to Netflix quality original documentaries.

We’re continuing to work in partnership with Palantir to develop state of the art data targeting as we develop the STAGWELL ID graph, and we are testing with clients now. All of these new tools and systems will significantly upgrade our media offerings to be fully competitive against the majors majors when it comes to digital marketing, which in the world of AI is driven not by scale, but by effective technology. And that’s exactly what we’re developing. This quarter, we also announced the rebranding of the Stack Over Marketing Cloud to simply the Marketing Cloud. This new branding encourages use by other agencies and facilitates potential spin off at the right time.

You can check out the breadth of the new products all available on a single platform by logging on to www.themarketingcloud.com. In sum, we are well positioned for a successful second half, building on a strong half as first as new business continues to build, client size keeps increasing, digital transformation continues to grow, AI is being deployed and the company improves in terms of cash, leverage, margin and costs. As a result, we are reaffirming our guidance today. With that, I would like to hand it over to Frank Leonuto, EVP of Finance and Ryan Green, our new CFO, to walk through some of our financial results in more detail.

Frank Lunuto, EVP of Finance, Stagwell: Thank you, Mark. It has been a privilege to serve as CFO for Stagwell and its predecessor for the last six years. I look forward to supporting Ryan moving forward as he takes over the reins. I have full confidence that he will build on our achievements and take Stagwell’s finance function to new levels. Headlined by a significant improvement in cash flow from operations, Stagwell delivered solid second quarter financial results, which has positioned us well to achieve our full year guidance.

For the quarter, we reported net revenue of $598,000,000 an increase of 8% over the prior year. Excluding advocacy, total net revenue grew 10%. In the quarter, digital transformation net revenue grew 6% to $109,000,000 Excluding advocacy, net revenue grew 12%. The continued resurgence in digital transformation was fueled by a 20% increase in revenue from technology clients, led by expansions at major tech companies and a 36% increase in revenue from healthcare clients. The Marketing Cloud posted $66,000,000 in net revenue in the quarter, an increase of 28% year over year.

Excluding advocacy, net revenue grew 38%. We saw continued strong performance from our Harris Quest brand, which grew more than 180% in the second quarter, including 100% organic growth after recent product enhancements. Creativity and communications delivered $264,000,000 in net revenue in the quarter, an increase of 8% over the prior period. Excluding advocacy, net revenue also grew 8%. The results were driven by strong performance with auto clients, which almost doubled year over year and by a 67% increase with retail clients as recent wins with Starbucks and General Motors begin to drive growth.

Consumer insights and strategy continued its resurgence, posting $51,000,000 in net revenue, an increase of 6% as compared to last year. The growth was led by a 12% year over year increase in revenue from technology clients and by a strong growth in the financial sector, which more than doubled year over year. Finally, performance media and data returned to growth during the quarter, reporting $108,000,000 in net revenue, an increase of 1% over the prior period. Moving to operating expenses. We continue to make progress against our goal of margin improvement through effective cost management.

Personnel costs, excluding incentives, our largest expense came in at 62.6% in the second quarter. Excluding advocacy, the ratio was 63.2%, 110 basis points lower than last year. Both metrics represent the lowest Q2 ratios since 2023. Ryan will speak to our progress on the 80,000,000 to $100,000,000 in tech driven cost savings we announced at the Investor Day. But we are ahead of schedule and confident that a portion of these savings will flow through to adjusted EBITDA in the second half.

Summarizing our operating results, we delivered $93,000,000 in adjusted EBITDA in the second quarter with a margin of 15.5% on net revenue, flat year over year. Excluding advocacy, our margin improved by approximately 160 basis points over the prior year to 14.3%. Excluding our cloud investment of $18,000,000 this quarter, our second quarter adjusted EBITDA margin would have been approximately 18.5%, representing a 300 basis point improvement. Now moving to the balance sheet. We continue to focus on capital allocation to maintain a strong financial position.

Our deferred acquisition consideration balance stands at $92,000,000 as of the end of the second quarter, 10,000,000 lower than at the 2024. By the end of the year, DAC balances will reduce by nearly half with the remaining balance spread over the next four to five years. During the quarter, we acquired approximately 9,600,000.0 of our shares at an average price of $4.95 per share for approximately $48,000,000 Our buyback authorization as of the end of the second quarter has $160,000,000 in remaining availability. For the six months ended June 30, cash flows from operations improved by $122,000,000 year over year, driven by a number of improvements in working capital management, which Ryan will discuss in greater detail. As a result, we ended the quarter with $181,000,000 in cash, drawings under our revolver of $377,000,000 resulting in a net leverage ratio of 3.18 times, significantly better than the same point last year.

We expect leverage at year end will be in the twos. And finally, we are reiterating full year 2025 guidance today as follows. Total net revenue growth is expected to be approximately eight percent. Adjusted EBITDA is expected to be between $410,000,000 to $460,000,000 We expect to deliver in excess of 45% free cash flow conversion and adjusted earnings per share is expected to be between $0.75 per share and $0.88 per share. I will now turn the call over to Ryan to discuss our progress on both cost savings and cash flow.

Ryan Green, Chief Financial Officer, Stagwell: Thank you, Mark and Frank. I’m excited to take on the role of Chief Financial Officer and I look forward to working with both of you. Today, I’ll update you on two key initiatives: Our strong improvement in cash flows and our progress towards our 80,000,000 to $100,000,000 cost savings target by the 2026.

Frank Lunuto, EVP of Finance, Stagwell: Since the merger, Frank and

Ryan Green, Chief Financial Officer, Stagwell: I have focused on creating an integrated finance and operations function, resulting in $65,000,000 in cost synergies to date. Turning to cash flow, the treasury team has delivered strong results. We achieved our first ever second quarter positive cash flow from operations, contributing to $122,000,000 year over year improvement in the first half. This is the new normal for Stagwell and supports our full year guidance of 45% free cash flow conversion from adjusted EBITDA. On cost savings, we’re off to a fast start towards the 80,000,000 to $100,000,000 target.

Our 2025 goal is to take 60,000,000 to $70,000,000 of actions driven by real estate, back office consolidation and tech efficiencies through the stag wall content supply chain. Year to date, we have already executed $20,000,000 in annualized savings, with $7,000,000 flowing through to adjusted EBITDA. These are just a few of the proactive steps we have taken to drive operational improvement in the business, and we’re just getting started. Remarks. I’ll now turn the call over to Ben to open the Q and A.

Ben Allison, Investor Relations Lead, Stagwell: Thank you, Ryan. Just a reminder, if you have any questions, please do submit them via the chat button at the top of the screen. Mark, let’s start with a question and sort of come from a number of different people just talking about the acceleration in the back half of the year. First half of the year is some nice growth, but the second half implies a little bit of acceleration. Can you talk a little bit about what gives us confidence in that acceleration in the back half?

Mark Penn, Chairman and Chief Executive Officer, Stagwell: Well, I think you look at the strong growth in the first half. You look at the fact that organic growth is running three points ahead of last year when you look at H1. And when you look kind of at the pattern, I think, Kimberly gets used to, client churn is in the first half, client advancement really happens in the second half, because so much of the business revolves around the holiday seasons and the fall. And I think that’s been the clear pattern. If you look at last year, really precisely the same kind of pattern.

We’re off to a much stronger first half year. As you can see, we’re beating all metrics, and that’s what’s given us very good confidence that we’re going to meet all our metrics.

Ben Allison, Investor Relations Lead, Stagwell: Great. Other area where we’ve got a lot of questions this quarter is around improvement in cash flows. So maybe this one for you, Ryan. Could you maybe go into some further detail just on what has driven this improvement and maybe talk a little bit about the sustainability of that improvement moving forward.

Ryan Green, Chief Financial Officer, Stagwell: Yes, sure. Thanks for the question. And then I’m happy to go into some further detail. Cash has been a primary focus for us, and we’ve really dug into all areas of working capital. Last year, we principally finished the deployment of our back office tech stack.

And that’s provided real time visibility into cash flows across all of our businesses. But more importantly, allowed our team to take action when we noticed certain exceptions and allowed us to identify key terms in terms of days to bill, past due AR, and other areas within working capital management. We’ve also built out our back office center, which has allowed us to proactively chase processing invoices, tracking collections, and getting cash in the door, and even renegotiating some key vendor terms. This really isn’t a one quarter phenomenon. This is really the result of a holistic approach to improve cash.

And so we’re confident that this is going to be sustainable going forward. We’re going to bring the same rigor to other areas of our business, and with an immediate focus being on our cost structures and really improving our margin going forward. Great. AI.

Ben Allison, Investor Relations Lead, Stagwell: Lots of questions about AI this quarter. And so I’m going to sort of break them up a little bit. First one from Cameron McVeigh over at Morgan Stanley. He goes, curious how you would frame the opportunity around marketing for AI native companies, and what’s the value add of Stagwell within that particular process? Well,

Mark Penn, Chairman and Chief Executive Officer, Stagwell: I think first you look at the Code and Theory Network, and I think we’re really well positioned. I’ll go back to, look, I can’t disclose the exact level of our tech assignments, but behind the scenes, five of our six clients are tech companies, and a lot of that is helping to design and engineer AI experiences. What’s really happened with AI is the whole front end of how companies will interact with people and how consumers use AI is gonna generate a tremendous amount of work, and we believe that the Code and Theory Network is incredibly well positioned to pick up on that that work. And then I look internally to how AI will change what we do. And I think people always look at just efficiencies, not fully realizing that technology takes the best work to even higher standards.

And so that means that the ads of tomorrow are gonna be incredibly more sophisticated, personalized, and provide graphic images that would have been completely, unattainable without AI. So I think it up levels our business, and at the same time, as I noted in the script, creates a number of both internal efficiencies and new features and services that we can offer to clients that didn’t exist before.

Ben Allison, Investor Relations Lead, Stagwell: I think coming off that, questions about the machine, obviously, launching pretty soon. We’ve obviously been testing with at least one customer in the near future. Question from Laura Martin, first of all. You mentioned that the machine and tools like that could reduce costs by about 15%. Could you maybe give a little bit more detail about where you envision some of those cost savings coming from?

Sure. Look,

Mark Penn, Chairman and Chief Executive Officer, Stagwell: when you look at the marketing stack, there’s entry, there’s mid level, and then there’s kind of higher level performance. I think the machine does simplify a lot of tasks that are done by a lot of mid level people. I think you’re gonna see some condensation of the labor stack and marketing efficiency. And I’ve been through this before, particularly in research where things went from interviewers and coders to then analysts and people who can run computer systems. And I think we’re seeing how it changes production.

We’re seeing how it simplifies media. We’re seeing how it’s additive to the kind of research that can be done. So I’m expecting that the machine rolls in. Now, we’ll have a central platform for the processes that involve technology and clients, the same way that as you saw, we rolled in the systems for cash, we roll in the systems for cash and wow, cash becomes incredibly more efficient. I think you’re going to see the same thing.

As we roll in the machine, as we connect it to our other technologies here, as we integrate it with Adobe as well, you’re going to see the same kind of improved efficiency in what can be delivered.

Ben Allison, Investor Relations Lead, Stagwell: Good stuff. Before we get into talking about some of the capabilities, a question about net new business from Barton Crockett over at Roseby. He noted that net new win volume doubled in 1Q. It was a little bit slower in terms of growth in 2Q, but there was a little bit of volatility in the trend. How do you feel about the trajectory of net new business heading into the second half of the year?

Mark Penn, Chairman and Chief Executive Officer, Stagwell: Well, I think as I mentioned, we look at kind of our net available pipeline, and our net available pipeline keeps growing rather than shrinking. We don’t even put the new government stream into that pipeline. So we feel good about it. We think the 130 in Q1 was really exceptional. We think kind of the once we’re hitting over 100 here is a very solid benchmark for where new business really is landing.

And remember, the pitch season itself is really heaviest in the fall. It kind of begins to slow down a little bit here, then heavies up in the fall as people hire their vendors and put out their contracts to kick off at the beginning of next year.

Ben Allison, Investor Relations Lead, Stagwell: Maybe playing off that government point, obviously a nice first win within the government space. From Jason Kreyer over at Craig Hallum, could you maybe frame the opportunity in government and what that can mean for Stagwell in the coming years?

Mark Penn, Chairman and Chief Executive Officer, Stagwell: Sure. I think if you went back three years, Stagwell was not at the scale and organizational strength that it could qualify for major government contracts. I think if you look at today, I think we’re in The US alone, we’re the number two listed US marketing company. So as you know, there’s a little bit of a tendency now in the government to hire US based firms, and our scale now has qualified us for opportunities. My experience when I was at WPP was about 10 or 15% of our business should be really government contracts, and many of them are quite large in the hundreds of millions of dollars of media and services.

So I think it is a very considerable opportunity. We started on this really last year. We’re beginning to see the first benefits trickle in. We’re in the finals of three or four others. Definitely, several years from now, I think you should should see that that this is a major component of our business from growing from zero because we have scaled up and can handle the complex accounting and other systems necessary to to execute successful government contracts.

Ben Allison, Investor Relations Lead, Stagwell: Just a reminder, if you would like to submit any questions, please do feel free to do so through the chat function. Pivoting to media, you talked a little bit about it in your script and question from Steve Cahill and team over at Wells Fargo. A little bit of lagging maybe in our media business in the first half of the year. Can you maybe go into a little bit more detail about some of the steps that have been taken to kind of strengthen that? And then the second part of the question was, it’s currently a little bit subscale relative to some of the other players.

Do

Ryan Green, Chief Financial Officer, Stagwell: you consider it

Ben Allison, Investor Relations Lead, Stagwell: a core part of the offering? Does it make sense to continue operating at its current scale or is there a need to ramp? How would

Mark Penn, Chairman and Chief Executive Officer, Stagwell: you think about that? I think we’re putting a lot of emphasis on addressing those key points. I think right now we’re buying 5 or $6,000,000,000 of media, and about 75 or 80% of that is online media. We are performance oriented in nature, and I think the strength of our operation is that if you’re a performance oriented marketer, we probably have the most extensive and best built out performance marketing advertising system, and it works globally. We’re addressing the technology spine of that even further, not just with the machine, but with the content management system and with the Stagwell ID graph.

And so you put those this kind of push towards technology, you know, our position is that it’s not scale, but technological efficiency that that really is going to make the best in class when it comes to media. So our plan here is to kind of step up to the to the next level. We have already some global clients spending 3 or 400,000,000. There’s a big market opportunity for us. We are not shying away from it.

We expect these technology tools to be completed by the end of the year and to be able to announce a major upgrade what we can deliver to the marketplace in this area.

Ben Allison, Investor Relations Lead, Stagwell: We’re going wrap it up with just a couple of questions on M and A and our M and A approach, if that’s okay. First one is just talking about our global expansion, if that makes sense. And a question from an investor going, how do you think about realizing some of the cost synergies as part of that global expansion and as part of the overall M and A strategy? Is it back office consolidation? How do you think about that?

Mark Penn, Chairman and Chief Executive Officer, Stagwell: Well, I don’t know if Ryan or Frank you want to I think that the global expansion is less about cost efficiency and it’s more about revenue synergies. We need to really drive bigger contracts, regional and global assignments. That’s why last year, my primary focus was on completing our Asia network, which now immediately has drawn bids for Pan Asia work and also qualified us for other global assignments. And in The Mideast where I saw tremendous growth, and we now have 500 or 600 people, and we didn’t really have an operation there before. And those two functions expand the streams by which new business can come in.

So we’re getting bids now in contracts that simply we would never have been considered for both in Asia and in The Mideast. In terms of cost efficiencies, it may tear your hair out with a lot of new jurisdictions.

Ryan Green, Chief Financial Officer, Stagwell: Yeah, that is very accurate. I would say there is benefit that comes with our skilled cost that we have put in place when we negotiate it. But I think one of the biggest benefits really is we’ve established hubs. And when they join our hubs, it provides an opportunity for them to work together with us. So they’re not going in alone and bringing not only our offering more complete, but bringing more opportunities to them so that we can better service our clients.

Ben Allison, Investor Relations Lead, Stagwell: A couple of more questions here. I think two related ones. Just one asking about potential dispositions in the back half of the year. We’ve talked about in the past. But is there sort of any opportunity for that?

And then a couple of questions related, one from Barton and one from Laura. Talking about the possible spin off of the Marketing Cloud, something you mentioned in the past. How would you think about the time being right for that? If that was going to happen, what might be some of the barriers that would need to be met or whatever it might be before that happened?

Mark Penn, Chairman and Chief Executive Officer, Stagwell: Sure. Look, I think in terms of the marketing cloud, we’re a ways off from that. I think you’re beginning to see, like clearly, Harris Quest brand is a hit. And the first thing I think prerequisite in technology is to have some hits. And I think that’s beginning to to develop.

You know, in in that, I I think that you gotta get really pretty much double, you know, somewhere at least double or or more of the revenue before you consider alternatives. We wanna make sure that the marketing cloud gets its full value. If that full value is part of being incorporated in STAG World, great. If it’s a tracking stock or if it’s a if it’s a spin off, we’ll consider those options when we get there. Right now, as I said before, we’re finishing development on a lot of the products, bringing it together, beginning to get it to market, trying to identify if we’re we’re hitting consumer need.

And in terms of what was

Ben Allison, Investor Relations Lead, Stagwell: the first one on It was just about potential dispositions.

Mark Penn, Chairman and Chief Executive Officer, Stagwell: I don’t see anything slated for the rest of this year. There are one or two that we’re looking at for next year.

Ben Allison, Investor Relations Lead, Stagwell: One final question from Laura Martin. This is just turning back to the government work side of things. She goes, how much does government work add to your backlog? And she goes, aren’t government margins a little bit lower? Could you maybe discuss some of the pros and cons of government work versus commercial new business at a time when Gen AI is demanding resources across nearly all incumbent companies in The US economy?

Mark Penn, Chairman and Chief Executive Officer, Stagwell: Well, first of all, I think in government, they’re they’re looking for a few new vendors. I think they’re a little tired of some of the some of the old vendors, and we provide kind of a great new opportunity. Look, I think those contracts often are multi year in nature, and they provide actually an element of stability. Some of these contracts are three and five year contracts, even the one that we we won outside of California is a three year contract, and that actually provides more stability and definiteness. And I think the margins, I think, at the end of the day, come out about the same because there’s a lot more paperwork to comply with, but at the same time, they typically are of a larger size than typical corporate assignments.

And so, I think it will fit in nicely. We’re at the right scale now to be really tough competitors, and when appropriate, we’ll bring in or work with partners in order to win the business. And I think we’re not gonna be shy or shy away from doing that.

Ben Allison, Investor Relations Lead, Stagwell: Thank you, Mark. Thank you, Ryan. Thank you, Frank. That brings an end to the Q and A section of the call. Thank you as always for joining us today.

We look forward to welcoming you later this year for our third quarter call.

Mark Penn, Chairman and Chief Executive Officer, Stagwell: Thank you.

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