Stagwell Inc Q1 FY2025 earnings call

• Stagwell delivered strong results with double-digit net revenue growth ex Advocacy in Digital Transformation (15%), Creativity (10%), and Stagwell Marketing Cloud (45%). - Record net new business of $130 million, almost double YOY, including key wins like PayPal, Panera, etc. - M&A activity: Acquired JetFuel, UNICEPTA, Create.Group, ADK GLOBAL, Gold Rabbit. - AI initiatives: Appointed Chief AI Officer, progress with Stagwell ID graph, work with Palantir and Adobe. - Multiple agencies honored at Ad Age Awards and Webby Awards.

Stagwell delivered solid first quarter financial results. Net revenue was $564 million, up 6% over prior period. Excluding Advocacy, total net revenue grew 9%. Digital Transformation: Net revenue grew 8% to $106 million, ex Advocacy up 15%. Stagwell Marketing Cloud: Net revenue $63 million, +32% YOY, ex Advocacy up 45%. Creativity and Communications: $242 million, +7% YOY, ex Advocacy up 10%. Consumer Insights and Strategy: $49 million, +8% YOY. Performance Media and Data: $104 million, -10% YOY, but expected to rebound in Q2.

• Total net revenue growth expected ~8%. - Adjusted EBITDA between $410 million to $460 million. - Excess of 45% free cash flow conversion. - Adjusted EPS between $0.75 and $0.88. - Reiterated full-year 2025 guidance.

• Tariff impact: Minimal direct impact so far, but monitor developments. - Reputation risk: Executives navigating tariffs and political issues, risk unit helping brands manage messaging.

Q: Impressive new wins despite cautious macro, specific verticals?

A: Technology, creative, research, media convergence with Stagwell's scale and capabilities attracting large clients.

Q: New clients from consolidation or small size disadvantage?

A: Stagwell at scale, omniservice, and competitive positioning making it attractive to large clients, not a disadvantage.

Q: When will net new wins reflect in revenue?

A: Second half of 2025, particularly 3Q and 4Q as work ramps up.

Q: Turnaround in Performance Media and Data?

A: Client spend shift from a seasonal Q1 client, with new tools and data assets to drive rebound in second half.

Q: Tech customers' evolving needs?

A: Utilization of AI in consumer experiences, with Stagwell's Code & Theory Network addressing these needs.

Q: Client behavior in uncertain macro?

A: Minimal direct tariff impact, not front line of tariffs, with only minimal client pullback seen.

Q: Margin trajectory over five years?

A: AI application for front and back office efficiency, Marketing Cloud margin boost, and Media tool development to expand margins long-term.