Stagwell (STGW) Details Key Strategic Growth Targets at Investor Event, Increases Targeted Combined GAAP Revenue Goals for 2025

Rhea-AI Summary

Stagwell (NASDAQ: STGW) announced enhanced growth targets during its investor presentation, projecting a combined GAAP revenue of $3.4 billion by 2025, up from $3 billion. The company aims for a 7-9% annual organic revenue growth, primarily driven by digital services, which are expected to comprise 65% of total revenue. Additionally, M&A-related revenue targets have been increased to $450 million. The company also revised its 2021 revenue guidance to $2.15B-$2.18B and expects adjusted EBITDA of $370M-$380M.

Positive

• Increased GAAP revenue target of $3.4 billion for 2025, up from $3 billion.
• Projected annual organic revenue growth of 7-9%, higher than the previous target of 5%.
• Digital services expected to account for 65% of total revenue by 2025, increasing from 48%.
• Increased M&A revenue target to $450 million by 2025, up from $325 million.
• Revised 2021 revenue guidance of $2.15B-$2.18B.
• Adjusted EBITDA expectations increased to $370M-$380M from earlier estimates of $325M-$340M.

Negative

• None.

Management announced increased annual organic revenue targets, expanded M&A commitments, and plans to bolster its capabilities across high-growth digital marketing services including cloud suite of digital SaaS and DaaS products

NEW YORK, Nov. 10, 2021 /PRNewswire/ -- (NASDAQ: STGW) – Stagwell announced several strategic growth targets at the company's first in-person and virtual presentation for investors and analysts. Those include:

• Increased targeted combined GAAP revenue for 2025 to $3.4B versus $3B previously, based on:
• Increased target of 7-9% annual organic revenue growth compared to 5% previously, leading to double digit overall annual revenue growth. The increase is driven by 1) an increased mix of digital revenue targeted to grow at a blended 10-15% per year, 2) increased confidence in higher growth of conventional marketing driven by success in winning larger pitches, and 3) increased confidence in secular growth in advocacy.
• Increased incremental revenue target from M&A and associated organic growth of acquisitions to $450M by 2025 versus prior target of $325M. (Increased levels of cash flow due to business outperformance are expected to be dedicated to acquisitions in synergistic geographies and capabilities, in addition to faster growing digital areas.)
• Stagwell Marketing Cloud announced to service in-house marketers with suite of digital SaaS and DaaS products is targeted to generate ~$75M in revenue by 2025.
• Proportion of New Revenue derived from digital services — including digital transformation, performance marketing & data, and online research — targeted to grow to 65% by 2025, up from 48% of pro forma venue in Q3 2021.
• Adjusted EBITDA margin expansion of 25 to 50 basis points per year, driven by a combination of synergies and increased mix of higher margin digital services, partially offset by normalization of travel & entertainment.

"Stagwell is demonstrating new levels of growth and profitability that go beyond simple pandemic recovery, bolstered by our best-in-class digital services," said Mark Penn. "The combination has set us up to deliver record year-end growth and we are confident that doubling down on our aggressive investment in connected, integrated marketing solutions is the key to further sustained growth."

These targets follow strong Q3 2021 performance from the world's newest marketing services network, including 22.8% pro forma net organic revenue and 25.2% year over year pro forma net organic revenue. GAAP Revenue for the quarter was $466.6 million.

Stagwell last week revised its full year-end guidance, which had previously been revised higher in Q2. The company now expects to end the year with pro forma revenue of $2.15B-$2.18B and is raising its Adjusted EBITDA expectations for a second time to $370M-$380M from $325-$340 at the beginning of the year.*

A replay of Stagwell's November 8, 2021 Investor Day, including copies of all management presentation materials, is available at www.stagwellglobal.com/investors/

*The Company has excluded a quantitative reconciliation with respect to the Company's 2021 guidance under the "unreasonable efforts" exception in Item 10(e)(1)(i)(B) of Regulation S-K.

About Stagwell

Stagwell is the challenger network built to transform marketing. We deliver scaled creative performance for the world's most ambitious brands, connecting culture-moving creativity with leading-edge technology to harmonize the art and science of marketing. Led by entrepreneurs, our 10,000+ specialists in 20+ countries are unified under a single purpose: to drive effectiveness and improve business results for their clients. Join us at www.stagwellglobal.com.

Forward Looking Statements & Other Information

This press release contains forward-looking statements. Statements in this press release that are not historical facts, including without limitation the information under the heading "Financial Outlook" and statements about the Company's beliefs and expectations, earnings (loss) guidance, recent business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Words such as "estimates", "expects", "contemplates", "will", "anticipates", "projects", "plans", "intends", "believes", "forecasts", "may", "should", and variations of such words or similar expressions are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:

• risks associated with international, national and regional unfavorable economic conditions that could affect the Company or its clients, including as a result of the novel coronavirus pandemic ("COVID-19");
• the effects of the outbreak of COVID-19, including the measures to reduce its spread, and the impact on the economy and demand for our services, which may precipitate or exacerbate other risks and uncertainties;
• an inability to realize expected benefits of the combination of the Company's business with the business of MDC (the "Business Combination" and, together with the related transactions, the "Transactions");
• adverse tax consequences in connection with the Transactions for the Company, its operations and its shareholders, that may differ from the expectations of the Company, including that future changes in tax law, potential increases to corporate tax rates in the United States and disagreements with the tax authorities on the Company's determination of value and computations of its attributes may result in increased tax costs;
• the occurrence of material Canadian federal income tax (including material "emigration tax") as a result of the Transactions;
• the impact of uncertainty associated with the Transactions on the Company's businesses;
• direct or indirect costs associated with the Transactions, which could be greater than expected;
• risks associated with severe effects of international, national and regional economic conditions;
• the Company's ability to attract new clients and retain existing clients;
• reduction in client spending and changes in client advertising, marketing and corporate communications requirements;
• financial failure of the Company's clients;
• the Company's ability to retain and attract key employees;
• the Company's ability to achieve the full amount of its stated cost saving initiatives;
• the Company's implementation of strategic initiatives;
• the Company's ability to remain in compliance with its debt agreements and the Company's ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to redeemable noncontrolling interests and deferred acquisition consideration;
• the successful completion and integration of acquisitions which complement and expand the Company's business capabilities; and
• foreign currency fluctuations.

Investors should carefully consider these risk factors and the additional risk factors outlined in more detail under the caption "Risk Factors" in Exhibit 99.2 to our Current Report on Form 8-K, filed with the Securities and Exchange Commission (the "SEC") on August 10, 2021, and accessible on the SEC's website at www.sec.gov., and in the Company's other SEC filings.

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SOURCE Stagwell Inc.

FAQ

What are Stagwell's revenue targets for 2025?

Stagwell aims for a combined GAAP revenue of $3.4 billion by 2025.

How much is Stagwell projecting for annual organic revenue growth?

Stagwell projects annual organic revenue growth of 7-9%, up from the previous target of 5%.

What percentage of revenue will digital services represent by 2025?

Digital services are expected to account for 65% of total revenue by 2025.

What is Stagwell's new M&A revenue target?

The new M&A revenue target is $450 million by 2025, increased from $325 million.

What is the updated revenue guidance for Stagwell in 2021?

Stagwell revised its revenue guidance for 2021 to between $2.15 billion and $2.18 billion.

What are the adjusted EBITDA expectations for Stagwell?

The adjusted EBITDA expectations have been increased to $370 million to $380 million.