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    Stagwell weathers hurricane and inflation to post 35% revenue growth

    US agency group sees 35% net revenue growth despite literal headwinds.

    Challenger agency network Stagwell has published its third-quarter results, revealing a record new business streak and the impact of extreme weather events on political ad spending.

    The group, which owns agencies such as 72andSunny, Anomaly and Stagwell Brand Performance Network, saw revenues grow over 35% in the last three months, but reduced its predicted revenues for the whole of 2022 slightly downward.

    Mark Penn, chairman and chief executive pfficer of Stagwell, said that “due to our unique mix of digital and creative capabilities, clients now recognize Stagwell as a serious alternative to legacy incumbents.”

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    What do the results show?

    In the third quarter of 2022, Stagwell recorded $555.8 in net revenue – a like-for-like increase of 35.8% on 2021, adding up to a year-to-date net revenue of $1.6bn.

    Earnings before interest, tax, deprecation and amortization (EBITDA) came to $128.5m, a rise of 31.5% on the previous year. The EBITDA margin was 20.7% for Q3.

    The group collectively brought in $86m in net new business, a record for the company. Chief executive officer Mark Penn told The Drum that it had managed to diverse its category portfolio, bringing in accounts from Microsoft, Bud Light, 3M, Dropbox, General Mills, Salesforce and Topgolf.

    Agency Gale saw “triple digit growth,” according to Penn, and the formation of Stagwell’s Brand Performance Network has begun to pay dividends.

    “More than anything else, we’re getting into more pitch rooms and we’re winning our proportionate share. I would say we qualify for any pitch in the US and we’re now at a critical mass in Europe, as well,” he said. “We’ve got 72andSunny, Assembly and NRG … what we’re trying to do now is bring people together and pitch more centrally.”

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    Bringing in bigger accounts, Penn noted, will also help the company maintain its “fiscal discipline” as it expands, even as rival networks struggle with high salary bills. Investment in the group’s infrastructure, and integrating some of its subsidiary operations, has also helped.

     “We’re getting bigger clients and maintaining longer-term relationships. The larger accounts are actually easier to maintain consistent levels of staffing. We aim towards a 20% margin and in the long-term, we expect it to improve because our back end is becoming more efficient.”

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    Hurricanes hit political ad spend

    Stagwell’s expectations for its full year revenue took a knock, however. It downgraded investor guidance to expect organic net revenue growth of 16-20%; previously, it had projected 18-22%.

    The principal reason behind that, Penn said, was lower than expected spending on political advocacy in the midterm elections – held back in part by Hurricane Ian striking the coast of Florida in September. Some of Stagwell’s most profitable agencies provide support to political candidates’ fundraising activities, but the extreme weather shelved that work in a key state.

    “The change really has been the drop in advocacy. When the hurricane hit Florida, for several weeks it wouldn’t have been appropriate. We had to suspend all fundraising activity during those periods when there’s any kind of event like that.”

    Inflation also had an impact, he added. “Gas and food prices have a very significant impact on the available funds that people have to contribute to politics.

    “Despite this decline, we still grew very significantly in the advocacy area. It would have been even more significant without the hurricane and without the impact of inflation.”

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