Stagwell Inc. (NASDAQ:STGW) Q3 2022 Earnings Conference Call November 3, 2022 8:30 AM ET

Company Participants

Michaela Pewarski - IR

Mark Penn - Chairman & CEO

Frank Lanuto - CFO

Conference Call Participants

Laura Martin - Needham and Company

Michaela Pewarski

Good morning, everyone. Welcome to the Stagwell Inc. webcast for the Third Quarter of 2022. On today's webcast, Mark Penn, Chairman and Chief Executive Officer, will first provide an overview of Stagwell's third quarter, followed by a full review of the financial results from our Chief Financial Officer, Frank Lanuto. We will then take questions, which you can submit through the chat function on the video webcast portal.

Before we begin our prepared remarks, I'd like to remind you the following discussion contains forward-looking statements, non-GAAP financial data. Forward-looking statements about the Company, including those relating to earnings guidance, are subject to uncertainties referenced in the cautionary statements included in our earnings release and slide presentation and are further detailed in the Company's SEC filings. Unless otherwise stated, comparisons to prior year periods and historical results discussed on this webcast will be pro forma for the combination, giving full effect to historical results, as if the combination had been completed on January 1st, 2021.

For your reference, we've posted an investor presentation to our website at stagwelglobal.com. We also refer you to this morning's press release and slide presentation for definitions, explanations and reconciliations of non-GAAP financial data.

And now to get started, I'd like to turn it over to our Chairman and Chief Executive Officer, Mark Penn.

Mark Penn

Thank you, Michaela, and thank you for joining us to discuss Stagwell's third quarter 2022 results. Stagwell delivered another quarter of double-digit organic growth, strong margin expansion, reduced net debt and record net new business. We continue to outgrow most of the large technology companies and are taking share from global marketing service incumbents.

3Q revenue was $664 million, a pro forma increase of 17% over the prior year with 16% organic growth. Year-to-date, revenue was $1.98 billion, up 23% on both a reported and organic basis. Net revenue, which excludes pass-through costs, grew 12% to $556 million and was driven by 11% organic growth. Year-to-date, net revenue increased 16% to $1.64 billion, with 17% organic growth.

In addition to top line growth, third quarter margins and profitability were strong. Adjusted EBITDA increased 15% year-over-year to $115 million, and margins expanded 60 basis points to 20.7% of net revenue. Year-to-date, EBITDA is up 19% to $328 million, with margins expanding 50 basis points to 20%. We continue to manage labor costs effectively, while making investments to support our rapid growth and new business generation.