Earnings call transcript: Stagwell Inc. Q1 2025 sees stock rise despite EPS miss

Stagwell Inc. (STGW) reported its Q1 2025 earnings with an EPS of $0.12, falling short of the $0.16 forecast. Despite this miss, the company’s stock rose by 6.71% in premarket trading, reflecting investor optimism about its strategic initiatives and future growth prospects. According to InvestingPro data, the stock has shown significant volatility with a beta of 1.69, making such price swings not unusual. The company posted net revenue of $564 million, a 6% increase from the previous year, and reaffirmed its full-year guidance.

Key Takeaways

• Stagwell’s stock rose 6.71% in premarket trading despite missing EPS forecasts.
• The company reported a 6% increase in net revenue to $564 million.
• Stagwell Marketing Cloud revenue grew by 45%.
• The firm reaffirmed its full-year guidance for 2025.

Company Performance

Stagwell Inc. demonstrated resilience in Q1 2025 with a 6% increase in net revenue, reaching $564 million. The company’s trailing twelve-month revenue growth of 12.43% shows consistent expansion momentum. The company continues to expand its market share, particularly in the technology and retail sectors, which saw spending increases of 18% and 52%, respectively. Despite missing EPS expectations, Stagwell’s strategic initiatives in AI and technology partnerships position it favorably against competitors. For deeper insights into Stagwell’s growth metrics and financial health, InvestingPro subscribers can access 8 additional exclusive ProTips and comprehensive analysis.

Financial Highlights

• Revenue: $564 million, up 6% year-over-year.
• Earnings per share: $0.12, below the forecast of $0.16.
• Adjusted EBITDA: $81 million with a 14.3% margin.
• Personnel costs reduced to 65% of revenue.

Earnings vs. Forecast

Stagwell’s EPS of $0.12 was 25% below the forecasted $0.16, marking a notable miss. Revenue also fell short of expectations, coming in at $652 million against a forecast of $692.6 million. This divergence may raise concerns about the company’s short-term execution but has not significantly deterred investor sentiment.

Market Reaction

Despite the earnings miss, Stagwell’s stock rose to $6.20 in premarket trading, a 6.71% increase. This positive movement suggests investor confidence in the company’s long-term strategy and growth potential, particularly in its AI-driven initiatives and expansion in key markets like the Middle East and Asia. InvestingPro analysis indicates the stock is currently trading near its Fair Value, while analyst targets range from $6.36 to $10.00, suggesting potential upside opportunities.

Outlook & Guidance

Stagwell reaffirmed its full-year guidance, projecting an 8% growth in total net revenue and adjusted EBITDA between $410 million and $460 million. The company aims to achieve $5 billion in revenue over the next five years, driven by strategic partnerships and technological advancements. With an overall Financial Health Score of 2.54 (GOOD) from InvestingPro, and management actively buying back shares, the company appears well-positioned to pursue its growth objectives.

Executive Commentary

CEO Mark Penn emphasized the company’s strong position, stating, "I firmly believe that Stagwell has never been stronger." Penn highlighted the impact of AI, asserting, "The AI era really is here," underscoring the company’s focus on integrating advanced technologies into its offerings.

Risks and Challenges

• The high net leverage ratio of 3.3x could pose financial risks.
• Execution risks from missing EPS and revenue targets.
• Potential macroeconomic challenges affecting client spending.

Q&A

Analysts inquired about the impact of new business wins and AI on future performance. The company noted that new contracts are expected to contribute significantly in Q3 and Q4, with AI driving increased engagement from technology clients.

Full transcript - Stagwell Inc (STGW) Q1 2025:

Ben Allison, Investor Relations Lead, Stagwell: Good morning from Stagwell’s global headquarters in New York City. Welcome to Stagwell Inc. First 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 founder, chairman, and chief executive officer, and Frank Lunuto, the chief financial officer.

Mark will provide a business update, and Frank will share a financial review. After the prepared remarks, we will open the floor for q and a. You are 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, stagwellglobal.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 Pet.

Mark Penn, Founder, Chairman, and CEO, Stagwell: Thank you, Ben, on this really lovely day here at the World Trade Center, and thank you to everyone joining us for our earnings call. Stagwell delivered strong results to start the year firmly in line with our expectations and with another record breaking net new business quarter indicative of the strengthening position of Stagwell as the challenger network. While others in the industry are flailing about with endless reorganizations, behemoth mergers, and downsizing. Stagwell is on a steady course of growth, scale, and innovation. I have never been more bullish about the opportunities for Stagwell in this marketplace.

Despite the noise of tariffs and the low point of the advocacy cycle this quarter, we achieved double digit net revenue growth ex advocacy of 15% in digital transformation, 10% in creativity, 45% in the Stagwell Marketing Cloud. We’re taking share. We have built an enviable mix of best in class creative, transformative digital capabilities, and an innovative suite of tech solutions. I would strongly encourage you to visit Stagwell’s investor website to watch webcast of the Investor Day we held last month to learn more about our strategy to grow, scale and innovate. Turning to our results.

Stagwell delivered strong growth in four of five principal capabilities posting 9% total net revenue growth excluding advocacy in the first quarter. We have achieved this while generating $81,000,000 in adjusted EBITDA and investing $17,000,000 into our tech initiatives and carefully managing our labor costs. The comp to net revenue ratio for the first quarter was 65.3%, an improvement of 175 basis points over the same period in 2023, the last nonpolitical year. Work has been done on implementing the AI tools that underpin the eighty to one hundred million dollar efficiency drive that we announced on Investor Day. We are on track to achieve 60 to $70,000,000 in cost savings this year, and we’ll update further on that progress in the second quarter call.

SkyGirl saw a minimal impact from tariffs in the first quarter. We’ll continue to monitor developments as the second quarter begins, but our business, which is particularly strong with tech companies, is not directly impacted, and customers have not signaled any intention to pull back spending. Tariff mania seems overblown for us at the moment. However, reputation risk is at the top of mind of many executives as they navigate the challenges that tariffs and thorny political issues bring. Our risk and reputation unit bringing together experts from across Stagwell’s agency is uniquely positioned to help brands adapt their message in a rapidly evolving landscape and is winning major new assignments.

The first quarter saw record net new business trends, a record in Stagwell’s history. Stagwell posted a hundred and $30,000,000 in net new business for the quarter, almost double a year ago. This figure includes key wins with PayPal, Panera, CarMax, Celsius, and Hyatt. These results bring our trailing twelve months net new business to $446,000,000 more than $160,000,000 higher than the same figure at the end of 1Q24. These wins are highlighted by customers in the technology and retail industries, leading to strong growth in these verticals.

In the first quarter, we saw technology customers increase their spend with us by 18% and retail customers by 52%. The work for these new customers is just beginning and will ramp throughout the year, particularly in the second half, giving us confidence in our guidance. We’re already transforming brand positioning of many clients. Our agencies reintroduced Starbucks to the world at the Super Bowl and launched Visa’s new global campaign at the Oscars. We’re winning bigger assignments with bigger clients that offer great opportunities to expand the relationship across our core capabilities.

We now report organic growth annually as opposed to quarterly, but you can rest assured that this quarter saw a positive organic growth ex advocacy, headlined by the digital transformation capability that had 15% growth but no acquisitions or dispositions. Turning to scale. We have now fully reinvested the proceeds from the ConcentraClack disposition into prudent M and A at accretive multiples. M and A will continue to be a key driver for us as we look to expand internationally and strengthen our capabilities while deploying capital wisely. We announced this week the acquisition of Jet Fuel to strengthen our experiential and shopper marketing capabilities.

They’ve delivered outstanding experiences for a number of established brands like Walmart and Unilever, as well as amplifying the reach of emerging brands like C4 Energy and MrBeast Feastables. Our recent acquisition of German media monitoring and analytics platform Unicepta is also off to a good start. It recently won significant multiyear business with the European Commission and the BBC. In The Middle East, we completed the acquisition of the Create Group at the beginning of the second quarter, but the collaborative work with Code and Theory the Code and Theory Network started before the deal even closed. The partnership has already delivered transformative work for clients, including work for HSBC and Conde Nast in Abu Dhabi.

The Middle East is a major growth market for us, and we saw net revenue grow by more than 250% year over year in the first quarter. We’re also making progress in Asia, winning new mandates with Diageo, Jollibee, and Princess Cruises. This push will only be strengthened by the

Ben Allison, Investor Relations Lead, Stagwell: addition of ADK Global, which we anticipate will close in the next couple of months.

Mark Penn, Founder, Chairman, and CEO, Stagwell: And we continue to lean into the sports business as a key differentiator. We added to our sports offering with the acquisition of Gold Rabbit in q one, and the around augmented reality experience continues to gain traction, now providing its innovative experience to the athletics edit at their new home in Sacramento. This sports push this sports push aligns with our programming at times, where we will once again bring together athletes, marketers, and global leaders. This time is the official sports partner of the Lions Festival. We have inspirational athletes like Carmelo Anthony, Alex Rodriguez, Sue Bird, and Jordan Childs in our lineup.

We’ll look for more partner and programming announcements in the coming weeks. Lastly, we continue to be at the frontier of innovation as a tech company’s tech company. The Stagwell Marketing Cloud saw net revenue growth, excluding advocacy of 45% in the first quarter. We celebrated a number of wins, including with a large U. S.

Specialty insurance company. Quest Brands saw a particularly strong growth approaching 200% in the quarter as it incorporated recent acquisition, Bara dot ai. Brands like Intel, Amazon, HP, Lenovo and PayPal are increasingly trusting the Stagwell Marketing Cloud to provide tools to augment their marketing capabilities. SMC will continue to be an investment priority for Stagwell in 2025. We invested approximately $17,000,000 in the quarter to further strengthen our data, software development and sales efforts.

However, we anticipate the investment cadence to decline throughout 2026 as the products reach greater maturity and gain additional traction. AI continues to be front and center at Stagwell as we announced the appointment of John Cahan,

Ben Allison, Investor Relations Lead, Stagwell: a

Mark Penn, Founder, Chairman, and CEO, Stagwell: former Microsoft and IBM executive, as our Chief AI Officer at Investor Day. We continue to make progress with our internal tools like the Stagwell ID Graph, our proprietary customer ID platform, already delivering outstanding impact for a global CPG client and a DTC retailer. We also announced on Investor Day that we’re working with Palantir to test developing advanced military grade targeting to enhance the utilization of Stagwell’s unique datasets. And we anticipate the machine, content management operating system we’re developing with Adobe, will begin integrating into workflows at Stagwell at the end of the summer. The completion of these two products will mark a major advance in the capabilities of our media and data business and its ability to compete with the other majors.

Our digital transformation capability, led by Code and Theory, grew net revenue 15% year over year in the first quarter, excluding Heptics. Code and Theory debuted its new Adobe content supply chain solution at the Adobe Summit driving personalization at scale with generative AI. We saw tremendous interest in Coding Theory’s capabilities at the event, drawing almost 700 demos and leads. Meanwhile, Left Field Labs developed an interactive AI demo for the Qualcomm CEO’s keynote speech at South by Southwest, showing how agentic AI can be integrated into everyday life with an on device processing like AR glasses or wearables. Our transformative work has not gone unnoticed in the industry.

Just two weeks ago at the Webby Awards, Code Theory, Kettle, and Lethia Labs received a total of four accolades for their work with NBC’s election coverage, e. F. Beauty, and Hasbro. These successes come on the back of Code and Theory being named digital innovation agency of the year by Campaign. And the recognition is not just within our digital transformation capabilities.

Four of our agencies were honored at the 2025 Ad Age award last month. Anomaly in ’seventy two landed on the prestigious A list with code named B2B Agency of the Year and Gale named Business Transformation Agency of the Year. Stagwell’s first quarter results are firmly in line with our expectations. Our new business trends give us a positive tailwind for the remainder of 2025, and we are reiterating our guidance today. The momentum in the Stagwell business is undeniable.

We’re providing the best services and tools at the intersection of creativity and technology. Our customers trust us to help transform the way they interact with their customers. Our capacity to deliver strong growth, expanding margins and an MA engine needs to be appreciated by the Street. I firmly believe that Stagwell has never been stronger, and I’m optimistic about Stagwell’s trajectory and ability to reach $5,000,000,000 in revenue over the next five years. Now I’d like to hand it over to Frank Lanuto, our Chief Financial Officer, to walk through some of our financial results in more detail.

Frank?

Frank Lunuto, Chief Financial Officer, Stagwell: Thank you, Mark. Good morning, everyone, and thank you for joining us to discuss our first quarter results. As a reminder, if you would like to ask a question after the prepared remarks conclude, please feel free to submit them through the chat function. Stagwell delivered solid first quarter financial results, which were in line with our expectations. For the quarter, we reported net revenue of $564,000,000 an increase of 6% over the prior period.

Excluding advocacy, which is outside the political cycle, total net revenue grew 9%. In the first quarter, digital transformation net revenue grew 8% to $106,000,000 Excluding advocacy, net revenue grew 15%. The continued resurgence in digital transformation was fueled by a 16% increase in revenue from technology clients driven by expansions at Apple and Google and a 28% increase in revenue from industrial clients. Sagwell Marketing Cloud posted $63,000,000 in net revenue in the quarter, an increase of 32% year over year. Excluding advocacy, net revenue grew 45%.

Performance was driven by the recent acquisitions of Bera dot ai, Leaders, and Unicept as well as the strong performance at our Harris Quest brand, which grew more than a 70% with existing clients due to recent significant platform enhancements. Creativity and communications delivered $242,000,000 in net revenue in the quarter, an increase of 7% over the prior period. Excluding advocacy, net revenue grew 10%. The results were driven by strong performance with retail clients, which more than doubled year over year and by a 15% increase with technology clients as we began to realize the impact from our record net new business wins. Consumer insights and strategy returned to growth in the first quarter, posting $49,000,000 in net revenue, an increase of 8% as compared to last year.

The growth was led by a 23% year over year increase in revenue from technology clients and then almost doubling year over year revenue from financial sector clients, fueled by new business from Visa and JPMorgan. Finally, Performance Media and Data reported $104,000,000 in net revenue in the first quarter, a decline of 10 over the prior period. Growth in consumer products and retail clients was offset by a reduction in spend by a single customer in its strongest seasonal quarter as it currently revises its media strategy. We fully expect to see a strong sequential rebound in Performance Media and Data’s results starting in Q2. Moving to operating expenses.

We continue to make progress against our goal of margin improvement through effective cost management. Personnel costs, excluding incentives, our single largest expense, landed at 65% in the first quarter. Excluding advocacy, the ratio was 64.8%, fifty basis points lower than last year and 150 basis points lower than in 2023. We’ve also made further progress with our targeted cost saving initiatives. In the first quarter, we actioned approximately $4,000,000 in annualized cost savings in connection with our real estate consolidation and shared services initiatives.

Our content supply chain initiative, which we introduced at Investor Day, is just getting underway. We expect to take actions throughout ’25 totaling 60 to $70,000,000 in annualized cost savings, with the remaining $20,000,000 to $30,000,000 being taken in 2026. We expect to start providing updates on our progress with this initiative as early as the second quarter earnings call. Summarizing our operating results, we delivered $81,000,000 in adjusted EBITDA in the first quarter with a margin of 14.3% on net revenue, an improvement of approximately 50 basis points over the same period in ’23, the last nonpolitical year. Excluding our cloud investment of $17,000,000 this quarter, our first quarter adjusted EBITDA margin would have been approximately 17.3%.

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 $93,000,000 at the end of the first quarter, dollars ’80 million lower than at the end of the same period last year, and approximately $73,000,000 lower than at the end of the first quarter in ’20 ’20 ’3. We’ve also reduced our NCI balances by approximately $2,000,000 year over year to $21,000,000 During the quarter, we acquired approximately 1,000,000 of our shares at an average price of $6.07 per share for approximately $6,000,000 Our buyback authorization as of the end of the first quarter had $164,000,000 in remaining availability. CapEx and capitalized software for the quarter was $16,000,000 which is broadly in line with our targets.

As a result, we ended the quarter with $138,000,000 in cash and drawings under our revolver of $375,000,000 resulting in a net leverage ratio of 3.3 times. Since the end of the first quarter, we have taken two significant steps to simplify our capital structure and increase our financial flexibility. Early in the second quarter, we completed the refinancing of our revolving credit facility on improved terms. The revolver now has a capacity of $750,000,000 an increase of $110,000,000 reduced credit spreads, and an extended maturity date of April 2030. This is an important step for Sagwell, giving us increased financial flexibility as we pursue our growth strategy.

And on April 2, as announced at our Investor Day, Stagwell converted all outstanding Class C shares to Class A common stock. Not only will this simplify our capital structure, but it will also lead to a step up in our tax basis, resulting in future tax savings. And finally, as Mark noted, we are reiterating full year 2025 guidance as follows. Total net revenue growth is expected to be approximately 8% 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 and $0.88 That concludes our prepared remarks for this morning. I will now turn the call back over to Ben to open the q and a portion of the call.

Ben?

Ben Allison, Investor Relations Lead, Stagwell: Thank you, Frank. Just a reminder, if you do have any questions, please feel free to submit them via the chat button at the top of the screen. Let’s kick off with a question from Jason Cryer. So I have a number of questions here about new wins in the quarter. He says, you had an impressive quarter of new wins.

Can you provide some more color on why you’re winning more despite what feels like a more cautious macro? And if there are any specific verticals where you we really feel like we’re excelling in these wins.

Mark Penn, Founder, Chairman, and CEO, Stagwell: Sure. Look, I think there are a number of trends coming together here. First, when it comes to technology, as I previously predicted, the AI era really is here, getting increasing assignments to remake consumer experiences using AI. And I think the Code and Theory Network, which is now I think a rather complete network headed by Dave Gardner, is really meeting the challenges that clients are looking for and expanding its capabilities out. I think in terms of creative, what we’ve really seen is that a lot of the other big agencies are going through so many reorganizations, mergers, what have you.

And they’ve deemphasized creative at a time when top flight creative is more important than ever because these new tools give you the ability to make even greater, more interesting creative ads. And the whole kind of change from generation to generation requires a level of cultural knowledge that computers are never going to really fully understand. So I think we’re seeing tremendous success. And again, I call out people at seventy two, Anomaly, and Colm McVoy and Donor for just doing incredible work, F and B as well, really working hard I think to produce top flight, award winning creative. As you see, our research is really I think growing.

We do 40,000 interviews a week, and the offerings that we there are a great combination of data and tremendous analysis. And our media continues to move along, and I really think we’ll see a breakthrough in the second half, particularly as these new tools come through. So there’s a convergence. The rest of the industry you can see is kind of flailing or involved in mergers. We’ve come up now to a level of scale that is really being appreciated by the largest clients.

You see the nature of our wins in places like Starbucks and Visa and the large scale tech companies that are putting us, I think, in an entirely new market position. And that’s why you see this kind of flood of business, which, of course, whatever is won in the first quarter really doesn’t happen in the first quarter. It happens later in the year, come into Stagwell right now.

Ben Allison, Investor Relations Lead, Stagwell: Let’s let’s keep going just on the on the net new business trends. And I think an interesting question from Laura Martin over at Needham. She goes, are you getting new clients as a result of direct consolidation of some of the larger players? Or or does your small size become almost a bit of a disadvantage as they scale up?

Mark Penn, Founder, Chairman, and CEO, Stagwell: I’m quite sure I get her get get her a question. Can we

Ben Allison, Investor Relations Lead, Stagwell: I think it’s I think it’s sort of asking a question. As we see consolidation amongst some of the larger holdcos, is that leading to this some of this new business stuff, or is

Mark Penn, Founder, Chairman, and CEO, Stagwell: it I think all of these things are converging. We’re at the right we’re at the right place at the right time. As you can see, a lot of the the big holding companies are wondering, how do you remake your offering? You saw this huge consolidation, in media offerings yesterday. You see the merger that’s going on.

You see those that are smaller than us who didn’t really adopt our strategy really flailing because they can’t handle the total needs of a client. We’re just at the right size and scale. What I’ve been telling people is Skywall scales up. We’re omniservice. We’re going to be completely global.

We’re expanding our capabilities so that we can 100% compete against the majors in a nimble, tech infused, and aggressive way. That is exactly what we’re doing.

Ben Allison, Investor Relations Lead, Stagwell: And final question on net new business from Barton Crockett at Rosenblatt. Your quarterly net new net new wins nearly doubled year over year, a record as you noted. When will that start to be reflected in some of the net revenue growth?

Mark Penn, Founder, Chairman, and CEO, Stagwell: I think you really look to see that come through in the second half of the year. I think I think in the what you really see is all those wins in the first quarter couldn’t possibly start in the first quarter. The first quarter is the reflection of the last half year’s wins. And I think what you really see is, particularly with the kinds of clients, and I see our media, to really, three and four q should be where you see those really come through.

Ben Allison, Investor Relations Lead, Stagwell: And and maybe just on the media point of things. I had a question here again from Barton. Just saying, can you provide a little bit more detail on on what turns around that performance media and data in 2Q? Obviously, a little bit of a a drag in q one, but Yeah.

Mark Penn, Founder, Chairman, and CEO, Stagwell: It was a little bit of a drag in q one because they had in the in the last two years client that actually is their season was q one, and and that client reduced their their spend with us, you know, which is more in line with a more typical q one. And and that’s why we see the new clients that are coming on have a more typical pattern of q three and q four waiting into the season. And I really expect that as I’ve said, we’ve got two major new technology offerings, the Stagwell ID Graph, and we’re working on improving, you know, having really state of the industry targeting with Palantir, and the content management system that we’re developing with Adobe. Those two things, when you add to our data and media, and the incredible unique data sets that we have in terms of the Harris Poll, in terms of the people platform, in terms of what we’ve got at NRG, in terms of entertainment habits. When you add those unique data assets together with those two new products, we’re going have a whole new strengthened and and even more competitive offering, you know, beginning in the second half of this year.

Ben Allison, Investor Relations Lead, Stagwell: Great. Another question here, and I thought a really interesting one just go, can you talk a little bit about some of the new work we’re doing for some technology customers? I think we had a couple of Qualcomm and a few other guys. You know, how is how are their needs evolving at the moment? How is Staggle kind of aligned as as we said, tech companies, tech company?

Mark Penn, Founder, Chairman, and CEO, Stagwell: Look, the truth of the matter is a lot of those assignments, you know, are confidential, but I think they all revolve around two letters, AI. And I think what what you’re really seeing is that the tech companies are looking to how they can best utilize AI in consumer related experiences, and even in their contacts with their consumers to show that they’re the right place. Look, this has gone from from, I think, years of efficiency in in the tech companies to what I’ve predicted as the year of competition. Right? AI is out there, and I think there’s a massive competition among the big tech companies to get to consumers with lasting AI based experiences.

And one of the places they turn to, whether it’s for experiences, advice, marketing, or engineering, all of those aspects are the stagwell companies, you know, headed, I think, by now, the Code and Theory Network.

Ben Allison, Investor Relations Lead, Stagwell: Great. We’ve had a number of questions about tariffs, macro uncertainty, and a number of other things. And I I thought I’d read out one from from Wells Fargo. Have you seen any changes in client behavior in the midst of this more uncertain macro? And, you know, what are we seeing at the moment that gives us confidence in reiterating our full year guide this year?

Mark Penn, Founder, Chairman, and CEO, Stagwell: Sure. You know, I’ve been out there, if you look at my posted comments, to say, look, you have to put tariffs in proportion. Only about 11% of The US economy is imported. A 10% tariff on 11% is only 1% of the economy. So I think to some extent, the media and others have exaggerated the total impact of tariffs.

But of course, there can be differential effects in industries. The truth of the matter is we have seen really minimal direct impacts on tariffs. We had one customer that primarily was an importer of foreign goods pulled back, but that was one out of thousands. We’ve we’ve run two new campaigns emphasizing for companies that their products were were made right here in America. But net net, we’re not on the direct firing line of tariffs, it seems.

We’ve been through the pandemic. We’ve been through fear of recession. I’ve been through a lot of experiences. If there wasn’t tariff mania in the paper right now, I would not know that there’s tariffs in the business. Now, could change.

I will be the first person to say that. But I can only report on what we’re seeing, which is that we may we’re more on the secondary lines. If the economy goes down, of course, we’ll be affected. But we’re not on the front lines of tariffs.

Ben Allison, Investor Relations Lead, Stagwell: Just a reminder, any final questions, please do put them in the chat. But a question about margins for a second. And obviously, you got solid margin improvement over 2023 in the first quarter here. Can you talk a little bit about kind of as we think about the next five years, that margin profile, the margin, you know, the margin trajectory as we get to that sort of five to five?

Mark Penn, Founder, Chairman, and CEO, Stagwell: Sure. I think you have to look at how are we going to, in the long term, grow our margin beyond what it is? First, as you can see, we are aggressively looking to apply AI in the front office and to streamline in the back office. And that’s why we’ve announced this. What we’ve announced here is not cuts, but efficiencies that we believe can be made in the business using the latest tools of technology.

Second, remember the Stagwell Marketing Cloud itself is going to be, instead of costing $70,000,000 a quarter, we’ll start to flip around in 2026. And most of those products have between 6080% gross margins. And so we’re really looking for those to be a margin booster. Third, I think we’re, like much of the other industry, developing new tools and techniques within within media to offer interesting services to clients in in the media, both in terms of of new data sources and also in terms of, I wouldn’t call it principal buying per se, but in terms of better leveraging media transactions to the benefit of clients. And I think those three or four areas all represent ways in which we look at the margins being able to expand in the long term, particularly within, you know, particularly in kind of what I would see as years three to five of that five year plan.

Ben Allison, Investor Relations Lead, Stagwell: I think I think that brings an end to the to the question for the quarter, and I think, yeah, I think it I think it’s I think this brings good insightful answers. I do wanna remind everyone we have a very busy schedule coming up in terms of investor investor engagement. Please do feel free to reach out if you’re interested in meeting with us at any upcoming conferences, and then we will have our events will be chat can as well. So once again, please reach out to ir@staglogglobal.com if you’d like to connect. Thank you again for joining, and we will host for later this year.

Mark Penn, Founder, Chairman, and CEO, Stagwell: And I just wanna thank I know many of employees and executives also tuned into this call, and I want to thank them all for the hard work that you really see reflected in the results that we’re showing here at Stack. Thank you.

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