Stagwell outpaces the other holding companies in growth, thanks to ‘digital Wheaties’

revenue magnet

Overall it wasn’t a bad 2022 for the major agency holding companies — but for Stagwell, which eschews the designation of holding company (even though that’s exactly what it is, it was a pretty great year. And its forecast for 2023 growth is more bullish than its competitors have predicted.

The company’s full year 2022 earnings, announced Thursday morning, showed 21% net revenue growth to $2.68 billion, while organic revenue grew by 14%. Meantime, net income nearly doubled to just under $66 million (up from $36 million in 2021), while the company was able to keep margins at 20%. New business generated in 2022 totaled $213 million.

“We’re eating digital Wheaties,” joked Mark Penn, Stagwell’s chairman and CEO. “Take a look at the top three layers of our four layer pyramid, and those have been growing 28%. Because we’re overweighted in higher-growth areas, we continue to put up numbers that look substantially better than the bigger holding companies.”

For the more traditional holding companies, 2022 revenue flat at Omnicom, up 7% at WPP while Publicis saw revenue rise 20% — meanwhile, organic growth ranged between 4-10% among them. 

Stagwell forecasting for 2023 was similarly more bullish than the other holding companies, calling for 7-10% organic revenue growth (and between 10-14% when excluding Stagwell’s political businesses). “In 2023, we have to work against the lack of a political cycle, but we still see research continues to be strong [as well as], digital transformation. And our brand experience group is getting a lot of pitches — that area is continuing to come to the fore when we put together the creative and the media.”

Independent analyst Brian Wieser noted that Stagwell has a bit of an advantage by virtue of its size (it’s not quite as large as the other holding companies — yet), and can therefore afford to be more bullish in predicting 2023 growth.

The underlying economy in the U.S. and most major markets should still be positive in 2023.
Independent analyst Brian Wieser

“Many smaller agency groups out there… appear to be well positioned for faster growth than traditional agency holding companies because of where their businesses have focused,” said Wieser, who noted he doesn’t track Stagwell as closely as the established holding companies.

“The underlying economy in the U.S. and most major markets should still be positive in 2023, with inflation providing a tailwind to growth in marketers’ budgets,” added Wieser. “At the same time, most public companies are reluctant to provide numbers they don’t think they can beat as guidance, so to the extent that the larger holding companies’ guidance is essentially for a 3-4% organic growth rate in 2023, one should interpret that as the number they collectively expect to beat.”

Stagwell’s results for 2022 also showed a surge in growth Internationally — while North American revenue growth hit 14%, international hit 26%. “We grew twice as fast outside the U.S. as we grew [domestically],” said Penn. “And we’re continuing to focus on getting our European business in shape — bringing together our companies there so they can pitch at scale. We’re doing the same thing in Asia, and we’re looking on an M&A basis to fill out Latin America — we have a strong [base] in Brazil, but I want to be strong throughout the region.”

Debt targets for Stagwell are reduced to $2 billion from $2.5 billion, said Penn, who added that devoting cash to reduce the firm’s debt load doesn’t take away from acquisitive growth targets. “We’re using a third for new growth, a third to pay for old stuff, and a third to pay for shareholder stock buybacks,” he said.

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