‘It’s going to be a good year’: Stagwell’s Mark Penn brushes off Q1 revenue drop
Stagwell saw organic growth slip in its first-quarter financial results, released today. CEO Mark Penn says the group was exposed to a slowdown among tech clients.
Mark Penn, chairman and CEO of Stagwell
Revenues at agency group Stagwell were down 3% for the first quarter of the 2023 financial year, new figures show.
The company, which owns 72andSunny and Crispin, Porter + Bogusky, posted an overall revenue of $622m, 3% less than the same period of last year.
Chairman and CEO Mark Penn said the performance had been expected and pointed to external market pressures – namely a slowdown in the tech sector and caution among advertisers – as the culprits. The firm’s performance also suffered in direct comparison with last year’s period, which saw unusually high growth.
“Q1 last year was extraordinary, against the normal balance of 10-14% growth this would look great: against a comparison of 30% growth… the fact is we’ve re-achieved and held that position. There were some tech slowdowns and we’re particularly oriented towards tech. But we think those tech slowdowns are beginning to reverse themselves. That was the primary concern.
“Having great tech clients as our top clients is a great thing to have. In the end, they may have a temporary slowdown but they are overall the best growers that the country has.”
With labor costs high, the group made around 300 job cuts during the last quarter. Further redundancies may be en route, according to chief financial officer Frank Lanuto. He said: “Our brands have already taken action to reduce compensation expenses to align with revenue. We eliminated more than 300 roles in the first quarter, which will generate approximately $25 million in annualized savings.
“We will take further action this quarter which should result in additional run rate savings of approximately another $20 million. We will continue to monitor performance over the remainder of the year and, if necessary, we’ll make further adjustments.“
Stagwell’s annual revenues closely followed those of Havas, traditionally considered one of the industry’s ‘big six’ groups. But its first-quarter performance showed the business had fared worse than the French network; organic revenue fell 3.1% to $521.6m at Stagwell, while Havas’ rose 3.5%, to $669.4m.
Revenues for its political advocacy practices, including Assembly, were expected to be down because it’s not an election year in the US. But excluding the figures associated with its lobbying businesses, Stagwell’s organic growth for the period was still -1.1%.
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Organic revenue within Stagwell’s digital transformation agencies fell 9%, while its creative and communications businesses – including Forsman & Bodenfors – decreased 3.5%.
The group’s most recent acquisition deal, for Dublin-based In The Company of Huskies, sought to bolster that portion of its business, and its foothold in Europe more generally.
According to Penn, “We’re strengthening our European presence. Our goal is to bring our resources more closely together in Europe and win bigger business there.”
The group netted $53m in net new business revenue in the first quarter, including account wins with T-Mobile and MSNBC; president Jay Leveton said much of that was driven by healthcare and travel clients.
“Travel was obviously extraordinarily challenged during the pandemic, and it’s come to bounce back very strong. We’ll see that continue for the most part, as they’re not the most inflation-impacted areas,” he added.
Penn said, however, that the firm had brought in $40m in new business for April alone, a record for the company. “I think a lot of people were kind of holding out their pitches until they saw how the economy was going. And I think they accelerated some of the closings, but I think it was a diversified set of wins. And I think it certainly strengthened our belief that this year is going to be a good year.”
The company still expects to chart organic growth of 7-10% for 2023 overall.