Stagwell Q1 Earnings Call Highlights

Key Points

• Stagwell reported a record $141 million in net new business in Q1 (LTM $486 million), is closing multiple large assignments including a nearly $60 million five‑year government contract, and is prioritizing bigger wins while cutting churn.
• The company’s AI and enterprise product effort is gaining early traction, with $12 million booked toward a $25 million first‑year sales goal for offerings like The Machine, SATS and Stagwell Search+, supported by partnerships with Palantir, Google and Adobe.
• Financials and capital allocation improved: revenue rose 8% to $704 million, adjusted EBITDA increased ~9% to about $90 million with margins up 75 bps, Stagwell repurchased ~7.3 million shares for roughly $45 million, boosted free cash flow, lowered net leverage to 3.11x, and reiterated full‑year guidance.

Stagwell NASDAQ: STGW reported first-quarter 2026 results that management said were “firmly in line with our expectations,” while emphasizing a strong start in net new business and continued investment in AI-enabled products and sales capabilities. Chairman and CEO Mark Penn said the company is “hitting major milestones” in its effort to expand from full-service marketing offerings into “platform self-service AI applications,” while CFO Ryan Greene highlighted cost controls, margin expansion, and improved cash flow.

Record net new business and a bigger push into large-scale wins

Penn said the company’s net new business hit a record in the first quarter, totaling $141 million and bringing the last 12 months to $486 million. He added that wins were about $80 million ahead of the same point last year and that the company was “closing in on four new major assignments under final negotiations.” Penn also said Stagwell signed its “first five-year, nearly $60 million government contract” during the week of the call, with a formal announcement expected within two weeks.

Management described a strategy focused on winning larger assignments and reducing churn among smaller clients. Penn said Stagwell doubled the size of its new business team and announced several hires, including Nicole Souza as Chief Growth Officer for North America. He also pointed to a “client accountability program” designed to ensure every client has an owner and to use AI monitoring tools to track client needs and trends. According to Penn, the company’s top 100 clients grew 15% in size and client churn declined by more than 10% versus the first quarter of 2025 as the programs have rolled out.

In response to an analyst question on new business, Penn said digital transformation and creative were the strongest areas. He also said margins on new clients were “at or better than the previous,” arguing that as Stagwell moves toward larger clients, margin pressure has not increased and that smaller, lower-margin clients were “cycling out of the system.”

AI and enterprise products: early traction, pipeline building

Penn positioned AI adoption as a tailwind, saying clients have moved from asking what AI is and what legal teams say about it to a mindset of “I better have AI.” He said Stagwell’s new enterprise tech products and sales organization were tracking toward an initial sales goal of $25 million, with $12 million booked. The company described three key products housed in the Digital Transformation segment:

• The Machine, which Penn described as an “agentic marketing operations operating system” that brings together a company’s marketing stack.
• SATS (Stagwell Agentic Targeting System), which combines client and proprietary data with “the power of Palantir’s targeting.”
• Stagwell Search+, tools for managing search “in the world of AI answers.”

Penn said three active engagements for The Machine were included in the $12 million booked: Con Edison, a division at Microsoft, and a “soon-to-be-announced Global Spirits brand.” He added that Stagwell had nine active opportunities, with two deep in scoping, spanning industries including public sector and financial services.

On demand generation, Penn said Stagwell attended the Adobe Summit and collected “over 600 leads,” adding that the company had achieved “50% of our first year quota” in the first couple months after organizing its sales force. He also said Search+ was described by senior Google leaders as “genuinely differentiating,” and the company is working with Google industry heads on adoption. Penn also noted partnerships with The Trade Desk, AppLovin, and Adobe, including a recently announced initiative with Adobe called the Creative Intelligence System for financial-sector marketers using Adobe as their system of record.

Quarterly results: revenue up 8%, margins improved

For the first quarter, Stagwell reported revenue growth of 8% to $704 million and net revenue growth of about 3.6% to $585 million. Penn said net revenue grew 4% and noted growth across all five segments, led by Digital Transformation.

Greene said Digital Transformation net revenue rose 9% year-over-year to $96.5 million, driven by demand for integrated technology solutions paired with services. The Marketing Cloud grew 5.3% to $26.5 million, reflecting demand for AI-enabled communications platforms and research offerings; Greene noted that one Middle East product shifted into the second quarter due to regional conflicts. He also cited growth in specific products, including BERA (up 28%) and the Harris Quest family of products (up 19%).

Other segment results cited by management included:

• Media and Commerce: net revenue growth of 2.3% to $149.5 million, which Greene attributed to improving new business momentum and expanded relationships.
• Marketing Services: net revenue growth of 1.1% to $217.6 million, led by creative and research agencies; Greene said the centralized production group “nearly doubled” net revenue as more production moved in-house.
• Communications: net revenue growth of 6.4% to $96.8 million, driven largely by new corporate assignments, with election-related revenue expected to ramp beginning in the second quarter, according to Greene.

Adjusted EBITDA increased about 9% to $89.7 million (Penn cited $90 million), and Stagwell posted an adjusted EBITDA margin of 15.3%, up 75 basis points year-over-year. Greene said payroll as a percentage of net revenue declined 110 basis points to 63.9%, while G&A declined about 50 basis points to 19.6%.

Share repurchases, cash flow improvement, and leverage

Stagwell repurchased approximately 7.3 million shares in the quarter for roughly $45 million at an average price of $6.16, Greene said. Penn said shares outstanding ended the quarter at about 246 million, down about 19 million since last April and down about 50 million since August 2021. Adjusted EPS was $0.17, up 31% from the prior-year quarter. Greene attributed the increase to both higher adjusted EBITDA and the reduced share count from buybacks.

Greene said cash flow from operations improved by $34 million versus the first quarter of last year due mainly to better working capital execution, contributing to an $18 million year-over-year increase in free cash flow for the quarter. The company ended the quarter with $350 million on its revolver, down $25 million from the year-ago period, and net leverage improved to 3.11 times, a 0.17 turn improvement. Greene also noted that Moody’s reaffirmed Stagwell’s B1 rating and revised its outlook to positive in late March.

Outlook: second-half acceleration tied to pipeline and political cycle

Management reiterated full-year guidance for total net revenue growth of 8% to 12%, adjusted EBITDA of $475 million to $525 million, free cash flow conversion of 50% to 60% of adjusted EBITDA, and adjusted EPS of $0.98 to $1.12.

Asked about what drives expected second-half acceleration, Penn said it was less dependent on AI product scaling than on large creative contracts nearing completion, a strong digital transformation pipeline, and what he called a “political super cycle.” He said Stagwell expects growth to accelerate to double digits by the third and fourth quarters and said the company already has political clients “in the bank.”

On the macro environment, Penn said the only direct impact the company was seeing related to Middle East tourism, which he characterized as about 3% of Stagwell’s business. He said Stagwell was not currently seeing clients make contingency plans, pull back, or alter marketing plans due to the conflict, and he emphasized continued investment in AI as a major theme.

Regarding government opportunities, Penn said Stagwell has built the team, accounting, and structure needed to compete for larger contracts and has begun partnering with firms such as Deloitte and Palantir on “massive contracts.” He described the newly won government contract as a “real breakthrough” and said the company is preparing to bid for large opportunities such as the post office and the Navy.

About Stagwell NASDAQ: STGW

Stagwell Inc is a modern marketing and communications network that partners with global organizations to drive brand growth through data-driven insights and creative solutions. The company operates a diversified portfolio of specialized agencies and technology platforms, offering services that span digital marketing, advertising, public relations, consumer and market research, social media strategy, and commerce consulting. By integrating research, creative, media, and technology under a unified network, Stagwell aims to deliver end-to-end marketing solutions tailored to the evolving needs of clients in sectors such as technology, healthcare, consumer goods, and financial services.

Founded in 2015 by long-time political strategist and pollster Mark Penn, Stagwell has expanded organically and through strategic acquisitions to build capabilities across the marketing value chain.

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