Stagwell Q2 Earnings Call Highlights

Key Points

• Strong Q2 performance: Revenue rose 11% to $786 million, organic revenue increased 10%, and adjusted EBITDA grew 15% to $108.7 million as margins expanded to 17.2%. Adjusted EPS climbed 39% to $0.25.
• AI-driven demand and new business fueled growth: Digital transformation organic net revenue surged 18% and communications grew 12%, while record net new business reached $171 million. Stagwell also secured $16 million in committed enterprise technology revenue and expects to exceed its $25 million annual bookings target for AI products.
• Outlook maintained, EPS raised: Full-year revenue, EBITDA and free-cash-flow guidance remained unchanged, but adjusted EPS guidance increased to $1.03–$1.17 due largely to share repurchases. Cost savings, improving cash flow and planned debt reduction are expected to lower leverage toward the mid-two-times range by year-end.

Stagwell NASDAQ: STGW reported second-quarter results marked by accelerating organic growth, higher profitability and record net new business, as the marketing services company emphasized demand for AI-enabled digital transformation and communications work.

Revenue increased 11% year over year to $786 million, while net revenue rose 6% to $632 million, Chief Financial Officer Ryan Greene said. Organic revenue grew 10% and organic net revenue grew 5%, which Greene described as the company’s strongest growth rate in the past six quarters.

Adjusted EBITDA rose 15% to $108.7 million, and the adjusted EBITDA margin expanded 143 basis points to 17.2%. Adjusted earnings per share increased 39% year over year to $0.25, aided by both EBITDA growth and a lower share count following repurchases.

Digital Transformation and Communications Lead Growth

Chairman and Chief Executive Officer Mark Penn said the company’s digital transformation segment was a principal growth driver, posting 18% organic net revenue growth to $107 million. The segment generated a 30% margin during the quarter, its highest since the merger, according to Greene.

Penn attributed the performance to demand for work combining business strategy, technology, creativity and AI transformation. He said clients are moving away from commoditized IT services and seeking partners that can help redesign consumer communications and workflows around AI.

“AI is the tech transformation that we were built for,” Penn said, adding that the company expects the demand to be sustainable over the long term. He said approximately 75% of coding work is now performed agentically, improving efficiency while Stagwell pursues higher-level client assignments.

Communications organic net revenue increased 12% to $112 million, its strongest second quarter since the merger. Penn said political activity is beginning to contribute to the segment’s growth and should accelerate ahead of November’s midterm elections, while public relations work has also continued to rebound.

Other segment results included:

• Marketing Cloud organic net revenue growth of 4% to $27 million, supported by demand for AI-embedded products and subscription offerings.
• Marketing Services net revenue of $243 million, up 0.5% organically. Greene said major creative assignments awarded during the quarter are expected to scale in the second half and support stronger growth in 2027.
• Media and Commerce organic net revenue growth of 1% to $155 million.

Geographically, U.S. organic net revenue increased 7.1%, while U.K. organic net revenue rose 13.4%.

Record New Business and AI Product Pipeline

Stagwell reported $171 million in net new business, its highest level to date and 45% above the prior-year second quarter, Penn said. New assignments included IBM’s creative business, expanded work with Adobe, Visit California, Hershey, Mondelez, Heineken, Haier Europe, Navy Federal Credit Union and Allegiant Air.

Penn said the company expects its cumulative year-end new-business pipeline to be about 30% higher than the prior year. He characterized the wins as evidence that clients are seeking a combination of creativity, technology and agility from agencies.

The company is also developing an enterprise suite of agentic marketing products, including The Machine, the Knowledge Machine, the Targeting Machine and The Media Machine. Penn said Stagwell had secured $16 million in committed enterprise technology revenue during the first half, with another $16 million in its pipeline. The company remains on track to exceed its initial $25 million annual bookings goal for the products, he said.

Stagwell’s Targeting Machine, or SATS, is built on Palantir’s Foundry platform, while the company has also expanded its relationship with Adobe. Penn said the company is adding sales teams to support technology-product distribution alongside its traditional marketing-services sales infrastructure.

Cost Actions, Cash Flow and Capital Allocation

Greene said Stagwell has implemented about $70 million in annualized savings since launching a cost-reduction program in April 2025 and remains on track for $80 million to $100 million of savings by year-end. Staff costs declined 280 basis points year over year to 60.9% of net revenue, the company’s lowest second-quarter labor ratio in four years.

Year-to-date cash flow from operations was $63.7 million, up $9 million, or 16%, from the first half of the prior year. Stagwell expects operating cash flow to improve through the remainder of the year because of business seasonality and anticipated election-related communications activity.

The company’s revolver balance was $360 million at quarter-end, with $374 million in unused borrowing capacity. Net leverage stood at 3.04 times, and management said it expects to exit the year with leverage in the mid-two-times range.

During the quarter, Stagwell repurchased approximately 5.9 million shares at an average price of $6.22 each. Through the first half, it repurchased about 14.4 million shares for $88 million at an average price of $6.10 per share. Shares outstanding at the end of the second quarter were 244.4 million, down 6.4% from a year earlier.

Guidance Maintained; EPS Outlook Raised

Stagwell maintained its full-year guidance for net revenue growth of 8% to 12%, adjusted EBITDA of $475 million to $525 million, and free-cash-flow conversion of 50% to 60% of adjusted EBITDA.

However, the company raised its adjusted EPS outlook to $1.03 to $1.17, primarily reflecting year-to-date share repurchases. Management said growth in the second half is expected to be overwhelmingly organic, led by digital transformation and communications.

Penn said Stagwell expects some acquisitions in the second half but does not anticipate any transaction that would be “huge or disruptive.” He said capital allocation will remain balanced among debt reduction, share buybacks, capital expenditures and selective small- to midsize acquisitions.

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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