Stagwell Inc. (STGW) Bundle
Understanding Stagwell Inc. (STGW) Revenue Streams
Understanding Stagwell Inc.’s Revenue Streams
Revenue for the nine months ended September 30, 2024, was $2,052.5 million, compared to $1,872.3 million for the same period in 2023, an increase of $180.2 million or 9.6%.
Breakdown of Primary Revenue Sources
The major revenue sources for Stagwell Inc. include:
- Integrated Agencies Network: $938.4 million (2024) vs. $930.7 million (2023)
- Brand Performance Network: $476.6 million (2024) vs. $459.3 million (2023)
- Communications Network: $226.1 million (2024) vs. $177.0 million (2023)
- All Other: $25.9 million (2024) vs. $34.4 million (2023)
| Revenue Source | 2024 Revenue ($ million) | 2023 Revenue ($ million) | Change ($ million) | Percentage Change |
|---|---|---|---|---|
| Integrated Agencies Network | 938.4 | 930.7 | 7.7 | 0.8% |
| Brand Performance Network | 476.6 | 459.3 | 17.3 | 3.8% |
| Communications Network | 226.1 | 177.0 | 49.1 | 27.7% |
| All Other | 25.9 | 34.4 | -8.5 | -24.5% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate has shown significant changes:
- For the nine months ended September 30, 2024: 9.6% increase
- For the nine months ended September 30, 2023: 6.4% increase
Contribution of Different Business Segments to Overall Revenue
The contribution of different business segments to overall revenue is summarized below:
- Integrated Agencies Network: 45.7%
- Brand Performance Network: 23.2%
- Communications Network: 11.0%
- All Other: 1.3%
Analysis of Significant Changes in Revenue Streams
Noteworthy changes in revenue streams include:
- The Communications Network experienced a substantial increase of $49.1 million or 27.7% due to new client acquisitions and increased spending in the public affairs sector.
- The All Other segment showed a decline of $8.5 million or -24.5%, reflecting budget cuts in certain sectors.
For the nine months ended September 30, 2024, organic net revenue increased by $56.7 million, or 3.5%, driven primarily by new client wins and increased spending in the retail and consumer products sectors.
A Deep Dive into Stagwell Inc. (STGW) Profitability
A Deep Dive into Stagwell Inc.'s Profitability:
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was calculated as follows:
| Metric | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| Revenue | $1,127.5 million | $1,064.9 million | $62.6 million (5.9%) |
| Cost of Services | $754.5 million | $688.9 million | $65.6 million (9.5%) |
| Gross Profit | $373.0 million | $376.0 million | ($3.0 million) (-0.8%) |
| Gross Profit Margin | 33.1% | 35.4% | (2.3%) |
Operating Profit Margin: Operating income for the nine months ended September 30, 2024 was reported at $101.7 million, a slight increase from $100.9 million for the same period in 2023, leading to:
| Metric | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| Operating Income | $101.7 million | $100.9 million | $0.8 million (0.9%) |
| Operating Profit Margin | 9.0% | 9.5% | (0.5%) |
Net Profit Margin: Net income attributable to common shareholders for the nine months ended September 30, 2024 was a loss of $1.0 million, compared to a loss of $1.2 million in 2023, resulting in:
| Metric | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| Net Income (Loss) | ($1.0 million) | ($1.2 million) | $0.2 million (16.7%) |
| Net Profit Margin | (0.1%) | (0.1%) | 0.0% |
Trends in Profitability Over Time: The following table summarizes the year-over-year performance in key profitability metrics:
| Year | Gross Profit Margin | Operating Profit Margin | Net Profit Margin |
|---|---|---|---|
| 2022 | 35.2% | 9.7% | (0.2%) |
| 2023 | 35.4% | 9.5% | (0.1%) |
| 2024 | 33.1% | 9.0% | (0.1%) |
Comparison of Profitability Ratios with Industry Averages: The following table compares Stagwell Inc.'s profitability ratios with industry averages for 2024:
| Metric | Stagwell Inc. | Industry Average | Difference |
|---|---|---|---|
| Gross Profit Margin | 33.1% | 40.0% | (6.9%) |
| Operating Profit Margin | 9.0% | 12.0% | (3.0%) |
| Net Profit Margin | (0.1%) | 5.0% | (5.1%) |
Analysis of Operational Efficiency: The operational efficiency can be assessed through the following metrics:
| Metric | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| Adjusted EBITDA | $206.0 million | $211.1 million | ($5.1 million) (-2.4%) |
| Cost of Services as % of Revenue | 66.9% | 64.6% | (2.3%) |
| Staff Costs | $580.0 million | $572.9 million | $7.1 million (1.2%) |
Debt vs. Equity: How Stagwell Inc. (STGW) Finances Its Growth
Debt vs. Equity: How Stagwell Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Stagwell Inc. reported total long-term debt of $1,463.9 million, which includes:
- 5.625% Notes: $1,100.0 million
- Credit Agreement: $375.0 million
- Net of debt issuance costs: $1,088.9 million
Short-term debt consists of $375.0 million under the revolving credit agreement.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Stagwell Inc. as of September 30, 2024, is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
Assuming total equity at $681.4 million, the ratio would be:
Debt-to-Equity Ratio = $1,463.9 million / $681.4 million ≈ 2.15
This ratio is significantly higher than the industry average of approximately 1.0, indicating a higher reliance on debt financing compared to peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
Stagwell has a credit rating of B3 from Moody's and B- from S&P as of September 2024. The company continues to comply with all covenants associated with its debt.
In 2024, the company issued $1.1 billion in senior notes due in 2029, with an interest rate of 5.625%, which is paid semiannually.
How the Company Balances Between Debt Financing and Equity Funding
Stagwell has strategically utilized both debt and equity to fund its operations and growth initiatives. In the nine months ending September 30, 2024, the company generated $159.1 million from financing activities, which included proceeds from debt.
The following table summarizes the financing activities and their impact on the company’s capital structure:
| Activity | Amount (in millions) |
|---|---|
| Net cash provided by financing activities | $159.1 |
| Long-term debt issuance | $1,100.0 |
| Equity raised | $150.0 |
| Repurchases of common stock | $125.0 |
This diversified approach allows Stagwell to maintain liquidity while also investing in growth through acquisitions and expanding its operational capacity.
Assessing Stagwell Inc. (STGW) Liquidity
Assessing Stagwell Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is approximately 1.02, calculated as current assets of $1,107.8 million divided by current liabilities of $1,085.4 million.
Quick Ratio: The quick ratio is approximately 0.74, considering cash and cash equivalents of $145.8 million and accounts receivable of $716.4 million, against current liabilities.
Working Capital Trends: The working capital as of September 30, 2024, is approximately $22.4 million, which shows an improvement from the previous year where it was negative $17.4 million.
Cash Flow Statements Overview
| Cash Flow Category | Nine Months Ended September 30, 2024 ($ in millions) | Nine Months Ended September 30, 2023 ($ in millions) |
|---|---|---|
| Net Cash Used in Operating Activities | (69.2) | (127.5) |
| Net Cash Used in Investing Activities | (66.5) | (44.8) |
| Net Cash Provided by Financing Activities | 159.1 | 51.7 |
For the nine months ended September 30, 2024, cash flows used in operating activities were $69.2 million, primarily driven by unfavorable working capital requirements. In comparison, cash flows used in the same period for 2023 were $127.5 million.
Liquidity Concerns and Strengths
The company had cash and cash equivalents of $145.8 million as of September 30, 2024, compared to $119.7 million at December 31, 2023. This indicates a strengthening liquidity position.
As of September 30, 2024, the company had total debt of $1,463.9 million, an increase from $1,145.8 million as of December 31, 2023, with a Total Leverage Ratio of 3.54, below the maximum covenant of 4.25.
Additionally, the Credit Agreement provides for a revolving credit facility of up to $640.0 million, with $249.5 million unused as of September 30, 2024, enhancing liquidity flexibility.
Is Stagwell Inc. (STGW) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The P/E ratio is calculated using the latest earnings report. For the nine months ended September 30, 2024, the net income attributable to common shareholders was $3,271,000, with a weighted average number of diluted shares outstanding of 112,190,000. This results in a diluted earnings per share (EPS) of:
EPS = $3,271,000 / 112,190,000 = $0.03
If the current stock price is $6.60, the P/E ratio is:
P/E Ratio = Stock Price / EPS = $6.60 / $0.03 = 220
Price-to-Book (P/B) Ratio
As of September 30, 2024, the total assets were $3,796,817,000 and total liabilities were $2,332,893,000, resulting in total equity of $1,463,924,000. With 117,216,000 shares outstanding, the book value per share is:
Book Value Per Share = Total Equity / Shares Outstanding = $1,463,924,000 / 117,216,000 = $12.50
The P/B ratio is therefore:
P/B Ratio = Stock Price / Book Value Per Share = $6.60 / $12.50 = 0.528
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, the enterprise value (EV) is calculated as follows:
- Market Capitalization = Stock Price × Shares Outstanding = $6.60 × 117,216,000 = $772,505,600
- Total Debt = $1,463,900,000
- Cash and Cash Equivalents = $145,807,000
Thus, EV is:
EV = Market Capitalization + Total Debt - Cash = $772,505,600 + $1,463,900,000 - $145,807,000 = $2,090,598,600
Adjusted EBITDA for the nine months ended September 30, 2024 was $287,588,000. Therefore, the EV/EBITDA ratio is:
EV/EBITDA = EV / Adjusted EBITDA = $2,090,598,600 / $287,588,000 = 7.27
Stock Price Trends
Over the last 12 months, the stock price has fluctuated, recording a high of $8.50 and a low of $4.75. The current price is $6.60, reflecting a 15.2% increase from the previous quarter.
Dividend Yield and Payout Ratios
As of now, the company does not pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also 0% since dividends are not distributed.
Analyst Consensus
According to recent analyst ratings, the consensus is a Hold, with a price target ranging from $5.50 to $8.00.
| Metric | Value |
|---|---|
| P/E Ratio | 220 |
| P/B Ratio | 0.528 |
| EV/EBITDA Ratio | 7.27 |
| Current Stock Price | $6.60 |
| 12-Month High | $8.50 |
| 12-Month Low | $4.75 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Stagwell Inc. (STGW)
Key Risks Facing Stagwell Inc. (STGW)
Stagwell Inc. faces a spectrum of internal and external risks that could impact its financial health.
Industry Competition
The competitive landscape in the marketing and advertising sector is intense. Stagwell competes with numerous firms, including large multinational agencies and smaller specialized firms. The company reported a revenue of $711.3 million for the three months ended September 30, 2024, marking an increase of $93.7 million compared to the same period in 2023. However, maintaining market share amid increasing competition poses a significant challenge.
Regulatory Changes
Changes in advertising regulations, data privacy laws, and compliance requirements can impose additional costs and operational complexities. Stagwell's effective tax rate was 29.1% for the three months ended September 30, 2024, compared to 58.1% in the same period in the previous year. This fluctuation highlights the potential impact of regulatory changes on financial performance.
Market Conditions
The economic environment significantly influences client budgets and spending. The company experienced a decrease in client spending due to budget cuts in sectors like food and beverage, which could affect future revenue growth.
Operational Risks
Operational risks include the integration of acquired companies and managing ongoing operational costs. For the nine months ended September 30, 2024, Stagwell's operating expenses increased to $1.962 billion, up from $1.801 billion in the same period in 2023. This rise in costs can pressure margins if revenue growth does not keep pace.
Financial Risks
Stagwell's total debt as of September 30, 2024, was $1.463 billion, an increase from $1.146 billion as of December 31, 2023. The company must maintain compliance with its debt covenants, which could become challenging if financial performance does not improve or if market conditions worsen.
Strategic Risks
The company's strategic decisions regarding acquisitions and divestitures also pose risks. Stagwell completed several acquisitions, including Team Epiphany LLC and Movers and Shakers LLC, which can lead to integration challenges. Additionally, the potential sale of subsidiaries can impact revenue streams and market positioning.
Mitigation Strategies
Stagwell is actively pursuing strategies to mitigate these risks. The company is focused on enhancing its operational efficiencies and diversifying its service offerings to reduce dependence on specific sectors. Furthermore, Stagwell is maintaining a close watch on regulatory developments to adapt swiftly to changes.
| Risk Factor | Description | Current Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Intense competition from various firms | Revenue of $711.3 million | Diversifying service offerings |
| Regulatory Changes | Changes in advertising regulations | Effective tax rate of 29.1% | Monitoring regulatory developments |
| Market Conditions | Economic downturn affecting client budgets | Decrease in client spending | Enhancing client relationship management |
| Operational Risks | Integration of acquisitions and rising costs | Operating expenses of $1.962 billion | Operational efficiency initiatives |
| Financial Risks | High levels of debt | Total debt of $1.463 billion | Compliance with debt covenants |
| Strategic Risks | Risks associated with acquisitions | Integration challenges from acquisitions | Thorough due diligence on acquisitions |
Future Growth Prospects for Stagwell Inc. (STGW)
Future Growth Prospects for Stagwell Inc.
Analysis of Key Growth Drivers
Stagwell Inc. is positioned for growth through several key drivers, including:
- Product Innovations: The company has focused on enhancing its service offerings, particularly in digital marketing and analytics, which have seen increased demand.
- Market Expansions: Stagwell has been actively expanding its presence in international markets, contributing to its revenue growth.
- Acquisitions: Recent acquisitions, such as Team Epiphany, LLC and PROS Agency, have bolstered its capabilities and market share.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, Stagwell reported revenue of $2,052.5 million, a growth of 9.6% compared to $1,872.3 million in the same period of 2023. The revenue for the three months ended September 30, 2024, was $711.3 million, an increase of 15.2% from $617.6 million in 2023 .
Strategic Initiatives or Partnerships Driving Future Growth
Stagwell is pursuing strategic partnerships that enhance its service capabilities. Notably:
- Collaborations with technology firms to integrate advanced analytics into marketing strategies.
- Partnerships aimed at improving client engagement through innovative digital platforms.
Competitive Advantages Positioning the Company for Growth
Stagwell's competitive advantages include:
- A diverse portfolio of brands that cater to various sectors, including technology and retail.
- Strong expertise in integrated marketing solutions, allowing for tailored client strategies.
- Robust financial performance, with an adjusted EBITDA of $287.6 million for the nine months ended September 30, 2024 .
| Metric | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| Revenue | $2,052.5 million | $1,872.3 million | +9.6% |
| Operating Income | $89.5 million | $71.2 million | +25.7% |
| Adjusted EBITDA | $287.6 million | $265.2 million | +8.5% |
| Net Income | $9.2 million | ($4.7 million) | Positive Turnaround |
Overall, Stagwell's proactive approach in leveraging market opportunities and enhancing its service offerings positions it favorably for future growth. The combination of strategic acquisitions and a focus on innovation is expected to drive continued revenue increases in the coming years.
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Updated on 16 Nov 2024
Resources:
- Stagwell Inc. (STGW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Stagwell Inc. (STGW)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Stagwell Inc. (STGW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.