Diana Marszalek 04 Nov 2021 // 6:11PM GMT
NEW YORK — Stagwell's communications group, which includes its PR and advocacy agencies, saw revenue drop 5.6% during the third quarter of the year, according to the first quarterly report since Stagwell closed a deal to buy MDC Partners firms in July.
The communications group — which includes PR agencies Allison+Partners, Exponent, Hunter, KWT, Sloane & Company, and Canadian firm Veritas — is still, however, up for the year to date. Revenue for the first three quarters of 2021 grew 3.2% from the same period of time in 2020.
PR agencies performed particularly well, registering 33% growth so far this year. Stagwell credits the quarterly decline experienced by the communications group, which accounts for 13% of Stagwell's revenue, to the expected dip in advocacy business that comes with it being an off-cycle year.
Stagwell Group as a whole saw organic revenue rise 22.8% in Q3. Net revenue for the three months ending September 30 was $498.1 million, up 25.2% from $397.8 million for the third quarter of 2020 and 14.4% from Q3 2019.
Organic net revenue increased primarily due to a continuation of the Covid recovery in spending by clients begun in the first quarter, according to the report. Net new business wins in the third quarter of 2021 totaled $63.7 million.
Adjusted EBITDA for the third quarter of 2021 was $100.3 million versus $89.3 million for the third quarter of 2020, an increase of 12.4%, primarily driven by strong revenue growth. Adjusted EBITDA margin in the third quarter of 2021 was 20.1%, down from 22.4% compared to the same period in 2020. Excluding the impact of the advocacy business, adjusted EBITDA margins would have been 20.1% for the third quarter of 2021 and 19.3% for the third quarter of 2020.
Net revenue for the first nine months of 2021 was $1,407.1 million versus $1,185.4 million in the prior year period. Organic net revenue for the nine months ended 2021 increased by 15.6% and foreign exchange and acquisitions, net of dispositions, had a positive impact of 1.3% and 1.8%, respectively.
Adjusted EBITDA for the first nine months of 2021 was $275.3 million versus $205.9 million in the first nine months of 2020, an increase of 33.7%. This led to an Adjusted EBITDA Margin of 19.6% versus 17.4% in prior year period.
“Stagwell’s third quarter results make one thing very clear: the combination is working. We delivered pro forma organic net revenue growth of 23%, a pro forma adjusted EBITDA margin over 20%, and are pleased to raise our full year adjusted EBITDA guidance on the basis of our results to date,” said chairman and CEO Mark Penn. “Our growth this quarter was driven by double-digit, pro forma net revenue growth across nearly all our client offerings, including digital transformation, communications, media and data analytics. On a year-over-year basis excluding the advocacy business, pro forma organic net revenue grew 28%. With net new business of $64 million, this is a strong first quarter as a newly combined company.”
The July merger of Stagwell and MDC was the culmination of a deal that started in March 2019, when Stagwell invested $100 million in MDC with an eye on buying it.
In January, the holding company struck partnerships with three international agencies as part of its new global affiliate program — the first step in the holding company’s larger plan to grow its geographic footprint in emerging markets. MDC partnered with agencies with presences in Eastern Europe and MENA (Brand New Galaxy); East Asia and North America (Beyond Media Global) and Vilnius and Moscow (OKC.Media).
The creation of the affiliate network is one of a series of moves Penn has made since he assumed leadership of MDC.
In June 2020, KWT merged with sister MDC agency HL Group, which doubled KWT’s staff and boosted its expertise in sectors including consumer, lifestyle, fashion and beauty.
In late 2019, MDC Partners created a network that aligns six of its specialty agencies, including PR firms KWT and HL Group, with one of its largest US advertising firms, Doner.