Stagwell Expects About 10% Of A $1.5 Billion Central Command Subcontract In Fees
CEO Mark Penn says the marketing firm's first major federal assignment spans five years, and a second win followed within weeks.
Stagwell will serve as prime subcontractor to Kaki on work for U.S. Central Command, a $1.5 billion total award over five years, Chairman and CEO Mark Penn said on the company's third-quarter earnings call Thursday. Stagwell, which sells marketing, communications and software services, "conservatively" expects to capture 10% of that total in fees.
A first federal win, and a second
Penn said Stagwell won the assignment in the third quarter, calling it the company's first major federal job, and that it will "really kick off the beginning of the year." He told analysts the fee share carries "potential for significantly more."
Winning a first federal assignment "is often the hard part," Penn said. Stagwell is now established in the ecosystem, he said, and won a second significant federal assignment "just weeks ago."
Government-related work can become 10% or more of the business over time, Penn said. Asked about weakness in creative work, he said he thinks government contracts "are going to come on."
Middle East drag and the quarter
Penn said Stagwell lost $9 million of work in the Middle East because much of it was tourism-based. CFO Ryan Greene put the region's organic net revenue decline at 35%, or $9 million, while Penn described it as a 2% organic headwind to the company overall.
The quarter itself was a record, the executives said. Revenue rose 10% to $816 million and net revenue rose 8% to $664 million. Adjusted EBITDA climbed 25% to $144.8 million, and adjusted earnings per share rose 42% to $0.34.
Stagwell raised its full-year adjusted EBITDA outlook to $490 million to $540 million and adjusted EPS to $1.07 to $1.21. It kept its 8% to 12% net revenue growth and 50% to 60% free cash conversion targets.
The pivot to AI software
Penn framed the government push as part of a shift from marketing services toward AI-based marketing transformation. Enterprise tech bookings stand at $59 million so far this year, more than double his initial $25 million goal, and he doubled the 2027 goal to $150 million.
The Marketing Cloud segment, which sells software and data products, grew 108% organically to $56 million in net revenue. Digital transformation grew 23% organically to $119 million.
Penn said newly won government contracts and commercial assignments will kick in as the largest presidential cycle begins in earnest in the second half of 2027. Marketing services and media, he said, are poised to return to single-digit growth.
Greene said Stagwell was on track to exit 2026 with net leverage in the mid twos, after ending the third quarter at 2.73 times.
Sources
- Stagwell Non-GAAP EPS of $0.34 beats by $0.03, revenue of $816M misses by $18.21M (STGW:NASDAQ) | Seeking Alpha — seekingalpha.com
- Stagwell (STGW) Q3 Earnings Top Estimates — Yahoo Finance
- Stagwell: Q3 Earnings Snapshot – WTOP News — wtop.com
- Stagwell: Q3 Earnings Snapshot | wusa9.com — Associated Press
- Stagwell’s Freestar deal brings buying and selling under one roof — digiday.com
