Stagwell - Q4 2022

Transcript

Jason Reid (Chief Investment Officer)

Good morning from Stagwell's Headquarters at One World Trade Center in New York City. Welcome to Stagwell Inc's Earnings Webcast for Q4 and Full Year 2022. My name is Jason Reid, Chief Investment Officer at Stagwell. I'm here joined by Mark Penn, Stagwell's Chairman and Chief Executive Officer, and Frank Lanuto, Chief Financial Officer. Mark will begin with a business update, followed by a full financial review from Frank. We will proceed to a discussion with Barton Crockett from Rosenblatt Securities and open the floor for Q&A. You are welcome to submit questions through the chat function. As we begin, I'd like to remind you that the following remarks include forward-looking statements and non-GAAP financial data. Forward-looking statements about the company include those related to earnings guidance, are subject to uncertainties and risk factors addressed in our earnings release, slide presentation, and the company's SEC filings.

Unless otherwise stated, comparisons to prior full-year periods discussed on this webcast will be pro forma for the combination, giving full effect to historical results as if the combination had been completed on January 1, 2021. Please refer to our website, stagwellglobal.com/investors, for investor presentation and additional resources. This morning's press release and slide deck provide definitions, examples, explanations, and reconciliations of non-GAAP financial data. With that, I'll turn it over to our Chairman and CEO, Mark Penn.

Mark Penn (Chairman and CEO)

Thank you, Jason. Stagwell closed out 2022 with industry-leading double-digit growth, strong margin expansion, record free cash flow, record earnings per share, and a net debt ratio significantly below our year-end target. We promised to transform marketing, building game-changing AI and AR products and services as we continue to grow and transform both our business and the industry. In 2022, Stagwell hit a record $2.7 billion in revenue, achieving a 21% overall revenue growth and 19% organic growth. On a net revenue basis, we achieved 15% growth, 14% organically. This growth was led by our digital transformation services, performance media, and research offerings. In line with our strategic focus on global expansion, Stagwell grew 26% internationally about twice as fast as in North America. In Q4, we also grew by double digits, marking six consecutive quarters of double-digit growth.

All this in the face of market headwinds and a difficult economy tempered by rising interest rates. We delivered a 20.3% EBITDA margin on net revenue for the full year as we controlled our labor costs, benefited from the even year advocacy cycle, and reduced our comp to net revenue ratio to 62.7%. This generated over $450 million of EBITDA, $270 million of free cash flow, a 60% conversion ratio. We delivered $0.90 of adjusted earnings per share, and this performance in turn drove our net debt ratio down to 2.17, significantly below our previous target of 2.5, and placing overall net debt on December 31st at $979 million.

We also invested over $7 million out of OpEx in the new cloud product teams and will continue to expand that level of investment to $12 million this year as we bring new products to market. Our Q4 revenue topped $700 million. We closed out the year with a 21.1% adjusted EBITDA margin on net revenue. We're reaffirming our long-term annual organic growth target of 10%-12%. Stagwell is achieving consistent double-digit annual organic growth in the ex-advocacy parts of the business and even higher growth in advocacy years, and we expect to exceed this target in the 2024/2025 cycle. Recall that our overall growth is a combination of organic growth, self-funded acquisitions, and the creation of the Stagwell Marketing Cloud, all of which are on or above plan.

Based on the metrics of growth, margin, EBITDA, cash flow, adjusted EPS that we are consistently delivering at scale, our stock remains significantly undervalued. Don't take my word for it. Ask the growing set of analysts who cover us. The state of Stagwell remains vibrant despite the headwinds of a too hot and too cool economy. Some clients, especially the tech companies, are holding back work early in the year as they right-size their staffing. We expect full resumption of that work as they stabilize their workforce. There's no slowdown in RFPs, which are coming in at record rates. We continue to push the envelope of what a well-managed digital-first company can do. Today, we're announcing another $35 million drive over the next two years to cut administrative expenses as we close out the final round of deal-related synergies later this year.

This will contribute to expanding margins. These new savings will be above and beyond the past efforts as we streamline IT, HR, real estate, and other centralized offerings, all made possible by the new systems coming online now. We are also announcing a doubling of the stock buyback program to $250 million from $125 million. We bought back 7.2 million shares in 2022. We are setting 2.0 as the long-term net leverage target, lowering it from 2.5. We will continue to use our free cash flow for three purposes, making prudent investments to augment our growth in tech services and expand our global footprint. Paying off existing investments. Three, buying back our stock or otherwise supporting our shareholders through debt reduction.

We continued this year to reduce forward deferred acquisition costs, trimming them to about $60 million in cash in 2023. DAC is scheduled to drop to de minimis levels in 2025, reflecting our strategy of growing fully owned properties. In 2022, we used less than a third of our free cash flow for new acquisitions, including Brand New Galaxy, an e-commerce company that uses AI to improve online shopping, Arloo, a leading SaaS research platform that is part of the Stagwell Marketing Cloud, and Epicenter Experience, renamed The People Platform, a location data company within SMC that augments our media performance and evaluation. Stagwell is gaining in share and reputation in the marketing arena. RFPs increasingly include Stagwell alongside global competitors, and we win a disproportionate share of them. In 2022, Stagwell was invited to a record $1 billion of pitches.

Q4 net new business was $42 million, bringing 2022 total net new business to a healthy $213 million. We're increasingly successful at executing a land and expand client strategy. Our top 25 clients contributed a record average of $6.3 million in net revenue per client in Q4, up from $6.1 million in Q3. We achieved 28% growth in business from our top 25 clients for the full year, bringing our annualized average of each major client to $24 million. Technology, food, beverage, experiential, transportation, and travel clients drove the largest gains in this group. Notable Q4 wins include Cotopaxi at GALE, Yohana at Instrument, and a joint win between Forsman & Bodenfors and Assembly for global brand duties at the Mandarin Oriental Hotel Group.

For the full year, we picked up significant accounts of Audible, 72andSunny, Bud Light at Anomaly, T. Rowe Price at Assembly, Lenovo at Assembly, Tishman Speyer at Doner, Dropbox at GALE, and AT&T Mexico at YML. Three key industry trends are working in our favor and will work for us in the long term as we position Stagwell at the frontier of marketing. First, media and creative are coming together, and our creative media consultancy, GALE, grew 140% in 2022. We're bringing two disciplines together across Stagwell and giving media capability to all our major creative agencies so that they can plan and execute online campaigns. This is opening up scores of new pitches that generate long-standing client relationships. Second, every company is not only becoming a digital company, but also becoming a digital marketing company.

Businesses need to market to a set of targeted consumers based on data across addressable mediums, and our companies and services are best oriented to service those consumers as 57% of our services are high-growth digital services. Digital transformation grew 33% in 2022, performance media and data grew 18%, and consumer insights and strategy grew 32%. Third, we are getting ahead of the next wave of technology with the Stagwell Marketing Cloud. We've unveiled our stadium augmented reality experience called ARound, developed with the Minnesota Twins, and held the largest virtual snowball fight in history with the LA Rams. Users engage with the ARound app for an average of 25 minutes each, opening up vast sponsorship potential, beginning with SoFi as our first sponsor as we aim to take augmented reality to every stadium and every sport in the world.

Additionally, a large PR agency just signed on to our generative AI-based communications technology product, PRophet, that helps PR professionals write and pitch the most effective news release. Our next version of the product in beta now will write the first draft of a news release and refine it based on AI feedback. PRophet came out number one in a recent competition of more than 750 tech products in the public relations space. Among other Stagwell Marketing Cloud products, the Harris Brand Terminal is growing at nearly 100% per year. We're progressing in the development and deployment of our Media Studio product, which by next year will place us in direct competition with The Trade Desk, leveraging our $5 billion of media that we place to train and perfect our models.

By 2024, we expect SMC services to contribute significantly to the bottom line, building to $500 million in SaaS, PaaS, and advanced media platform services by 2027. Stagwell continues to be best positioned in the industry amidst a digital revolution in marketing. Our performance-based media division is ideally situated to benefit from the growth of connected TV while competitors struggle with the transition. Our research is fast, agile, and sophisticated, commanding a premium in the marketplace as companies need more advice than ever in an uncertain world. Our digital transformation division takes on ever more complex projects from creating online publications to advising on Web3 implementation. All while our creatives turn out top-rated Super Bowl commercials. Anomaly, which was behind the famous Ben Affleck commercial, won Adweek's 2022 Agency of the Year.

In 2023, we expect to deliver 7.5%-10% net organic growth and $450 million to $490 million in EBITDA in line with our long-term targets. We expect free cash flow to again be in the 50%-60% range, and that should generate between $0.90-$1.05 of adjusted EPS.

Remember that our high-margin advocacy businesses are semi-dormant in odd years and then add to the growth rates in even years. We're once again guiding double-digit growth, 10%-14% in the ex advocacy services and believe we have hedged for a difficult economy in these projections. We expect 2024 to be a year in which advocacy, the economy, and the Stagwell Marketing Cloud come together to accelerate growth even higher. Our strategy is working. We're generating results double or more than traditional competitors because of accelerated growth of our high-growth digital services, and we're achieving expanded client relationships through global scale. We are not standing still. We're innovating with the Stagwell Marketing Cloud and AI and AR experiences that put us at the forefront of the industry.

Now, Frank Lanuto will lead a deeper review, but first, enjoy a short film made by our own company of 2022's highlights.

Speaker 4

2022 was a strong year for Stagwell, capped off by our sixth quarter of consecutive double-digit growth. Take a look at how the challenging network performed in our first full year as a combined company. For the quarter, we delivered $583 million in net revenue and $123 million in adjusted EBITDA. For the year, we led the industry in growth and margin, including $2.7 billion in revenue and $451 million in EBITDA. Our growth was driven by digital acceleration, international expansion, and innovative work in AI and AR. Stagwell remains the only full-service marketing network with a digital majority revenue mix. New clients are joining us with great work for amazing partners and accolades around the world. We remain fiscally disciplined and expanded margin.

We also generated record free cash flow, substantially reduced net debt, and returned capital to shareholders. We expect another year of industry-leading growth in 2023. Join us. We're still just getting started.

Frank Lanuto (CFO)

Thanks, Mark. Good morning, everyone. We're pleased to have you join us today to discuss our Q4 and full-year results. As has been the case with our recent post-merger results, my comments today will include a limited discussion of our GAAP results as they pertain to the full year, followed by pro forma comments for the full year. Beginning in Q4, we no longer have quarterly pro forma results to report, as we have anniversaried the merger from August 2021. The full-year pro forma combined results are presented as if the business combination had occurred on January 1, 2021. Our Q4 revenue was $708 million, an increase of 16% over the prior year. Full-year revenue grew 21% to $2.7 billion. Both mark records for the company.

Q4 net revenue, excluding pass-through costs, grew 12% to $583 million. For the full year, net revenue increased 15% to $2.22 billion. Again, records for the company. When reviewing our revenue based on our four principal capabilities, digital transformation organic net revenue increased by 21% and 33% in Q4 and the full year, respectively. Net revenue in performance media and data increased by 12% and 18% in Q4 and the full year, respectively. In consumer insights and strategy, organic net revenue grew 17% and 25% in Q4 and the full year, respectively, as our research-related businesses continued to perform strongly. Finally, creativity and communications grew organic net revenue by 3% and 5% in Q4 and the full year, respectively.

Shifting to operating expenses, the company continued to manage costs carefully in 2022. Despite the highest level of inflation in decades, we were effective in controlling our single largest expense and improved our compensation-to-revenue ratio to 62.7% in 2022, down from 64.2% a year ago. Since our merger, the company has increased the use of equity awards to drive the financial performance and improve the retention of key talent. For 2022, stock-based compensation represented 1.5% of net revenue, down from 3.6% in 2021 and consistent with our estimate of 1.5%. Administrative costs rose 22% to $378 million versus the prior year, in line with our revenue growth.

While some of these costs increased with our sales activity and T&E increased above pandemic lows, we continued to reduce our real estate costs by consolidating our footprint in Los Angeles in 2022 and have plans to consolidate further in Los Angeles, London, Chicago, and Toronto in 2023. We are targeting a further reduction in annual real estate costs by $3 million to $4 million.

As a result of our strong revenue growth and effective cost management, we delivered record adjusted EBITDA of $123 million in Q4, up 19% from the prior year, and $451 million for the full year, also higher by 19% from the prior year. We also expanded our adjusted EBITDA margins by 120 basis points in Q4 to 21.1% and by 70 basis points for the full year to 20.3%. For the year, we delivered net income to Stagwell Inc common shareholders of $27 million, up from $21 million a year ago, and EPS of $0.17 a share, up from a loss of $0.04 a share a year ago.

Normalizing for certain one-time and non-cash items, we delivered adjusted net income of $63 million or $0.22 per share in Q4, and $268 million or $0.90 per share for the full year. With respect to our ongoing initiatives, and specifically our previously discussed core synergy program, we expect to complete the program during 2023 and achieve the $30 million in annual run-rate cost savings. We are not slowing our efforts. We have nearly completed our rollout of a global ERP and have initiated the deployment of a global payroll system, which we expect to complete by early 2024. These financial systems will allow us to continue our plan to expand our shared service operations, consolidate our accounting back office, and ultimately reduce costs further.

As Mark said, we are targeting an additional $35 million of administrative cost savings over the next two years. Moving to our balance sheet, we made significant strides in strengthening our financial position in 2022, leveraging and maintaining financial flexibility. The steps we took to recapitalize our balance sheet with a refinancing of our bonds at a fixed rate of 5.625% and an 8-year maturity immediately after the merger, allowed us to add long-term financing at an attractive cost of capital as compared to the current interest rate environment. Driven by free cash flow of $270 million for the year, an increase of 35% over the prior year, we were able to successfully deliver our capital allocation plan this year.

We lowered our acquisition-related liabilities of deferred acquisition consideration and redeemable non-controlling interests by $65 million to $200 million, as compared with $265 million at year-end 2021, as we systematically move towards 100% ownership of our agencies. In 2023, we will lower our obligations further with estimated cash payments of approximately $70 million, after which our acquisition-related obligations will be under $100 million. We also acquired $7.2 million shares under our stock repurchase program during the year, returning capital to our shareholders. Reduced our net debt by $201 million from Q3, ending the year with $221 million in cash and $100 million drawn against our $500 million revolver.

This resulted in lowering our net leverage to 2.17x below our prior target of 2.5x. CapEx for Q4 and the full year was $5 million and $23 million, respectively, or approximately 1% of full-year revenue in line with our previous guidance. Finally, reiterating our 2023 guidance, Stagwell expects to deliver 7.5%-10% organic net revenue growth, 10%-14% organic net revenue growth excluding advocacy, $450 million to $490 million of adjusted EBITDA, 50%-60% conversion of adjusted EBITDA to free cash flow, and adjusted earnings per share of $0.90-$1.05. Thank you. Jason, back over to you.

Jason Reid (Chief Investment Officer)

Thank you, Frank. That concludes our prepared remarks for this morning. We'll now turn to Q&A. To submit questions, click on your chat button at the top of the screen. We're going to begin questions from Barton Crockett, Managing Director and Senior Research Analyst at Rosenblatt Securities. We're pleased to have Barton joining us here live from One World Trade Center. Barton, the floor is yours.

Barton Crockett (Managing Director, Senior Research Analyst - Internet Media)

Okay. First off, I wanna say thank you for inviting me to join you here. It's a, it's a privilege in my first quarter of covering you guys to get the opportunity to interact with you after this earnings report. Thank you. I wanted to ask about the first of all, the performance relative to kind of your guidance, right? You delivered a full year that was kind of at the low end of your guidance that you had put out on your in terms of EBITDA on your last earnings report. That suggests to me that perhaps things got a little bit more difficult than you were anticipating just, you know, a couple of months ago.

I was wondering if you could talk to that, why at the low end versus kind of the midpoint or above?

Frank Lanuto (CFO)

I think the difference between the low end and the high was primarily falloff in low dollar political contributions.

That was what I said in the third quarter earnings call was a falloff that once gas prices went up. That continued throughout the election season in which the Republican fundraising, frankly, given the overall turnout, what happened in the midterms, you know, fundraising in the Republican side was significantly down. I think that was the major factor between being towards the lower end of the guidance and the higher end.

We don't expect this to repeat itself as the upcoming presidential race promises to be the election of the century.

Barton Crockett (Managing Director, Senior Research Analyst - Internet Media)

Okay. I wanna ask a little bit more about the presidential, but before we do that, in terms of the current environment, you know, what can you tell us about what you're seeing right now? How do things look relative to your guidance for the full year? How does it kind of trend?

Mark Penn (Chairman and CEO)

Obviously, we're tracking in line with the guidance for the full year. I think that right now we're seeing, as I pointed out, some of the tech companies I think in what we'd call management, temporary management disarray while people kind of get their footing again. Then we expect to see a full resumption. Outside of that, we see very strong work across areas like travel, which have come back really strongly. Alcohol, which I think is really expanding and coming back. We see caution out there, but we don't see panic.

Barton Crockett (Managing Director, Senior Research Analyst - Internet Media)

Okay. All right. One more question about your guidance, in terms of margins. One of the great, you know, things with this past year is you had margin expansion as you highlighted. You know, in your guidance, the revenue growth, at the low end, would still be up, but the EBITDA would be flat year-over-year, which suggests maybe risk of margin compression at the low end. At the high end, they're kind of trending at the same kind of pace, which would suggest margin stability in your guide. All these things you're talking about sound like they would make you a more efficient, higher margin business. Is there some conservatism in this guidance?

Mark Penn (Chairman and CEO)

I think as I said that I've tried to incorporate various economic projections in the guidance already. I think second, remember we've spent a lot of money to really steam out some of the administrative expenses. We're right in the middle of putting all these systems in. Once they're in, I think we'll be able to shrink administrative expenses considerably.

Barton Crockett (Managing Director, Senior Research Analyst - Internet Media)

Okay. You had teased the presidential, and so I was wondering if you could talk about what you're seeing in the buildup to this presidential election. You know, what are the indicators that kind of support your belief that this'll be a record year for political overall and then for your company?

Mark Penn (Chairman and CEO)

Well, 40 years of experience in the field. We're seeing things on track, but right now this is kind of the lull in the political season. What we're really seeing is storm clouds are gathering on both sides, and it looks to me like they're gonna have active primaries on both sides, and that, you know, come May and June, this political season is gonna take off. There's no question, given a 50/50 country, that the battle here will really drive fundraising and financial commitments to an absolute high level.

Barton Crockett (Managing Director, Senior Research Analyst - Internet Media)

Yes. You know, you had flagged the small dollar as an issue here most recently. What gives you confidence that that doesn't continue to be a problem? In general, do you see anything in the fundraising side that can speak to that?

Mark Penn (Chairman and CEO)

We are seeing recovery from what last year when gas prices went up, particularly during the summer, there was extreme panic. I think people choosing between another political contribution and food and gas chose food and gas. I think that what we're seeing is much more of a normalization of that. You've seen gas prices come down, which I think is a key indicator. I'd be surprised if the administration allows gas prices to rise in the face of a presidential election. We're seeing really high levels of political involvement and activity. Again, trust me, this is going to be in the scheme of things, an all-out battle for the soul of America, and that means active participation.

We're also broadening out our services on the R side from just fundraising to also mail ballot collection. I think we're also gonna add additional services. On the D side, I think you're gonna have a very, very active season with a lot of successful candidates who are advancing or will be defending their Senate positions.

That's all about 2024. They said in my script, I think you see all of that coming together in 2020.

Barton Crockett (Managing Director, Senior Research Analyst - Internet Media)

Now one of the things that's also interesting about this report is that you've upped the share repurchase authorization, and you've been an active share repurchaser. You know, you noted that your EPS for the past year was $0.90. It's a single-digit dollar stock. In terms of looking ahead, the upped share repurchase authorization would suggest that there could be more dollars going towards that, yet it's a, you know, an environment that is somewhat constrained. Is there, you know, still an opportunity and ability for you guys to continue to do M&A? Do you think that that's maybe less and it's more of an opportunity for repurchase as we look ahead?

Mark Penn (Chairman and CEO)

You know, I've said previously that I generally look to take about a third of our free cash flow and put it into M&A, generally a third to pay for older obligations, and then a third kind of flexible for buybacks and others. If you notice, we have our DAC applications down to a record low, so actually that will also free up some useful cash. We're continuing to look at acquisitions that make sense and that fit in line with the strategy. I think we have the cash capability to do both of those things, you know, quite strongly as we did last year. Look, we have continued confidence that this stock is undervalued at this level. As long as it's undervalued, that's one of the best investments we can make.

Barton Crockett (Managing Director, Senior Research Analyst - Internet Media)

Okay. All right. Switching gears a little bit to an industry issue that I was curious of to get some perspective from you on, that is this AI-driven search debate that's been stoked by Microsoft. Impacting sentiment around Google. This is part of your business. I mean, a meaningful part of what you do is driven around search-based advertising. I was wondering if you could talk to Mark, what you think will happen. How do you think this evolves, and what impact, if any, does this have on your business?

Mark Penn (Chairman and CEO)

Well, as you know, I was Chief Strategy Officer at Microsoft before coming here.

I'm pretty well grounded where I think the tech industry is going, and AI is the next big thing here. It's the next major development that's going to change people's lives. Certainly, in terms of our industry, we're at the forefront with our PRophet product. I think that AI can be incredibly useful and accurate at helping people write and draft things. I don't think it does the final draft, but it sure does the first draft, and it does the first draft in ways that are quite powerful. In fact, I'm demonstrating later this afternoon to the entire company how our new product generates the entire release from just a few sentences of what you want.

Barton Crockett (Managing Director, Senior Research Analyst - Internet Media)

Okay. All right. To lean in on that a little bit, any predictions? Do you think Microsoft takes share? Do you think it's disruptive?

Mark Penn (Chairman and CEO)

Look, I think over at Google they're saying, "Hmm, how did Microsoft get the drop on this?" I think that Google has the engineers and the talent to bounce back. I think for the first time we're gonna see some real head-to-head competition in the tech industry to see who winds up the leader, I think that both companies are gonna go all out on that.

Jason Reid (Chief Investment Officer)

Thank you, Barton.

Barton Crockett (Managing Director, Senior Research Analyst - Internet Media)

Great. Thank you.

Jason Reid (Chief Investment Officer)

We will now move to questions from the call. The first question comes from Laura Martin at Needham & Company. What are your key goals and strategic priorities for 2023?

Mark Penn (Chairman and CEO)

Well, obviously in 2023, you can see that 2023 we're focusing on organic, you know, GAAP revenue growth within, you know, the three top layers of the pyramid. We believe continuing that, continuing that overall pattern, I think is number one. A lot of my time is personally spent helping to develop the cloud products. I believe that those cloud products here are just getting to market. We come out with the Media Studio, that's gonna be a major new product. And then the third level, as I announced, we're gonna embark upon a new effort really to try to bring the latest in technology and even AI into the central management of the company to reduce expenses even further.

We're not gonna be satisfied up there with just, you know, business software as usual. We really wanna be a model company in the way we administer our own finances.

Jason Reid (Chief Investment Officer)

The next question comes from Jeff Van Sinderen at B. Riley. What's the update on what you are experiencing in the cloud industry?

Mark Penn (Chairman and CEO)

The update is really that we're now moving to the next level. The stadium product now was released August 22nd. We're gonna be in stadiums, you know, come the opening of baseball. You know, we're really developing that product. We're developing that product not just in stadium but at home so that it expands the at-home television experience. We think there's gonna be great pickup on that product. We think that we've also in the process, you know, we bought Maru last year and that gives us kind of a self-service research platform. We're right now in the process of re-skinning that to make it even more consumer-friendly. That and the Harris Brand Platform I think really give us a significant competitive offering in the self-service automated research space.

As I said, the Media Studio I expect to come probably second or third quarter. We've just finished our media mix modeling product, and we're working to the other components of that product. We're testing right now special QR code marketing on the advanced marketing platforms, and we're doing really well with ReachTV and out there into the addressable airport screens. I think it's gonna be a big year for the cloud. PRophet, as I said, the PR product, won the competition against 750 products and now is really out there with the generative AI. We also now have put together a central team.

Our lead CTO is taking all of the company's data and putting it together, and we also have a central AI resource that can be drawn upon by all the various programs. We're really building a state-of-the-art platform here with a series of products that are gonna win in the marketplace over the next few years.

Jason Reid (Chief Investment Officer)

The next question comes from Steven Cahall at Wells Fargo. What's your outlook for M&A in 2023 after doing eight deals in 2022? What are you seeing in terms of valuations, and is the environment either better or worse for deals?

Mark Penn (Chairman and CEO)

I don't know, Jason, if you wanna comment on the valuations.

Jason Reid (Chief Investment Officer)

Sure. I think it's gonna be a very interesting year, in terms of valuations. You are certainly seeing some rationalization from, what we experienced effectively with what was a bubble, in the past few years. We remain long-term disciplined around, our investment philosophy, and I believe we'll have a very constructive year again, and do a few deals. Probably not to the extent in '22, but we remain very focused on adding value through strategic acquisitions.

Mark Penn (Chairman and CEO)

Right. We continue to look to expand the global market or to add to our advanced tech services as our primary goals and acquisitions.

Jason Reid (Chief Investment Officer)

Next question comes from Mark Zgutowicz. Please qualify, quantify the market for global RFPs. How does a muted macro perhaps impede these ops? Following a record-setting net new business in Q3, $86 million. What does the trajectory look like for the next 12 months? Will marquee existing client brands such as Amazon, Google, Microsoft drive the majority of your continued net new business wins?

Mark Penn (Chairman and CEO)

We achieved about $1 billion of pitches in last year. Our goal really is $1.2 billion this year. We don't wind up participating in about 20% of them for various reasons, and then we have been winning 25%-30% of the pitches that we do participate in above our share. Our goal this year is to actually, we just expanded the team to get more pitches in Europe that actually we have a lot of resources in Europe, generally have been overlooked by the marketplace.

Now that I think Stagwell is at scale, we're gonna have a very strong presence at Cannes as well with a what we call Sport Beach in order to kind of, again, I think last year our biggest marketing came after the splash we made at last year's Cannes. Again, tech companies are, you know, strongly favor us. They favor our combination of services and people. Some other of the holding companies might do best, you know, across, you know, older segments of industries. We tend to do best in the forefront of technology and industry, and I think that will continue to be the case. It is a very, very diversified client mix. You look at some of the recent clients, you know, you see hotels, you see a lot of alcohol. It's gonna continue to be a mix like that.

Jason Reid (Chief Investment Officer)

Do you have any closing comments, Mark?

Mark Penn (Chairman and CEO)

No. I just wanna thank you all. Thank you for following, you know, Stagwell. I think we become each year too big to ignore in the marketplace. As I think our numbers grow, the size of the company grows, our continued double-digit performance grows, and our ability to outpace competitors and to transform marketing, you know, grows with the 57% of our resources that are digital first. With the creative resources that you saw all out in force at the Super Bowl and the kind of awards that they win, that combination I think that really makes for transforming marketing. Thank you.

Jason Reid (Chief Investment Officer)

This concludes our conference call. Thank you everyone for joining us, and we look forward to seeing you next quarter.