Stagwell kicked off 2024 with a return to growth. 

Organic revenue growth for Q1 was up 8% year over year to $670 million. That’s also an 8% increase from Q4, when the holding company reported a 6.7% organic net revenue decline.

Growth was led by performance media and data, up 13% YOY to $77 million, driven by transportation and lodging, CPG and financial services clients. Creativity and communications, which makes up 42% of the business, also grew double-digits YOY (11%) to $292 million in revenue.

Stagwell’s advocacy business had a strong quarter as the U.S. inches closer to the 2024 presidential election, growing 80% YOY to $64 million. 

Consumer insights and strategy was the only one of Stagwell’s five business units to decline, 7% YOY to $46 million, due to last year’s Hollywood actors’ and writers’ strikes impacting entertainment client spend. 

Financials were also stabilized by cost cutting, including laying off 4% of staff and reducing annual salaries by $98 million. Q1 labor costs decreased by 2%, or $7 million, as a result. 

Stagwell CEO Mark Penn told Campaign US in an interview after the earnings call that cuts were mostly made on digital transformation teams, which were hit hard across agency groups as tech clients pulled back spending last year. 

But Penn is bullish on digital transformation as a growth area for 2024, as clients look to implement AI into their customer-facing experiences. Digital transformation returned to growth in Q1 after dipping 13.2% in Q4, up 6% YOY to $196 million.

“AI represents a new wave of work for interacting between brands and consumers,” Penn said. “It could become the most important factor in whether you consider a company to be on the ball or not. I don’t think people fully appreciate that yet, but they will over time — and when that happens, the first paradigms of what really modern consumer experiences are, enhanced by AI, you’ll see floodgates open.”

The rebound was also driven by growth in the U.S. of 9% YOY, reversing a 7.8% decline in the prior quarter. Meanwhile, Stagwell continued to expand internationally, growing 14% YOY in both EMEA and the U.K. 

In April, Stagwell opened a European headquarters in London, bringing together 17 agencies under the leadership of EMEA CEO James Townsend.

“They used to get very small pitches because their services were fragmented. Now it’s almost like a shopping mall,” Penn told investors of the consolidated London HQ. “That’s what we are going to do, region by region, until we have a complete, functioning, scaled network [globally].”

Penn said Stagwell has a target to double its international business to make up 40% of net revenue “over the coming years.”

Stagwell is sticking to its guidance set at the end of last year of organic net revenue growth between 5% to 7% for 2024.

Tech clients return 

The return to growth in digital transformation, and at Stagwell overall, was in part driven by technology clients increasing spending after cutting budgets during a “year of efficiencies.” Spending on digital transformation services from the sector was up 20%.

While Penn said technology clients are “not back to full throttle yet,” he believes spending will ramp up throughout the year, particularly after strong Q1 earnings. 

“You’re still seeing some caution … but they are building out their programs [for] how to bring AI to the masses. That’s where we’re going to benefit. They’re all facing competition for AI. They’re all going to want to get out in front of consumers in new ways,” he said.

Stagwell continues to make inroads with large clients, with its top 100 clients now contributing to 50% of net revenue, up from 25% the previous year. These clients are being serviced by more than one of Stagwell’s agencies, with integrated accounts growing 12% YOY.

Meanwhile, Stagwell brought in $66 million in net new business in the quarter, bringing new business for the past 12 months to $280 million. Win size also increased 13% YOY as the holding company participated in larger pitches against the “big six,” Penn said. 

“For the first time, we’re in a $40 million to $60 million pitch,” he said. “Our pipeline is 50% higher than it was at this time last year.”

Media, data and tech

While performance media and data made up just 14% of Stagwell’s revenue in the quarter, the company is eyeing the sector for growth. 

Penn said with the merger of Assembly and ForwardPMX in 2021, Stagwell now has a “credible, performance-first media offering that didn’t exist before to that kind of scale.”

The company invested $14 million into the Stagwell Marketing Cloud (SMC) in Q1, which grew 7% YOY to $60 million, reversing a Q4 decline of 7.8%. It is now integrating research tools from the Harris Poll and creating an ID Graph, as well as more AI capabilities.

Penn estimates that one-third to one-half of the investment in SMC is AI-related.  

“Customers are beginning to get over the, ‘Let’s take a look at it,’ and starting to implement [AI],” he said. “As customers get confident that AI can be used safely and securely, you’re just gonna see this take off.”

He added that clients are spending on advertising again after fearing a “recession around every corner” last year. “This year, people are realizing, ‘We can’t be left behind, we gotta get out there.’ It’s a fundamental change in attitude.”

This article originally appeared on Campaign US.