Stagwell Inc Q4 FY2023 Earnings Call

Good morning from Stagwell's Global Headquarters at One World Trade Center in New York City. And welcome to Stagwell Inc's Earnings Webcast for Q4 and Full Year 2023. My name is Ben Allanson, and I lead the Investor Relations function here at Stagwell. With me today are Mark Penn, Stagwell's Chairman and Chief Executive Officer; and Frank Lanuto, the Chief Financial Officer. Mark will provide a business update and Frank will share a financial review. After the prepared remarks, we will open the floor for Q&A. You're welcome to submit questions through the chat function. Before 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, including 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. Please refer to our website stagwellglobal.com/investors for an investor presentation and additional resources. This morning's press release and slide deck provide definitions, explanations, and reconciliations of non-GAAP financial data. With that, I'd like to turn the call over to our Chairman and CEO, Mark Penn.

Thank you, Ben, and thank you to everyone joining us for our fourth quarter and full-year earnings call. With 2023 behind us, we're ready to return in 2024, a political year, to the organic growth that Stagwell has shown year after year since its inception, while we strongly execute our strategy to transform marketing through the right combination of technology and talent. 2023 presented a mix of unique factors that affected the marketing services industry. Ongoing concerns about a potential recession, rising interest rates, and geopolitical risks led to substantial restructuring actions, especially among tech companies, and notable cuts across marketing budgets, compounded by a banking crisis and labor strikes in the auto and entertainment sectors. Despite these challenges, Stagwell increased its market share with some of our largest clients, continued to secure significant new business, and achieved another year of strong adjusted EBITDA generation through careful cost management. We undertook key initiatives with long-term positive impacts on our business. In the first quarter, we successfully completed a secondary offering, enhancing our liquidity. The equity research analyst community has shown increased interest in Stagwell following this offering, and we now have eight analysts covering us. In the second quarter, we simplified our capital structure and eliminated an overhang by buying out AlpInvest. This transaction, along with other share buybacks completed throughout the year, successfully reduced our share count by 12%. In the fourth quarter, we completed the sale of ConcentricLife to Accenture for $245 million, representing a sale at 18 times EBITDA and about 4 to 5 times our initial investment. This sale, which had never prompted investor or analyst inquiries, reflects the Company's underlying value and produced a taxable gain of about $175 million this year. We have already replaced the revenue and EBITDA lost from the transaction while only utilizing a fraction of the proceeds. We believe that modest portfolio turnover at multiples exceeding those we pay for acquisitions is a vital part of our operations moving forward. As previously mentioned, we anticipate closing another profitable disposition later this year. Additionally, we focused on strengthening our services, expanding our geographic presence, and investing in innovation to keep us at the forefront of digital marketing. We acquired leaders in digital technology and emerging platforms, including Left Field Labs and Movers and Shakers. We made our first acquisition in Ireland with the company Huskies. Recently, we welcomed the digital-first creative collective Sidekick and our first French creative agency, What's Next Partners. We enhanced the capabilities and commercialization path of the Stagwell Marketing Cloud through unique partnerships with technology leaders. We partnered with Google to co-develop Gen AI solutions and enable placement of our AI-enabled products in their cloud store. We also formed a partnership with MNTN, the leader in performance TV, to provide access to our SMC influencer and content products for MNTN clients, while assisting clients in our Media business with performance marketing strategies. During the third quarter call, I mentioned we were seeing positive signs of a turnaround in our business and expected a recovery over the next two quarters. We began to see this in the fourth quarter with a return to sequential net revenue growth. In that quarter, Stagwell reported $655 million in revenue and $551 million in net revenue, as we started to see some challenges that had impacted our business ease. For the full year, we achieved $2.53 billion in revenue and $2.15 billion in net revenue. Our Performance Media and Data capability demonstrated solid results in the fourth quarter, increasing net revenue by 1% and 5% for the year. Strong performance among our media and buying and strategy brands is leading the group, with those brands posting a 7% year-over-year growth in the fourth quarter, their best quarterly growth in the last two years. This strength is somewhat tempered by macro-driven challenges in some of our owned media businesses. Importantly, our digital transformation services showed significant signs of recovery. Excluding advocacy, digital transformation declined by 3% year-over-year in the fourth quarter, a considerable sequential improvement compared to a 17% decline excluding advocacy in the third quarter. We successfully expanded our relationships with our largest and most important clients, consistently throughout 2023. In Q4, our top 100 customers, accounting for about 48% of net revenue, grew 13% year-over-year. Our international business also maintained its momentum with a 3% growth in the quarter, led by a 19% growth in the UK. We recorded a robust quarter of over $65 million in net new business wins, with more than $270 million in net new business over the past 12 months, marking an all-time high. In the fourth quarter, we focused on effectively managing our cost structure to ensure we are well-positioned for 2024. In terms of staffing, actions taken in the fourth quarter resulted in an additional $16 million in annualized savings. We achieved $98 million in cost-saving measures for the full year, and we are seeing positive results from our new business gains and cost reductions as we move into a strong January. We also continued efforts to consolidate our real estate footprint and back-office functions, leading to $4 million in real estate savings and over $4 million in savings through our Shared Services program. I'm pleased to report that as of the end of 2023, we have essentially achieved ahead of schedule the promised $30 million in synergies. We are now focused on achieving an incremental $35 million in efficiencies that we announced earlier this year. Consequently, we delivered another strong quarter of profitability, achieving $95 million in adjusted EBITDA, reflecting a 17% margin. We accomplished this while continuing to invest significantly in the Stagwell Marketing Cloud. For the full year, we delivered $360 million in adjusted EBITDA, also representing a 17% margin. We invested around $20 million from operating funds into the development of new technology, which I consider to be both proportionate and crucial for our future. Our approach to capital use has remained consistent. This year, we invested in growth through share buybacks, acquisitions, and internal technology development. We also observed expanded media working capital requirements, which we are working to reduce. Overall, deferred acquisition costs have markedly decreased, down by $60 million this year and projected to be only about $40 million by 2025. We anticipate our leverage will be close to two by year-end, but our primary goal remains focused on the company's vision and achieving above-average industry growth. This year, we expect organic net revenue growth between 5% and 7%. We project adjusted EBITDA growth of 11% to 25% year-over-year, resulting in adjusted EBITDA of between $400 million and $450 million. We also aim to convert roughly 50% of our EBITDA into free cash flow this year. It's essential to note that Stagwell started with nothing just eight years ago, and the same energy we invested then is at work today to shape this company into a leading marketing firm, transitioning from a full-service global model to a platform self-service model. This involves implementing critical strategic initiatives to drive above-industry average growth and widen our margins. First and foremost, we aim to expand our market share by enhancing our global and technology footprints. This has been evident in our recent acquisitions and a steady stream of awards, as our agencies' creative work during the Super Bowl significantly surpassed our relative size, with five national in-game spots and over a dozen other client campaigns for major brands. Consequently, Stagwell's agencies are being invited to more RFPs with larger clients. Inspiration days with Fortune 100 companies asking what else Stagwell can do are becoming almost weekly occurrences. Last year, we experienced a 20% increase in pitches we were invited to, totaling nearly $1.2 billion. We anticipate similar growth in 2024. Our record-breaking new business wins lay a solid foundation for our return to growth this year. In the fourth quarter, our digital transformation revenue from technology clients increased by 30%, fueled by both increased spending from existing clients and the acquisition of Left Field Labs. TMT clients are soliciting our agencies to reshape their operations and customer interactions. For instance, Stagwell is assisting Qualcomm in advancing the future of AI for developers and everyday devices, while next month RealClearPolitics will introduce a new AI overlay for their historical polling database that will enhance users' search capabilities in engaging ways. We are continuing to secure new mandates with significant wins at companies like Samsung and Shopify, as well as notable account expansions with Amazon and Google. Our international expansion efforts are yielding results, showing a 13% growth internationally in 2023. We will persist in diversifying the Company's geographic reach, which is crucial for increasing our global client portfolio. We plan to enter 10 new markets in 2024, increasing our non-affiliated presence to 44 countries. In EMEA, net revenue grew by 70% last year, and this year we are further expanding by launching our European headquarters in London at the Blue Fin Building and appointing James Townsend as our first CEO for EMEA. Our advocacy business in 2023, a non-election year, shrank by 22%, but experienced a growth of 16% compared to 2021, the last non-cycle year. While the presidential election often takes center stage, we anticipate a fiercely competitive political environment, with multi-hundred million dollar down-ballot races. This suggests that political spending records are likely to be broken in 2024, with over $12 billion at stake. Secondly, we are developing more products from the Stagwell Marketing Cloud team, which grew by 31% in 2023. Our AI-enabled research suite, Harris Quest, welcomed its 150th enterprise customer in 2023. On Monday, we launched Unlock Surveys, potentially the most significant research panel introduced in nearly a decade. As opening day approaches, we are thrilled to announce that our immersive platform for stadiums has been integrated into Major League Baseball's native ballpark app and approved for use by all MLB teams and venues. This marks a significant achievement for this emerging technology from Stagwell. Thirdly, we are implementing an aggressive AI data and media strategy. We are developing solutions that assist our agencies and clients in transforming their operations through AI. We created private GPT environments for our agencies and clients, allowing them to leverage advanced AI without compromising their data security. We will continue to expand this strategy, and we have already signed a large domestic office supply retailer onto our platform. In terms of data, we are developing an identity solution, the Stagwell ID Graph, which will include information on hundreds of millions of people worldwide. This solution will enhance our existing data capabilities and make consumer information available for refining our performance marketing campaigns across all our agencies. We aim to acquire or build out the last mile of the media chain so that our offerings will encompass planning, targeting, audience creation, placement, and media supply. We will shift more towards performance-based pricing rather than fee-for-service pricing. This transition should result in margin expansion over time and ensure a guaranteed ROI for clients as our Media business continues to grow in scale and size. It's noteworthy that more than 10% of Stagwell employees are engineers, positioning us well to apply AI to meet client demands as they redesign their websites, apps, and customer interfaces. We are also implementing AI within our own processes with tools such as profit, which generates news releases, Harris Quest AI for focus group analysis, and smart assets that optimize content delivery for maximum effectiveness. Fourth, we will keep streamlining operations, both back-office functions and our service offerings. We are significantly offshoring our finance and other services and applying AI to tasks such as reading and inputting the vast number of media bills we receive annually. In addition to launching our survey research panel, we will consolidate content production into a central operation, aiming to reduce external production costs by an estimated $20 million to $30 million over the next 18 months. All major agencies within our group are collaborating on this initiative, and we expect it to be operational by mid-year. In conclusion, I want to express our enthusiasm and confidence for 2024. We believe we are primed for a return to profitable organic net revenue growth in 2024, in line with the guidance I shared earlier. Due to various factors, including the easing of headwinds that burdened the industry in 2023, remarkable new business trends, continued momentum in our Marketing Cloud products, anticipation of a record-setting political cycle, along with our strategic cost management, service enhancement, and geographic expansion efforts, we expect to outperform our legacy competitors in 2024. Now, I'll turn it over to Frank Lanuto, our Chief Financial Officer, to provide a more detailed overview of our financial results.

Thank you, Mark. Good morning, everyone, and thank you for joining us to discuss our fourth-quarter and full-year results. As a reminder, if you would like to ask a question after the prepared remarks conclude, please feel free to submit them through the chat function. Our 2023 results were significantly impacted by the combination of prevailing macroeconomic conditions, multiple industry-specific events, and the cyclic off-election year impact on our advocacy businesses. When comparing our net revenues to the most recent non-election year in 2021, our net revenues on a like-for-like basis increased 5% for the full year. When we discussed our Q3 results a few months ago, Mark had called for a bottom, in line with this in the fourth quarter, there were indications that the macroeconomic and industry-specific challenges experienced throughout the year were beginning to abate. For the quarter, we reported revenue of $655 million, a decline of 8% as compared to the same period in the prior year. Net revenue excluding pass-through costs declined 6% for the same period to $551 million, but importantly increased sequentially from $535 million in Q3. We've also observed additional positive trends developing over the year. Throughout '23, we saw our largest customers invest in their relationship with our agencies. Our top 100 customers in 2023 grew to 48% of total net revenue. For the full year, this group of customers increased our year-over-year net revenues by 7%. This growth was more pronounced among our top 10 customers, which drove 11% increase in our year-over-year net revenue. These companies are among the most recognized brands in the world, leaders in technology, business services, consumer, and transportation. The growth resulted from both increased spending on existing projects as well as the addition of several new assignments. Examining the revenue by capability, the fourth quarter marked a turning point for both our digital transformation and consumer insights businesses after bottoming in the third quarter. While headwinds have not completely dissipated for either capability, the year-over-year decline in net revenue was significantly smaller in the fourth quarter than it had been in the prior quarters during the year. In Q4, digital transformation delivered $133 million in net revenue, a decline of 9% year-over-year. For the full year, net revenue was $529 million, representing a year-over-year decline of 15%. Excluding advocacy, which is in an off-election cycle year, the capability declined a much smaller 3% for the fourth quarter. This is a significant improvement compared to the 17% decline in revenue in the third quarter. The sequential ex-advocacy improvement was driven by technology customers, who began putting dollars to work with our digital transformation agencies. This gives us optimism that digital transformation will return to growth in 2024. Consumer Insights and Strategy reported $52 million in net revenue in the fourth quarter, a decline of 3% year-over-year. For the full year, net revenue declined 4% to $199 million. The Writers and Actors' Guild Strike had a residual impact on this capability running over into the fourth quarter, but we were still able to post sequential improvement overall for the quarter. The decline of 3% in the fourth quarter is a meaningful improvement over the 9% decline in Q3, providing more optimism that the trend is reversing. Outside of the Media and Entertainment verticals, the capability performed well in '23, posting 6% growth, led by gains in automotive, consumer products, and transportation. Performance Media and Data reported $75 million in net revenue for the quarter, an increase of 1% over the prior period. The non-recurrence of a large automotive media placement weighed on the growth during the quarter. Despite that, the full year's net revenue increased 5% to $285 million. Creativity and Communications delivered $235 million in net revenue in the fourth quarter, a decline of 6% over the prior period. Excluding advocacy, the net revenue decline was 5% for the full year. Excuse me, for the full year, Creativity and Communications posted $936 million in net revenue, a decline of 3%. Excluding Advocacy, the decline was only 2%. The capability was impacted by several factors in a quarter, including the after-effects of strikes on our auto customers and macroeconomic uncertainty weighing on some of our retail and technology customers. Stagwell Marketing Cloud Group delivered $55 million in net revenue in the fourth quarter, representing a 6% decrease over the prior comparable period. $45 million of this net revenue came from our Advanced Media Platforms group, and approximately $10 million was derived from our Software Platform products. For the full year, SMCG delivered $198 million in net revenue, representing a 31% increase over 2022. The suite of software products continues to be a key strategic investment priority for us. For the full year, we increased our investment in this product group by $20 million over the prior year. International delivered 17% of our consolidated net revenue for '23 and grew 13% for the full year, led by particularly strong growth of 17% in EMEA and 5% in Asia-Pacific. Management has taken decisive actions in response to the persistent pressure on revenue during the year. In the fourth quarter, we took additional steps to align our staffing costs with trending revenue, eliminating $16 million of annualized salaries and bringing our full-year annualized actions to $98 million. Our headcount exiting the year was 4% lower than at the beginning of the year. Our actions have resulted in a reduction in the staff cost ratio to 64.3% in Q4 from 67% at the end of the first quarter, an improvement of 270 basis points. And we continue to monitor our staff cost carefully, as we transition to increasing revenues in 2024. General and administrative costs accounted for 18% of net revenue in the fourth quarter. This is an improvement of 60 basis points versus the first quarter as we took steps to lower discretionary spending. Noteworthy specifics include real estate consolidation, which has been a significant priority for us since the merger. In 2023, we realized an additional $4 million of annualized savings, bringing the total annualized savings from real estate actions to more than $7 million since the merger. The implementation of our global ERP and HR systems is now nearly complete. Our focus is now shifting to consolidating our agency's finance organizations to our Shared Services Platform. Based on actions taken throughout '23, more than $4 million of annualized savings have been realized through this initiative, and the HR team has taken further steps to reduce costs by consolidating resources where appropriate. In recruiting, the implementation of a new global applicant tracking system has reduced recruiting costs by more than $2.5 million year-over-year. The totality of our actions has led to Q4 adjusted EBITDA of $95 million or 17% margin on net revenue. For the full year, adjusted EBITDA was $360 million, also at a margin of 17%. As I mentioned previously, we continued to make strategic investments in the Stagwell Marketing Cloud. Excluding the incremental $20 million of investment in 2023, our full-year adjusted EBITDA margin would have been approximately 130 basis points higher, or approximately 18%. During the quarter, we also sold ConcentricLife, which was no longer a core strategic asset in our portfolio. Gross proceeds from the transaction were $245 million. Adjusting for transaction costs, we received approximately $230 million in cash, resulting in a taxable gain of $175 million. The amount reported in our year-end financial statements is lower than the taxable gain as a result of the approximately $100 million of non-cash goodwill relieved from the balance sheet in connection with the sale. As a result of our collective actions in the fourth quarter, we generated a consolidated net income of $46 million as compared to a net loss of $43 million in the prior year. For the full year, the consolidated net came to $42 million versus $50 million in 2022. And moving to the balance sheet, we continue to take actions to improve the strength of the long-term balance sheet. Starting with deferred acquisition consideration, we reduced obligations by approximately $60 million from year-end 2022 to $101 million at the end of '23. Excluding the impact of our recently announced acquisitions, the year-end DAC balance would have been $97 million. In line with what we communicated previously, we are now on track to reduce our DAC applications to approximately $40 million by the end of 2024. We've also acquired 3.3 million shares during the quarter at an average price of $5.21 per share, for approximately $17 million. This brings our total buyback activity year-to-date, inclusive of the AlpInvest transaction announced on our first quarter call, to approximately $209 million, representing approximately 33 million shares at an average price of $6.30. Our existing buyback authorization as of year-end has $139 million in remaining availability. CapEx in capitalized software for the quarter was $11 million, bringing our full-year CapEx in capitalized software to $42 million, which is in line with our guidelines. As a result, we ended the quarter and year with cash of $120 million and drawings under our revolver to $59 million. Our leverage ratio at year-end was 2.9 times. And finally, moving to 2024 guidance as highlighted by Mark in his remarks, we are guiding to full-year 2024 as follows: Organic net revenue growth is expected to be between 5% to 7%. Organic net revenue, excluding advocacy growth is expected to be 4% to 5%. Adjusted EBITDA is expected to be between $400 million to $450 million. We expect to deliver approximately 50% free cash flow conversion, and adjusted earnings per share is expected to be between $0.75 and $0.88. That concludes our prepared remarks for this morning. I will now turn the call back over to Ben Allanson to open the Q&A portion of the call.

Thank you, Frank. If you have any questions, please do submit them via the chat button at the top of the screen. We're going to start today with a question from Steve Cahill. Steve has asked here we've seen core creatives slow at some of your peers. Was that part of the Q4 trend that resulted in growth in EBITDA coming a little bit below expectations?

I think that a lot of our core creative tends to be a little bit more project-oriented, so I think that it can ebb and flow more easily than some of the others. I was generally satisfied with the performance of the core creative, given the overall marketplace. And I think that you look then at a lot of stuff pushed into this year because I think we had a really strong Super Bowl presence.

Next question from Mark Zgutowicz over at Benchmark. Can you provide a bit of an update on your big tech client spending and has visibility here improved a little bit this year?

I believe we are witnessing a reduction in the constraints faced by big tech. Last year, there was a significant cutback that persisted throughout the year. By the fourth quarter, I anticipated it would take about two quarters for recovery. We've experienced notable growth, with one tech company expanding nearly 50% to 100% without any formal pitch. Several companies that had drastically reduced their spending are not fully back to where they were, but they have definitely begun to ease their constraints. We started to observe this trend in the fourth quarter, and I expect it will carry into the first quarter. The work needed to integrate AI with their consumers will be substantial. Companies are introducing AI products but are realizing the extensive effort required for digital transformation. Ultimately, I think it's just a matter of time before they start investing more heavily. While the floodgates aren't open yet, I would be surprised if they don't open by mid-year.

Maybe playing off that. A question from Jason Kreyer over at Craig-Hallum. Can you just walk through some of the digital transformation trends we're seeing today and how that perhaps plays into guidance for the new year?

AI, AI and AI. Look, I think that this is going from the year of efficiency, where I think the tech companies managed to recover their bottom line very strongly by cutting back what they're doing, into what is a year of competition. I think nobody owns the cloud anymore. I think nobody owns AI. I think the two biggest things out there now are going to see really active competition. And that means the big tech companies are going to have to invest in both their own products and in the marketing of those products and in winning over consumers.

Great. Maybe on the AI question. Jeff Van Sinderen at B. Riley, can you speak more about your AI initiatives for 2024 and where you expect to gain the most traction? Maybe touch a little bit of margin contribution, how that might shift?

Look, I think ultimately the most traction will be in developing AI applications for our clients. I think you have to look at every website and say, is it doing the best job that it can do, given AI. Look at some of the things we're doing where people are going to say something like, well, I want to hold an office party or I want to hold an earnings call, tell me all the things I need. So rather than having to go specify everything, AI is going to figure that out for you. It's going to transform the shopping and communication experience that people have. I think that is going to be the biggest area and our biggest area of weakness over this year, which has been the digital transformation. I mean, by the way, the digital transformation industry saw weakness across the board in a lot of the players here. I think that's going to fill up with these kinds of assignments. Obviously, we're incorporating it in our products, profit, Quest AI, and obviously, we are looking to simplify our own internal procedures, even down to like the reading of all the hundreds of thousands of bills that come in using AI. So it is at all levels. But I think the biggest thing is that out there virtually every company is going to get organized now to figure out how is it going to apply AI, particularly to the last mile, how you communicate with your consumer.

Great. Just pivoting to advocacy for a second. A question about advocacy spend, last week a TV broadcast talked about the Trump campaign using funds for legal fees versus advertising. Do you see 2024 political ad spend at risk versus prior cycles?

No. I think that if anything, you can be sure this is going to be an all-out slugfest of the highest possible dimensions and proportions. The closer the country is, and this is a very close country, the more political spending goes to infinity, because that very last vote determines the fate of the nation, literally. So I think all indications are and our early indications are that this is going to be the strongest political cycle in history.

Maybe a question for Frank here just a little bit. How should we think about Q1 seasonality relative to a year ago as baited to the guidance?

I think the overall pattern remains the same. I think the actions, though, that we have taken, particularly on the cost side, put us in a better position than perhaps last year, entering the first, which is generally the softest quarter of the year.

And maybe on the cost as well, Laura Martin at Needham says, great year-over-year cost-cutting in Q4. How much more cost-cutting do you think you can achieve in 2024?

I think we'll see more cost-cutting. Mark talked about the $35 million initiative that we have out there. So we're pursuing that. I mentioned in my script that we nearly completed the rollout of the ERP systems and the big platform systems. Now we're going to start to move the organizations onto the Shared Service Platform, which we expect to realize incremental savings from. So I think there is room for more savings here.

But I don't think you have to look at savings just in terms of standard cutbacks. I think you look at the kind of inventive things that we're doing to save. The application of AI internally, the creation of a new central production group that will greatly reduce internal production costs, the creation of a new survey panel. We spend $50 million on outside surveys. So the ability to in-house and produce more of those basic costs of goods is really going to, I think, be very much behind the next phase of cost reduction, as well as the kind of offshoring that we're doing for simplified tasks. If people aren't in the office, they might as well be in a long, long way to lower cost jurisdiction. So I think that we're going to apply all of those things to continue to drive costs down in what I believe is the cost-declining industry.

A couple more questions just to wrap it up. First, from an investor. Can management comment on any other non-core assets that might be for sale and what would be an approximate range of value for these assets?

I think we're looking at a sale that I thought might take place by the end of the year that I think is going to be later in the year, probably something about a half or a little bit more than half the size of the last disposition. I have one or two others. I do think that we're going to continue to look at our portfolio and say, look at those things that are non-core and somewhere between $100 million and $200 million a year, say, maybe we can better invest at a lower multiple in the areas that are core to us, and also take advantage of the fact that we have an incredible platform and we've grown some amazing companies over time here that have spectacular values that aren't fully realized in the marketplace yet.

Great. And final question, and this is on guidance. We've had it from a few people from Barton over at Rosenblatt and from Steve at Wells Fargo. Can we just talk a little bit about some of your learnings from the guidance process last year and tell us what makes this year's guidance sufficiently de-risked in your view?

Well, look, I think we heard you. I think that first, many of the moves that occurred in the marketplace were unprecedented. We've been doing this for eight years or so. And outside the pandemic, we haven't had a situation as we did, where say, three major clients cut back $50 million of fees so quickly as you saw the year of efficiency come in. I think, second, we have really cut costs significantly during the year and have significant additional goals for cutting costs. And I think we were coming off of that a really strong, heady 2022 that had really high levels of labor. And also, this is a political year in what we expect to be a political year. And we have hedged the budgets here to really try to be prudent in the kind of projections that we're making. And finally, as I mentioned, we're informed by being able to take a peek at the numbers coming into check.

That's the end of the Q&A session from us. Thank you, Mark. Thank you, Frank. And we hope you'll join us on the Q1 call coming up later this year.

Thank you.