Stagwell Inc. (STGW) Q1 2018 Earnings Report, Transcript and Summary

Good day, and welcome to the MDC Partners First Quarter Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Matt Chesler, Senior Vice President, Investor Relations and Finance. Please go ahead.

Good afternoon, everyone. I’d like to thank you for taking the time to listen to the MDC Partners conference call for the first quarter of 2018. Joining me today from MDC are Scott Kauffman, Chairman and CEO; and David Doft, Chief Financial Officer. Before we begin our prepared remarks, I’d like to remind you all that the following discussion contains forward-looking statements and non-GAAP financial data. As we all know, forward-looking statements about the company are subject to uncertainties, referenced in the cautionary statement included in our earnings release and slide presentation, and are further detailed in the company’s Form 10-K and subsequent SEC filings. For your reference, we posted an investor presentation to our website. We also refer you to this afternoon’s press release and slide presentation for definitions, explanations and reconciliation of non-GAAP financial data. And now to start the call, I’d like to turn it over to our Chairman and CEO, Scott Kauffman.

Thank you, Matt, and good afternoon, everyone. The start of 2018 has been challenging. All the prospects for the business this year were strong coming into the year. Our performance in March and April has been disappointing. Separate from the impact of the adoption of the new accounting rules for revenue recognition, which has added some noise to our Q1 reported results, we’ve experienced a number of client cutbacks and spending delays over the past several weeks. In addition, while our new business pipeline continues to build, we’ve also seen a slower rate of conversion of our new business. And in some instances, budgets appear to be smaller than anticipated. Taken together with our 1% organic revenue growth in the first quarter, it’s no longer realistic to expect our agencies to generate the amount of revenue growth over the balance of the year required to hit our original target of approximately 4% organic growth. We’re, therefore, lowering our 2018 financial guidance, and David will provide more detail on our performance and our revised outlook in just a moment. Our results are unacceptable and we know that. So let me tell you what we’re doing about it to improve performance. Revenue generation, operating efficiency and unlocking value are our top priorities. Our revenue initiatives range from scaling our customer data platform, ramping up our centralized business development team to serve all of our partners and their agencies, positioning our portfolio to benefit from the large opportunity in health care, enhancing our digital product and design offering and continuing our successful expansion into new markets outside of North America. First, at the center, we’re investing in data analytics to amplify our agencies strategic value to clients. We’ve incubated Zero & One, a data intelligence platform and consultancy launched earlier this year. This agency, available only within the MDC portfolio, helps solve the biggest problems facing CMOs today. Leveraging a proprietary customer data platform, Zero & One delivers actionable, customer level insights, a clear articulation of ROI on marketing spend and tactical strategies to increase customer lifetime value and reduce churn. Next, health care is an exciting area for us and one that we’re building out in a meaningful way, including adding a seasoned health care marketing executive to bolster our new business capabilities in this area. Health care is almost 20% of the U.S. GDP, and it’s an industry experiencing a staggering amount of disruption, driven by advances in technology and changing consumer behavior. Patients are interacting with providers using a wide range of technology from booking appointments to monitoring their own biometrics, and they’re increasingly going online, seeking content to research conditions, treatment options and pharmaceutical brands. Providers and pharmaceutical companies are relying on marketing content and digital experiences to drive adoption, to promote beyond the pill programs that inspire healthier lifestyles and to generate efficiencies for their businesses. Combined with an aging population across the developed world, the health care sector will continue to grow and be an important source of growth for us. And we start with a very solid foundation in health care. Our Concentric agency experienced another strong year in 2017, and was named Agency of the Year by Met Ad News last month, the fifth time Concentric has received this honor. And across MDC, beyond pharmaceutical companies, we’re already working with hospital networks, health destinations, nutritional brands and other verticals within the broader scope of health. Next, we’re continuing to organize a portfolio of modern marketing platform and attracting the best talent in the industry. Most notably, this quarter, we finalized the acquisition of Instrument, which closed on April 2. We’re thrilled to welcome this world-class firm to the MDC Partners family. In a time of significant change in the industry, our investments in digital-first innovation and data are strengthening our competitive position, ensuring that we have the range of service capabilities to provide innovative solutions and build brand equity. Instrument is a digital brand and experienced innovation firm. One of the best at building brands, products, and personalized experiences across digital channels. Their multidisciplinary team of 175 strategists, designers, technologists and content developers help leading organizations transform their brands. They lead with design and user experience and back it up with deep technology expertise, and it’s the combination of these capabilities that sets them apart. Our plan is to scale Instrument and position it to collaborate with the rest of the MDC portfolio, just as we’ve done successfully over the past decade with Creative; Agencies of the Year, 72andSunny and Anomaly; Media Agency of the Year, Assembly; Leading Global PR Firm, Allison+ Partners; and of course, Concentric. Finally, in terms of operating efficiency, we’ll continue to improve our cost ratios at underperforming agencies, centralize certain functions, consolidate or divest agencies where it makes strategic and financial sense and look at any and all options to improve MDC’s overall positioning. As an example, over the past 2 years, we’ve consolidated the number of separate P&Ls reporting to us from 36 to 27 as of this quarter, either through mergers or divestitures. This creates more scaled assets, delivering more integrated offerings and it allows for better leverage of individual agency resources in areas such as finance, IT and HR. We’re ensuring that our best managers are focused on sales and serving clients, while at the same time, improving our ability at corporate to serve our partners. We think this is critical, and we’re moving quickly to continue these efforts. While managing a portfolio sometimes involves adding capabilities and attracting new firms, from time to time it requires some rebalancing. We sold 1 growing and profitable firm last year for good value, as well as 2 smaller ones. And this follows on select dispositions in prior years, and we expect to continue our rebalancing initiatives going forward. We believe there’s a lot of unrecognized value in our portfolio. Turning now to the overall environment. We continue to see that today’s CMOs are looking for partners to help them transform their business and response to pervasive shifts in consumer behavior, new technologies and disruption in the marketplace. In this environment, we remain very well positioned, thanks to our strategic investments in talent, creativity, strategy, digital and data that we’ve made over the past decade. While we’re operating in an environment that has its share of near-term challenges, we see plenty of opportunity for growth. And while our first quarter financial results are clearly disappointing, it should not be ignored or lost on anyone, that there continues to be outstanding campaigns and business transforming work being executed by our agencies. Our offerings are competitive in the marketplace, as evidenced by our agencies invitation into many of the biggest pitches in the industry. While the pitch process has been slower, during the quarter, MDC agencies won nearly $20 million of net new business, which had helped drive improved revenue growth later in the year. I’d like to touch on one additional update with respect to our corporate governance. We firmly believe that a strong and independent Board of Directors with diverse backgrounds is best able to promote long-term growth and create shareholder value. To that end, over the past 3 years, we’ve implemented a number of board renewal initiatives. And so it’s my great pleasure to welcome Desirée Rogers as our newest Independent Director. Desirée is a results-oriented business leader with strong collaborative and marketing skills, and will no doubt make a great addition to the board. Today, MDC’s 8-member board includes 7 non-management directors, and we remain fully committed to strong corporate governance practices. In closing, we share your frustration with our financial results. We need to do better. Every executive in our company knows this, and we are resolute about doing so. I’d now like to turn the call over to David to walk through the details of our financials as well as our full year 2018 outlook.

Thank you, Scott, and good afternoon. As Scott indicated, we adopted the new revenue accounting standard ASC 606 on January 1, 2018, and accordingly changed certain aspects of our revenue recognition accounting policy. The adoption of the new accounting rule has a meaningful impact on our reported financials by shifting recognized revenue out of the seasonally smaller first quarter and into the second quarter and second half of this year. In addition, there was also a change in classification from principle to agent for some of our client relationships. This led to a reduction of third-party cost recognized in revenue with a corresponding reduction in direct cost and thus, no impact on profit. If you reconcile the new rules with the old rules, or in other words had we not adopted the new standard, our reported GAAP revenue would have been $348.2 million and our adjusted EBITDA would have been $13.9 million. Our organic revenue growth of 1% is unaffected by the accounting change, as our organic revenue growth is normalized for the change in the accounting standard. However, separate from ASC 606, there was also over $5 million of additional revenue that we could not recognize in time for the first quarter under either standard for work already completed. We expect to recognize most, if not all of this revenue in the second quarter, but we already booked the related expense in Q1 so it will drop right to the bottom line in Q2. Additionally, as previously indicated, included in first quarter results were one-time costs totaling $6 million related to incremental professional fees associated with the adoption of the new accounting rules, real estate consolidation, strategic initiatives and incremental severance, in addition to $700,000 of adjusted EBITDA that was in the first quarter of last year from LBN, which we divested last summer. To be clear, while the adoption of ASC 606 results in greater variability compared to historical patterns throughout 2018 as we cycle through the rule change, we do not expect any material impact on a full year basis. While our accounting changes, there is no change to our client relationships or our underlying contracts. There’s no impact on cash or cash flow. And importantly, there’s no impact on adjusted EBITDA dollars or underlying performance metrics related to the accounting change. The quarterly variability relative to historical patterns is another reminder why investors should evaluate our business on an annual basis, and why we do not provide quarterly guidance. We adopted the new standard using the modified retrospective method, where there is a cumulative adjustment to the opening retained earnings balance on January 1, 2018, and applied the new policy starting with this quarter and on a go-forward basis. Prior periods have not been restated and continue to be reported under the historical accounting standards and policies in effect for those periods. To help bridge our current and prior period results, you will notice an additional component in our revenue reconciliation table called Impact from ASC 606 that we will present for the balance of this year until we have cycled past the impact of the accounting change. And there’s a new table showing the adjustments on GAAP revenue, operating expenses, net loss attributable to MDC Partners income and shareholders, and adjusted EBITDA. These additional disclosures can be found on Schedules 2 and 3 of our press release and Pages 5 through 7 of our slide presentation. Now, let’s walk through the specific impacts. In terms of revenue, our reported revenue under ASC 606 was $327 million in the first quarter compared to revenue of $344.7 million in the first quarter of 2017 under the prior standard. The impact of applying the new revenue recognition standard reduced reported revenue by $21.3 million or 6.2%. $15.2 million of the impact related to a change from gross to net revenue accounting for certain client arrangements. These arrangements were previously being accounted for as principal, but are now being accounted for as agent. In these instances, certain third party pass-through and out-of-pocket costs, which were billed to clients in connection with services being provided, are no longer included in revenue. And therefore, the revenue recorded is equal to the net amount billed. There is a corresponding reduction and expense so no net impact on profit. The remaining $6.1 million of impact on revenue was timing related, and should simply shift the quarters later during the year. As an example, previously, revenue for our retainer relationships was generally recognized on a straight-line basis over the life of the contract. Under ASC 606, the pattern of revenue recognition is more proportional to effort and time. And therefore, less Q1 weighted. Another accounting standard change that went into effect this quarter was ASU 2016-15, which requires that we reclassify certain cash flows for contingent consideration. Previously, all cash flows for contingent consideration were classified as a financing activity. Under the new standard, the portion of deferred contingent payments that were initially estimated flow through cash flow from financing and any amount in excess of the initial estimation, which occurs when businesses exceed our forecast, are now required to flow through cash flow from operations. The new standard requires us to reclassify our period so that they are comparable. The amount reclassified for Q1 2017 was $2.5 million and the amount recognized this quarter was $6.7 million. In terms of our outlook, as Scott mentioned, we are lowering our 2018 outlook based on a combination of select client cutbacks and a slower conversion of our new business pipeline. When we go into the year, we make assumptions about the spending plans of existing client and overall risk on those relationships, as well as about what rate and how quickly will it convert on the new business pipeline. Unfortunately, based on our trends in March and April, we’re not tracking to those earlier views. We are, therefore, updating our financial guidance as follows: In terms of revenue, we expect 1% to 3% organic revenue growth for the full year. Given the tougher comp for 2Q 2017, this means that growth rates will be weighted to the second half of the year. Next, assuming foreign exchange rates remain the same, we expect currency to favorably impact revenue by 50 basis points as the recent dollar strength has worked against us by roughly 0.5 percentage point and cost us $1 million to $2 million of adjusted EBITDA to the full year, as compared to when we originally gave guidance. The impact of net acquisitions and dispositions is now expected to be positive 100 basis points to revenue growth, reflecting 9 months contribution from Instrument, partially offset by the remaining 8 months of drag from LBN, which was sold in August 2017. The impact of the adoption of ASC 606 is not expected to have a material impact on a full year basis, with the exception being the shift from gross to net accounting for certain relationships. This shift reduces full year revenue by approximately $65 million with a dollar for dollar reduction in expense, so no impact on adjusted EBITDA dollars. In terms of margins, we are adjusting our margin outlook from approximately 20 basis points of expansion to flat to 40 basis points expansion. Our revised outlook incorporates approximately 60 basis points benefit from the shift from gross to net revenue accounting related to certain client contracts, whereas our prior outlook did not. So to be clear, our revenue outlook -- excuse me, our revised outlook therefore implies underlying margins are down for the year. In terms of our deferred acquisition-related payment obligations, we made $14 million of payments in Q1 and expect $41 million in Q2 and then approximately $10 million in the second half of 2018. Liquidity is strong. We continue to expect to be out of the revolver and in a positive cash position at year-end, with a lower leverage ratio at year-end compared to last year. We’d now like to take your questions.

[Operator Instructions] Our first question will come from Dan Salmon of BMO Capital Markets. Please go ahead.

Hi, guys. This is Caroline, on for Dan. I was hoping you could expand on the reasons for the downgraded 2018 outlook and particularly, the margin outlook. I know it’s been several years since you issued a long-term target for ‘17 to ‘19, but is that target still in view? And if so, how has the time line changed?

Great. Thanks, Caroline. So as you can imagine when we have shortfalls of revenue, we look to address cost within those businesses, which sometimes has soft short-term impact for longer-term benefit to their cost structures. And part of that is what’s incorporated in the revenue and margin guidance for this year. Overall, we continue to believe that we have substantial room to improve margins based on continuing to optimize performance at our agencies. And ultimately, there are certain agencies in the portfolio where we need better performance out of them in order to reach those targets, and it’s tough to say how long that might take. We still think that, that prior range is achievable over the next few years, but it’s hard to put a specific target on it.

Okay. Helpful. Thank you.

Thanks.

Our next question will come from Jaime Morris of Jefferies. Please go ahead.

Hi, thank you. I was hoping that you could try and help us understand what the assumption is for net new business in the current year. So I think, David, you mentioned that you make an assumption on that going into the year. Just trying to get an idea of what part of the revision comes from net new business that didn’t materialize versus cutbacks from existing clients?

Jaime, its Scott. A part of - if you look at the underperformance, the bulk of it came from our global integrated agencies, and these are our largest agencies that are oftentimes invited to the largest pitches. And our net new business projections are, in some part, assessed based on the robustness of the pipeline. We continue to see a very robust pipeline. As we’ve said before, a lot of accounts come into review. What we weren’t anticipating is the slowdown in the pitch process. And in some cases, even as we crossed the finish line, those budgets are not what had been initially anticipated. So we’re seeing a bit of softness and pull back from clients. Now there are certain clients that are always going to be focused on price, and think of the marketing and advertising budget as an expense to be cut. We tend to be more effective with clients that look at advertising and marketing as an investment to grow their businesses. And so these are some of the challenges that we’re looking at as we think about the headwinds in the industry and how our agencies are grappling with them.

Okay, thank you. And then, I guess, just one other. The slowdown in March and April, it just seems to be slightly different than what some of your peers have reported. And it’s a relatively strong economic environment, and I understand what you’re saying. I’m just wondering, is there anything - any sectors in particular or anything to call out where you might be differing versus others?

Jaime, you’ve been around us long enough to know that we’ve never really been consistent with overall industry trends in good times or bad times. And ultimately, it comes down to our client base versus the overall exposure of the industry, where our competitors are large enough where they’re basically proxies for the industry. So in this case, we have a small handful of clients that have reduced their spending, which has impacted us, combined with a pipeline that’s playing out slower. And it’s really those 2 things together that have impacted us.

Okay. Thank you.

Our next question will come from Peter Stabler of Wells Fargo. Please go ahead.

So a couple, if I could here. Just, first of all, David, on the new business stuff, could you just clarify this a little bit. I’m a little confused. I’m not sure whether it’s wins that are converting more slowly, whether it’s a win rate that you had anticipated going into the year that’s not materializing. I’m just unclear on exactly what you’re saying when you’re talking about timing. And that, let’s start there, and then I have another one.

Sure. It’s not wins that we have ramping up slower. It is new business opportunities that are taking much longer to play out than we anticipated. And when, going back to my prepared remarks about how we look at coming to the year, obviously, there are things in our pipeline that are very near term in terms of potential, and there are things that are more medium and long term. And it’s some of those near-term potential items that have just dragged and dragged to the point where, even if they were to convert, we wouldn’t have enough time in the year to make up the gap from what we expected, especially when you combine it with the couple of the hits that we took with existing clients that I referred to. So it was kind of a build of those, a combination of those 2 things. And it got to the point where we felt that we were running out of time to catch up to the level that we needed for our prior guidance, and so decided to update you on that today.

So just to be clear then, these were pitches that you were involved in, that you had expected to conclude earlier than they have, and you had also expected to win a certain percentage of them, is that right?

They are pitches we’re involved in or direct discussions we’re involved in that aren’t playing out at the pace that we expected.

Okay. And then, secondly, in terms of the revised outlook for the year. In some of the other agencies, the larger peers last year hit air pockets. A lot of time, that was assigned to projects not coming through. I didn’t hear you talk about any project-based business. Kind of hoping you could comment on your visibility and your confidence going forward. The narrative, while the others were suffering, the narrative was very bullish out of you guys, and I understand that you’re not proxy for the industry, but you had also consistently talked about durable advantages. And now, now we’re hearing more about kind of restructuring or new initiatives and that kind of thing, so I’m just trying to reconcile these things.

Sure. I’ll start out on the project versus retainer and then pass on to Scott, broadly. Ultimately, again, it just comes down to a few clients that, some are retainer, a couple are project. There’s no big project trend versus retainer trend, except that we’ve seen some instances where there are cutbacks that came after the year started, that weren’t anticipated and impacting us combined, again, and I’m sorry I repeat myself, but combined with the stretching out of the pipeline. And it’s the cumulative aspect of that that we’re looking at. For sure, over the last 3 years, there’s been a little bit more volatility in the business. I think you all have seen that. And we see that, too. But based on the desire of brands to speak to our agencies, to include them in discussions for opportunities to help them with their businesses, we continue to have high visibility of opportunity to grow and grow a whole lot faster than everybody else. It’s just not happening right now.

David, I think, said it all. I mean, it’s a constrained environment and it’s impacted our financial performance.

Our next question will come from Rich Tullo of Midtown Partners. Please go ahead.

Hey guys, thank you for taking my questions. One question here. You lost hotels.com right after you reported first quarter results, correct?

I’m not sure of the specific timing. The difference when things get reported in the press versus when we know about it.

Okay. How much is that resulting in the guidance being brought down? And in general, with everything else we’ve discussed today, can we look at this in terms of headwind that you have to get over or is this some more secular trend in what’s going on at MDC Partners?

So I’m not going to point to one client that impacted this. And to be clear, on hotels, we lost the media buying piece of the business, but continue to be their creative agency for their work. And surely, we lose business all the time and we win business all the time, and some makes the press and some doesn’t make the press. And that’s just the life of all ad agencies. So ultimately, I think that based on the opportunity that’s ahead of us, and the pipeline of new business opportunities that we see, assuming that those move along and we start to see some conversion, hopefully, we could see a reacceleration of growth rates sooner rather than later. But we didn’t think it would be prudent sitting here on this call, with the first quarter results as they are, to keep the old numbers out there and so we’re updating them.

And with all that’s going on with WPP, are you guys a strategic buyer or seller in the market -- in the M&A market?

We just closed an acquisition. And we had said at the outset, in our end of year call, that we were revisiting the M&A markets given the strength of the balance sheet and the free cash flow that we had generated. I think it’s independent of anything that WPP is or isn’t doing.

Okay, thank you.

Our next question will come from Barry Lucas of Gabelli & Company.

Thank you, good evening. David or Scott, I’m just trying to square this. Again, we’ve got a fairly good economy, benefits of tax reform likely to help the balance of the year, you’re North American-centric. So what are you -- if your existing clients are cutting back, what do they tell you? What are you hearing in pitches? Where is the business going because this is relatively new and novel?

Every client wants more for less. And to remain competitive, we continue to bring new features and functions and solutions to the table. So there’s been a constant and ongoing challenge and tension and friction with clients. Price has always been part of the equation. There’s been a dramatic shift in all of the different services that we deliver and how those are priced. But at the end of the day, I’d say this is more about slowdown than about a tectonic shift. When we look at the pipeline and we think about the businesses that are still there to be won, to the extent that they didn’t close in the first quarter, then they can maybe close in the second quarter, but we don’t see revenue until the back half of the year. So we’re just trying to be prudent. We look at - or we talk with all of our agencies, we roll up all the numbers, and this is where we sit today. And it’s just a handful of clients that can shift things both up and down. And so we’re staying close to it, we’re very focused on it and we’re going to continue to help our agencies drive the top line, create operational efficiencies and look for additional ways to unlock shareholder value within the portfolio.

Scott, is this sector-specific? Are there particular areas of the economy that you can call out that seem to be more affected or is it broader based across your client portfolio?

I’d say it’s more a sentiment among CMOs generally, who have to be held - are being held more accountable across all industry for results of these investments. But, historically, where there have been challenges to the sector, for instance, in consumer packaged goods, we’ve done well. There’s been a lot of disruption in the traditional agency relationships and our agencies which, in the prior era, not too long ago, we’re affectionately referred to as creative boutiques, now have the scale and the technical problems to meet global agencies is likely. You heard us talk about health care, which is the place where we’re making more dramatic investments. We think it’s a high-growth sector, and we continue to grow outside of North America. So we see lots of pockets of growth and we’re just being prudent about setting expectations about the rest of the year based on what the first quarter has look like.

And Barry, just to point out, on Slide 9 of the presentation, we show impact of client verticals in the quarter. And it was actually quite a bit of divergence this quarter. We actually had no verticals that were flat to up 10%. They either grew more than 10% or they went backwards a little bit. And ultimately, there you can see in the ones that grew more than 10%, some good underlying momentum. But then there are the instances where we’ve seen an impact from a client or 2 would be reflected more in those categories that were below 0.

All right. Thanks for that.

[Operator Instructions] Our next question will come from Lee Cooperman from Omega Advisors.

I’ve got a series of questions, some of which implicitly might have asked. But do we have a financial covenant that we have to worry about given this miss? Second, what is the net debt you’re projecting at year-end 2018? And do you have a revised - the third question is, do you have a revised EBITDA guidance? Because I don’t really see that in the releases. And fourth and probably bigger, I’ve held on for so long because I was hoping the industry would be consolidated, but I’m wondering whether with the advent of digital media, Google and Facebook’s effect on the advertising business, whether the franchise is worth less than I would have thought. But if you could comment on these 4 questions, I’d appreciate it. Thank you.

Sure. So we don’t have any issues with our covenants at the first quarter, which is seasonally our peak quarter in terms of leverage ratios. We finished with lots of room on our covenants and continue to expect lots of room. And as I said in our prepared remarks, liquidity of the business is strong and we continue to be on a path to deleveraging the balance sheet, again, this year on top of very strong deleveraging last year. As you know, to your next question, we have $900 million of senior notes and we expect to be in a cash position, not in the revolver, at year-end. We haven’t given a specific target so net debt should be less than $900 million. Revised EBITDA, the range implied by the revenue and margin guidance we gave should fall out between $200 million and $210 million.

[Indiscernible] previously?

The last range, the last number implied is kind of $214 million, $215 million.

I’m sorry, before the revision of guidance, it was $214 million, $215 million. So you’ve reduced your EBITDA by $14 million to $15 million, to $5 million, $5 million to $14 million?

Correct.

And Lee, on the issue of consolidation, that speaks to our pronouncement of, we believe there’s a lot of unrecognized value in the portfolio and we are vigorously pursuing any and all options to realize that value on behalf of shareholders.

You’ve been more of a buyer than a seller. I mean, we’ve not been the best custodian of the shareholders money. I mean, this call is so different, Scott, than what you just talked about on the last call when, people wonder kind of what you’re up to.

Well, look, as the Chairman, I can assure you that it’s the board’s responsibility to consider any and all options to maximize shareholder value. It’s a fiduciary duty that we take seriously. And as I said, we’re committed to it.

And the next question will come from Steven Cahall with RBC. Please go ahead.

Yes. Sorry, I joined a little late. So hopefully, I’m not asking anything that you have to repeat. My question is just around visibility. Last year, you significantly exceeded your guidance and this year, obviously, after the quarter, you’re changing your guidance. And I don’t think that, that’s just, that you all are bad forecasters, but that your clients are just having a lot less visibility in their own outlook. And so what do you think it takes in this industry for some of the visibility to return just to improve the predictability of revenue growth for the longer term?

That’s, actually, a really interesting way to ask that question, and I appreciate it. We think about that all the time. I think, ultimately, as Scott alluded to before, there’s kind of 2 schools of thought right now in corporate America. And one, our company is under pressure to drive any sorts of earnings growth they can in competitive industries. And unfortunately, we have looked at marketing sometimes is an expense that could be made more efficient or cut. But many companies and many emerging companies that are challenging those other ones that I just referred to, view marketing as an investment in order to differentiate their business and drive growth. And one of the core premises of our strategy is to continue to evolve our offering where we can increase. We prove out the value of the service we deliver so that there’s no question that marketing is an investment, as opposed to an expense. And I think that as we and others are able to do that by leveraging the power of 1 to 1 relationships with customers, the power of data will, I think, greatly enhance the visibility both for corporate America and for us and our competitors related to advertising spend.

That’s fair, thank you.

Ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Scott Kauffman, Chairman and CEO, for closing remarks.

Thanks. In closing, I just want to thank everyone for joining us today and to reiterate that we remain focused on accelerating revenue growth, driving operating efficiency and unlocking unrecognized value in our portfolio. Good afternoon from New York City.

The conference has now concluded. Thank you for attending today’s presentation, and you may now disconnect your lines.