Good day, everyone, and welcome to today's MDC Partners Stagwell Global earnings call. At this time, all participants are in a listen-only mode. Later, you'll have an opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one on your touch-tone phone. Please note today's call may be recorded. I will be standing by should you need any assistance. It is now my pleasure to turn the call over to Michaela Pewarski, Vice President of Investor Relations. Please go ahead.
Thank you, operator. Good morning, everyone. Welcome to the Stagwell conference call for the second quarter of 2021 to discuss standalone financial results for MDC Partners and Stagwell Marketing Group. On today's call, Mark Penn, Chairman and Chief Executive Officer, will first provide an overview of Stagwell's network-wide second quarter results, followed by comments from Stagwell President Jay Leveton, and a review of financial results from our Chief Financial Officer, Frank Lanuto. We will then be joined by Stagwell Chief Operating Officer Ryan Greene for a Q&A session. Before we begin our prepared remarks, I'd like to remind you that the following discussion contains forward-looking statements and non-GAAP financial data.
Forward-looking statements about the company, including those relating to earnings guidance, are subject to certain uncertainties referenced in the cautionary statements included in our earnings release and slide presentations and are further detailed in the company's Form 10-K and subsequent SEC filings. For your reference, we've posted two investor presentations to our website at stagwellglobal.com. We also refer you to this morning's press releases and slide presentations for definitions, explanations, and reconciliations of non-GAAP financial data. Now to start the call, I'd like to turn it over to our Chairman and Chief Executive Officer, Mark Penn.
Thank you, Michaela. Good morning, and thank you for joining us. It's a momentous week for Stagwell with the closing of the combination and our first day of trading on Nasdaq under the new ticker STGW. That's STGW. Thank you to all our employees and shareholders who supported our vision and made it happen. I'll be outlining the results of both legacy MDC and legacy Stagwell. This is the last time results will be reported separately and two separate releases were issued as well. Overall, this was an excellent quarter for both companies in the combination. Legacy MDC continued to come back from the depths of the pandemic faster than expected, and legacy Stagwell accelerated its off-election cycle growth across the board. Legacy MDC reported GAAP revenue of $346 million, up 33% year-over-year, and net revenue of $298 million, up 29%, reporting organic revenue growth of 31%.
Legacy Stagwell reported impressive growth numbers as well. GAAP revenue for legacy Stagwell was $210 million, up 29% year-over-year. Net revenue of $182 million was up 40%, and organic growth was 24% on a GAAP basis and 33% on a net revenue basis. Stagwell was a rare business in marketing that showed growth even during the pandemic last year, and this growth comes on top of last year's expansion, even though its travel and tourism business remain subdued. Legacy MDC adjusted EBITDA climbed to $60 million, the highest second quarter in the company's history, growing 67%. Legacy Stagwell increased its adjusted EBITDA to $39 million, up 92% over last year. These are excellent numbers turned in by both legacy companies as we come out of the gate ready for the combination and beyond.
Adding the solid results from the first quarter, both legacy MDC and Stagwell delivered strong results for the first half of 2021. MDC GAAP revenue was $653 million, up 11% from 2020. Legacy Stagwell delivered $391 million of GAAP revenue, up 13%, or 7.5% on an organic basis. For adjusted EBITDA, legacy MDC delivered $112 million in the first half, up 48% from a year ago, while legacy Stagwell delivered $63 million, up 50% from H1 2020. If you combine the results of the two companies in the first half, that sums to GAAP revenue of $1.04 billion, up 12% year-over-year. Net revenue of $909 million, up 15% year-over-year, and adjusted EBITDA of $175 million in the first half of 2021, up 49% year-over-year.
On an LTM basis, the two companies, if combined, delivered GAAP revenue of $2.2 billion and adjusted EBITDA of $378 million. The most important factor behind the growth we are seeing is that the pandemic appears to have sped up the adaptation to digital marketing and e-commerce. This, in turn, has helped spur growth at the most digital-first agencies. At legacy MDC, the digital businesses grew their combined revenue by over 70% on a year-over-year basis for the quarter. Stagwell saw its digital marketing and digital content segments combined grow by 47%. These results mean 40% of the combined revenue will now come from high growth digital businesses, with online companies expected to grow 10% or more in the long term. Another factor behind these numbers is the return and even expansion of online research.
Our research services for Hollywood movie studios and OTT streaming services jumped 84% from 2Q 2020 as movie theaters reopened and content production ramped up. The Harris Poll, which had the most accurate election poll last year, saw a significant pickup in business and is having success with its SaaS-based Harris Brand Platform, which has come from zero to a run rate of sales of $4 million, a strong start for a new way of delivering and analyzing research. Despite these gross numbers, some areas, nevertheless, still face headwinds and are not expected to make a full recovery until 2022. Our experiential business grew 22% year-over-year this quarter as in-person events gradually restarted. Similarly, an uptick in investment by clients in lodging, transportation, and travel sectors contributed to network-wide growth. However, experiential and travel-related services and publishing remain significantly below their pre-pandemic levels.
We expect these businesses to pick up heading into 2022, which is also expected to be a banner midterm election year for our political consulting and online fundraising agencies. As business has returned and our workforce recovered, margins have expanded and remained high. Legacy MDC adjusted EBITDA margins expanded year-over-year by 350 basis points to 17.4% on a GAAP basis, and by 460 basis points to 20.2% on a net revenue basis. Legacy Stagwell showed similarly robust margins of 18.5% against GAAP revenue and 21.3% against net revenue. We have announced the new management team of Stagwell Inc., and the team is headed by myself, along with Jay Leveton, who will serve as President of the new combined company. Frank Lanuto will continue to serve as CFO. Ryan Greene will work with him as COO.
Beth Sidhu will be our Chief Brand and Communications Officer, and Ryan Linder will continue to serve as Chief Marketing Officer. We also welcome Stephanie Howley as Chief People Officer. Stephanie joins us from BCW and brings more than 20 years of experience in people operations and strategy. She will lead Stagwell's people operations and foster a culture of collaboration, as well as focus on diversity and inclusion. In terms of new client activity, our net new business number for legacy MDC agencies was a positive $57 million. Certainly a record since I've been here. It was a strong quarter as our creative agencies capitalized on the 2Q pitch season, which was particularly busy this year given the economic recovery. Our legacy MDC agencies have won $129 million in LTM net new business, up from $92 million in the first quarter.
Notable recent wins include United Airlines, HubSpot, and Team USA at 72andSunny, Facebook's Oculus, Fetch Rewards and Netflix Asian representation at Anomaly, Aspen Dental at Mono, California Pizza Kitchen at Allison+Partners, and Lyrica, Roku, Party City, and Amazon Basics across the Doner Partners Network. Our digital shops continue to add exciting clients such as Rocket Mortgage, Champion, and Clover Network at YML, showcasing the power of collaboration across networks, media agency Assembly. Digital transformation shop Code and Theory won an exciting mandate to transform Con Edison's digital consumer experience. Our agencies not only won business in the quarter, they also won industry recognition. Taking home 17 of the awards at the Cannes Lions Festival, the industry's preeminent event, 72andSunny received a prestigious Grand Prix for Swipe Night, an in-app collective user experience created for Tinder. F&B won several awards for its Volvo E.V.A. program.
Ad Age also named GALE the data analytics agency of the year on its annual A-List and designated YML agency standout for its digital transformation network with the Thrive Market. This year's cohort of recognized work proves the best of modern marketing lies at the cross-section of culture-moving creativity, technology, and data-driven insights. The previously announced global affiliate program is fully operational. We designed the program to quickly scale capabilities and target international markets without investing capital. We're on pace to achieve our target of 50 affiliates by the end of the year, which will better position us to win large, sticky global contracts, and the affiliates will also serve as a pre-vetted source for potential M&A activity. On the talent front, we recently welcomed Toby Southgate as global CEO of Forsman & Bodenfors.
Drawing from his past experience as Chief Growth Officer of McCann Worldgroup, Toby will lead F&B's continued global expansion alongside the global F&B team out of Sweden. Our strategy in the new company remains the same: reduce back-office expenses while providing maximum freedom for the creative and digital agencies to hire the best talent and grow. We will continue to invest in the newly created networks and even expand them with the addition of legacy Stagwell companies. We'll bring together all our media companies to take advantage of growing scale while maintaining our go-to-market brands. We will reopen the window for M&A transactions to fill out the global network and invest in cutting-edge digital services. We will tell the story of a new company with the best in creativity and the best in connected experiences that can transform marketing and grow to compete against the majors.
We are off to a great start. In the coming days, we plan to launch a refinancing of our bonds, hoping to take advantage of our stronger balance sheet and lower rates to enhance our capital structure and save a potential $20 million of interest annually. This is on top of the planned $30 million in cost synergies. Simultaneous with the merger closing on Monday, we put in place a $500 million revolver and envision a simple, flexible, low-cost capital structure consisting of long-term bonds and a revolver. Of course, I would not be remiss if I did not put out a cautionary flag about the Delta variant and its potential to slow down the economy, and with it, marketing.
However, our business is largely concentrated in the U.S., where the effects are much smaller than in other parts of the world, and we've seen no direct impact so far on our business, which remains strong. Consequently, we are reaffirming our recent guidance for legacy MDC and for the combination. We believe that this year we can deliver adjusted EBITDA between $372 million and $387 million on a pro forma basis and including synergies, which is between $342 million and $357 million without such synergies. These are impressive numbers coming off the pandemic floor. We believe we're setting a strong new pace for the industry, and these numbers reflect the underlying strength of these assets and the ability of management to lay out a strategy and execute it even under pressure and in a short period of time.
I will now turn it over to new Stagwell President, Jay Leveton, for some additional comments about the exciting developments at Stagwell Inc.
Thank you, Mark. Good morning, everyone. I'm Jay Leveton, President of Stagwell Inc. It's a pleasure to be with you this morning and to serve in this role in the combined company. With the combination closing in the last 48 hours and the strong Q2 financial results from both companies, it is certainly an exciting time to be at Stagwell. I've spent more than 20 years working in marketing services, specifically in the market research and public relations vertical, managing agencies at scale globally. I'm not a lawyer or accountant, someone who has done client work and pitched for new business in the same way 10,000 people here at Stagwell do every day. I understand these businesses firsthand. To truly lead them, you have to have walked in these professional shoes.
Specifically, for the last six years at the legacy Stagwell Group, I helped lead the team with Mark that started from nothing in 2015 to what became an $880 million revenue and $145 million EBITDA company in 2020. We accomplished a significant amount in a short period of time. I'm very pleased those corporate executives that Mark mentioned earlier and every single one of our legacy Stagwell agency business leaders are continuing on in this new journey in what is now Stagwell Inc., a $2 billion company. It is a watershed moment for all of us. We are excited to partner with the many iconic MDC marketing companies in this new chapter. In my role as President at Stagwell Inc., my North Star is growth.
Growth creates shareholder value, it creates opportunity for our 10,000 professionals to progress in their careers, whether they are running some of our largest businesses or just starting out as an assistant account manager, growth better equips all of us to solve business challenges on behalf of our clients. Growth will come from staying on the cutting edge of the industry. We will continue to enhance our offerings in fast-growing segments of digital transformation, digital media buying, influencer marketing, data analytics, and digital products we can sell and service. These digital lines of businesses make up a significant amount of our revenue today. While our competitors are focused on consolidating brands, we're focused on growth through collaboration. We have strong, independent brands that will scale by working together seamlessly on behalf of clients.
At the end of the day, as the challenger in this space, we are one team with a mandate for mutual success. Coming out of the pandemic, marketers are looking for new and different ways to reach their most critical stakeholders. Whether they're seeking big creative advertising solutions to communicate with consumers, regulators, investors, or influencers, drive e-commerce sales, or work to take offline processes online, I would tell them that Stagwell is the best positioned at scale to help them achieve these important business objectives. With that, I'd like to turn it over to my colleague, Frank Lanuto, CFO of Stagwell, to review the financial results. I'd like to thank him personally for the critical role he played in getting this transaction across the finish line. Over to you, Frank.
Thanks, Jay. Good morning, everyone. As previously disclosed, Stagwell Marketing Group LLC and MDC completed its business combination earlier this week and changed the combined company's name to Stagwell Inc. My discussion of the financial results this morning will cover the quarter ended June 30th and will address the pre-combination results of each company. All future disclosure will address the consolidated results for Stagwell Inc.
Let me begin with MDC's results. The company delivered record Q2 revenue growth and its highest adjusted EBITDA in the company's history as the recovery from the pandemic accelerated during the quarter. For the quarter, revenue grew 33% to $346 million, or 31% on an organic basis. Net revenue, excluding pass-through costs, increased 28% to $298 million, or 27% on an organic basis. Looking at our revenue from a client sector standpoint, we saw growth across all sectors. Healthcare, technology, consumer products, and food and beverage saw the biggest year-over-year improvements, primarily driven by strong organic growth with existing clients. Lodging, transportation, and travel clients also saw an uptick, but is rebounding more slowly as clients remain cautious around the global travel outlook. We expect the travel sector, as well as our experiential businesses, to see gradual sequential improvement throughout the second half of the year.
Turning to our segments, revenue growth for the quarter was broad-based, as each of our reportable segments posted double-digit percentage revenue increases as compared to Q1 2020. In Integrated Network A, revenue increased 43% in Q2 versus the prior year, driven by growth in digital, PR, and our healthcare business. In Integrated Network B, revenue increased 32% in Q2 versus prior year, driven by strong momentum in our creative, digital, and PR businesses. In media and data, revenue was up 31% in Q2 versus the prior year, driven by strong growth in our data and analytics business. In all other, revenue increased 21% against prior year, driven by experiential and public relations.
Turning to costs, our strong control over costs during the quarter led to a smaller increase in operating expenses as compared to our revenue, driven by improvements in our compensation-to-revenue ratio of approximately 130 basis points, as well as a 60 basis point decrease in occupancy as a percentage of revenue. With respect to adjusted EBITDA, our adjusted EBITDA for the second quarter increased 67% to $60 million from $36 million in the prior year and was the highest Q2 reported amount in the company's history. Adjusted EBITDA margins also expanded 350 basis points to 17.4% versus 13.9% a year ago. Trailing 12-month covenant EBITDA increased to a record $220 million, up 14% year-over-year and 10% sequentially. Moving to our balance sheet. We ended the second quarter with cash of $180 million against $89 million of revolver borrowings.
Our total leverage ratio was 4.1x , down from 4.6x a year ago, and flat sequentially against Q1. With respect to acquisition-related liabilities, we funded approximately $45 million during the second quarter, primarily related to our digital businesses, lowering our M&A obligations to $133 million from $159 million in Q1. We expect to fund an additional $10 million through the rest of the year as the company continues to lower its acquisition-related liabilities. With respect to CapEx, we've incurred approximately $2 million through six months and expect no major expenditures through the end of the year. That concludes our discussion of MDC's results. I will now discuss the second quarter pre-combination Stagwell results. Stagwell drove strong revenue growth in the quarter despite a tough comp against the political cycle a year ago. Second quarter revenue was $210 million, up 29% from the prior year with 24% organic growth.
Net revenue grew 39.5% to $182 million, with 33% net organic growth. Stagwell's growth was also broad-based, with nearly all segments growing revenue in the solid double digits. The digital marketing and content segments grew a combined 47% year-over-year, continuing to benefit from the shift to digital accelerated by the pandemic. The entertainment and streaming content research segment grew 84% year-over-year as movie and television production ramped and theaters broadly reopened. Corporate research grew 38% from Q2 2020 as Harris Poll saw strong demand for its enterprise advisory services as well as its Harris Brand Platform, which is part of our growing portfolio of digital SaaS products. Communications, public affairs, and advocacy saw an expected modest revenue decline of 7% as 2021 is an off-cycle election year.
Turning to costs, excluding transaction costs and earn-out accretion, operating expense grew at a slower pace than revenue. With respect to EBITDA, our adjusted EBITDA for the second quarter increased 91% to $39 million from $20 million in the prior year. We also saw strong margin expansion in the quarter with adjusted EBITDA margins expanding 600 basis points to 18.5% versus 12.5% a year ago. Moving to the balance sheet, we ended the second quarter with cash and cash equivalents of $73.5 million and $188 million balance on our revolver. Our total leverage ratio was 1.2x , down from 2.3x a year ago, and from 1.3x last quarter. Our deferred acquisition cost balance was $16.3 million at quarter end, up slightly from $14.7 million in the first quarter. We incurred $7.3 million in CapEx in the six-month period related to new hires and investment in digital products.
Now moving to our guidance. With respect to the combined company, guidance for Stagwell Inc., we expect revenue for 2021 on a pro forma basis, giving effect to the combination as if it were completed on January 1st, 2021, to be between $2.135 billion-$2.18 billion, including an estimated $762 million for MDC for the seven-month period ending July 31st, 2021. Adjusted EBITDA for 2021, on the same pro forma basis, is estimated to be $342 million-$357 million, excluding synergies. This includes an estimated $128 million for MDC for the seven-month period ending July 31st. With our business combination now complete, we are now focused on taking advantage of the favorable interest rate environment and refinancing our senior notes. We have given notice to bond holders of our intention to redeem the notes, and we expect to launch the process for a new issue very shortly.
In closing, I want to thank all our employees who contributed to making this combination a reality, as well as the MDC Partners Special Committee for all their hard work. Thank you. Operator, we will now open it up for Q&A.
We'll take our first question from Tom White with D.A. Davidson. Your line is open.
Hi, this is Tevis on for Tom. Thanks for taking our question. I was wondering if I could hear your view about the evolution of the competitive landscape for Stagwell Inc. and Legacy MDC over the course of the pandemic. What does it look like? Is it significantly different now during the past few months where we've seen an emergence from the pandemic, and are you guys getting a better sense of everything, including the potential ramifications of further volatility via the Delta variant? One more, if I may. You mentioned in your prepared remarks your desire to further M&A down the line following the combination. Could you elaborate on that? Thank you.
Sure. First, I don't think you've seen any real change in the competitive set. What you've really seen, however, is a shift as a result of the pandemic. What I always say is, look, it's a three to five-year shift in digital habits. The trend towards people shifting away from fully conventional marketing or traditional marketing into online marketing, I think, was accelerated. As I always say, we had Instacart, but nobody used it. We had Zoom, but nobody used it. We have all these things that people use now that they didn't use, and online and e-commerce is up, I believe, 30% or 35%.
The competitive landscape shifts only in the sense that business now shifts, I think, more favorably in our direction, favoring our ability to gain market share because of our much higher percentage of such services and the collection that we have created here that we've put together of high growth digital services. In terms of the Delta, as I said, we're not seeing any direct effect to date. Obviously, you have to put out a cautionary. It doesn't look like businesses are going to want to shut down. Looks like there'd be obviously office, commercial, school, lots of impact in those areas. The question is whether or not it's going to impact commerce in the same way that it did last March, April, and May. That's unlikely. There could be some effects.
The government, again, has consistently stepped in if there's anything serious to put money in people's pockets. I don't see that we're headed for that kind of economic slowdown. As I said, I think that may not be as true in some of the other countries, but our revenue is really 80%-85% in the U.S. at this point. That also goes to the third question is when it comes to M&A, obviously we're planning to get our leverage down to about 3x. That's where we want to operate. As we have additional cash flow, we will look at appropriate M&A, and there are two areas, broadening out the global marketplace, which we need to get larger contracts. Right now, we've started the affiliate program as step one to do that.
There'll be certain limited acquisitions in that area, of course, you have to stay current on new and emerging digital marketplaces and services. It's quite important for a marketing service company to continue to invest, and we're going to continue to invest in our own technology, SaaS products, and continue to invest in companies as a vital part of the growth in the industry. I think it's a vital part of being such a company and being successful. Other questions?
Thank you.
If there's no more questions. Any more questions, Heather? If there's no more questions from the phone lines, we have a question through the chat. This is for Mark. You've mentioned how important SaaS products are for Stagwell. Can you give us an update on your overall plan for product development?
Well, I think we've been closed for about a day, so it's a little early for an update. above what I've been saying, which is we've developed about nine products. We're out in the marketplace with PRophet, which is a comm tool that enables you to predict how news releases will be covered. We're very strongly in the market with the Harris Brand Platform, which is really showing very fast pickup and adoption. We're about finishing Q, which is the consumer understanding and engagement platform, which will be used by our agencies to construct target audiences without a reliance on cookies as second. we're now getting into the market in Koalifyed, which is an influencer brand platform. my plan is to put more structure around this, put additional leadership, have a single sales team, have a group of entrepreneurs here who are pushing and selling the products.
One of the first things we're going to do now that we're a single company is go to the next step in terms of organizing that process. We're in market with three or four of the products. We're expecting to put more in markets. We're expecting to put more emphasis on systematizing the development and sales process so that we realize our plan.
Great. There's one more question from the chat. Understanding that the deal just closed, please can you talk about your plan for integrating the network and incentivizing collaboration?
Yeah. I think that we've been working very hard, really for the last 2 .5 years, both within MDC and Stagwell, for making collaboration an important part of the culture. A lot of what we did in creating the networks was by creating the networks and creating cross incentives across groups of companies. That created an incentive for people to get an incentive for themselves, for their company, for their network. Of course, greater emphasis on stock-based compensation to some extent will also create a greater emphasis on looking at the organization as a whole.
We have some plans that'll be coming out in the coming days about how we will strengthen the network, what legacy Stagwell companies will go into the networks, and how we will be organizing this media team, which will now have about $5 billion of media that it manages under, still have some go-to-market brands, but also be under a coherent leadership that I think can really take that forward. We'll be announcing those plans. I think you can expect announcements shortly.
Great. I think that's all the questions that we have from the chat. Operator, you can conclude the call.
Are they going to finish? Is that going to wrap up?
Oh, we'll turn it back to Mark for some closing comments.
I just want to thank you for coming to the call. I'm sorry that this is the last time that we'll give you a jigsaw puzzle of all the different areas we'll have. Now that we've closed, we'll be one company with one mission, transform marketing. We're going to do that with market-leading growth for a full-service, creative, and technology-based company. At the same time, we expect to provide strong margins, and we hope that will provide for investors strong returns, increased liquidity, and that we will get on the marketplace full value for these incredible assets and this incredible company going forward. We look forward to keep you updated as you follow our progress, starting with an investor introduction event slated for September 20th at our One World Trade Center campus, followed by hosting one-on-one meetings at Goldman Sachs Communacopia Conference during the week.
For more information or to receive our weekly investor newsletter, please reach out to ir@stagwellglobal.com. Thank you, and have a great day.