Stagwell Inc - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-13718

Stagwell Inc.

(Exact name of registrant as specified in its charter)


Delaware		86-1390679
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

One World Trade Center, Floor 65
New York,	New York	10007
(Address of principal executive offices)		(Zip Code)

(646) 429-1800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.001 per share	STGW	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,”

accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated Filer	☐	Accelerated Filer	☒
Non-accelerated Filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of common shares outstanding as of November 1, 2023, was 120,634,327 shares of Class A Common Stock and 151,648,740 shares of Class C Common Stock.

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STAGWELL INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	4
	Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022	4
	Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022	5
	Unaudited Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	6
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	7
	Unaudited Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022	9
	Notes to the Unaudited Consolidated Financial Statements	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	66
Item 4.	Controls and Procedures	67

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	68
Item 1A.	Risk Factors	68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	70
Signatures		72

EXPLANATORY NOTE

References in this Quarterly Report on Form 10-Q (this “Form 10-Q”) to “Stagwell,” the “Company,” “we,” “us,” and “our” refer to Stagwell Inc. and, unless the context otherwise requires or otherwise is expressly stated, its subsidiaries.

All dollar amounts are stated in U.S. dollars unless otherwise stated.

Note About Forward-Looking Statements

This document contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s representatives may also make forward-looking statements orally or in writing from time to time. Statements in this document that are not historical facts, including statements about the Company’s beliefs and expectations, future financial performance and future prospects, business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Forward-looking statements, which are generally denoted by words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “create,” “estimate,” “expect,” “focus,” “forecast,” “foresee,” “future,” “guidance,” “intend,” “look,” “may,” “opportunity,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” or the negative of such terms or other variations thereof and terms of similar substance used in connection with any discussion of current plans, estimates and projections are subject to change based on a number of factors, including those outlined in this section.

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Forward-looking statements in this document are based on certain key expectations and assumptions made by the Company. Although the management of the Company believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. The material assumptions upon which such forward-looking statements are based include, among others, assumptions with respect to general business, economic and market conditions, the competitive environment, anticipated and unanticipated tax consequences and anticipated and unanticipated costs. These forward-looking statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:

•risks associated with international, national and regional unfavorable economic conditions that could affect the Company or its clients;

•the continued impact of the coronavirus pandemic (“COVID-19”), and evolving strains of COVID-19 on the economy and demand for the Company’s services, which may precipitate or exacerbate other risks and uncertainties;

•inflation and actions taken by central banks to counter inflation;

•the Company’s ability to attract new clients and retain existing clients;

•the impact of a reduction in client spending and changes in client advertising, marketing and corporate communications requirements;

•financial failure of the Company’s clients;

•the Company’s ability to retain and attract key employees;

•the Company’s ability to compete in the markets in which it operates;

•the Company’s ability to achieve its cost saving initiatives;

•the Company’s implementation of strategic initiatives;

•the Company’s ability to remain in compliance with its debt agreements and the Company’s ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to redeemable noncontrolling interests and deferred acquisition consideration;

•the Company’s ability to manage its growth effectively, including the successful completion and integration of acquisitions that complement and expand the Company’s business capabilities;

•the Company’s ability to develop products incorporating new technologies, including augmented reality, artificial intelligence, and virtual reality, and realize benefits from such products;

•an inability to realize expected benefits of the combination of the Company’s business with the business of MDC Partners Inc. (the “Transactions”) and other completed, pending or contemplated acquisitions;

•adverse tax consequences in connection with the Transactions for the Company, its operations and its shareholders, that may differ from the expectations of the Company, including that future changes in tax law, potential increases to corporate tax rates in the United States and disagreements with the tax authorities on the Company’s determination of value and computations of its attributes may result in increased tax costs;

•the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Transactions;

•the Company’s unremediated material weaknesses in internal control over financial reporting and its ability to establish and maintain an effective system of internal control over financial reporting;

•the Company’s ability to protect client data from security incidents or cyberattacks;

•economic disruptions resulting from war and other geopolitical tensions (such as the ongoing military conflict between Russia and Ukraine), terrorist activities and natural disasters;

•stock price volatility; and

•foreign currency fluctuations.

Investors should carefully consider these risks and the additional risk factors described in more detail in our Annual Report on Form 10-K for the year ended December 31, 2022 (our “2022 Form 10-K”), filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2023, and accessible on the SEC’s website at www.sec.gov, under the caption “Risk Factors,” and in the Company’s other SEC filings.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue	$	617,573	$	663,791	$	1,872,282	$	1,979,607
Operating Expenses
Cost of services	384,980		417,134		1,201,309		1,253,765
Office and general expenses	160,021		119,186		481,379		429,121
Depreciation and amortization	38,830		32,207		107,795		95,642
Impairment and other losses	—		25,211		10,562		28,034
	583,831		593,738		1,801,045		1,806,562
Operating Income	33,742		70,053		71,237		173,045
Other income (expenses):
Interest expense, net	(25,886)		(19,672)		(67,755)		(56,552)
Foreign exchange, net	(140)		(3,927)		(2,288)		(4,163)
Other, net	(271)		147		(467)		182
	(26,297)		(23,452)		(70,510)		(60,533)
Income before income taxes and equity in earnings of non-consolidated affiliates	7,445		46,601		727		112,512
Income tax expense	4,324		11,540		12,425		20,150
Income (loss) before equity in earnings of non-consolidated affiliates	3,121		35,061		(11,698)		92,362
Equity in income (loss) of non-consolidated affiliates	(4)		213		(447)		1,053
Net income (loss)	3,117		35,274		(12,145)		93,415
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests	(2,464)		(24,665)		8,548		(59,668)
Net income (loss) attributable to Stagwell Inc. common shareholders	$	653	$	10,609	$	(3,597)	$	33,747

Earnings (Loss) Per Common Share:

Basic	$	0.01	$	0.08	$	(0.03)	$	0.27

Diluted	$	0.00	$	0.08	$	(0.03)	$	0.26
Weighted Average Number of Common Shares Outstanding:
Basic	110,787		125,384		118,772		124,710
Diluted	265,006		130,498		118,772		131,550

See Notes to the Unaudited Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$	3,117	$	35,274	$	(12,145)	$	93,415

Other comprehensive (loss) - Foreign currency translation adjustment	(13,516)		(30,505)		(6,153)		(59,678)


Comprehensive income (loss) for the period	(10,399)		4,769		(18,298)		33,737
Comprehensive (income) loss attributable to the noncontrolling and redeemable noncontrolling interests	5,483		(24,665)		34,829		(59,668)
Comprehensive income (loss) attributable to Stagwell Inc. common shareholders	$	(4,916)	$	(19,896)	$	16,531	$	(25,931)

See Notes to the Unaudited Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)


	September 30, 2023		December 31, 2022

ASSETS
Current Assets
Cash and cash equivalents	$	98,705	$	220,589
Accounts receivable, net	670,090		645,846
Expenditures billable to clients	128,903		93,077
Other current assets	104,082		71,443
Total Current Assets	1,001,780		1,030,955
Fixed assets, net	81,373		98,878
Right-of-use lease assets - operating leases	245,187		273,567
Goodwill	1,572,489		1,566,956
Other intangible assets, net	844,004		907,529
Other assets	125,376		115,447
Total Assets	$	3,870,209	$	3,993,332
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	306,956	$	357,253
Accrued media	183,510		240,506
Accruals and other liabilities	205,861		248,477
Advance billings	335,600		337,034
Current portion of lease liabilities - operating leases	67,976		76,349
Current portion of deferred acquisition consideration	104,294		90,183
Total Current Liabilities	1,204,197		1,349,802
Long-term debt	1,498,129		1,184,707
Long-term portion of deferred acquisition consideration	29,443		71,140
Long-term lease liabilities - operating leases	271,285		294,049
Deferred tax liabilities, net	47,717		40,109
Other liabilities	55,099		69,780
Total Liabilities	3,105,870		3,009,587
Redeemable Noncontrolling Interests	10,085		39,111
Commitments, Contingencies and Guarantees (Note 9)
Shareholders' Equity
Common shares - Class A & B	116		132
Common shares - Class C	2		2

Paid-in capital	324,926		491,899
Retained earnings	24,586		29,445
Accumulated other comprehensive loss	(18,813)		(38,941)
Stagwell Inc. Shareholders' Equity	330,817		482,537
Noncontrolling interests	423,437		462,097
Total Shareholders' Equity	754,254		944,634
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity	$	3,870,209	$	3,993,332

See Notes to the Unaudited Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	(12,145)	$	93,415
Adjustments to reconcile net income to cash (used in) provided by operating activities:
Stock-based compensation	34,615		33,410
Depreciation and amortization	107,795		95,642
Impairment and other losses	10,562		28,034

Deferred income taxes	(1,112)		(1,557)
Adjustment to deferred acquisition consideration	10,881		(14,420)

Other, net	(4,292)		1,679
Changes in working capital:
Accounts receivable	(25,405)		(34,637)
Expenditures billable to clients	(36,217)		5,525
Other assets	6,539		4,100
Accounts payable	(58,716)		34,630
Accrued expenses and other liabilities	(149,267)		(138,947)
Advance billings	(1,759)		(23,017)
Deferred acquisition related payments	(9,021)		(10,776)
Net cash (used in) provided by operating activities	(127,542)		73,081
Cash flows from investing activities:
Capital expenditures	(12,205)		(16,103)
Acquisitions, net of cash acquired	(6,678)		(37,461)
Capitalized software	(19,026)		(9,392)
Other	(6,939)		(1,328)
Net cash used in investing activities	(44,848)		(64,284)
Cash flows from financing activities:
Repayment of borrowings under revolving credit facility	(1,250,500)		(855,000)
Proceeds from borrowings under revolving credit facility	1,562,500		989,500
Shares repurchased and cancelled	(203,958)		(43,637)
Distributions to noncontrolling interests	(24,538)		(38,486)
Payment of deferred consideration	(31,666)		(61,089)

Purchase of noncontrolling interest	—		(3,600)

Debt issuance costs	(150)		—





Net cash provided by (used in) financing activities	51,688		(12,312)
Effect of exchange rate changes on cash and cash equivalents	(1,182)		(15,243)
Net decrease in cash and cash equivalents	(121,884)		(18,758)
Cash and cash equivalents at beginning of period	220,589		184,009
Cash and cash equivalents at end of period	$	98,705	$	165,251

Supplemental Cash Flow Information:
Cash income taxes paid	$	40,088	$	23,315
Cash interest paid	63,878		61,016

Non-cash investing and financing activities:

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)

(amounts in thousands)


	Nine Months Ended September 30,
	2023	2022
Establishment of Tax Receivables Agreement liability	—	17,649
Non-cash payments for deferred acquisition consideration	20,119	—
Reduction of Deferred tax liability related to exchange of Paired Units	—	20,763

See Notes to the Unaudited Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(amounts in thousands)



		Three Months Ended September 30, 2023
	Common Shares - Class A & B		Common Shares - Class C			Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity
		Shares	Amount		Shares	Amount
Balance at June 30, 2023		116,039	$	116	151,649	$	2	$	309,521	$	27,496	$	(13,244)	$	323,891	$	438,299	$	762,190
Net income		—	—		—	—		—		653		—		653		2,464		3,117
Other comprehensive loss		—	—		—	—		—		—		(5,569)		(5,569)		(7,947)		(13,516)
Total other comprehensive income (loss)										653		(5,569)		(4,916)		(5,483)		(10,399)

Distributions to noncontrolling interests		—	—		—	—		—		—		—		—		(8,155)		(8,155)
Changes in redemption value of RNCI		—	—		—	—		—		(3,562)		—		(3,562)		—		(3,562)
Restricted awards granted or vested		670	1		—	—		174		—		—		175		—		175
Shares repurchased and cancelled		(818)	(1)		—	—		(4,604)		—		—		(4,605)		—		(4,605)

Stock-based compensation		—	—		—	—		17,050		—		—		17,050		—		17,050
Change in ownership held by Class C holders		—	—		—	—		(215)		—		—		(215)		215		—


Other (1)		—	—		—	—		3,000		(1)		—		2,999		(1,439)		1,560
Balance at September 30, 2023		115,891	$	116	151,649	$	2	$	324,926	$	24,586	$	(18,813)	$	330,817	$	423,437	$	754,254

(1) The Other line within Paid-in Capital includes $3.0 million in connection with the modification of certain stock-appreciation rights from equity to cash-settled that were subsequently exercised in equity.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)

(amounts in thousands)



		Nine Months Ended September 30, 2023
	Common Shares - Class A & B		Common Shares - Class C			Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity
		Shares	Amount		Shares	Amount
Balance at December 31, 2022		131,724	$	132	160,909	$	2	$	491,899	$	29,445	$	(38,941)	$	482,537	$	462,097	$	944,634
Net loss		—	—		—	—		—		(3,597)		—		(3,597)		(8,548)		(12,145)
Other comprehensive loss		—	—		—	—		—		—		20,128		20,128		(26,281)		(6,153)
Total other comprehensive income (loss)										(3,597)		20,128		16,531		(34,829)		(18,298)

Distributions to noncontrolling interests		—	—		—	—		—		—		—		—		(19,164)		(19,164)
Changes in redemption value of RNCI		—	—		—	—		—		(621)		—		(621)		—		(621)
Restricted awards granted or vested		3,647	4		—	—		171		—		—		175		—		175
Shares repurchased and cancelled		(31,580)	(32)		—	—		(204,926)		—		—		(204,958)		—		(204,958)
Restricted shares forfeited		(13)	—		—	—		—		—		—		—		—		—
Stock-based compensation		—	—		—	—		33,883		—		—		33,883		—		33,883
Change in ownership held by Class C holders		—	—		—	—		(14,597)		—		—		(14,597)		14,597		—
Shares issued, acquisitions		2,853	3		—	—		20,116		—		—		20,119		—		20,119
Conversion of Class C to Class A shares		9,260	9		(9,260)	—		(9)		—		—		—		—		—
Other (1)		—	—		—	—		(1,611)		(641)		—		(2,252)		736		(1,516)
Balance at September 30, 2023		115,891	$	116	151,649	$	2	$	324,926	$	24,586	$	(18,813)	$	330,817	$	423,437	$	754,254

(1) The Other line within Paid-in Capital includes $1.6 million in connection with the modification of certain stock-appreciation rights from equity to cash-settled that were subsequently exercised in equity.

See Notes to the Unaudited Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)

(amounts in thousands)




	Three Months Ended September 30, 2022
	Common Shares - Class A & B			Common Shares - Class C			Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity
	Shares	Amount		Shares	Amount
Balance at June 30, 2022	131,838	$	135	164,427	$	2	$	368,345	$	10,268	$	(34,451)	$	344,299	$	513,085	$	857,384
Net income	—	—		—	—		—		10,609		—		10,609		24,665		35,274
Other comprehensive loss	—	—		—	—		—		—		(30,505)		(30,505)		—		(30,505)
Total other comprehensive income (loss)									10,609		(30,505)		(19,896)		24,665		4,769


Changes in redemption value of RNCI	—	—		—	—		—		(14,658)		—		(14,658)		—		(14,658)
Restricted awards granted or vested	1,689	2		—	—		(2)		—		—		—		—		—
Shares repurchased and cancelled	(2,032)	(4)		—	—		(13,872)		—		—		(13,876)		—		(13,876)
Restricted shares forfeited	(3)	—		—	—		—		—		—		—		—		—
Stock-based compensation	—	—		—	—		9,583		—		—		9,583		—		9,583
Conversion of Class C to Class A shares	51	1		(51)	—		(1)		—		—		—		—		—


Finalization of MDC acquisition accounting	—	—		—	—		(16,294)		—		—		(16,294)		2,301		(13,993)

Other	1	1		—	—		904		354		—		1,259		(5,575)		(4,316)
Balance at September 30, 2022	131,544	$	135	164,376	$	2	$	348,663	$	6,573	$	(64,956)	$	290,417	$	534,476	$	824,893

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)

(amounts in thousands)




	Nine Months Ended September 30, 2022
	Common Shares - Class A & B			Common Shares - Class C			Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	118,252	$	118	179,970	$	2	$	382,893	$	(6,982)	$	(5,278)	$	370,753	$	508,287	$	879,040
Net income	—	—		—	—		—		33,747		—		33,747		59,668		93,415
Other comprehensive loss	—	—		—	—		—		—		(59,678)		(59,678)		—		(59,678)
Total other comprehensive income (loss)									33,747		(59,678)		(25,931)		59,668		33,737

Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		(29,957)		(29,957)
Changes in redemption value of RNCI	—	—		—	—		—		(20,546)		—		(20,546)		—		(20,546)
Restricted awards granted or vested	3,678	4		—	—		(4)		—		—		—		—		—
Shares repurchased and cancelled	(6,011)	(6)		—	—		(43,637)		—		—		(43,643)		—		(43,643)
Restricted shares forfeited	(111)	—		—	—		—		—		—		—		—		—
Stock-based compensation	—	—		—	—		25,475		—		—		25,475		—		25,475
Conversion of Class C to Class A shares	15,594	16		(15,594)	—		(16)		—		—		—		—		—
Purchases of noncontrolling interests	—	—		—	—		(1,000)		—		—		(1,000)		(3,600)		(4,600)
Acquisition of noncontrolling interest	—	—		—	—		—		—		—		—		2,667		2,667
Finalization of MDC acquisition accounting	—	—		—	—		(16,294)		—		—		(16,294)		2,301		(13,993)
Other	142	3		—	—		1,246		354		—		1,603		(4,890)		(3,287)
Balance at September 30, 2022	131,544	$	135	164,376	$	2	$	348,663	$	6,573	$	(64,956)	$	290,417	$	534,476	$	824,893

See Notes to the Unaudited Consolidated Financial Statements

STAGWELL INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Basis of Presentation

Stagwell Inc. (the “Company,” “we,” or “Stagwell”), incorporated under the laws of Delaware, conducts its business through its networks and its portfolio of marketing services firms (“Brands”), which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment.

The accompanying consolidated financial statements include the accounts of Stagwell and its subsidiaries. Stagwell has prepared the unaudited consolidated interim financial statements included herein in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting interim financial information on Form 10-Q. Accordingly, pursuant to these rules, the footnotes do not include certain information and disclosures. The preparation of financial statements in conformity with GAAP requires us to make judgments, assumptions and estimates about current and future results of operations and cash flows that affect the amounts reported and disclosed. Actual results could differ from these estimates and assumptions. The consolidated results for interim periods are not necessarily indicative of results for the full year and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”).

The accompanying financial statements reflect all adjustments, consisting of normal recurring accruals, which in the opinion of management are necessary for a fair statement, in all material respects, of the information contained therein. Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior year financial information to conform to the current year presentation.

We recorded an out-of-period adjustment in the first quarter of 2023 which should have been reflected in the prior year financial statements. The impact of the adjustment was to allocate Accumulated other comprehensive loss to noncontrolling interest shareholders. As a result of the correction, Noncontrolling interests and Accumulated other comprehensive loss declined by approximately $24.0 million, but there was no impact to Total Shareholders’ Equity. The adjustment was reflected within other comprehensive income (loss). There was no impact to Net income in the annual or interim periods within the year ended December 31, 2022. The Company evaluated the impact of the out-of-period adjustment and concluded that this error was not material to the current period or any of its previously issued financial statements.

In the second quarter of 2023, we recorded a $5.3 million and $7.4 million out-of-period adjustment, respectively, to increase income tax expense to correct an understatement of the expense which should have been reflected in the prior year financial statements. The Company evaluated the impact of the out-of-period adjustment and concluded that the errors were not material to the current period or any of its previously issued financial statements. The adjustment is not expected to be material to the year ending December 31, 2023.

Recent Developments

On October 2, 2023, the Company acquired 100% of the membership interest of Left Field Labs, LLC, a digital experience design and strategy company, for approximately $9.4 million in cash, and 825 thousand shares of Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”), subject to post-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of $51.0 million, subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion.

On October 31, 2023, the Company completed the sale of its integrated healthcare marketing agency and pharmaceutical commercialization platform, ConcentricLife, for $245 million in cash.

On November 1, 2023, the Company acquired Movers and Shakers LLC, a business that provides social media marketing solutions, for approximately $15 million, to be paid in cash or up to 30% in shares of Class A Common stock, subject to post-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of $35 million, subject to meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion.

2. Acquisitions

2022 Acquisitions

Acquisition of Brand New Galaxy

On April 19, 2022, the Company acquired Brand New Galaxy (“BNG”), for approximately $20.9 million of cash consideration, as well as contingent consideration up to a maximum value of $50.0 million. The contingent consideration is due upon meeting certain future earnings targets through 2024, with approximately 67% payable in cash and 33% payable in shares of Class A Common Stock.

The consideration has been allocated to the assets acquired and assumed liabilities of BNG based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows:


	Amount
	(dollars in thousands)
Cash and cash equivalents	$	2,766
Accounts receivable	10,147
Other current assets	671
Fixed assets	1,587
Identifiable intangible assets	12,740
Other assets	1,583
Accounts payable	(4,771)
Accruals and other liabilities	(6,880)
Advance billings	(1,159)
Other liabilities	(3,642)
Net assets assumed	13,042
Goodwill	24,643
Purchase price consideration	$	37,685

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of BNG. Goodwill of $24.6 million was assigned to the Brand Performance Network reportable segment. The majority of the goodwill is non-deductible for income tax purposes.

Intangible assets consist of trade names, customer relationships and developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately ten years. The following table presents the details of identifiable intangible assets acquired:


	Fair Value		Estimated Useful Life in Years
	(dollars in thousands)
Customer relationships	$	6,150	10
Trade names	5,500		10
Developed technology	1,090		7
Total acquired intangible assets	$	12,740

Pro Forma Financial Information

The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time.


		Nine Months Ended September 30, 2022
	(dollars in thousands)
Revenue		$	1,989,833
Net income		$	92,670

Revenue attributable to BNG, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $7.7 million and $21.8 million, respectively, and Net loss was $0.7 million and $0.2 million, respectively. Revenue attributable to BNG, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2022 was $5.9 million and $11.2 million, respectively, and Net loss was $2.5 million and $2.6 million, respectively.

Acquisition of TMA Direct, Inc.

On May 31, 2022, the Company acquired approximately 87% of TMA Direct, Inc. (“TMA Direct”) for approximately $17.2 million of cash consideration and approximately $0.5 million of deferred acquisition payments. The Company was also granted an option to purchase the remaining 13% minority interest in TMA Direct for up to approximately $13.3 million.

The consideration has been allocated to the assets acquired and assumed liabilities of TMA Direct based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows:


	Amount
	(dollars in thousands)
Accounts receivable	$	582
Other current assets	669
Identifiable intangible assets	13,200
Accounts payable	(379)
Other liabilities	(270)
Noncontrolling interests	(2,667)
Net assets assumed	11,135
Goodwill	6,569
Purchase price consideration	$	17,704

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of TMA Direct. Goodwill of $6.6 million was assigned to the Communications Network reportable segment. The majority of the goodwill is deductible for income tax purposes.

Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is ten years. The following table presents the details of identifiable intangible assets acquired:


	Fair Value		Estimated Useful Life in Years
	(dollars in thousands)
Customer relationships	$	11,400	10
Trade names	1,800		10
Total acquired intangible assets	$	13,200

Pro Forma Financial Information


	Nine Months Ended September 30, 2022
	(dollars in thousands)
Revenue	$	1,983,437
Net income	$	94,768

Revenue attributable to TMA Direct, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $2.1 million and $8.7 million, respectively and Net income was $0.3 million and $0.7 million, respectively. Revenue attributable to TMA Direct, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2022 was $3.8 million and $5.0 million, respectively, and Net income was $1.4 million and $1.6 million, respectively.

Acquisition of Maru Group Limited Ltd.

On October 3, 2022, the Company acquired Maru Group Limited Ltd. (“Maru”) for approximately £23.0 million (approximately $25.8 million) in cash consideration.

The consideration has been allocated to the assets acquired and assumed liabilities of Maru based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows:


	Amount
	(dollars in thousands)
Cash and cash equivalents	$	1,033
Accounts receivable	7,374
Other current assets	899
Fixed assets	157
Identifiable intangible assets	14,300
Other assets	1,920
Accounts payable	(4,087)
Accruals and other liabilities	(9,154)
Advance billings	(6,462)
Deferred tax liability	(3,328)
Other liabilities	(2,891)
Net assets assumed	(239)
Goodwill	26,033
Purchase price consideration	$	25,794

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Maru and expected growth related to new customer relationships and geographic expansion. Goodwill of $26.0 million was assigned to the All Other reportable segment. The goodwill is partially deductible for income tax purposes.

Intangible assets consist of trade names, customer relationships, and developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately eight years. The following table presents the details of identifiable intangible assets acquired:


	Fair Value		Estimated Useful Life in Years
	(dollars in thousands)
Customer relationships	$	4,900	10
Trade names	4,000		10
Developed technology	5,400		2-7
Total acquired intangible assets	$	14,300

Pro Forma Financial Information


	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
	(dollars in thousands)
Revenue	$	672,435	$	2,009,482
Net income	$	30,113	$	79,414

Revenue attributable to Maru, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $7.7 million and $25.5 million, respectively and Net loss was $3.2 million and $7.6 million, respectively.

Acquisition of Wolfgang, LLC.

On October 3, 2022, the Company acquired the remaining 80% interest that it did not already own in Wolfgang, LLC., (“Wolfgang”) for approximately $3.8 million in cash consideration and 175 thousand shares of Class A Common Stock with a fair value of $1.2 million.

The consideration has been allocated to the assets acquired and assumed liabilities of Wolfgang based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows:


	Amount
	(dollars in thousands)
Cash and cash equivalents	$	1,606
Accounts receivable	1,180
Other current assets	100
Identifiable intangible assets	1,055
Other assets	46
Current liabilities	(278)
Net assets assumed	3,709
Goodwill	2,451
Purchase price consideration including fair value of previously owned interest	$	6,160

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Wolfgang. Goodwill of $2.5 million was assigned to the Integrated Agencies Network reportable segment. The majority of the goodwill is deductible for income tax purposes.

Intangible assets consist of customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately five years.

Pro Forma Financial Information


	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
	(dollars in thousands)
Revenue	$	665,615	$	1,988,548
Net income	$	35,114	$	94,769

Revenue attributable to Wolfgang, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $1.5 million and $3.6 million, respectively, and Net income was $0.1 million and $0.4 million, respectively.

Acquisition of Epicenter Experience LLC.

On October 3, 2022, the Company acquired the assets of Epicenter Experience LLC., (“Epicenter”) for approximately $9.9 million in cash consideration, as well as contingent consideration up to a maximum value of $5.0 million. The contingent consideration is subject to meeting certain future earnings targets through 2024 and can be paid up to 25% in shares of Class A Common Stock.

The consideration has been allocated to the assets acquired and assumed liabilities of Epicenter based upon fair values. The purchase price allocation is as follows:


	Amount
	(dollars in thousands)
Accounts receivable	$	901
Other current assets	45
Identifiable intangible assets	7,300
Accounts payable	(148)
Other current liabilities	(650)
Net assets assumed	7,448
Goodwill	4,416
Purchase price consideration	$	11,864

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Epicenter. Goodwill of $4.4 million was assigned to the All Other reportable segment. The majority of the goodwill is deductible for income tax purposes.

The intangible asset acquired was developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately five years.

Pro Forma Financial Information


	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
	(dollars in thousands)
Revenue	$	664,882	$	1,982,784
Net income	$	35,147	$	93,023

Revenue attributable to Epicenter, included within the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $1.1 million and $3.3 million, respectively, and Net loss was $0.1 million and less than $0.1 million, respectively.

Other Acquisitions

On July 3, 2023, the Company acquired Tinsel Experiential Design LLC (“Tinsel”) for approximately $2.5 million in cash consideration, subject to post-closing adjustments. In connection with the agreement, the previous owners are entitled to contingent consideration, subject to continued employment, and meeting certain future earnings targets. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Tinsel and expected growth related to new customer relationships. Goodwill of $1.6 million was assigned to the Integrated Agencies Network reportable segment. The majority of goodwill is deductible for income tax purposes.

On April 25, 2023, the Company acquired Huskies, Ltd. (“Huskies”) for approximately €5.2 million (approximately $5.6 million) of cash consideration, of which €0.9 million (approximately $1.0 million) is deferred, subject to post-closing adjustments. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Huskies and expected growth related to new customer relationships and geographic expansion. Goodwill of $2.6 million was assigned to the Brand Performance Network reportable segment. The majority of goodwill is non-deductible for income tax purposes.

On July 12, 2022, the Company acquired PEP Group Holdings B.V., an omnichannel content creation and adaption production company for approximately $0.5 million in cash consideration, as well as contingent consideration up to a maximum value of €2.6 million. The contingent consideration is subject to meeting certain future earnings targets through 2025.

On July 15, 2022, the Company acquired Apollo Program II Inc., a real-time artificial intelligence-powered software-as-a-service platform, for approximately $2.3 million in cash consideration, as well as guaranteed deferred payments of $1.0 million and $1.5 million on or prior to July 1, 2023 and July 1, 2024, respectively.

2022 Purchases of Noncontrolling Interests

On April 1, 2022, the Company acquired the remaining interest in Hello Design, LLC (“Hello Design”) that it did not already own for an aggregate purchase price of $4.6 million, comprised of a closing cash payment of $3.6 million and a contingent deferred acquisition payment of $1.0 million. The contingent deferred payment of $1.0 million was paid in the second quarter of 2023.

3. Revenue

Disaggregated Revenue Data

The Company provides a broad range of services to a large base of clients across the full spectrum of verticals globally. The primary source of revenue is from Brand arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses. Certain clients may engage with the Company in various geographic locations, across multiple disciplines, and through multiple Brands. Representation of a client rarely means that Stagwell handles marketing communications for all Brands or product lines of the client in every geographical location. The Company’s Brands often cooperate with one another through referrals and the sharing of both services and expertise, which enables Stagwell to service clients’ varied marketing needs by crafting custom integrated solutions. Additionally, the Company maintains separate, independent operating companies to enable it to effectively manage potential conflicts of interest by representing competing clients across the Stagwell network.

The following table presents revenue disaggregated by our principal capabilities for the three and nine months ended September 30, 2023 and 2022. We reclassified certain brands into the Stagwell Marketing Cloud Group (software-as-a-service and data-as-a-service tools for the in-house marketers) principal capability in the third quarter of 2023. We have reported disaggregated revenue data using the new classification and have recast the 2022 disaggregated revenue data to conform to the current year classification.


		Three Months Ended September 30,				Nine Months Ended September 30,
Principal Capabilities	Reportable Segment	2023		2022		2023		2022
		(dollars in thousands)
Digital Transformation	All segments	$	141,543	$	187,664	$	487,114	$	583,977
Creativity and Communications	All segments	300,026		304,971		851,652		892,416
Performance Media and Data	Brand Performance Network	72,785		67,302		215,691		202,622
Consumer Insights and Strategy	Integrated Agencies Network	45,929		50,256		147,310		156,460
Stagwell Marketing Cloud Group	All segments	57,290		53,598		170,515		144,132
		$	617,573	$	663,791	$	1,872,282	$	1,979,607

Stagwell has historically largely focused where the Company was founded, in North America, the largest market for its services in the world. The Company has expanded its global footprint to support clients in international markets. Stagwell’s Brands are located in the United States and United Kingdom, and more than 32 other countries around the world. Historically, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which included discretionary components that are easier to reduce in the short term than other operating expenses.

The following table presents revenue disaggregated by geography for the three and nine months ended September 30, 2023 and 2022:


		Three Months Ended September 30,				Nine Months Ended September 30,
Geographical Location	Reportable Segment	2023		2022		2023		2022
		(dollars in thousands)
United States	All	$	498,314	$	553,744	$	1,523,420	$	1,650,610
United Kingdom	All	40,323		42,774		116,889		125,950
Other	All	78,936		67,273		231,973		203,047
		$	617,573	$	663,791	$	1,872,282	$	1,979,607

Contract Assets and Liabilities

Contract assets consist of fees and reimbursable outside vendor costs incurred on behalf of clients when providing advertising, marketing and corporate communications services that have not yet been invoiced to clients. Unbilled service fees were $187.4 million and $116.4 million at September 30, 2023 and December 31, 2022, respectively, and are included as a component of Accounts receivable, net on the Unaudited Consolidated Balance Sheets. Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $128.9 million and $93.1 million at September 30, 2023 and December 31, 2022, respectively, and are included on the Unaudited Consolidated Balance Sheets as Expenditures billable to clients. Such amounts are invoiced to clients at various times over the course of providing services.

Contract liabilities represent advanced billings to customers for fees and reimbursements of third-party costs, whether we act as principal or agent. Such fees and reimbursements of third-party costs are classified as Advance billings on the Company’s Unaudited Consolidated Balance Sheets. In arrangements in which we are acting as an agent, the recognition related to the contract liability is presented on a net basis within the Unaudited Consolidated Statements of Operations. Advance billings at September 30, 2023 and December 31, 2022 were $335.6 million and $337.0 million, respectively. The decrease in Advance billings of $1.4 million for the nine months ended September 30, 2023 was primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $300.2 million of revenues recognized that were included in the Advance billings balances as of December 31, 2022 and reductions due to the incurrence of third-party costs.

Changes in the contract asset and liability balances during the nine months ended September 30, 2023 were not materially impacted by write offs, impairment losses or any other factors.

Unsatisfied Performance Obligations

The majority of our contracts are for periods of one year or less. For those contracts with a term of more than one year, we had approximately $122.5 million of unsatisfied performance obligations as of September 30, 2023 of which we expect to recognize approximately 30% in 2023, 57% in 2024 and 13% in 2025.

4. Earnings (Loss) Per Share

The following tables set forth the computations of basic and diluted loss per common share for the three and nine months ended September 30, 2023 (amounts in thousands, except per share amounts):


	Three Months Ended September 30,
	2023
Earnings Per Share - Basic
Numerator:
Net income	$	3,117

Net income attributable to Class C shareholders	(33)
Net income attributable to other equity interest holders	(2,431)
Net income attributable to noncontrolling and redeemable noncontrolling interests	(2,464)

Net income attributable to Stagwell Inc. common shareholders	$	653

Denominator:
Weighted average number of common shares outstanding	110,787
Earnings Per Share - Basic	$	0.01


Earnings Per Share - Diluted
Numerator:
Net income attributable to Stagwell Inc. common shareholders	$	653
Net income attributable to Class C shareholders	33
	$	686

Denominator:
Basic - Weighted Average number of common shares outstanding	110,787
Dilutive shares:
Stock appreciation rights	407
Restricted share and restricted unit awards	2,139
Employee Stock Purchase Plan shares	24
Class A shares	113,357
Class C shares	151,649
Diluted - Weighted average number of common shares outstanding	265,006

Earnings Per Share - Diluted	$	0.00

Anti-dilutive:
Class A Shares to settle deferred acquisition obligations	7,480


	Nine Months Ended September 30,
	2023
Earnings Per Share - Basic
Numerator:
Net loss	$	(12,145)

Net loss attributable to Class C shareholders	7,684
Net loss attributable to other equity interest holders	864
Net loss attributable to noncontrolling and redeemable noncontrolling interests	8,548

Net loss attributable to Stagwell Inc. common shareholders	$	(3,597)

Denominator:
Weighted average number of common shares outstanding	118,772
Earnings Per Share - Basic & Diluted	$	(0.03)

Anti-dilutive:
Class C Shares	151,649
Stock Appreciation Rights and Restricted Awards	5,532
Class A Shares to settle deferred acquisition obligations	6,843
Employee Stock Purchase Plan shares	72

The following table sets forth the computations of basic and diluted earnings per common share for the three and nine months ended September 30, 2022:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022		2022
Earnings Per Share - Basic	(amounts in thousands, except per share amounts)
Numerator:
Net income	$	35,274	$	93,415

Net income attributable to Class C shareholders	(19,286)		(51,027)
Net income attributable to other equity interest holders	(5,379)		(8,641)
Net income attributable to noncontrolling and redeemable noncontrolling interests	(24,665)		(59,668)

Net income attributable to Stagwell Inc. common shareholders	$	10,609	$	33,747

Denominator:
Weighted Average number of common shares outstanding	125,384		124,710

Earnings Per Share - Basic	$	0.08	$	0.27

Earnings Per Share - Diluted
Numerator:
Net income attributable to Stagwell Inc. common shareholders	$	10,609	$	33,747




Denominator:
Basic - Weighted Average number of common shares outstanding	125,384		124,710

Stock appreciation right awards	1,837		1,885
Restricted share and restricted unit awards	3,277		4,955
Dilutive - Weighted average number of common shares outstanding	130,498		131,550


Earnings Per Share - Diluted	$	0.08	$	0.26

Restricted stock awards of 3.7 million and 2.3 million as of September 30, 2023 and 2022, respectively, were excluded from the computation of diluted earnings (loss) per common share because the performance contingencies necessary for vesting were not met as of the reporting date.

5. Deferred Acquisition Consideration

Deferred acquisition consideration on the Unaudited Consolidated Balance Sheets consists of deferred obligations related to contingent and fixed purchase price payments, and contingent and fixed retention payments tied to continued employment of specific personnel. Contingent deferred acquisition consideration is recorded at the acquisition date fair value and adjusted at each reporting period within Office and general expenses on the Unaudited Consolidated Statements of Operations.

The following table presents changes in deferred acquisition consideration, measured at fair value on a recurring basis using significant unobservable inputs, and a reconciliation to the amounts reported on the Unaudited Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022:


	September 30, 2023		December 31, 2022
	(dollars in thousands)
Beginning balance	$	161,323	$	222,369
Payments (1)	(60,806)		(74,963)
Adjustments to deferred acquisition consideration (2)	10,881		(12,779)
Additions (3)	22,172		26,594
Currency translation adjustment	140		(758)
Other	27		860
Ending balance (4)	$	133,737	$	161,323

(1) Includes deferred acquisition consideration payments settled in the shares of Class A Common Stock of $20.1 million and $1.0 million, respectively, for the period ended September 30, 2023 and December 31, 2022.

(2) Adjustment to deferred acquisition consideration contains fair value changes from the Company’s initial estimates of deferred acquisition payments.

(3) In 2021, the Company entered into an agreement to purchase the remaining 26.7% interest in Targeted Victory it did not previously own. The agreement provided for the purchase of 50% of the interest on October 1, 2021 (payable in October 2023) and 50% on July 31, 2023 (payable in October 2025 with a seller’s right to defer until October 2027). In connection with the purchase, the estimated amount payable in October 2025, was reclassified from redeemable noncontrolling interest to deferred acquisition consideration.

(4) The contingent and fixed deferred acquisition consideration obligation was $90.9 million and $42.8 million, respectively, as of September 30, 2023 and $69.9 million and $91.4 million, respectively, as of December 31, 2022. The deferred acquisition consideration as of September 30, 2023, includes $42.6 million expected to be settled in shares of Class A Common Stock.

6. Leases

The Company leases office space in North America, Europe, Asia, South America, Africa, and Australia. This space is primarily used for office and administrative purposes by the Company’s employees in performing professional services. These leases are classified as operating leases and expire between years 2023 through 2034. The Company’s finance leases are immaterial.

Lease costs are recognized in the Unaudited Consolidated Statements of Operations over the lease term on a straight-line basis. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset.

Some of the Company’s leases include options to extend or renew the leases through 2044. The renewal and extension options are not included in the lease term as the Company is not reasonably certain that it will exercise its option.

From time to time, the Company enters into sublease arrangements with unrelated third parties. These leases are classified as operating leases and expire between years 2023 through 2032. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company subleases office space in North America and Europe.

As of September 30, 2023, the Company entered into three operating leases for which the commencement date has not yet occurred primarily because of the premises being prepared for occupancy by the landlord. Accordingly, these three leases represent an obligation of the Company that is not reflected within the Unaudited Consolidated Balance Sheets as of September 30, 2023. The aggregate future liability related to these leases is approximately $6.0 million.

The discount rate used for leases accounted for under the FASB’s Accounting Standards Codification (“ASC”) 842 is the Company’s collateralized credit adjusted borrowing rate.

The following table presents lease costs and other quantitative information for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Lease Cost:	(dollars in thousands)
Operating lease cost	$	19,029	$	19,966	$	57,557	$	54,929
Variable lease cost	5,517		4,759		15,735		13,963
Sublease rental income	(1,903)		(3,636)		(7,519)		(11,128)
Total lease cost	$	22,643	$	21,089	$	65,773	$	57,764
Additional information:
Cash paid for amounts included in the measurement of lease liabilities for operating leases
Operating cash flows	$	22,823	$	22,694	$	67,095	$	69,827

Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments	$	8,145	$	5,189	$	14,681	$	27,878

As of September 30, 2023, the weighted average remaining lease term (in years) and weighted average discount rate were 6.4 and 5.1%, respectively.

Operating lease expense is included in Office and general expenses in the Unaudited Consolidated Statements of Operations. The Company’s lease expense for leases with a term of 12 months or less is immaterial.

For the three months ended September 30, 2023, the Company did not record an impairment for leases. In the nine months ended September 30, 2023, the Company recorded a charge of $9.2 million, to reduce the carrying value of two of its right-of-use lease assets and related leasehold improvements. The right-of-use lease assets related to agencies within the Integrated Agencies Network.

In the three and nine months ended September 30, 2022, the Company recorded a charge of $1.7 million and $2.0 million, respectively, primarily to reduce the carrying value of one of its right-of-use lease assets and related leasehold improvements. The right-of-use lease assets and related leasehold improvements related to an agency within the Integrated Agencies Network.

With regard to the aforementioned impairments, the Company evaluated the facts and circumstances related to the use of the assets which indicated that they may not be recoverable. Using estimated sublease income to develop expected future cash flows, it was determined that the fair value of the assets were less than their carrying value. The impairment charges are included in Impairment and other losses within the Unaudited Consolidated Statements of Operations.

The following table presents minimum future rental payments under the Company’s leases as of September 30, 2023 and their reconciliation to the corresponding lease liabilities:


	Maturity Analysis
	(dollars in thousands)
Remaining 2023	$	20,220
2024	79,852
2025	63,117
2026	51,672
2027	47,110
Thereafter	139,394
Total	401,365
Less: Present value discount	(62,105)
Lease liability	$	339,260

7. Debt

As of September 30, 2023 and December 31, 2022, the Company’s indebtedness was comprised as follows:


	September 30, 2023		December 31, 2022
	(dollars in thousands)
Credit Agreement	$	412,000	$	100,000
5.625% Notes	1,100,000		1,100,000
Debt issuance costs	(13,871)		(15,293)
Total long-term debt	$	1,498,129	$	1,184,707

Interest expense related to long-term debt included in Interest expense, net on the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $25.3 million and $65.9 million, respectively, and for the three and nine months ended September 30, 2022 was $19.0 million and $54.9 million, respectively.

The amortization of debt issuance costs included in Interest expense, net on the Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $0.7 million and $2.5 million, respectively, and for the three and nine months ended September 30, 2022 was $0.6 million and $1.8 million, respectively.

Revolving Credit Agreement

The Company is party to a senior secured revolving credit facility with a five-year maturity with a syndicate of banks (the “Credit Agreement”). On May 4, 2023, the Company amended the Credit Agreement to, among other things, increase the revolving commitments under the Credit Agreement by $140.0 million from $500.0 million to $640.0 million and permit restricted payments for share repurchases or redemptions from certain of its stockholders in an aggregate principal amount of up to $150.0 million.

The Credit Agreement contains sub-limits for revolving loans denominated in pounds and euros not to exceed the U.S. dollar equivalent of $50.0 million in pounds and $50.0 million in euros and $100.0 million in the aggregate. Additionally, the Credit Agreement contains a $15.0 million sub-limit for letters of credit denominated in pounds or euros.

Borrowings pursuant to the Credit Agreement bear interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest in effect on such day, (b) the federal funds effective rate plus 0.50% and (c) the Secured Overnight Financing Rate (“SOFR”) plus 0.10%, plus 1% in each case, plus the applicable margin (calculated based on the Company’s Total Leverage Ratio, as defined in the Credit Agreement) at that time or (ii) the SOFR rate plus 0.10% plus the applicable margin (calculated based on the borrowers’ total leverage ratio) at that time.

Advances under the Credit Agreement may be prepaid in whole or in part from time to time without penalty or premium. The Credit Agreement commitment may be reduced by the Company from time to time. Principal amounts outstanding under the Credit Agreement are due and payable in full at maturity on August 3, 2026.

The Credit Agreement contains a number of financial and nonfinancial covenants and is guaranteed by substantially all of our present and future subsidiaries, subject to customary exceptions. The Company was in compliance with all covenants as of September 30, 2023.

A portion of the Credit Agreement in an amount not to exceed $50.0 million is available for the issuance of standby letters of credit. As of September 30, 2023 and December 31, 2022, the Company had issued undrawn outstanding letters of credit of $24.9 million and $25.3 million, respectively.

Senior Notes

The Company had $1.1 billion aggregate principal amount of 5.625% senior notes (“5.625% Notes”) outstanding as of September 30, 2023. The 5.625% Notes are due August 15, 2029 and bear interest of 5.625% to be paid on February 15 and August 15 of each year, commencing on February 15, 2022.

The 5.625% Notes are guaranteed on a senior unsecured basis by substantially all of the Company’s subsidiaries. The 5.625% Notes rank (i) equally in right of payment with all of the Company’s or any guarantor’s existing and future unsubordinated indebtedness, (ii) senior in right of payment to the Company’s or any guarantor’s existing and future subordinated indebtedness, (iii) effectively subordinated to any of the Company’s or any guarantor’s existing and future secured indebtedness to the extent of the collateral securing such indebtedness, including the Credit Agreement, and (iv) structurally subordinated to all existing and future liabilities of the Company’s subsidiaries that are not guarantors.

Our obligations under the 5.625% Notes are unsecured and are effectively junior to our secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. Borrowings under the Credit Agreement are secured by

substantially all of the assets of the Company, and any existing and future subsidiary guarantors, including all of the capital stock of each restricted subsidiary.

The Company may, at its option, redeem the 5.625% Notes in whole at any time or in part from time to time, on and after August 15, 2024 at a redemption price of 102.813% of the principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2024, at a redemption price of 101.406% of the principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2025 and at a redemption price of 100% of the principal amount thereof if redeemed on August 15, 2026 and thereafter. Prior to August 15, 2024, the Company may, at its option, redeem some or all of the 5.625% Notes at a price equal to 100% of the principal amount of the 5.625% Notes plus a “make whole” premium and accrued and unpaid interest. The Company may also redeem, at its option, prior to August 15, 2024, up to 40% of the 5.625% Notes with the net proceeds from one or more equity offerings at a redemption price of 105.625% of the principal amount thereof.

If the Company experiences certain kinds of changes of control (as defined in the indenture), holders of the 5.625% Notes may require the Company to repurchase any 5.625% Notes held by them at a price equal to 101% of the principal amount of the 5.625% Notes plus accrued and unpaid interest. In addition, if the Company sells assets under certain circumstances, it may be required to use the net sale proceeds (as defined in the indenture) to offer to repurchase the 5.625% Notes at a price equal to 100% of the principal amount of the 5.625% Notes plus accrued and unpaid interest, up to the net sale proceeds amount.

The indenture includes covenants that, among other things, restrict the Company’s ability and the ability of its restricted subsidiaries (as defined in the indenture) to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of the Company; make certain types of investments; create restrictions on the payment of dividends or other amounts from the Company’s restricted subsidiaries; sell assets; enter into transactions with affiliates; create liens; enter into sale and leaseback transactions; and consolidate or merge with or into, or sell substantially all of the Company’s assets to, another person. These covenants are subject to a number of important limitations and exceptions. The 5.625% Notes are also subject to customary events of default, including cross-payment default and cross-acceleration provisions. The Company was in compliance with all covenants as of September 30, 2023.

8. Noncontrolling and Redeemable Noncontrolling Interests

When acquiring less than 100% ownership of an entity, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances. Where the option to purchase the incremental ownership is within the Company’s control, the amounts are recorded as Noncontrolling interests within Shareholder’s Equity in the Unaudited Consolidated Balance Sheets. Where the incremental purchase may be required of the Company, the amounts are recorded as Redeemable noncontrolling interests in mezzanine equity in the Unaudited Consolidated Balance Sheets at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through Retained earnings (but not less than their initial redemption value), except for foreign currency translation adjustments.

The following table presents Net income (loss) attributable to noncontrolling and redeemable noncontrolling interests between holders of Class C common stock, par value $0.00001 per share (the “Class C Common Stock”) and other equity interest holders for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(dollars in thousands)
Net income (loss) attributable to Class C shareholders	$	33	$	19,286	$	(7,684)	$	51,027
Net income attributable to other equity interest holders	1,001		2,287		1,221		4,083
Net income (loss) attributable to noncontrolling interests	$	1,034	$	21,573	$	(6,463)	$	55,110
Net income (loss) attributable to redeemable noncontrolling interests	1,430		3,092		(2,085)		4,558
Net income (loss) attributable to noncontrolling and redeemable noncontrolling interests	$	2,464	$	24,665	$	(8,548)	$	59,668

The following table presents noncontrolling interests between holders of Class C Common Stock and other equity interest holders as of September 30, 2023 and December 31, 2022:


	September 30, 2023		December 31, 2022
	(dollars in thousands)
Noncontrolling interest of Class C shareholders	$	393,763	$	428,406
Noncontrolling interest of other equity interest holders	29,674		33,691
Total noncontrolling interests	$	423,437	$	462,097

The following table presents changes in redeemable noncontrolling interests:


	September 30, 2023		December 31, 2022
	(dollars in thousands)
Beginning balance	$	39,111	$	43,364
Redemptions (1)	(22,172)		(1,400)

Distributions	(5,374)		(2,822)
Changes in redemption value	621		(8,711)

Net income (loss) attributable to redeemable noncontrolling interests	(2,085)		8,135
Other	(16)		545
Ending balance	$	10,085	$	39,111

(1) Redemptions for the nine months ended September 30, 2023, is associated with redeemable noncontrolling interest of a certain brand we did not previously own. The amount was reclassified as a deferred acquisition contingent obligation (see Note 5).

The noncontrolling shareholders’ ability to exercise any such option right is subject to the satisfaction of certain conditions, including conditions requiring notice in advance of exercise and specific employment termination conditions. In addition, these rights cannot be exercised prior to specified staggered exercise dates. The exercise of these rights at their earliest contractual date would result in obligations of the Company to fund the related amounts during 2023 to 2027. It is not determinable, at this time, if or when the owners of these rights will exercise all or a portion of these rights.

The redeemable noncontrolling interest of $10.1 million as of September 30, 2023, consists of $6.2 million, assuming that the subsidiaries meet certain performance metrics, and $3.9 million upon termination of such owner’s employment with the applicable subsidiary or death.

These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. As such, there is no related impact on the Company’s earnings per share calculations for the three and nine months ended September 30, 2023 and 2022.

Comprehensive Loss Attributable to Noncontrolling and Redeemable Noncontrolling Interests

For the three months ended September 30, 2023, comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests was $5.5 million, which consists of $2.5 million of net income and $7.9 million of other comprehensive loss.

For the nine months ended September 30, 2023, comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests was $34.8 million, which consists of $8.5 million of net loss and $26.3 million of other comprehensive loss.

9. Commitments, Contingencies, and Guarantees

Legal Proceedings. The Company’s operating entities are involved in legal proceedings of various types. While any litigation contains an element of uncertainty, the Company has no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on the financial condition or results of operations of the Company.

Guarantees. Generally, the Company has indemnified the purchasers of certain assets in the event that a third party asserts a claim against the purchaser that relates to a liability retained by the Company. These types of indemnification guarantees

typically extend for a number of years. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying unaudited consolidated financial statements with respect to these indemnification guarantees. The Company continues to monitor the conditions that are subject to guarantees and indemnifications to identify whether it is probable that a loss has occurred and would recognize any such losses under any guarantees or indemnifications in the period when those losses are probable and estimable.

Commitments. At September 30, 2023, the Company had $24.9 million of undrawn letters of credit outstanding.

The Company entered into three operating leases for which the commencement date has not yet occurred as of September 30, 2023. See Note 6 of the Notes included herein for additional information.

In the ordinary course of business, the Company may enter into long-term, non-cancellable contracts with partner associations that include revenue or profit-sharing commitments related to the provision of its services. These contracts may also include provisions that require the partner associations to meet certain performance targets prior to any obligation to the Company. As of September 30, 2023, the Company estimates its future minimum commitments under these non-cancellable agreements to be: $2.7 million, $6.8 million, $6.6 million, $4.0 million, $2.9 million and $6.8 million for the remainder of 2023, 2024, 2025, 2026, 2027, and thereafter, respectively.

10. Share Capital

The authorized and outstanding share capital of the Company is below.

Class A Common Stock

There are 1.0 billion shares of Class A Common Stock authorized, of which 115.9 million shares were issued and outstanding as of September 30, 2023. Each share of Class A Common Stock carries one vote and represents an economic interest in the Company.

Class B Common Stock

During the nine months ended September 30, 2023, each remaining share of Class B Common Stock par value $0.001 per share (the “Class B Common Stock”) then issued and outstanding or held by the Company was reclassified as and converted into 1.25 shares of Class A Common Stock, with any fractional shares to which a holder of shares of Class B Common Stock would have been entitled rounded up to the nearest whole share of Class A Common Stock. As a result, there were no shares of Class B Common Stock issued and outstanding as of September 30, 2023.

Class C Common Stock

There are 250.0 million shares of Class C Common Stock authorized, of which 151.6 million shares were issued and outstanding as of September 30, 2023. Each share of Class C Common Stock carries one vote and does not represent an economic interest in the Company. Each share of Class C Common Stock is paired with a corresponding common unit of Stagwell Global LLC (“OpCo”) (each such paired share of Class C Common Stock and common unit of OpCo, a “Paired Unit”). Each holder of Paired Units may, at its option, exchange such Paired Units for shares of Class A Common Stock on a one-to-one basis (i.e., one Paired Unit for one share of Class A Common Stock).

In the three and nine months ended September 30, 2023, holders of the Paired Units exchanged approximately nil and 9.3 million Paired Units, respectively, for the same number of shares of Class A Common Stock.

Class A Common Stock Repurchases

The Company may purchase shares of Class A Common Stock under its stock repurchase program (the “Repurchase Program”) as well as repurchases outside of the Repurchase Program.

On March 1, 2023, the Company’s board of directors (the “Board”) authorized an extension and a $125.0 million increase in the size of the Repurchase Program to an aggregate of $250.0 million, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program, as amended, will expire on March 1, 2026.

Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices, including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice. Our board of directors will review the Repurchase Program periodically and may authorize adjustments of its terms.

During the nine months ended September 30, 2023, 6.7 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an aggregate value, excluding fees, of $42.5 million. These shares were repurchased at an average price of $6.38 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $155.7 million as of September 30, 2023.

In addition to the repurchases under the Repurchase Program, on May 23, 2023, the Company repurchased approximately 23.3 million shares of Class A Common Stock from certain affiliates of AlpInvest Partners B.V. at a price of $6.43 per share, for an aggregate total repurchase price of approximately $150.0 million.

Employee Stock Purchase Plan

The Board adopted the 2023 Employee Stock Purchase Plan (the “ESPP”), which was approved at the Company’s annual meeting of shareholders held on June 14, 2023. A total of 3.0 million shares of Class A Common Stock is reserved for sale under the ESPP to eligible employees as defined in the plan. Under the ESPP, eligible employees can elect to withhold up to 15% of their earnings, subject to certain maximums, to purchase shares of Class A Common Stock on certain plan-defined dates. The purchase price for each offering period is 92.5% of the fair market value of shares of Class A Common Stock at the end of the offering period. The plan is considered compensatory resulting in the fair value of the discount being expensed over the service period.

During the three and nine months ended September 30, 2023, there were no material costs incurred by the Company related to the ESPP and contributions to the ESPP were nominal.

11. Fair Value Measurements

A fair value measurement assumes a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. The hierarchy for observable and unobservable inputs used to measure fair value into three broad levels are described below:

•Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

•Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

•Level 3 - Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

Financial Instruments that are not Measured at Fair Value on a Recurring Basis

The following table presents certain information for our financial liability that is not measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:


	September 30, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(dollars in thousands)
5.625% Notes	$	1,100,000	$	881,705	$	1,100,000	$	902,000

The fair value of this instrument is based on quoted market prices in markets that are not active. Therefore, this debt is classified as Level 2 within the fair value hierarchy.

Financial Instruments Measured at Fair Value on a Recurring Basis

Contingent deferred acquisition consideration (Level 3 fair value measurement) is initially recorded at the acquisition date fair value and adjusted at each reporting period. The estimated liability is determined in accordance with models of each business’ future performance, including revenue growth and free cash flows. These models are dependent upon significant assumptions, such as the growth rate of the earnings of the relevant subsidiary during the contractual period and the discount rate. These growth rates are consistent with the Company’s long-term forecasts. As of September 30, 2023, the discount rate used to measure these liabilities ranged from 5.2% to 5.6%.

As these estimates require the use of assumptions about future performance, which are uncertain at the time of estimation, the fair value measurements presented on the Unaudited Consolidated Balance Sheets are subject to material uncertainty.

See Note 5 of the Notes included herein for additional information regarding contingent deferred acquisition consideration.

As of September 30, 2023 and December 31, 2022, the carrying amount of the Company’s financial instruments, including cash, cash equivalents, accounts receivable and accounts payable, approximated fair value because of their short-term maturity.

Non-financial Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Certain non-financial assets are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value measurements) and right-of-use lease assets (Level 2 fair value measurement). Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment.

The Company recognized an impairment of an intangible asset for the nine months ended September 30, 2023. The Company recognized an impairment of goodwill in the three and nine months ended September 30, 2022. See Note 12 of the Notes included herein for additional information.

The Company recognized an impairment of right-of-use lease assets for the nine months ended September 30, 2023 and for the three and nine months ended September 30, 2022. See Note 6 of the Notes included herein for additional information.

12. Supplemental Information

Stock Based Awards

Stock-based compensation recognized for awards authorized under the Company’s employee stock incentive plans during the nine months ended September 30, 2023 and 2022 was $33.3 million and $26.3 million, respectively. This increase was included as a component of stock-based compensation in Office and general expenses and Cost of services within the Unaudited Consolidated Statements of Operations.

On June 14, 2023, the Company’s compensation committee approved the modification of certain stock appreciation right awards. The modification provides the grantees the option to settle the awards in either cash or Class A Common Stock. As a result, the Company recognized $4.3 million and $0.5 million of incremental stock-based compensation expense for the three and nine months ended September 30, 2023, respectively, and a liability of $6.0 million as of September 30, 2023. The incremental expense is included in Office and general expenses in the Unaudited Consolidated Statement of Operations. The associated liability is included in Accruals and other liabilities in the Unaudited Consolidated Balance Sheets.

Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”). The awards generally provide the employee the right, but not the obligation, to sell their profits interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are primarily settled in cash, with certain awards having stock-settlement provisions at the Company’s discretion. The corresponding liability associated with these profits interests awards was $17.3 million and $21.0 million at September 30, 2023 and December 31, 2022, respectively, and is included as a component of Accruals and other liabilities and Other liabilities on the Unaudited Consolidated Balance Sheets. Stock-based compensation recognized for these awards was $1.3 million and $5.6 million for the nine months ended September 30, 2023 and 2022, respectively. This was included as a component of stock-based compensation in Cost of services within the Unaudited Consolidated Statements of Operations.

Transfer of Accounts Receivable

The Company transfers certain of its trade receivable assets to third parties under agreements to sell certain of its accounts receivables. Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer.

The trade receivables transferred to the third parties were $263.7 million and $87.9 million for the nine months ended September 30, 2023 and 2022, respectively. The amount collected and due to the third parties under these arrangements was $10.1 million as of September 30, 2023 and $5.7 million as of December 31, 2022. Fees for these arrangements were recorded in Office and general expenses in the Unaudited Consolidated Statements of Operations and totaled $4.1 million and $0.6 million for the nine months ended September 30, 2023 and 2022, respectively.

Impairment and Other Losses

The Company recognized an impairment and other losses charge of $10.6 million for the nine months ended September 30, 2023 related to the impairment of an intangible asset totaling $1.4 million, right-of-use lease assets totaling $6.1 million and its related leasehold improvements totaling $3.1 million.

The intangible asset impairment related to the discontinuation of a trade name in the Brand Performance Network reportable segment.

The Company recognized an impairment and other losses charge of $28.0 million for the nine months ended September 30, 2022, primarily related to the impairment of goodwill totaling $23.5 million, and the impairment of right-of-use lease assets and related leasehold improvements totaling $2.0 million. The goodwill impairment was to write-down the carrying value in excess of the fair value at two reporting units, one within the Brand Performance Network and one within the All Other category. The right-of-use lease asset and related leasehold improvement impairment was recorded in two reporting units, one in Brand Performance Network reporting segment, and one in Integrated Agencies Network reporting segment. The expense was recorded within Impairment and other losses on the Unaudited Consolidated Statements of Operations.

Current Expected Credit Losses

The Company adopted ASC 326, Current Expected Credit Losses, on January 1, 2023, which requires the measurement and recognition of expected credit losses using a current expected credit loss model. The allowance for credit losses on expected future uncollectible accounts receivable is estimated considering forecasts of future economic conditions in addition to information about past events and current conditions. The adoption resulted in an increase in the allowance for accounts receivables and a decrease to opening Retained earnings of $2.1 million, of which $1.4 million was subsequently allocated to noncontrolling interests. These amounts are presented within the “Other” line on the Statement of Shareholders’ Equity.

13. Income Taxes

Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in interim periods.

The Company had an income tax expense for the three months ended September 30, 2023 of $4.3 million (on a pre-tax income of $7.4 million resulting in an effective tax rate of 58.1%) compared to income tax expense of $11.5 million (on pre-tax income of $46.6 million resulting in an effective tax rate of 24.8%) for the three months ended September 30, 2022.

The difference in the effective tax rate of 58.1% in the three months ended September 30, 2023, as compared to 24.8% in the three months ended September 30, 2022, is due to the change in the pretax income and related reduction in benefit from the disregarded entity structure.

The Company had an income tax expense for the nine months ended September 30, 2023 of $12.4 million (on a pre-tax income of $0.7 million resulting in an effective tax rate of 1709.1%) compared to income tax expense of $20.2 million (on pre-tax income of $112.5 million resulting in an effective tax rate of 17.9%) for the nine months ended September 30, 2022.

The difference in the effective tax rate of 1709.1% in the nine months ended September 30, 2023, as compared to 17.9% in the nine months ended September 30, 2022, is primarily due to the change in pre-tax income, tax benefit of impairments offset by an increase in valuation allowance, lower share-based compensation windfalls and out-of-period adjustments in 2023. See Note 1 in the Notes to the Unaudited Consolidated Financial Statements.

Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within the next 12 months, based on the information currently available, we do not expect any change to be material to our consolidated financial statements.

Tax Receivables Agreement

In connection with the Tax Receivable Agreement (“TRA”), the Company is required to make cash payments to Stagwell Media LP (“Stagwell Media”) equal to 85% of certain U.S. federal, state and local income tax or franchise tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (i) increases in the tax basis of OpCo’s assets resulting from exchanges of Paired Units (defined in Note 10) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to us making payments under the TRA. The TRA liability is an estimate and actual amounts payable under the TRA could differ from this estimate.

In connection with the exchange of Paired Units for shares of Class A Common Stock, the Company has recognized a TRA liability of $28.7 million and an associated deferred tax asset of $33.8 million as of September 30, 2023 and December 31, 2022. There were no exchanges of Paired Units for shares of Class A Common Stock during 2023.

14. Related Party Transactions

In the ordinary course of business, the Company enters into transactions with related parties, including its affiliates. The transactions may range in the nature and value of services underlying the arrangements. The following table presents significant related party transactions where a third party receives services from the Company:


	Total Transaction Value	Revenue								Due From Related Party
		Three Months Ended September 30,				Nine Months Ended September 30,				September 30, 2023	December 31, 2022
Services		2023		2022		2023		2022
	(dollars in thousands)
Marketing and advertising services (1)	Continuous (7)	$	665	$	718	$	1,823	$	866		$	1,544	$	1,029
Marketing and advertising services (2)	$3,576 and Continuous (7)	600		966		1,193		2,038			4,283		4,831
Marketing and website development services (3)	$7,165 and Continuous (7)	759		2,658		2,702		6,945			609		488
Polling services (4)	$1,903	670		93		962		303			420		280
Polling services (5)	$797	116		109		282		477			169		—
Polling services (6)	$4,431	90		1,295		1,046		2,248			7		—



Total		$	2,900	$	5,839	$	8,008	$	12,877		$	7,032	$	6,628

(1) A member of the Company’s board of directors holds an executive leadership position or is on the board of directors of the client.

(2) Brands’ partners and executives either hold a key leadership position in or are on the board of directors of the client.

(3) Client has a significant interest in the Company.

(4) A family member of the Company’s Chief Executive Officer holds a key leadership position in the client.

(5) A family member of the Company’s President holds a key leadership position in the client.

(6) Founder of the client has significant interest in the Company.

(7) Certain of the contractual arrangements within these transactions were entered into for an indefinite term and are invoiced as services are provided, while others have a fixed definitive contract value.

In 2019, a Brand entered into a loan agreement with a related party who holds a minority interest in the Brand. The loan receivable of $1.2 million and $3.6 million due from the third party is included within Other current assets in the Company’s Unaudited Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022, respectively. The Company recognized $0.1 million and $0.2 million for the three and nine months ended September 30, 2023, respectively, and $0.1 million and $0.2 million for the three and nine months ended September 30, 2022, respectively, of interest income within Interest expense, net on its Unaudited Consolidated Statements of Operations. In addition, in 2021, the Brand entered into an arrangement to obtain sales and management services from the same third party. Under the arrangement, the Brand has incurred $1.1 million and $1.8 million of related party expense for the three and nine months ended September 30, 2023, respectively and $0.6 million and $1.3 million for the three and nine months ended September 30, 2022, respectively. As of September 30, 2023 and December 31, 2022, $0.8 million and $1.4 million, respectively, was due to the third party.

In 2022, the Company made loans to three employees of a subsidiary each in the amount of approximately $0.9 million, together with interest on the unpaid principal balance at a fixed interest rate equal to 3.5% per annum, compounding quarterly. The cash from the loan was used by the employees to purchase the noncontrolling interest of 13.3% in TMA Direct.

15. Segment Information

allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of operating segments is applicable. This determination is based upon a quantitative analysis of the expected and historic average long-term profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics.

The CODM uses Adjusted EBITDA (defined below) as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions. Adjusted EBITDA is defined as Net income excluding non-operating income or expense to achieve operating income, plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items.

The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

The Company has three reportable segments as follows: “Integrated Agencies Network,” “Brand Performance Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria, and includes the elimination of certain intercompany services, as “All Other.” This segment also includes the elimination of intercompany revenue. The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes included herein.

•The Integrated Agencies Network includes five operating segments: the Anomaly Alliance, Constellation, the Doner Partner Network, Code and Theory, and National Research Group. The operating segments offer an array of complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications. The Brands included in the operating segments that comprise the Integrated Agencies Network reportable segment are as follows: Anomaly Alliance (Anomaly, Concentric and Scout (Brands)), Constellation (72andSunny, Colle McVoy, Hunter, Instrument, Redscout, Team Enterprises, Storyline, and Harris Insights), the Doner Partner Network (Doner, KWT Global, Harris X, Veritas, and Yamamoto (Brands)), Code and Theory (Code and Theory and Y Media Labs) and National Research Group.

These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these operating segments may occasionally compete with each other for new business or have business move between them.

•The Brand Performance Network (“BPN”) is comprised of a single operating segment. BPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities. Our Brands in this segment aim to provide scaled creative performance through developing and executing sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data. BPN’s Brands provide media solutions such as audience analysis, media planning, and buying across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast, among others) and includes multichannel Brands Assembly, Brand New Galaxy, Crispin Porter Bogusky, Forsman & Bodenfors, Goodstuff, digital creative & transformation consultancy Gale, B2B specialist Multiview, CX specialists Kenna, and travel media experts Ink.

•The Communications Network reportable segment is comprised of a single operating segment, our specialist network that provides advocacy, strategic corporate communications, investor relations, public relations, online fundraising and other services to both corporations and political and advocacy organizations and consists of our Allison & Partners, SKDK, and Targeted Victory brands.

•All Other consists of the Company’s digital innovation group and Stagwell Marketing Cloud, including Maru and Epicenter, and products such as PRophet and ARound.

•Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the

corporate office. Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(dollars in thousands)
Revenue:
Integrated Agencies Network	$	348,781	$	366,437	$	1,032,914	$	1,092,364
Brand Performance Network	173,361		171,463		574,729		563,546
Communications Network	82,505		122,455		230,261		314,472
All Other	12,926		3,436		34,378		9,225
Total Revenue	$	617,573	$	663,791	$	1,872,282	$	1,979,607

Adjusted EBITDA:
Integrated Agencies Network	$	77,177	$	76,198	$	211,377	$	215,462
Brand Performance Network	23,193		24,312		67,387		89,259
Communications Network	17,294		25,489		35,754		59,089
All Other	(4,005)		(363)		(10,166)		(972)
Corporate	(11,890)		(10,544)		(39,193)		(35,015)
Total Adjusted EBITDA	$	101,769	$	115,092	$	265,159	$	327,823

Depreciation and amortization	$	(38,830)	$	(32,207)	$	(107,795)	$	(95,642)
Impairment and other losses	—		(25,211)		(10,562)		(28,034)
Stock-based compensation	(12,065)		(12,258)		(34,615)		(33,410)
Deferred acquisition consideration	(6,401)		29,789		(10,881)		14,420
Other items, net	(10,731)		(5,152)		(30,069)		(12,112)
Total Operating Income	$	33,742	$	70,053	$	71,237	$	173,045

Other Income (expenses):
Interest expense, net	$	(25,886)	$	(19,672)	$	(67,755)	$	(56,552)
Foreign exchange, net	(140)		(3,927)		(2,288)		(4,163)
Other, net	(271)		147		(467)		182
Income before income taxes and equity in earnings of non-consolidated affiliates	7,445		46,601		727		112,512
Income tax expense	4,324		11,540		12,425		20,150
Income (loss) before equity in earnings of non-consolidated affiliates	3,121		35,061		(11,698)		92,362
Equity in income (loss) of non-consolidated affiliates	(4)		213		(447)		1,053
Net income (loss)	3,117		35,274		(12,145)		93,415
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests	(2,464)		(24,665)		8,548		(59,668)
Net income (loss) attributable to Stagwell Inc. common shareholders	$	653	$	10,609	$	(3,597)	$	33,747

The Company’s CODM does not use segment assets to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed.

See Note 3 of the Notes included herein for a summary of the Company’s revenue by geographic region for the three and nine months ended September 30, 2023 and 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is based on and should be read in conjunction with our unaudited consolidated financial statements and the notes related thereto included in Part 1, Item 1 of this Form 10-Q. The following discussion and analysis contains forward-looking statements and should be read in conjunction with the disclosures and information contained and referenced under the captions “Note about Forward-Looking Statements” in this Form 10-Q and “Forward-Looking Statements” and “Risk Factors” in our 2022 Form 10-K. The following discussion and analysis also includes a discussion of certain non-GAAP financial measures. A description of the non-GAAP financial measures discussed in this section and reconciliations to the comparable GAAP financial measures are below.

In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” refer to Stagwell Inc. and its direct and indirect subsidiaries. References to a “fiscal year” mean the Company’s year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal 2023 means the period beginning January 1, 2023, and ending December 31, 2023).

Executive Summary

Overview

Stagwell conducts its business through its networks, which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment. Stagwell’s differentiation lies in its creative roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients. Stagwell leverages its range of services in an integrated manner, offering strategic, creative and innovative solutions that are technologically forward and media-agnostic. The Company’s strategy is intended to challenge the industry status quo, realize outsized returns on investment, and drive transformative growth and business performance for its clients and stakeholders.

Stagwell manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenue, operating expenses, capital expenditures and the non-GAAP financial measures described below. Revenue growth is analyzed by reviewing a mix of measurements, including (i) growth by major geographic location, (ii) growth from existing clients and the addition of new clients, (iii) growth by principal capability, (iv) growth from currency changes, and (v) growth from acquisitions. In addition to monitoring the foregoing financial indicators, the Company assesses and monitors several non-financial performance indicators relating to the business performance of our networks. These indicators may include a network’s recent new client win/loss record; the depth and scope of a pipeline of potential new client account activity; the overall quality of the services provided to clients; and the relative strength of the network’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.

Recent Developments

On October 31, 2023, the Company completed the sale of its integrated healthcare marketing agency and pharmaceutical commercialization platform, ConcentricLife, for $245 million in cash.

Significant Factors Affecting our Business and Results of Operations

The most significant factors affecting our business and results of operations include national, regional, and local economic conditions, our clients’ profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees. New business wins and client losses occur due to a variety of factors. The two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the digital and data-driven products that our portfolio of marketing services firms, which we refer to as “Brands,” offer. A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain a Brand that it may have previously worked with. In addition, if the client is merged or acquired by another company, the

marketing communication firm is often changed. Clients also change firms as a result of the firm’s failure to meet marketing performance targets or other expectations in client service delivery.

Seasonality

Historically, we typically generate the highest quarterly revenue during the fourth quarter in each year. In addition, within our Communications Network, client concentration increases during election years due to the cyclical nature of our advocacy Brands. The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season.

Non-GAAP Financial Measures

The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”). In addition, the Company has included non-GAAP financial measures and ratios, which management uses to operate the business, which it believes provide useful supplemental information to both management and readers of this report in making period-to-period comparisons in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP. The non-GAAP financial measures included are “organic revenue growth or decline,” “Adjusted EBITDA,” and “Adjusted Diluted EPS.”

“Organic revenue growth” and “Organic revenue decline” refer to the positive or negative revenue results, respectively, of subtracting the impact of foreign exchange and acquisitions (dispositions) from total revenue growth.

The impact of foreign currency represents the period-over-period change in revenue driven by the fluctuation of foreign exchange rates between such periods and is calculated as the difference between prior period revenue reported and prior period revenue converted utilizing the current period foreign exchange rates.

The impact of acquisitions is calculated as follows: (a) for entities purchased in the current year, prior year revenue of the acquired entity beginning on the acquisition date, as if we acquired the entity in the prior year, through the end of the reported period and (b) for entities purchased in the prior year, prior year revenue of the acquired entity as if we acquired the entity at the beginning of the reported period through the date of acquisition (prior year revenue for the period we did not own the acquired entity).

The impact of divestitures is calculated as the prior year revenue of the disposed entity from the date of disposition, as if the entity was disposed of in the prior year, to the end of the reporting period.

“Net Organic revenue growth” and “Net Organic revenue decline” include the adjustments above and also excludes the impact of billable costs in analyzing Organic revenue growth (decline) as these costs and their fluctuations are not indicative of the operating performance of our underlying business.

Adjusted EBITDA is defined as Net income (loss) attributable to Stagwell Inc. common shareholders excluding non-operating income or expense to achieve operating income (loss), plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items. Adjusted EBITDA for our reportable segments is reconciled to Operating Income (Loss), as Net Income (Loss) is not a relevant reportable segment financial metric.

Adjusted Diluted EPS is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income (loss) attributable to Class C shareholders, excluding the impact of amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, based on total consolidated amounts, then allocated to Stagwell Inc. common shareholders and Class C shareholders, based on their respective income allocation percentage using a normalized effective income tax rate divided by (ii) (a) the weighted average number of common shares outstanding plus (b) the weighted average number of shares of Class C common Stock outstanding. Other items includes restructuring costs, acquisition-related expenses, and non-recurring items. The diluted weighted average shares outstanding include shares of Class C Common Stock as if converted to shares of Class A Common Stock to calculate Adjusted Diluted EPS.

All amounts are in dollars unless otherwise stated. Amounts reported in millions herein are computed based on the amounts in thousands. As a result, the sum of the components, and related calculations, reported in millions may not equal the total amounts due to rounding.

The percentage changes included in the tables in Item 2 herein that are not considered meaningful are presented as “NM.”

Segments

The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of operating segments is applicable. This determination is based upon a quantitative analysis of the expected and historic average long-term profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics.

The CODM uses Adjusted EBITDA as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions.

The Company has three reportable segments as follows: “Integrated Agencies Network,” “Brand Performance Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria, and includes the elimination of certain intercompany services, as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Unaudited Consolidated Financial Statements included herein and Note 2 of the Company’s Audited Consolidated Financial Statements included in the 2022 Form 10-K.

In addition, Stagwell reports its corporate office expenses incurred in connection with the strategic resources provided to the networks, as well as certain other centrally managed expenses that are not fully allocated to the operating segments as Corporate. Corporate provides client and business development support to the networks as well as certain strategic resources, including accounting, administrative, financial, real estate, human resource and legal functions.

The following discussion focuses on the operating performance of the Company for the three and nine months ended September 30, 2023 and 2022 and the financial condition of the Company as of September 30, 2023.

(Results of Operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(dollars in thousands)
Revenue:
Integrated Agencies Network	$	348,781	$	366,437	$	1,032,914	$	1,092,364
Brand Performance Network	173,361		171,463		574,729		563,546
Communications Network	82,505		122,455		230,261		314,472
All Other	12,926		3,436		34,378		9,225
Total Revenue	$	617,573	$	663,791	$	1,872,282	$	1,979,607

Operating Income	$	33,742	$	70,053	$	71,237	$	173,045

Other Income (Expenses):
Interest expense, net	$	(25,886)	$	(19,672)	$	(67,755)	$	(56,552)
Foreign exchange, net	(140)		(3,927)		(2,288)		(4,163)
Other, net	(271)		147		(467)		182
Income before income taxes and equity in earnings of non-consolidated affiliates	7,445		46,601		727		112,512
Income tax expense	4,324		11,540		12,425		20,150
Income (loss) before equity in earnings of non-consolidated affiliates	3,121		35,061		(11,698)		92,362
Equity in income (loss) of non-consolidated affiliates	(4)		213		(447)		1,053
Net income (loss)	3,117		35,274		(12,145)		93,415
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests	(2,464)		(24,665)		8,548		(59,668)
Net income (loss) attributable to Stagwell Inc. common shareholders	$	653	$	10,609	$	(3,597)	$	33,747

Reconciliation to Adjusted EBITDA:
Net income (loss) attributable to Stagwell Inc. common shareholders	$	653	$	10,609	$	(3,597)	$	33,747
Non-operating items (1)	33,089		59,444		74,834		139,298
Operating income	33,742		70,053		71,237		173,045
Depreciation and amortization	38,830		32,207		107,795		95,642
Impairment and other losses	—		25,211		10,562		28,034
Stock-based compensation	12,065		12,258		34,615		33,410
Deferred acquisition consideration	6,401		(29,789)		10,881		(14,420)
Other items, net	10,731		5,152		30,069		12,112
Adjusted EBITDA	$	101,769	$	115,092	$	265,159	$	327,823

(1) Non-operating items includes items within the Statements of Operations, below Operating Income, and above Net income (loss) attributable to Stagwell Inc. common shareholders.

THREE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2022

Consolidated Results of Operations

The components of operating results for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were as follows:


	Three Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	617,573	$	663,791	$	(46,218)	(7.0)	%
Operating Expenses
Cost of services	384,980		417,134		(32,154)		(7.7)	%
Office and general expenses	160,021		119,186		40,835		34.3	%
Depreciation and amortization	38,830		32,207		6,623		20.6	%
Impairment and other losses	—		25,211		(25,211)		(100.0)	%
	$	583,831	$	593,738	$	(9,907)	(1.7)	%
Operating Income	$	33,742	$	70,053	$	(36,311)	(51.8)	%


	Three Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Net Revenue	$	534,864	$	555,754	$	(20,890)	(3.8)	%
Billable costs	82,709		108,037		(25,328)		(23.4)	%
Revenue	617,573		663,791		(46,218)		(7.0)	%

Billable costs	82,709		108,037		(25,328)		(23.4)	%
Staff costs	338,914		349,127		(10,213)		(2.9)	%
Administrative costs	62,339		61,600		739		1.2	%
Unbillable and other costs, net	31,842		29,935		1,907		6.4	%
Adjusted EBITDA	101,769		115,092		(13,323)		(11.6)	%
Stock-based compensation	12,065		12,258		(193)		(1.6)	%
Depreciation and amortization	38,830		32,207		6,623		20.6	%
Deferred acquisition consideration	6,401		(29,789)		36,190		NM
Impairment and other losses	—		25,211		(25,211)		(100.0)	%
Other items, net	10,731		5,152		5,579		NM
Operating Income (1)	$	33,742	$	70,053	$	(36,311)	(51.8)	%

(1) See the Results of Operations section above for a reconciliation of Operating Income to Net income (loss) attributable to Stagwell Inc. common shareholders.

Revenue

Revenue for the three months ended September 30, 2023 was $617.6 million, compared to $663.8 million for the three months ended September 30, 2022, a decrease of $46.2 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were as follows:


		Net Revenue - Components of Change					Change
	Three Months Ended September 30, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Three Months Ended September 30, 2023	Organic	Total
	(dollars in thousands)
Integrated Agencies Network	$311,926	$664	$2,117	$(17,639)	$(14,858)	$297,068	(5.7)%	(4.8)%
Brand Performance Network	160,473	2,666	1,573	(2,284)	1,955	162,428	(1.4)%	1.2%
Communications Network	79,919	70	—	(17,573)	(17,503)	62,416	(22.0)%	(21.9)%
All Other	3,436	(32)	9,738	(190)	9,516	12,952	(5.5)%	NM
	$555,754	$3,368	$13,428	$(37,686)	$(20,890)	$534,864	(6.8)%	(3.8)%
Component % change		0.6%	2.4%	(6.8)%	(3.8)%

For the three months ended September 30, 2023, organic net revenue decreased $37.7 million, or 6.8%. The macroeconomic uncertainty continues to challenge the industry in 2023. This contributed to certain clients pausing projects and reduced spending, specifically in the technology sector. In addition, the loss of clients also contributed to the decline in organic net revenue. The increase in net acquisitions (divestitures) was primarily driven by the acquisitions of Huskies, Ltd. (“Huskies”), Epicenter Experience LLC (“Epicenter”), Wolfgang, LLC (“Wolfgang”) and Maru Group Limited Ltd. (“Maru”).

The geographic mix in net revenues for the three months ended September 30, 2023 and 2022 is as follows:


	Three Months Ended September 30,
	2023		2022
	(dollars in thousands)
United States	$	424,163	$	453,160
United Kingdom	42,114		42,443
Other	68,587		60,151
Total	$	534,864	$	555,754

Impairment and Other Losses

The Company recognized an impairment and other losses charge of $25.2 million for the three months ended September 30, 2022, primarily related to the impairment of goodwill totaling $23.5 million. The goodwill impairment was to write-down the carrying value in excess of the fair value at two reporting units, one in the Brand Performance Network and one within the All Other category. The expense was recorded within Impairment and other losses on the Unaudited Consolidated Statements of Operations.

Operating Income

Operating Income for the three months ended September 30, 2023 was $33.7 million, compared to Operating Income of $70.1 million for the three months ended September 30, 2022, representing a decrease of $36.3 million. The change in Operating Income was primarily attributable to a decrease in Revenue, Cost of services and Impairment and other losses, and an increase in Office and general expenses and Depreciation and amortization.

The decrease in Cost of services was primarily attributable to lower billable costs, commensurate with lower revenue, lower staff costs due to cost savings initiatives and lower stock-based compensation primarily due to a reduction in fair value of profits interest awards.

The increase in Office and general expenses was primarily attributable to an increase in deferred acquisition consideration expense.

Deferred acquisition consideration increased approximately $36.2 million, primarily attributable to a significant reduction in the fair value of the deferred acquisition consideration liability associated with a certain Brand that occurred in the third quarter of 2022.

Depreciation and amortization expense increased approximately $6.6 million, primarily attributable to acceleration of amortization for the discontinuation of certain trade names, as well as the recognition of intangible assets in connection with the acquisition of Maru, Wolfgang, and Epicenter.

Other, net

Other, net, for the three months ended September 30, 2023 was expense of $0.3 million, compared to income of $0.1 million for the three months ended September 30, 2022, representing a decrease of $0.4 million.

Foreign Exchange Transaction Gain (Loss)

The foreign exchange loss for the three months ended September 30, 2023 was $0.1 million compared to a loss of $3.9 million for the three months ended September 30, 2022, primarily attributable to the U.S. dollar weakening against the Euro and British Pound.

Interest Expense, Net

Interest expense, net, for the three months ended September 30, 2023 was $25.9 million, compared to $19.7 million for the three months ended September 30, 2022, representing an increase of $6.2 million, primarily attributable to higher levels of debt outstanding under the Credit Agreement (as defined and discussed in Note 7 of the Notes included herein), and a higher interest rate of borrowings on amounts outstanding under the Credit Agreement.

Income Tax Expense

The Company had an income tax expense for the three months ended September 30, 2023 of $4.3 million (on a pre-tax income of $7.4 million resulting in an effective tax rate of 58.1%), compared to income tax expense of $11.5 million (on pre-tax income of $46.6 million resulting in an effective tax rate of 24.8%) for the three months ended September 30, 2022.

The difference in the effective tax rate of 58.1% in the three months ended September 30, 2023 as compared to 24.8% in the three months ended September 30, 2022, is due to the change in the pretax income and related reduction in benefit from the disregarded entity structure.

Noncontrolling and Redeemable Noncontrolling Interests

The effect of noncontrolling and redeemable noncontrolling interests for the three months ended September 30, 2023 was income of $2.5 million compared to income of $24.7 million for the three months ended September 30, 2022, representing a decrease of $22.2 million. The change is attributable to the decline in net income (loss) resulting in a lower noncontrolling interest allocated to the holders of Class C Common Stock.

Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders

As a result of the foregoing, net income attributable to Stagwell Inc. common shareholders for the three months ended September 30, 2023 was $0.7 million, compared to net income attributable to Stagwell Inc. common shareholders of $10.6 million for the three months ended September 30, 2022.

Earnings (Loss) Per Share

Dilutive EPS and Adjusted Diluted EPS for the three months ended September 30, 2023 was as follows:


	GAAP		Adjustments (1)		Non-GAAP
	(amounts in thousands, except per share amounts)
Net income attributable to Stagwell Inc. common shareholders	$	653	$	20,844	$	21,497
Net income attributable to Class C shareholders	33		26,530		26,563
Net income attributable to Stagwell Inc. and Class C and adjusted net income	$	686	$	47,374	$	48,060

Weighted average number of common shares outstanding	113,357		5,663		119,020
Weighted average number of common Class C shares outstanding	151,649		—		151,649
Weighted average number of shares outstanding	265,006		5,663		270,669

Dilutive EPS and Adjusted Diluted EPS	$	0.00			$	0.18

Adjustments to Net income(1)


Amortization			$	31,182
Impairment and other losses			—
Stock-based compensation			12,065
Deferred acquisition consideration			6,401
Other items, net			10,731
			$	60,379
Adjusted tax expense			(13,005)
			$	47,374

(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

Diluted EPS and Adjusted Diluted EPS for the three months ended September 30, 2022 was as follows:


	GAAP		Adjustments (1)		Non-GAAP
	(amounts in thousands, except per share amounts)
Net income attributable to Stagwell Inc. common shareholders	$	10,609	$	16,863	$	27,472



Weighted average number of common shares outstanding	130,498		—		130,498



Diluted EPS and Adjusted Diluted EPS	$	0.08			$	0.21

Adjustments to Net income (1)


Amortization			$	25,808
Impairment and other losses			25,211
Stock-based compensation			12,258
Deferred acquisition consideration			(29,789)
Other items, net			5,152
			38,640
Adjusted tax expense			(420)
			$	38,220




Less: Net income attributable to Class C shareholders			(21,357)
Net income attributable to Stagwell Inc. common shareholders			$	16,863

(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

Adjusted EBITDA

Adjusted EBITDA for the three months ended September 30, 2023 was $101.8 million, compared to $115.1 million for the three months ended September 30, 2022, representing a decrease of $13.3 million, primarily attributable to the decrease in revenue, partially offset by lower operating expenses.

Integrated Agencies Network

The components of operating results for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were as follows:


	Three Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	348,781	$	366,437	$	(17,656)	(4.8)	%
Operating Expenses
Cost of services	221,781		235,035		(13,254)		(5.6)	%
Office and general expenses	62,975		62,434		541		0.9	%
Depreciation and amortization	22,559		18,286		4,273		23.4	%
Impairment and other losses	—		1,735		(1,735)		(100.0)	%
	$	307,315	$	317,490	$	(10,175)	(3.2)	%
Operating Income	$	41,466	$	48,947	$	(7,481)	(15.3)	%


	Three Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Net Revenue	$	297,068	$	311,926	$	(14,858)	(4.8)	%
Billable costs	51,713		54,511		(2,798)		(5.1)	%
Revenue	348,781		366,437		(17,656)		(4.8)	%

Billable costs	51,713		54,511		(2,798)		(5.1)	%
Staff costs	177,173		190,975		(13,802)		(7.2)	%
Administrative costs	28,610		27,343		1,267		4.6	%
Unbillable and other costs, net	14,108		17,410		(3,302)		(19.0)	%
Adjusted EBITDA	77,177		76,198		979		1.3	%
Stock-based compensation	6,706		5,308		1,398		26.3	%
Depreciation and amortization	22,559		18,286		4,273		23.4	%
Deferred acquisition consideration	1,018		841		177		21.0	%
Impairment and other losses	—		1,735		(1,735)		(100.0)	%
Other items, net	5,428		1,081		4,347		NM
Operating Income	$	41,466	$	48,947	$	(7,481)	(15.3)	%

Revenue

Revenue for the three months ended September 30, 2023 was $348.8 million, compared to $366.4 million for the three months ended September 30, 2022, a decrease of $17.7 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were as follows:


		Net Revenue - Components of Change					Change
	Three Months Ended September 30, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Three Months Ended September 30, 2023	Organic	Total
	(dollars in thousands)
Integrated Agencies Network	$311,926	$664	$2,117	$(17,639)	$(14,858)	$297,068	(5.7)%	(4.8)%
Component % change		0.2%	0.7%	(5.7)%	(4.8)%

The decline in organic net revenue was primarily attributable to the loss of clients in the retail sector and clients who withheld spending in the financial, and technology sectors due to uncertain macroeconomic factors. The increase in net acquisition (divestitures) was primarily attributable to the acquisition of Wolfgang.

Operating Income

Operating Income for the three months ended September 30, 2023 was $41.5 million, compared to $48.9 million for the three months ended September 30, 2022, representing a decrease of $7.5 million. The change in Operating Income was primarily attributable to a decrease in Revenue and Cost of services, and an increase in Depreciation and amortization.

The decrease in Cost of services was primarily attributable to lower billable costs, commensurate with lower revenue and lower staff costs associated with cost saving initiatives.

Depreciation and amortization expense increased approximately $4.3 million, primarily attributable to acceleration of amortization for the discontinuation of a certain trade name, as well as the recognition of intangible assets in connection with acquisition of Wolfgang.

Operating Income was lower and Adjusted EBITDA was higher, driven by the decrease in revenue and expenses as detailed above.

Brand Performance Network

The components of operating results for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were as follows:


	Three Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	173,361	$	171,463	$	1,898	1.1	%
Operating Expenses
Cost of services	101,928		105,298		(3,370)		(3.2)	%
Office and general expenses	56,070		47,386		8,684		18.3	%
Depreciation and amortization	9,229		8,205		1,024		12.5	%
Impairment and other losses	—		7,494		(7,494)		(100.0)	%
	$	167,227	$	168,383	$	(1,156)	(0.7)	%
Operating Income	$	6,134	$	3,080	$	3,054	99.2	%


	Three Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Net Revenue	$	162,428	$	160,473	$	1,955	1.2	%
Billable costs	10,933		10,990		(57)		(0.5)	%
Revenue	173,361		171,463		1,898		1.1	%

Billable costs	10,933		10,990		(57)		(0.5)	%
Staff costs	103,349		100,062		3,287		3.3	%
Administrative costs	22,953		23,661		(708)		(3.0)	%
Unbillable and other costs, net	12,933		12,438		495		4.0	%
Adjusted EBITDA	23,193		24,312		(1,119)		(4.6)	%
Stock-based compensation	1,744		2,923		(1,179)		(40.3)	%
Depreciation and amortization	9,229		8,205		1,024		12.5	%
Deferred acquisition consideration	2,130		1,444		686		47.5	%
Impairment and other losses	—		7,494		(7,494)		(100.0)	%
Other items, net	3,956		1,166		2,790		NM
Operating Income	$	6,134	$	3,080	$	3,054	99.2	%

Revenue

Revenue for the three months ended September 30, 2023 was $173.4 million, compared to $171.5 million for the three months ended September 30, 2022, an increase of $1.9 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were as follows:


		Net Revenue - Components of Change					Change
	Three Months Ended September 30, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Three Months Ended September 30, 2023	Organic	Total
	(dollars in thousands)
Brand Performance Network	$160,473	$2,666	$1,573	$(2,284)	$1,955	$162,428	(1.4)%	1.2%
Component % change		1.7%	1.0%	(1.4)%	1.2%

The decline in organic net revenue was primarily attributable to client losses and decreased spending in the communications sector, primarily as a result of the writer and actor strike, the healthcare sector due to reduced budgets and work post the peak of the COVID pandemic, and the transportation and travel/lodging sector. The increase in net acquisitions (divestitures) was primarily driven by a $1.6 million increase in revenue from the acquisition of Huskies.

Operating Income

Operating Income for the three months ended September 30, 2023 was $6.1 million compared to $3.1 million for the three months ended September 30, 2022, representing an increase of $3.1 million. The change in Operating Income was primarily attributable to an increase in Revenue and Office and general, and a decrease in Cost of services and Impairment and other losses.

The decrease in Cost of services was primarily attributable to lower staff costs associated with cost saving initiatives and lower stock-based compensation.

Stock-based compensation expense decreased approximately $1.2 million, primarily attributable to a decrease in the value of profits interests awards.

The increase in Office and general expenses was primarily attributable to an increase in staff costs due to increased headcount and an increase in employee salaries.

Deferred acquisition consideration increased approximately $0.7 million primarily attributable to the increase in fair value of certain awards, partially offset by a decrease due to the earn out period for a certain award ending in the second quarter of 2023.

Impairment and other losses decreased by approximately $7.5 million due to the impairment of goodwill in the third quarter of 2022.

Operating Income increased and Adjusted EBITDA decreased primarily due to a slight increase in revenues, partially offset by a decrease in expenses as detailed above.

Communications Network

The components of operating results for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were as follows:


	Three Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	82,505	$	122,455	$	(39,950)	(32.6)	%
Operating Expenses
Cost of services	51,913		75,649		(23,736)		(31.4)	%
Office and general expenses	18,551		(9,666)		28,217		NM
Depreciation and amortization	2,784		2,683		101		3.8	%

	$	73,248	$	68,666	$	4,582	6.7	%
Operating Income	$	9,257	$	53,789	$	(44,532)	(82.8)	%


	Three Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Net Revenue	$	62,416	$	79,919	$	(17,503)	(21.9)	%
Billable costs	20,089		42,536		(22,447)		(52.8)	%
Revenue	82,505		122,455		(39,950)		(32.6)	%

Billable costs	20,089		42,536		(22,447)		(52.8)	%
Staff costs	37,412		45,030		(7,618)		(16.9)	%
Administrative costs	7,626		9,332		(1,706)		(18.3)	%
Unbillable and other costs, net	84		68		16		23.5	%
Adjusted EBITDA	17,294		25,489		(8,195)		(32.2)	%
Stock-based compensation	1,252		671		581		86.6	%
Depreciation and amortization	2,784		2,683		101		3.8	%
Deferred acquisition consideration	3,757		(32,074)		35,831		NM

Other items, net	244		420		(176)		(41.9)	%
Operating Income	$	9,257	$	53,789	$	(44,532)	(82.8)	%

Revenue

Revenue for the three months ended September 30, 2023 was $82.5 million, compared to $122.5 million for the three months ended September 30, 2022, a decrease of $40.0 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were as follows:


		Net Revenue - Components of Change					Change
	Three Months Ended September 30, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Three Months Ended September 30, 2023	Organic	Total
	(dollars in thousands)
Communications Network	$79,919	$70	$—	$(17,573)	$(17,503)	$62,416	(22.0)%	(21.9)%
Component % change		0.1%	—%	(22.0)%	(21.9)%

Operating Income

Operating Income for the three months ended September 30, 2023 was $9.3 million, compared to $53.8 million for the three months ended September 30, 2022, representing a decrease of $44.5 million. The change in Operating Income was primarily attributable to a decrease in Revenue and Costs of services, and an increase in Office and general expenses.

The decrease in Cost of services was primarily attributable to lower billable costs, commensurate with lower revenue, and lower staff costs associated with cost saving initiatives.

The increase in Office and general expenses was primarily attributable to an increase in deferred acquisition consideration expense, partially offset by a decrease in staff costs (as detailed above).

Deferred acquisition consideration increased approximately $35.8 million, primarily attributable to a significant reduction in the fair value of the deferred acquisition consideration liability associated with a certain Brand that occurred in the third quarter of 2022.

Operating Income and Adjusted EBITDA were lower, driven by the decrease in revenue and increase in expenses as detailed above.

All Other

The components of operating results for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were as follows:


	Three Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	12,926	$	3,436	$	9,490	NM
Operating Expenses
Cost of services	9,203		1,152		8,051		NM
Office and general expenses	7,784		2,653		5,131		NM
Depreciation and amortization	2,138		1,207		931		77.1	%
Impairment and other losses	—		15,982		(15,982)		(100.0)	%
	$	19,125	$	20,994	$	(1,869)	(8.9)	%
Operating Loss	$	(6,199)	$	(17,558)	$	11,359	(64.7)	%


	Three Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Net Revenue	$	12,952	$	3,436	$	9,516	NM
Billable costs	(26)		—		(26)		(100.0)	%
Revenue	12,926		3,436		9,490		NM

Billable costs	(26)		—		(26)		(100.0)	%
Staff costs	10,391		2,735		7,656		NM
Administrative costs	1,849		1,045		804		76.9	%
Unbillable and other costs, net	4,717		19		4,698		NM
Adjusted EBITDA	(4,005)		(363)		(3,642)		NM
Stock-based compensation	268		7		261		NM
Depreciation and amortization	2,138		1,207		931		77.1	%
Deferred acquisition consideration	(504)		—		(504)		(100.0)	%
Impairment and other losses	—		15,982		(15,982)		(100.0)	%
Other items, net	292		(1)		293		NM
Operating Loss	$	(6,199)	$	(17,558)	$	11,359	(64.7)	%

Revenue

Revenue for the three months ended September 30, 2023 was $12.9 million, compared to $3.4 million for the three months ended September 30, 2022, an increase of $9.5 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were as follows:

Net Revenue - Components of Change

Change

Three Months Ended September 30, 2022

Foreign Currency

Net Acquisitions (Divestitures)

Organic

Total Change

Three Months Ended September 30, 2023

Organic

Total

(dollars in thousands)

All Other

$3,436

$(32)

$9,738

$(190)

$9,516

$12,952

(5.5)%

Component % change

(0.9)%

(5.5)%

The increase in net acquisitions (divestitures) was primarily driven by a $6.4 million increase in revenue from the acquisition of Maru.

Operating Loss

Operating Loss for the three months ended September 30, 2023 was $6.2 million compared to $17.6 million for the three months ended September 30, 2022, representing a decrease of $11.4 million. The change in Operating Loss was primarily attributable to an increase in Revenue, Cost of services, and Office and general expenses, and a decrease in Impairment and other losses.

The increase in Cost of services was primarily attributable to higher unbillable and staff costs, commensurate with higher revenue, and due to the acquisition of Maru.

The increase in Office and general expenses was primarily attributable to an increase in staff costs primarily associated with the acquisition of Maru.

The decrease in Impairment and other losses was primarily attributable to the impairment of goodwill during the third quarter of 2022.

The decrease in Operating Loss and decrease in Adjusted EBITDA were driven by higher revenue, partially offset by higher expenses as detailed above.

Corporate

The components of operating results for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 were as follows:


	Three Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Staff costs	$	10,589	$	10,325	$	264	2.6	%
Administrative costs	1,301		219		1,082		NM

Adjusted EBITDA	(11,890)		(10,544)		(1,346)		12.8	%
Stock-based compensation	2,095		3,349		(1,254)		(37.4)	%
Depreciation and amortization	2,120		1,826		294		16.1	%

Other items, net	811		2,486		(1,675)		(67.4)	%
Operating Loss	$	(16,916)	$	(18,205)	$	1,289	(7.1)	%

Operating Loss for the three months ended September 30, 2023 was $16.9 million, compared to $18.2 million for the three months ended September 30, 2022, representing a decrease of $1.3 million.

The decrease in Operating Loss was primarily attributable to lower stock-based compensation expense attributable to the vesting of certain awards in 2023.

NINE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2022

Consolidated Results of Operations

The components of operating results for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were as follows:


	Nine Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	1,872,282	$	1,979,607	$	(107,325)	(5.4)	%
Operating Expenses
Cost of services	1,201,309		1,253,765		(52,456)		(4.2)	%
Office and general expenses	481,379		429,121		52,258		12.2	%
Depreciation and amortization	107,795		95,642		12,153		12.7	%
Impairment and other losses	10,562		28,034		(17,472)		(62.3)	%
	$	1,801,045	$	1,806,562	$	(5,517)	(0.3)	%
Operating Income	$	71,237	$	173,045	$	(101,808)	(58.8)	%


	Nine Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Net Revenue	$	1,595,586	$	1,638,707	$	(43,121)	(2.6)	%
Billable costs	276,696		340,900		(64,204)		(18.8)	%
Revenue	1,872,282		1,979,607		(107,325)		(5.4)	%

Billable costs	276,696		340,900		(64,204)		(18.8)	%
Staff costs	1,034,645		1,040,117		(5,472)		(0.5)	%
Administrative costs	196,846		183,359		13,487		7.4	%
Unbillable and other costs, net	98,936		87,408		11,528		13.2	%
Adjusted EBITDA	265,159		327,823		(62,664)		(19.1)	%
Stock-based compensation	34,615		33,410		1,205		3.6	%
Depreciation and amortization	107,795		95,642		12,153		12.7	%
Deferred acquisition consideration	10,881		(14,420)		25,301		NM
Impairment and other losses	10,562		28,034		(17,472)		(62.3)	%
Other items, net	30,069		12,112		17,957		NM
Operating Income (1)	$	71,237	$	173,045	$	(101,808)	(58.8)	%

(1) See the Results of Operations section above for a reconciliation of Operating Income to Net income (loss) attributable to Stagwell Inc. common shareholders.

Revenue

Revenue for the nine months ended September 30, 2023 was $1,872.3 million, compared to $1,979.6 million for the nine months ended September 30, 2022, a decrease of $107.3 million.

Net Revenue

The components of the fluctuations in net revenue for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were as follows:


		Net Revenue - Components of Change					Change
	Nine Months Ended September 30, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Nine Months Ended September 30, 2023	Organic	Total
	(dollars in thousands)
Integrated Agencies Network	$929,033	$(3,173)	$6,271	$(39,004)	$(35,906)	$893,127	(4.2)%	(3.9)%
Brand Performance Network	487,829	(2,466)	11,296	(5,636)	3,194	491,023	(1.2)%	0.7%
Communications Network	212,620	(282)	1,918	(37,224)	(35,588)	177,032	(17.5)%	(16.7)%
All Other	9,225	(170)	35,135	(9,786)	25,179	34,404	NM	NM
	$1,638,707	$(6,091)	$54,620	$(91,650)	$(43,121)	$1,595,586	(5.6)%	(2.6)%
Component % change		(0.4)%	3.3%	(5.6)%	(2.6)%

For the nine months ended September 30, 2023 and 2022, organic net revenue decreased $91.7 million, or 5.6%. The macroeconomic uncertainty continues to challenge the industry in 2023. This contributed to certain clients pausing projects and reduced spending, specifically in the technology sector. In addition, the loss of clients also contributed to the decline in organic net revenue. The increase in net acquisitions (divestitures) was primarily driven by the acquisitions of Maru, Epicenter, TMA Direct, Inc. (“TMA”), Brand New Galaxy (“BNG”), Huskies, and Wolfgang.

The geographic mix in net revenues for the nine months ended September 30, 2023 and 2022 was as follows:


	Nine Months Ended September 30,
	2023		2022
	(dollars in thousands)
United States	$	1,276,144	$	1,333,571
United Kingdom	115,829		122,798
Other	203,614		182,338
Total	$	1,595,587	$	1,638,707

Impairment and Other Losses

The Company recognized an impairment and other losses charge of $10.6 million during the nine months ended September 30, 2023 related to the impairment of an intangible asset totaling $1.4 million, right-of-use lease assets totaling $6.1 million and the associated leasehold improvements totaling $3.1 million. The expense was recorded within Impairment and other losses on the Unaudited Consolidated Statements of Operations.

Operating Income

Operating Income for the nine months ended September 30, 2023 was $71.2 million, compared to $173.0 million for the nine months ended September 30, 2022, representing a decrease of $101.8 million. The change in Operating Income was primarily attributable to a decrease in Revenue, Cost of services, and Impairment and other losses, partially offset by an increase in Office and general expenses, and Depreciation and amortization.

The decrease in Cost of services was primarily attributable to lower billable costs commensurate with lower revenue and lower staff costs associated with cost-savings initiatives, partially offset by higher unbillable and staff costs primarily associated with the acquisitions of Maru and Epicenter.

The increase in Office and general expenses was primarily attributable to an increase in stock-based compensation expense, deferred acquisition consideration, and occupancy-related expenses.

Occupancy-related expenses increased primarily due to nonrecurring credits incurred in the first quarter of 2022 connected with a benefit associated with the initiative to consolidate real estate in New York City.

Deferred acquisition consideration increased approximately $25.3 million, primarily attributable to a significant reduction in the fair value of the deferred acquisition consideration liability associated with a certain Brand that occurred in the third quarter of 2022.

Stock-based compensation increased $1.2 million primarily attributable to new awards being issued in 2023, partially offset by the reduction in the fair value of certain profits interest awards.

Depreciation and amortization expense increased $12.2 million, primarily attributable to the recognition of intangible assets in connection with the acquisition of Maru, Wolfgang, and Epicenter.

Other, net

Other, net for the nine months ended September 30, 2023 was an expense of $0.5 million, compared to income of $0.2 million for the nine months ended September 30, 2022.

Foreign Exchange, Net

The foreign exchange loss for the nine months ended September 30, 2023 was $2.3 million, compared to a loss of $4.2 million for the nine months ended September 30, 2022, primarily attributable due to the U.S. dollar weakening against the Euro and British Pound.

Interest Expense, Net

Interest expense, net for the nine months ended September 30, 2023 was $67.8 million compared to $56.6 million for the nine months ended September 30, 2022, representing an increase of $11.2 million, primarily attributable to higher levels of debt outstanding under the Credit Agreement, and a higher interest rate of borrowings on amounts outstanding under the Credit Agreement.

Income Tax Expense

The difference in the effective tax rate of 1709.1% in the nine months ended September 30, 2023 as compared to 17.9% in the nine months ended September 30, 2022 is primarily due to the change in pre-tax income, tax benefit of impairments offset by an increase in valuation allowance, lower share-based compensation windfalls and out-of-period adjustments in 2023. See Note 1 in the Notes to the Unaudited Consolidated Financial Statements.

Noncontrolling and Redeemable Noncontrolling Interests

The effect of noncontrolling and redeemable noncontrolling interests for the nine months ended September 30, 2023 was a loss of $8.5 million compared to income of $59.7 million for the nine months ended September 30, 2022, representing a decrease of $68.2 million. The change is attributable to the decline in net income (loss) resulting in a lower noncontrolling interest allocated to the holders of Class C Common Stock.

Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders

As a result of the foregoing, net loss attributable to Stagwell Inc. common shareholders for the nine months ended September 30, 2023 was $3.6 million compared to net income of $33.7 million for the nine months ended September 30, 2022.

Earnings (Loss) Per Share

Diluted EPS and Adjusted Diluted EPS for the nine months ended September 30, 2023 was as follows:


	GAAP		Adjustments(1)		Non-GAAP
	(amounts in thousands, except per share amounts)
Net income (loss) attributable to Stagwell Inc. common shareholders	$	(3,597)	$	61,195	$	57,598
Net income attributable to Class C shareholders	—		70,200		70,200
Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income	$	(3,597)	$	131,395	$	127,798

Weighted average number of common shares outstanding	118,772		10,736		129,508
Weighted average number of common Class C shares outstanding	—		156,092		156,092
Weighted average number of shares outstanding	118,772		166,828		285,600

Diluted EPS and Adjusted Diluted EPS	$	(0.03)			$	0.45

Adjustments to Net Income (loss)(1)
Amortization			$	86,605
Impairment and other losses			10,562
Stock-based compensation			34,615
Deferred acquisition consideration			10,881
Other items, net			30,069
			172,732
Adjusted tax expense			(33,653)
			139,079

Net loss attributable to Class C shareholders			(7,684)
			$	131,395

Allocation of adjustments to net income (loss)
Net income attributable to Stagwell Inc. common shareholders			$	61,195

Net income attributable to Class C shareholders			77,884
Net loss attributable to Class C shareholders			(7,684)
			70,200
			$	131,395

(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

Diluted EPS and Adjusted Diluted EPS for the nine months ended September 30, 2022 was as follows:


	GAAP		Adjustments(1)		Non-GAAP
	(amounts in thousands, except per share amounts)
Net income attributable to Stagwell Inc. common shareholders	$	33,747	$	52,699	$	86,446



Weighted average number of common shares outstanding	131,550		—		131,550



Diluted EPS and Adjusted Diluted EPS	$	0.26			$	0.66

Adjustments to Net income(1)
Amortization			$	75,877
Impairment and other losses			28,034
Stock-based compensation			33,410
Deferred acquisition consideration			(14,420)
Other items, net			12,112
			135,013
Adjusted tax expense			(15,569)
			$	119,444

Less: Net income to attributable to Class C shareholders			(66,745)
Net income attributable to Stagwell Inc. common shareholders			$	52,699

(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

Adjusted EBITDA

Adjusted EBITDA for the nine months ended September 30, 2023 was $265.2 million, compared to $327.8 million for the nine months ended September 30, 2022, representing a decrease of $62.7 million, primarily driven by lower Operating Income, as discussed above.

Integrated Agencies Network

The components of operating results for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were as follows:


	Nine Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	1,032,914	$	1,092,364	$	(59,450)	(5.4)	%
Operating Expenses
Cost of services	668,261		707,437		(39,176)		(5.5)	%
Office and general expenses	190,417		192,781		(2,364)		(1.2)	%
Depreciation and amortization	61,416		55,136		6,280		11.4	%
Impairment and other losses	9,175		2,519		6,656		NM
	$	929,269	$	957,873	$	(28,604)	(3.0)	%
Operating Income	$	103,645	$	134,491	$	(30,846)	(22.9)	%


	Nine Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Net Revenue	$	893,127	$	929,033	$	(35,906)	(3.9)	%
Billable costs	139,787		163,331		(23,544)		(14.4)	%
Revenue	1,032,914		1,092,364		(59,450)		(5.4)	%

Billable costs	139,787		163,331		(23,544)		(14.4)	%
Staff costs	548,012		575,959		(27,947)		(4.9)	%
Administrative costs	86,200		86,002		198		0.2	%
Unbillable and other costs, net	47,538		51,610		(4,072)		(7.9)	%
Adjusted EBITDA	211,377		215,462		(4,085)		(1.9)	%
Stock-based compensation	15,945		15,044		901		6.0	%
Depreciation and amortization	61,416		55,136		6,280		11.4	%
Deferred acquisition consideration	8,118		5,697		2,421		42.5	%
Impairment and other losses	9,175		2,519		6,656		NM
Other items, net	13,078		2,575		10,503		NM
Operating Income	$	103,645	$	134,491	$	(30,846)	(22.9)	%

Revenue

Revenue for the nine months ended September 30, 2023 was $1,032.9 million compared to $1,092.4 million for the nine months ended September 30, 2022, a decrease of $59.5 million.

Net Revenue

The components of the fluctuations in net revenue for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were as follows:


		Net Revenue - Components of Change					Change
	Nine Months Ended September 30, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Nine Months Ended September 30, 2023	Organic	Total
	(dollars in thousands)
Integrated Agencies Network	$929,033	$(3,173)	$6,271	$(39,004)	$(35,906)	$893,127	(4.2)%	(3.9)%
Component % change		(0.3)%	0.7%	(4.2)%	(3.9)%

The decline in organic net revenue was primarily attributable to the loss of clients in the retail sector and clients who withheld spending in the financial, communications and retail sector due to uncertain macroeconomic factors and the writer and actor strikes. The increase in net acquisitions (divestitures) was primarily driven by a $4.6 million increase in revenue from the acquisition of Wolfgang.

Operating Income

Operating Income for the nine months ended September 30, 2023 was $103.6 million, compared to $134.5 million for the nine months ended September 30, 2022, representing a decrease of $30.8 million. The change in Operating Income was primarily attributable to a decrease in Revenue and Cost of services, partially offset by an increase in Impairment and other losses and Depreciation and amortization.

The decrease in Cost of services was primarily attributable to lower billable costs, commensurate with lower revenue and lower staff costs associated with cost savings initiatives.

Depreciation and amortization expense increased $6.3 million, primarily attributable to the recognition of intangible assets in connection with the acquisition of Wolfgang.

Impairment and other losses increased approximately $6.7 million due to the impairment of two right-of-use assets and the related leasehold improvements in the second quarter of 2023.

Operating Income and Adjusted EBITDA were lower, driven by the decrease in revenue, partially offset by a decrease in expenses as detailed above.

Brand Performance Network

The components of operating results for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were as follows:


	Nine Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	574,729	$	563,546	$	11,183	2.0	%
Operating Expenses
Cost of services	357,224		341,796		15,428		4.5	%
Office and general expenses	163,832		152,668		11,164		7.3	%
Depreciation and amortization	26,021		25,044		977		3.9	%
Impairment and other losses	1,387		8,051		(6,664)		(82.8)	%
	$	548,464	$	527,559	$	20,905	4.0	%
Operating Income	$	26,265	$	35,987	$	(9,722)	(27.0)	%


	Nine Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Net Revenue	$	491,023	$	487,829	$	3,194	0.7	%
Billable costs	83,706		75,717		7,989		10.6	%
Revenue	574,729		563,546		11,183		2.0	%

Billable costs	83,706		75,717		7,989		10.6	%
Staff costs	313,813		297,243		16,570		5.6	%
Administrative costs	70,963		65,830		5,133		7.8	%
Unbillable and other costs, net	38,860		35,497		3,363		9.5	%
Adjusted EBITDA	67,387		89,259		(21,872)		(24.5)	%
Stock-based compensation	3,365		9,152		(5,787)		(63.2)	%
Depreciation and amortization	26,021		25,044		977		3.9	%
Deferred acquisition consideration	1,112		7,349		(6,237)		(84.9)	%
Impairment and other losses	1,387		8,051		(6,664)		(82.8)	%
Other items, net	9,237		3,676		5,561		NM
Operating Income	$	26,265	$	35,987	$	(9,722)	(27.0)	%

Revenue

Revenue for the nine months ended September 30, 2023 was $574.7 million, compared to $563.5 million for the nine months ended September 30, 2022, an increase of $11.2 million.

Net Revenue

The components of the fluctuations in net revenue for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were as follows:


		Net Revenue - Components of Change					Change
	Nine Months Ended September 30, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Nine Months Ended September 30, 2023	Organic	Total
	(dollars in thousands)
Brand Performance Network	$487,829	$(2,466)	$11,296	$(5,636)	$3,194	$491,023	(1.2)%	0.7%
Component % change		(0.5)%	2.3%	(1.2)%	0.7%

The decline in organic net revenue was primarily attributable to decreased spending and client losses in the communications sector, primarily as a result of the writer and actor strike, as well as decreased spending in the retail and healthcare sectors. The increase in net acquisitions (divestitures) was primarily driven by a $7.8 million increase in revenue from the acquisition of BNG and $2.7 million increase in revenue from the acquisition of Huskies.

Operating Income

Operating Income for the nine months ended September 30, 2023 was $26.3 million, compared to $36.0 million for the nine months ended September 30, 2022, representing a decrease of $9.7 million. The change in Operating Income was primarily attributable to an increase in Revenue, Costs of services, and Office and general expenses, partially offset by a decrease in Impairment and other losses.

The increase in Cost of services was primarily attributable to higher billable costs, commensurate with higher revenue, higher staff costs primarily associated with an increased headcount resulting in higher salary costs and the acquisition of Huskies, partially offset by lower stock-based compensation.

Stock-based compensation expense decreased approximately $5.8 million, primarily attributable to a decrease in the value of profits interests awards.

The increase in Office and general expenses was primarily attributable to an increase in staff costs associated with an increased headcount and salary increases, an increase in occupancy-related expenses, partially offset by a decrease in deferred acquisition consideration.

Deferred acquisition consideration decreased approximately $6.2 million primarily attributable to the reduction in fair value in 2023 associated with a Brand that was acquired in the second quarter of 2022 and the earn out period for a certain award ending in the second quarter of 2023.

Impairment and other losses decreased approximately $6.7 million, primarily due to the impairment of goodwill and right of use assets in 2022, as discussed above.

Operating Income and Adjusted EBITDA decreased due to an increase in revenues more than offset by an increase in expenses as detailed above.

Communications Network

The components of operating results for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were as follows:


	Nine Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	230,261	$	314,472	$	(84,211)	(26.8)	%
Operating Expenses
Cost of services	149,873		200,328		(50,455)		(25.2)	%
Office and general expenses	51,551		29,223		22,328		76.4	%
Depreciation and amortization	8,216		7,787		429		5.5	%

	$	209,640	$	237,338	$	(27,698)	(11.7)	%
Operating Income	$	20,621	$	77,134	$	(56,513)	(73.3)	%


	Nine Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Net Revenue	$	177,032	$	212,620	$	(35,588)	(16.7)	%
Billable costs	53,229		101,852		(48,623)		(47.7)	%
Revenue	230,261		314,472		(84,211)		(26.8)	%

Billable costs	53,229		101,852		(48,623)		(47.7)	%
Staff costs	115,846		128,784		(12,938)		(10.0)	%
Administrative costs	25,096		24,475		621		2.5	%
Unbillable and other costs, net	336		272		64		23.5	%
Adjusted EBITDA	35,754		59,089		(23,335)		(39.5)	%
Stock-based compensation	2,177		1,077		1,100		NM
Depreciation and amortization	8,216		7,787		429		5.5	%
Deferred acquisition consideration	3,403		(27,466)		30,869		NM

Other items, net	1,337		557		780		NM
Operating Income	$	20,621	$	77,134	$	(56,513)	(73.3)	%

Revenue

Revenue for the nine months ended September 30, 2023 was $230.3 million, compared to $314.5 million for the nine months ended September 30, 2022, a decrease of $84.2 million.

Net Revenue

The components of the fluctuations in net revenue for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were as follows:


		Net Revenue - Components of Change					Change
	Nine Months Ended September 30, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Nine Months Ended September 30, 2023	Organic	Total
	(dollars in thousands)
Communications Network	$212,620	$(282)	$1,918	$(37,224)	$(35,588)	$177,032	(17.5)%	(16.7)%
Component % change		(0.1)%	0.9%	(17.5)%	(16.7)%

The decline in organic net revenue was attributable to decreased spending in public relations and related advocacy services as compared to higher spending in 2022 associated with the 2022 elections as well as decreased spending in the technology sector due to a reduction in budgets stemming from the current macroeconomic conditions. The increase in net acquisitions (divestitures) was driven by a $1.9 million increase in revenue from the acquisition of TMA.

Operating Income

Operating income for the nine months ended September 30, 2023 was $20.6 million compared to $77.1 million for the nine months ended September 30, 2022, representing a decrease of $56.5 million. The change in Operating Income was primarily attributable to a decrease in Revenue and Costs of services, and an increase in Office and general expenses.

The decrease in Cost of services was primarily attributable to lower billable costs, commensurate with lower revenue, and a decrease in staff costs associated with cost savings initiatives.

The increase in Office and general expenses was primarily attributable to an increase in deferred acquisition consideration expense, partially offset by a decrease in staff costs related to cost saving initiatives.

Deferred acquisition consideration increased approximately $30.9 million, primarily attributable to a significant reduction in the fair value of the deferred acquisition consideration liability associated with a certain Brand that occurred in the third quarter of 2022.

Operating Income and Adjusted EBITDA were lower driven by lower revenue, partially offset by lower expenses as detailed above.

All Other

The components of operating results for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were as follows:


	Nine Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	34,378	$	9,225	$	25,153	NM
Operating Expenses
Cost of services	25,796		4,204		21,592		NM
Office and general expenses	18,502		6,029		12,473		NM
Depreciation and amortization	6,152		2,458		3,694		NM
Impairment and other losses	—		17,464		(17,464)		(100.0)	%
	$	50,450	$	30,155	$	20,295	67.3	%
Operating Loss	$	(16,072)	$	(20,930)	$	4,858	(23.2)	%


	Nine Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Net Revenue	$	34,404	$	9,225	$	25,179	NM
Billable costs	(26)		—		(26)		(100.0)	%
Revenue (1)	34,378		9,225		25,153		NM

Billable costs	(26)		—		(26)		(100.0)	%
Staff costs	31,124		7,919		23,205		NM
Administrative costs (1)	1,244		2,249		(1,005)		(44.7)	%
Unbillable and other costs, net	12,202		29		12,173		NM
Adjusted EBITDA	(10,166)		(972)		(9,194)		NM
Stock-based compensation	427		15		412		NM
Depreciation and amortization	6,152		2,458		3,694		NM
Deferred acquisition consideration	(1,752)		—		(1,752)		(100.0)	%
Impairment and other losses	—		17,464		(17,464)		(100.0)	%
Other items, net	1,079		21		1,058		NM
Operating Loss	$	(16,072)	$	(20,930)	$	4,858	(23.2)	%

(1) All Other Revenue and Administrative costs include approximately $6.0 million of eliminations of intercompany services.

Revenue

Revenue for the nine months ended September 30, 2023 was $34.4 million, compared to $9.2 million for the nine months ended September 30, 2022, an increase of $25.2 million.

Net Revenue

The components of the fluctuations in net revenue for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were as follows:

Net Revenue - Components of Change

Change

Nine Months Ended September 30, 2022

Foreign Currency

Net Acquisitions (Divestitures)

Organic

Total Change

Nine Months Ended September 30, 2023

Organic

Total

(dollars in thousands)

All Other

$9,225

$(170)

$35,135

$(9,786)

$25,179

$34,404

Component % change

(1.8)%

The decline in organic revenue was primarily attributable to the elimination of intercompany revenue during the nine months ended September 30, 2023. The increase in net acquisitions (divestitures) was primarily driven by a $21.2 million increase in revenue from the acquisition of Maru and a $3.2 million increase in revenue from the acquisition of Epicenter.

Operating Loss

Operating Loss for the nine months ended September 30, 2023 was $16.1 million compared to $20.9 million for the nine months ended September 30, 2022, representing a decrease of $4.9 million. The change in Operating Loss was primarily attributable to an increase in Revenue, Cost of services, Office and general expenses and Depreciation and amortization, partially offset by a decrease in Impairment and other losses.

The increase in Cost of services was primarily attributable to higher unbillable and staff costs, commensurate with higher revenue, and due to the acquisitions of Maru and Epicenter.

The increase in Office and general expenses was primarily attributable to an increase in staff costs primarily associated with the acquisitions of Maru and Epicenter.

Depreciation and amortization expense increased approximately $3.7 million, primarily attributable to the recognition of intangible assets in connection with the acquisitions of Maru and Epicenter.

Impairment and other losses decreased primarily due to the impairment of goodwill in the third quarter of 2022.

The decrease in Operating Loss and Adjusted EBITDA were driven by higher revenue, more than offset by higher expenses (as detailed above), and partially offset by a decrease in Impairment and other losses.

Corporate

The components of operating results for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were as follows:


	Nine Months Ended September 30,
	2023		2022		Change
	(dollars in thousands)
					$		%
Staff costs	$	25,850	$	30,212	$	(4,362)	(14.4)	%
Administrative costs	13,343		4,803		8,540		NM

Adjusted EBITDA	(39,193)		(35,015)		(4,178)		11.9	%
Stock-based compensation	12,701		8,122		4,579		56.4	%
Depreciation and amortization	5,990		5,217		773		14.8	%

Other items, net	5,338		5,283		55		1.0	%
Operating Loss	$	(63,222)	$	(53,637)	$	(9,585)	17.9	%

Operating Loss for the nine months ended September 30, 2023 was $63.2 million compared to $53.6 million for the nine months ended September 30, 2022, representing an increase of $9.6 million. The increase in Operating Loss was primarily attributable to an increase in stock-based compensation, partially offset by a decrease in Staff costs. Staff costs decreased due to cost-savings initiatives.

Stock-based compensation expense increased approximately $4.6 million, primarily attributable to the modification of certain share-based payment awards, awards granted in the second and third quarter of 2023, and the completed vesting of awards in the second half of 2022 as well as the first quarter of 2023.

Liquidity and Capital Resources:

The following table provides summary information about the Company’s liquidity position:


	Nine Months Ended September 30,
	2023		2022
	(dollars in thousands)
Net cash (used in) provided by operating activities	$	(127,542)	$	73,081
Net cash used in investing activities	(44,848)		(64,284)
Net cash provided by (used in) financing activities	51,688		(12,312)

The Company had cash and cash equivalents of $98.7 million and $220.6 million as of September 30, 2023 and December 31, 2022, respectively. The Company expects to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months and subsequent periods. The Company has historically maintained and expanded its business using cash generated from operating activities, funds available under the Credit Agreement, and other initiatives, such as obtaining additional debt and equity financing. On May 4, 2023, as discussed in Note 7 of the Notes included herein, the Company amended the Credit Agreement to, among other things, increase the revolving commitments under the Credit Agreement by $140.0 million from $500.0 million to $640.0 million and permit restricted payments for share repurchases or redemptions from certain of its stockholders in an aggregate principal amount of up to $150.0 million. As of September 30, 2023, the Company had $412.0 million of borrowings outstanding, $24.9 million of outstanding and undrawn letters of credit resulting in $203.1 million under the Credit Agreement.

On March 1, 2023, the Board authorized an extension and a $125.0 million increase in the size of our stock repurchase program (the “Repurchase Program”) to an aggregate of $250.0 million, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program, as amended, will expire on March 1, 2026. During the nine months ended September 30, 2023, 6.7 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an aggregate value, excluding fees, of $42.5 million. These shares were repurchased at an average price of $6.38 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $155.7 million as of September 30, 2023. The Board will review the Repurchase Program periodically and may authorize adjustments of its terms. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice.

On May 23, 2023, the Company repurchased approximately 23.3 million shares of Class A Common Stock from certain AlpInvest Partners B.V. at a price of $6.43 per share, for an aggregate total repurchase price of approximately $150.0 million.

The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition consideration payments, purchases of noncontrolling interests, subsidiary awards, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company’s 5.625% Notes and Credit Agreement. The Company expects to make estimated cash payments in the future to satisfy obligations under the Tax Receivables Agreement (“TRA”) (see Note 13 of the Notes included herein for additional details). The amount and timing of payments are contingent on the Company achieving certain tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize as a result of (i) increases in the tax basis of OpCo’s assets resulting from exchanges of Paired Units (each as defined in Note 10 of the Notes included herein) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to the Company making payments under the TRA. Based on the current outlook, the Company believes future cash flows from operations, together with the Company’s existing cash balance and availability of funds under the Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the next twelve months and subsequent periods. The Company’s

ability to make scheduled deferred acquisition consideration payments, to make principal and interest payments, to refinance indebtedness or to fund planned capital expenditures or other obligations will depend on future performance, which is subject to general economic conditions, the competitive environment and other factors, including those described in this Form 10-Q and in the Company’s other SEC filings.

Cash Flows

Operating Activities

Cash flows used in operating activities for the nine months ended September 30, 2023, were $127.5 million, primarily driven by unfavorable working capital requirements, including the timing of media supplier payments, partially offset by earnings.

Cash flows provided by operating activities for the nine months ended September 30, 2022, were $73.1 million, primarily driven by earnings, partially offset by unfavorable working capital requirements, including the timing of media supplier payments.

Investing Activities

Cash flows used in investing activities were $44.8 million for the nine months ended September 30, 2023, primarily driven by $19.0 million in capitalized software spend, $12.2 million in capital expenditures, and $6.7 million for acquisitions, net of cash acquired.

Cash flows used in investing activities were $64.3 million for the nine months ended September 30, 2022, primarily driven by $9.4 million in capital capitalized software spend, $16.1 million in capital expenditures, and $37.5 million in acquisitions, net of cash acquired.

Financing Activities

During the nine months ended September 30, 2023, cash flows provided by financing activities were $51.7 million, primarily driven by $312.0 million in net borrowings under the Credit Agreement, partially offset by shares repurchased and cancelled of $204.0 million, payments of deferred consideration of $31.7 million, and distributions to noncontrolling interests of $24.5 million.

During the nine months ended September 30, 2022, cash flows used in financing activities were $12.3 million, primarily driven by $134.5 million in net borrowings under the Credit Agreement, partially offset primarily by shares repurchased and cancelled of $43.6 million, payments of deferred consideration of $61.1 million, and distributions to noncontrolling interests of $38.5 million.

Total Debt

Debt, net of debt issuance costs, as of September 30, 2023, was $1,498.1 million as compared to $1,184.7 million outstanding at December 31, 2022. See Note 7 to the Unaudited Consolidated Financial Statements included herein for information regarding the Company’s 5.625% Notes, and the Credit Agreement, which provides for a $640.0 million senior secured revolving credit facility maturing on August 3, 2026.

The Company is currently in compliance with all of the terms and conditions of the Credit Agreement, and management believes, based on its current financial projections, that the Company will be in compliance with its covenants over the next twelve months.

If the Company loses all or a substantial portion of its lines of credit under the Credit Agreement, or if the Company uses the maximum available amount under the agreement, it will be required to seek other sources of liquidity. If the Company were unable to find these sources of liquidity, for example through an equity offering or access to the capital markets, the Company’s ability to fund its working capital needs and any contingent obligations with respect to acquisitions and redeemable noncontrolling interests would be adversely affected.

Pursuant to the Credit Agreement, the Company must maintain a Total Leverage Ratio (as defined in the Credit Agreement) below an established threshold. For the period ended September 30, 2023, the Company’s calculation of this ratio, and the maximum permitted under the Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:


			September 30, 2023
Total Leverage Ratio			3.75
Maximum per covenant			4.25

These ratios and measures are not based on GAAP and are not presented as alternative measures of operating performance or liquidity. Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one-time charges, and other items, as defined in the Credit Agreement. They are presented here to demonstrate compliance with the covenants in the Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.

Material Cash Requirements

The Company’s Brands enter into contractual commitments with media providers and agreements with production companies on behalf of its clients at levels that exceed the revenue from services. Some of our Brands purchase media for clients and act as an agent for a disclosed principal. These commitments are included in Accounts payable and Accrued media when the media services are delivered by the media providers. Stagwell takes precautions against default on payment for these services including the procurement of credit insurance and has historically had a very low incidence of default. Stagwell is still exposed to the risk of significant uncollectible receivables from our clients. The risk of a material loss could significantly increase in periods of severe economic downturn.

Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments. See Note 5 of the Notes included herein for additional information regarding contingent deferred acquisition consideration. As of September 30, 2023, approximately $42.6 million of the deferred acquisition consideration is expected to be settled in shares of Class A Common Stock.

The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the Credit Agreement (or any refinancings thereof), and, if necessary, through the incurrence of additional debt and/or issuance of additional equity. The ultimate amount payable in the future relating to these transactions will vary because it is dependent on the future results of operations of the subject businesses and the timing of when these rights are exercised.

Critical Accounting Estimates

See the Company’s 2022 Form 10-K for information regarding the Company’s critical accounting estimates.

Website Access to Company Reports and Information

Stagwell Inc. is the successor SEC registrant to MDC Partners Inc. Stagwell Inc.’s Internet website address is www.stagwellglobal.com. The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to the Exchange Act, will be made available free of charge through the Company’s website as soon as reasonably practical after those reports are electronically filed with, or furnished to, the SEC. The Company announces material information to the public through a variety of means, including filings with the SEC, press releases, public conference calls, and its website. The Company uses these channels, as well as social media, including its Twitter account (@stagwell) and its LinkedIn page (https://www.linkedin.com/company/stagwell/), to communicate with investors and the public about the Company, its products and services, and other matters. Therefore, investors, the media, and others interested in the Company are encouraged to review the information the Company makes public in these locations, as such information could be deemed to be material information. Information on or that can be accessed through the Company’s websites or these social media channels is not part of this Form 10-Q, and the inclusion of the Company’s website addresses and social media channels are inactive textual references only.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, the Company is exposed to market risk related to interest rates, foreign currencies and impairment risk.

Debt Instruments: At September 30, 2023, the Company’s debt obligations consisted of amounts outstanding under its Credit Agreement and the 5.625% Notes. The 5.625% Notes bear a fixed 5.625% interest rate. The Credit Agreement bears

interest at variable rates based upon SOFR, EURIBOR, and SONIA depending on the duration of the borrowing product. The Company’s ability to obtain the required bank syndication commitments depends in part on conditions in the bank market at the time of syndication.

On April 28, 2022, the Company amended its Credit Agreement. This amendment replaced references to LIBOR with references to SOFR. With regard to our variable rate debt, a 10% increase or decrease in interest rates would change our annual interest expense by approximately $2.5 million.

Foreign Exchange: While the Company primarily conducts business in markets that use the U.S. dollar, the Canadian dollar, the Euro and the British Pound, its non-U.S. operations transact business in numerous different currencies. The Company’s results of operations are subject to risk from the translation to the U.S. dollar of the revenue and expenses of its non-U.S. operations. The effects of currency exchange rate fluctuations on the translation of the Company’s results of operations are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 2 of the Company’s Audited Consolidated Financial Statements included in the 2022 Form 10-K. For the most part, revenues and expenses incurred related to the non-U.S. operations are denominated in their functional currency. This reduces the impact that fluctuations in exchange rates will have on profit margins. Translation of intercompany debt, which is not intended to be repaid, is included in cumulative translation adjustments. Translation of current intercompany balances are included in net income (loss). The Company generally does not enter into foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.

Impairment Risk: For the nine months ended September 30, 2023, the Company recorded an impairment charge of $10.6 million to reduce the carrying value of two of its right-of-use lease assets and related leasehold improvements and a long lived asset, specifically a trade name. See the Significant Accounting Policies section in the “Notes to Consolidated Financial Statements” of the Company’s 2022 Form 10-K for information related to impairment testing for Goodwill, Right-of-use lease assets and long lived assets and the risk of potential impairment charges in future periods. See the Critical Accounting Estimates section in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information related to the risk of potential impairment charges in future periods.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”), who is our principal executive officer, and Chief Financial Officer (“CFO”), who is our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

We conducted an evaluation, under the supervision and with the participation of our management, including our CEO, CFO and management Disclosure Committee, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, and in light of the material weaknesses identified in our internal control over financial reporting as disclosed in our Form 10-K for the fiscal year ended December 31, 2022, our CEO and CFO concluded that, as of September 30, 2023, our disclosure controls and procedures were not effective.

Material Weakness Remediation Plan and Status

Under the leadership of our CFO and our Senior Vice President of Sarbanes-Oxley Act, the Company has made significant progress with the remediation of these material weaknesses and continued to execute on the previously communicated remediation activities through September 30, 2023. Particularly:

•We continued our enhanced communications with the Audit Committee of the Board of Directors for increased oversight. The Company also formally reports quarterly to the Audit Committee regarding progress against the remediation plan.

•We designed and implemented controls over the risk assessment process that include detailed qualitative and quantitative factors to identify and assess risks and implement or modify controls in response to those risks. The risk assessment is regularly updated for new entities and changes in risk profile.

•Based on our assessment of the current state of the system of internal control at the consolidated and brand levels, we enhanced existing business processes and control activities and assessed the adequacy of resources.

•We implemented new controls and enhanced existing controls across our information technology environment including general controls related to access, change management and segregation of duties, and centralized certain IT functions.

•We redesigned and strengthened control activities over reconciliations including enhanced review and approval controls.

•We designed and enhanced management review controls to improve monitoring of internal control over financial reporting.

•We also formalized internal control policies and procedures and conducted multiple in-depth training sessions with control owners throughout the Company.

The Company has also continued to roll out its finance transformation initiative, which involves a phased deployment of new enterprise resource planning and human resource information systems and a shared service platform.

During the nine months ended September 30, 2023, management evaluated our internal control processes, remediated gaps in the design of internal controls and has been making progress in performing operating effectiveness testing. We will consider the above material weaknesses to be fully remediated once the applicable controls operate for a sufficient period of time and our management has concluded, through testing, that these controls are operating effectively. We may also conclude that additional measures may be required to remediate the material weaknesses in our internal control over financial reporting, which may necessitate further internal control changes.

Change in Internal Control Over Financial Reporting

Other than the changes discussed above in connection with our implementation of the remediation plan, there were no other changes in our internal control over financial reporting (as such term is defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) that occurred during our most recent quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we are involved in various legal proceedings. We do not currently expect that these proceedings will have a material adverse effect on our results of operations, cash flows or financial position.

Item 1A. Risk Factors

There have been no material changes to the risk factors in Part I, Item 1A “Risk Factors” of our 2022 Form 10-K. These risks could materially and adversely affect our business, results of operations, financial condition, cash flows, projected results and future prospects. These risks are not exclusive and additional risks to which we are subject include the factors listed under “Note About Forward-Looking Statements” and the risks described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

In the three months ended September 30, 2023, the Company granted the Company granted 85,041 shares of Class A Common Stock and issued 222,569 shares of Class A Common Stock in transactions exempt from registration under Section 4(a)(2) of the Securities Act. The 85,042 shares were granted as inducement for employment. The 222,569 shares were issued as a result of the exercise of stock appreciation rights that were granted as inducement for employment. The Company received no cash proceeds and no commissions were paid to any person in connection with the issuance of these shares.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

On March 1, 2023, the Board authorized an extension and a $125.0 million increase in the size of the Repurchase Program. Under the Repurchase Program, as amended, we may repurchase up to an aggregate of $250.0 million outstanding shares of our Class A Common Stock, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program will expire on March 1, 2026. Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices (including through trading plans that may

be adopted in accordance with Rule 10b5-1 of the Exchange Act), in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice. The Board will review the Repurchase Program periodically and may authorize adjustments of its terms. Pursuant to its Credit Agreement (as defined and discussed in Note 7 of the Notes included herein) and the indenture governing the 5.625% Notes, the Company is currently limited as to the dollar value of shares it may repurchase in the open market.

The following table details our monthly shares repurchased during the third quarter of 2023 and the approximate dollar value of shares that may yet be purchased pursuant to the Repurchase Program:


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Program (2)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (2)
7/1/2023 - 7/31/2023	230,630	$	7.93	—	$	158,434,817
8/1/2023 - 8/31/2023	2,194	$	5.66	—	$	158,434,817
9/1/2023 - 9/30/2023	585,710	$	4.72	585,710	$	155,660,866
Total	818,534	$	5.63	585,710	$	155,660,866

(1) Includes information for all shares repurchased by the Company, including shares repurchased as part of the Company’s publicly announced Repurchase Program, and 232,824 shares to settle employee tax withholding obligations related to the vesting of restricted stock awards and restricted stock units.

(2) Only includes information for shares repurchased as part of the Company’s publicly announced Repurchase Program.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the quarterly period covered by this Form 10-Q, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K).

Unregistered Sales of Equity Securities

On November 1, 2023, the Company issued 2,845,446 shares of Class A Common Stock in fulfillment of $12.7 million of its payment obligation with respect to the purchase of additional interests in its Targeted Victory subsidiary.

The issuance of the shares is exempt from registration under Section 4(a)(2) of the Securities Act, as amended. The Company will receive no cash proceeds and no commissions will be paid to any person in connection with the issuance.

On November 1, 2023, the Company acquired Movers and Shakers LLC, a business that provides social media marketing solutions, for approximately $15 million, approximately $4.5 million of which was paid through the issuance of 1,006,766 shares of Class A Common Stock. In connection with the acquisition, the previous owners are entitled to two contingent payments, each up to $17.5 million, subject to meeting certain future earnings targets for the three-year period from November 1, 2023 to November 1, 2026 and the two-year period from November 1, 2026 to November 1, 2028. The Company may elect to pay up to 50% of each contingent payment in shares of Class A Common Stock. The number of shares issued will be calculated based on the volume-weighted average closing price of the Class A Common Stock for the 10 trading days immediately prior to the earlier of the date the Company notifies the sellers of its election or the payment due date.

Item 6. Exhibits

The exhibits required by this item are listed on the Exhibit Index.

EXHIBIT INDEX


Exhibit No.						Description
3.1						Second Amended and Restated Certificate of Incorporation of Stagwell Inc., as amended (incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q filed on May 9, 2023).
3.2						Amended and Restated Bylaws of Stagwell Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on August 2, 2021).
31.1						Certification by Chief Executive Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2						Certification by Chief Financial Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1						Certification by Chief Executive Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2						Certification by Chief Financial Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101						Interactive Data File, for the period ended September 30, 2023. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.*
104						Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document and are included in Exhibit 101.*

* Filed herewith.

** Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


STAGWELL INC.

/s/ Mark Penn
Mark Penn
Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
November 2, 2023

/s/ Frank Lanuto
Frank Lanuto
Chief Financial Officer (Principal Financial Officer)
November 2, 2023