Stagwell Inc 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the shareholders and the Board of Directors of Stagwell Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Stagwell Inc. and subsidiaries (the “ Company ” ) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), shareholders ’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes and schedules listed in the Index at Item 15 (collectively referred to as the “ financial statements ” ). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company ’ s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 17, 2022, expressed an adverse opinion on the Company ’ s internal control over financial reporting because of material weaknesses. Basis for Opinion These financial statements are the responsibility of the Company ’ s management. Our responsibility is to express an opinion on the Company ’ s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue — Refer to Notes 2 and 5 to the financial statements Critical Audit Matter Description The Company ’ s revenue is primarily derived from the provision of marketing and communications services which includes strategy, creative and production for advertising campaigns, public relations services including strategy, editorial, crisis support or issues management, media training, influencer engagement and events management, media buying and planning, experiential marketing and application/website design and development. Each of the Company ’ s operating companies (referred to as Brands) generate revenue from one or more of these services. The Brands have numerous customers and contracts, under a variety of contract terms and provisions. The volume of such contracts and the diversity of the terms in such contracts introduces significant complexity in assessing the accounting under the revenue accounting standard. This complexity includes the critical judgements around defining performance obligations and the recognition of revenue when or as the customer obtains control of the promised services in an amount that reflects the consideration expected to be received in exchange for those services. Given the volume and diversity of the Company’s contracts, performing audit procedures to evaluate whether revenue was appropriately recorded, required a high degree of auditor judgement and an increased extent of audit effort and is therefore considered a critical audit matter. How the Critical Audit Matter Was Addressed in the Audit 59 Table of Contents Our audit procedures related to the testing of the Company’s application of revenue accounting standard to their revenue contracts included the following, among others: • Assessed the nature and amount of revenue recorded by Brand and evaluated the overall application of the revenue accounting standard, • Selected a sample of contracts, specifically including individually material revenue contracts, across the Brands and types of contracts. Testing included consideration of the specific application of the revenue accounting standard, including the identification of the performance obligation(s), the evaluation of the methods applied in the recognition and measurement of revenue, and the verification of the timing of delivery, transaction price and performance of services related to the revenue recorded. • Tested the mathematical accuracy of revenue recorded for each selection based on audit evidence obtained. Intangible Assets – Acquisitions and Dispositions — Refer to Notes 2 and 4 t o the financial statements Critical Audit Matter Description Stagwell Inc. was formed on August 2, 2021 as the result of a merger between Stagwell Marketing Group, LLC (a private company, “legacy SMG”) and MDC Partners, Inc. (an existing public operating company listed on the NASDAQ, “legacy MDC”). Upon consummation of the merger (“Transaction”), Stagwell has become the issuer through a reverse merger by taking control of MDC, and was renamed Stagwell Inc. The acquisition consideration totaled $426 million. The Acquisition was accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including customer relationship assets of $713 million and tradenames of $98 million. The fair value determination of the acquired customer relationship and tradename intangible assets required management to make significant estimates and assumptions related to the forecasts of future cash flows and the selection of the customer attrition rates, discount rates, and royalty rates. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the forecasts of future cash flows and the selection of the customer attrition rates, discount rates, and royalty rates for the customer relationships and tradename intangible assets acquired included the following, among others: • We evaluated the sensitivity of changes in the assumptions on the fair value of the customer relationship and tradename intangible assets. • We assessed the reasonableness of management’s forecasts of future cash flows by comparing the projections to historical results and industry market data. • We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit. • With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) customer attrition rates, (2) discount rates, and (3) royalty rates by: ◦ We assessed the reasonableness of management’s selection of customer attrition rates by comparing the revenue lost from customer attrition to historical data. ◦ Testing the source information underlying the determination of the customer attrition rates, discount rates, and royalty rates, and testing the mathematical accuracy of the calculations. ◦ Developing a range of independent estimates and comparing those to the discount rates and royalty rates selected by management. /s/ Deloitte & Touche LLP New York, NY March 17, 2022 We have served as the Company ’ s auditor since 2020. 60 Table of Contents STAGWELL INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Financial Statements: Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 59 Consolidated Statements of Operations for each of the T wo Years in the Period Ended December 31, 20 2 1 62 Consolidated Statements of Comprehensive Income (Loss) for each of the Two Years in the Period Ended December 31, 202 1 63 Consolidated Balance Sheets as of December 31, 202 1 and 20 20 64 Consolidated Statements of Cash Flows for each of the Two Years in the Period Ended December 31, 202 1 65 Consolidated Statements of Shareholders’ Equity for each of the Two Years in the Period Ended December 31, 2021 67 Notes to Consolidated Financial Statements 69 Financial Statement Schedules: Schedule II — Valuation and Qualifying Accounts for each of the Two Years in the Period Ended December 31, 2021 109 61 Table of Contents Item 1. Financial Statements STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (thousands of United States dollars, except per share amounts) Twelve Months Ended December 31, 2021 2020 Revenue $ 1,469,363 $ 888,032 Operating Expenses Cost of services 906,856 571,588 Office and general expenses 424,038 191,679 Depreciation and amortization 77,503 41,025 Impairment and other losses 16,240 — 1,424,637 804,292 Operating income 44,726 83,740 Other Income (expenses): Interest expense, net ( 31,894 ) ( 6,223 ) Foreign exchange, net ( 3,332 ) ( 721 ) Gain on sale of business and other, net 50,058 544 14,832 ( 6,400 ) Income before income taxes and equity in earnings of non-consolidated affiliates 59,558 77,340 Income tax expense 23,398 5,937 Income before equity in earnings of non-consolidated affiliates 36,160 71,403 Equity in (income) losses of non-consolidated affiliates ( 240 ) 58 Net income 35,920 71,461 Net income attributable to noncontrolling and redeemable noncontrolling interests ( 14,884 ) ( 15,105 ) Net income attributable to Stagwell Inc. common shareholders $ 21,036 $ 56,356 Loss Per Common Share: Basic Net loss attributable to Stagwell Inc. common shareholders $ ( 0.04 ) N/A Diluted Net loss attributable to Stagwell Inc. common shareholders $ ( 0.04 ) N/A Weighted Average Number of Common Shares Outstanding: Basic 90,426,215 N/A Diluted 90,426,215 N/A See notes to the Audited Consolidated Financial Statements . 62 Table of Contents STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (thousands of United States dollars) Twelve Months Ended December 31, 2021 2020 COMPREHENSIVE INCOME Net income $ 35,920 $ 71,461 Other comprehensive income (loss) Foreign currency translation adjustment ( 6,000 ) 2,371 Benefit plan adjustment 722 — Net unrealized loss on available for sale investment — ( 5,156 ) Other comprehensive income (loss) ( 5,278 ) ( 2,785 ) Comprehensive income for the period 30,642 68,676 Comprehensive income attributable to the noncontrolling interests ( 14,884 ) ( 15,105 ) Comprehensive income attributable to Stagwell Inc. $ 15,758 $ 53,571 See notes to the Audited Consolidated Financial Statements . 63 Table of Contents STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (thousands of United States dollars, except share amounts) December 31, 2021 December 31, 2020 ASSETS Current Assets: Cash and cash equivalents $ 184,009 $ 92,457 Accounts receivable, net 696,937 225,733 Expenditures billable to clients 63,065 11,063 Other current assets 61,830 36,433 Total Current Assets 1,005,841 365,686 Fixed assets, net 118,603 35,614 Right-of-use assets - operating leases 311,654 57,752 Goodwill 1,652,723 351,725 Other intangible assets, net 937,695 186,035 Other assets 29,064 17,043 Total Assets $ 4,055,580 $ 1,013,855 LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable $ 271,769 $ 147,826 Accruals and other liabilities 510,327 90,557 Advance billings 361,885 66,418 Current portion of lease liabilities - operating leases 72,255 19,579 Current portion of deferred acquisition consideration 77,946 12,579 Total Current Liabilities 1,294,182 336,959 Long-term debt 1,191,601 198,024 Long-term portion of deferred acquisition consideration 144,423 5,268 Long-term lease liabilities - operating leases 342,730 52,606 Deferred tax liabilities, net 103,093 16,050 Other liabilities 57,147 5,801 Total Liabilities 3,133,176 614,708 Redeemable Noncontrolling Interests 43,364 604 Commitments, Contingencies and Guarantees (Note 14) Shareholders' Equity: Members' capital — 358,756 Common shares - Class A & B 118 — Common shares - Class C 2 — Paid-in capital 382,893 — Accumulated deficit ( 6,982 ) — Accumulated other comprehensive loss ( 5,278 ) — Stagwell Inc. Shareholders' Equity 370,753 358,756 Noncontrolling interests 508,287 39,787 Total Shareholders' Equity 879,040 398,543 Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity $ 4,055,580 $ 1,013,855 See notes to the Audited Consolidated Financial Statements . 64 Table of Contents STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands of United States dollars) Twelve Months Ended December 31, 2021 2020 Cash flows from operating activities: Net income $ 35,920 $ 71,461 Adjustments to reconcile net income to cash provided by (used in) operating activities: Stock-based compensation 75,032 — Depreciation and amortization 77,503 41,025 Impairment and other losses 16,240 — Provision for bad debt 2,031 6,222 Deferred income taxes ( 3,818 ) ( 5,463 ) Adjustment to deferred acquisition consideration 18,721 4,520 Interest from preferred investments — ( 600 ) Equity in losses of unconsolidated affiliates, net of dividends received — ( 58 ) Transaction costs contributed by Stagwell Media LP — 10,160 Foreign currency translation loss on foreign denominated debt — 721 Other ( 1,463 ) 1,329 Gain on sale of business ( 43,440 ) — Changes in working capital: Accounts receivable ( 30,784 ) ( 26,805 ) Expenditures billable to clients ( 35,371 ) 10,078 Other assets 3,997 ( 10,461 ) Accounts payable ( 46,356 ) 5,606 Accruals and other liabilities 61,974 22,922 Advance billings 76,021 7,423 Deferred acquisition related payments ( 5,351 ) — Net cash provided by operating activities 200,856 138,080 Cash flows from investing activities: Capital expenditures ( 22,626 ) ( 12,099 ) Proceeds from sale of business, net 37,232 — Acquisitions, net of cash acquired 150,346 ( 14,732 ) Other ( 1,000 ) ( 2,190 ) Net cash provided by (used in) investing activities 163,952 ( 29,021 ) Cash flows from financing activities: Repayment of borrowings under revolving credit facility and term loan ( 719,088 ) ( 126,994 ) Proceeds from borrowings under revolving credit facility 516,669 167,000 Shares acquired and cancelled ( 841 ) — Payment of deferred consideration and other — ( 1,000 ) Contributions — 1,554 Proceeds from issuance of the 5.625% Notes 1,100,000 — Purchase of noncontrolling interest ( 37,500 ) ( 1,559 ) Debt issuance costs ( 15,053 ) ( 3,099 ) Payment of contingent consideration — ( 500 ) Distributions ( 233,203 ) ( 115,543 ) 65 Table of Contents STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued) (thousands of United States dollars) Twelve Months Ended December 31, 2021 2020 Repurchase of 7.50% Senior Notes ( 884,398 ) — Net cash used in financing activities ( 273,414 ) ( 80,141 ) Effect of exchange rate changes on cash and cash equivalents 158 ( 321 ) Net increase in cash and cash equivalents 91,552 28,597 Cash and cash equivalents at beginning of period 92,457 63,860 Cash and cash equivalents at end of period $ 184,009 $ 92,457 Supplemental disclosures: Cash income taxes paid $ 58,578 $ 10,714 Cash interest paid 23,528 9,287 Non-cash investing and financing activities: Acquisitions of business $ 425,752 $ 23,720 Acquisitions of noncontrolling interest 170,266 — Issuance of redeemable noncontrolling interest 27,280 — Net unrealized gain on available for sale investment — 5,156 Non-cash contributions 12,372 93,880 Non-cash distributions to Stagwell Media LP 13,000 — Non-cash payment of deferred acquisition consideration 7,080 64,345 Conversion of preferred shares 209,947 — See notes to the Audited Consolidated Financial Statements . 66 Table of Contents STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (thousands of United States dollars, except share amounts) Twelve Months Ended December 31, 2021 Members' capital Convertible Preference Shares Common Shares - Class A & B Common Shares - Class C Paid-in Capital Accumulated Deficit Other Comprehensive Loss Stagwell Inc. Shareholders' Equity Noncontrolling Interests Shareholders' Equity Shares Amount Shares Amount Shares Amount Balance at December 31, 2020 $ 358,756 — $ — — $ — — $ — $ — $ — $ — $ 358,756 $ 39,787 $ 398,543 Net income prior to reorginization 24,742 — — — — — — — — — 24,742 2,693 27,435 Other comprehensive loss ( 375 ) — — — — — — — — — ( 375 ) — ( 375 ) Contributions 250 — — — — — — — — — 250 — 250 Distributions, net ( 204,929 ) — — — — — — — — — ( 204,929 ) — ( 204,929 ) Distributions to noncontrolling interests — — — — — — — — — — — ( 11,936 ) ( 11,936 ) Changes in redemption value of RNCI ( 72 ) — — — — — — — — — ( 72 ) — ( 72 ) Other — — — — — — — — — — — ( 300 ) ( 300 ) Effect of reorganization ( 178,372 ) 123,849,000 209,980 78,793,502 77 179,970,051 2 110,555 — — 142,242 636,416 778,658 Reclass NCI to Liability — — — — — — — — — — ( 8,475 ) ( 8,475 ) Impact of PPA adjustment to noncontrolling interests — — — — 1 — — 8,845 — — 8,846 ( 1,549 ) 7,297 Net income (loss) attributable to Stagwell Inc. — — — — — — — — ( 3,706 ) — ( 3,706 ) 12,602 8,896 Other comprehensive loss — — — — — — — — — ( 5,278 ) ( 5,278 ) — ( 5,278 ) Distributions to noncontrolling interests — — — — — — — — — — — ( 16,338 ) ( 16,338 ) Changes in redemption value of RNCI — — — — — — — — ( 3,834 ) — ( 3,834 ) — ( 3,834 ) Grants of restricted awards — — — 1,961,588 2 — — ( 2 ) — — — — — Shares acquired and cancelled — — — ( 14,423 ) — — — ( 841 ) — — ( 841 ) — ( 841 ) Stock-based compensation — — — — — — — 70,427 — — 70,427 — 70,427 Reclass noncontrolling interests to RNCI — — — — — — — ( 25,236 ) — — ( 25,236 ) ( 2,719 ) ( 27,955 ) Purchases of noncontrolling interests — — — 4,475,653 5 — — ( 14,138 ) — — ( 14,133 ) ( 143,134 ) ( 157,267 ) Tax impact on step up transactions — — — — — — — 23,108 — — 23,108 — 23,108 Conversion of shares — ( 123,849,000 ) ( 209,980 ) 33,035,446 33 — — 209,947 — — — — — Other — — — — — — — 228 558 — 786 1,240 2,026 Balance at December 31, 2021 $ — — $ — 118,251,766 $ 118 179,970,051 $ 2 $ 382,893 $ ( 6,982 ) $ ( 5,278 ) $ 370,753 $ 508,287 $ 879,040 See notes to the Audited Consolidated Financial Statements 67 Table of Contents STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued) (thousands of United States dollars, except share amounts) Twelve Months Ended December 31, 2020 Members' capital Convertible Preference Shares Common Shares - Class A & B Common Shares - Class C Paid-in Capital Accumulated Deficit Other Comprehensive Income Stagwell Inc. Shareholders' Equity Noncontrolling Interests Shareholders' Equity Shares Amount Shares Amount Shares Amount Balance at December 31, 2019 $ 316,960 — $ — — $ — — $ — $ — $ — $ — $ 316,960 $ 31,577 $ 348,537 Net income attributable to Stagwell Inc. 56,356 — — — — — — — — — 56,356 18,231 74,587 Other comprehensive loss ( 2,785 ) — — — — — — — — — ( 2,785 ) — ( 2,785 ) Contributions 95,434 — — — — — — — — — 95,434 — 95,434 Distributions ( 108,468 ) — — — — — — — — — ( 108,468 ) ( 7,075 ) ( 115,543 ) Changes in redemption value of RNCI ( 128 ) — — — — — — — — — ( 128 ) — ( 128 ) Other 1,387 — — — — — — — — — 1,387 ( 2,946 ) ( 1,559 ) Balance at December 31, 2020 $ 358,756 — $ — — $ — — $ — $ — $ — $ — $ 358,756 $ 39,787 $ 398,543 See notes to the Audited Consolidated Financial Statements 68 Table of Contents STAGWELL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (thousands of United States dollars, except per share amounts, unless otherwise stated) 1. Business and Basis of Presentation Stagwell Inc. (the “Company” or “Stagwell”), incorporated under the laws of Delaware, conducts its business through its networks and their Brands (“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 audited consolidated 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 financial information on this Annual Report on Form 10-K (this “Form 10-K”). 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. On December 21, 2020, MDC Partners Inc. (“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of Stagwell Media (the “Stagwell Subject Entities”). The Stagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell Marketing”) and its direct and indirect subsidiaries. On August 2, 2021, we completed the previously announced combination of MDC Partners Inc. (“MDC”) and the operating businesses and subsidiaries of Stagwell Media LP. (“Stagwell Media”) and a series of related transactions (such combination and transactions, the “Transactions”). The Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing Group LLC (“Stagwell Marketing or SMG”) treated as the accounting acquirer. The results of MDC are included within the Audited Consolidated Statements of Operations for the period beginning on the date of the acquisition through the end of the respective period presented and the results of SMG are included for the entire period presented. See Note 4 of the Notes to the Consolidated Financial Statements (the “Notes” included herein for information in connection with the acquisition of MDC. The Company continues to monitor the worldwide public health threat and government actions to combat COVID-19 and the impact such developments may have on the overall economy, our clients and operations. The impact of the pandemic and the corresponding actions are reflected in our judgments, assumptions and estimates in the preparation of the financial statements. The judgments, assumptions and estimates will be updated and could result in different results in the future depending on the continued impact of the COVID-19 pandemic. The accompanying financial statements reflect all adjustments, consisting of normally recurring accruals, which in the opinion of management are necessary for a fair presentation, 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. Recent Developments On March 11, 2022, the Company and Mark Penn, Chief Executive Officer of the Company, entered into (i) a Second Amended and Restated Employment Agreement (the “Second A&R Employment Agreement”) and (ii) an Amended and Restated Stock Appreciation Rights Agreement (the “A&R SARs Agreement”). The Second A&R Employment Agreement and the A&R SARs Agreement provide that, with respect to the December 14, 2021 award to Mr. Penn of 1,500,000 stock appreciation rights (“SARs”) in respect of the Company’s Class A common stock with a base price equal to $ 8.27 under the Company’s 2016 Stock Incentive Plan (the “Plan”), (i) the SARs will be settled only in cash upon any exercise, and (ii) the SARs will be considered to have been granted outside of the Plan and are not subject to stockholder approval. 2. Significant Accounting Policies The Company’s significant accounting policies are summarized as follows: Principles of Consolidation . The accompanying consolidated financial statements include the accounts of Stagwell Inc. and its domestic and international controlled subsidiaries that are not considered variable interest entities, and variable interest entities for which the Company is the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation. Use of Estimates . The preparation of the consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and 69 Table of Contents liabilities including goodwill, intangible assets, contingent deferred acquisition consideration, redeemable noncontrolling interests, deferred tax assets, right-of-use lease assets and the amounts of revenue and expenses reported during the period. These estimates are evaluated on an ongoing basis and are based on historical experience, current conditions and various other assumptions believed to be reasonable under the circumstances. These estimates require the use of assumptions about future performance, which are uncertain at the time of estimation. To the extent actual results differ from the assumptions used, results of operations and cash flows could be materially affected. Fair Value . The Company applies the fair value measurement guidance for financial assets and liabilities that are required to be measured at fair value and for non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis, including goodwill, right-of-use lease assets and other identifiable intangible assets. See Note 18 of the Notes included herein for additional information regarding fair value measurements. Concentration of Credit Risk . The Company provides marketing communications services to clients who operate in most industry sectors. Credit is granted to qualified clients in the ordinary course of business. Due to the diversified nature of the Company’s client base, the Company does not believe that it is exposed to a concentration of credit ris k. No sales to an individual client accounted for more than 7% of revenue for the twelve months ended December 31, 2021 and 2020. Cash and Cash Equivalents . The Company’s cash equivalents are primarily comprised of investments in overnight interest-bearing deposits, money market instruments and other short-term investments with original maturity dates of three months or less at the time of purchase. The Company has a concentration of credit risk in that there are cash deposits in excess of federally insured amounts and international cash balances that may not qualify for foreign government insurance programs. To date, the Company has not experienced any losses on cash and cash equivalents. Allowance for Doubtful Accounts . Trade receivables are stated at invoiced amounts less allowances for doubtful accounts. The allowances represent estimated uncollectible receivables associated with potential customer defaults usually due to customers’ potential insolvency. The allowances include amounts for certain customers where a risk of default has been specifically identified. The assessment of the likelihood of customer defaults is based on various factors, including the length of time the receivables are past due, historical experience and existing economic conditions. Allowance for doubtful accounts was $ 5,638 and $ 5,109 at December 31, 2021 and 2020, respectively. Expenditures Billable to Clients . Expenditures billable to clients consist principally of outside vendor costs incurred on behalf of clients when providing services that have not yet been invoiced to clients. Such amounts are invoiced to clients at various times over the course of the period. Fixed Assets . Fixed assets are stated at cost, net of accumulated depreciation. Computers, furniture and fixtures, and capitalized software are depreciated on a straight-line basis over periods of three to ten years . 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. Repairs and maintenance costs are expensed as incurred. Accumulated depreciation was $ 44,652 and $ 28,364 at December 31, 2021 and 2020 respectively. Leases . Effective January 1, 2019, the Company adopted Accounting Standards Codification, Leases (“ASC 842”). The Company recognizes on the balance sheet at the time of lease commencement a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments. All right-of-use lease assets are reviewed for impairment. With the adoption of ASC 842, the Company elected to apply the package of practical expedients: (i) whether a contract is or contains a lease, (ii) the classification of existing leases, and (iii) whether previously capitalized costs continue to qualify as initial indirect costs. Additionally, the Company elected the practical expedient to not separate non-lease components from lease components for all operating leases. See Note 10 of the Notes included herein for further information on leases. Impairment of Long-lived Assets . A long-lived asset or asset group is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such events occur, the Company compares the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of such asset or asset group. If this comparison indicates that there is an impairment, the amount of the impairment is typically calculated using discounted expected future cash flows where observable fair values are not readily determinable. The discount rate applied to these cash flows is based on the Company’s weighted average cost of capital (“WACC”), risk adjusted where appropriate, or other appropriate discount rate. Goodwill . Goodwill (the excess of the acquisition cost over the fair value of the net assets acquired) acquired as a result of a business combination which is not subject to amortization is tested for impairment, at the reporting unit level, annually as of October 1st of each year, or more frequently if indicators of potential impairment exist. For the annual impairment test, the Company has the option of assessing qualitative factors to determine whether it is more likely than not that the carrying amount of a reporting unit exceeds its fair value or performing a quantitative goodwill impairment test. Qualitative factors considered in the assessment include industry and market considerations, the competitive 70 Table of Contents environment, overall financial performance, changing cost factors such as labor costs, and other factors specific to each reporting unit such as change in management or key personnel. If the Company elects to perform the qualitative assessment and concludes that it is more likely than not that the fair value of the reporting unit is more than its carrying amount, then goodwill is not considered impaired and the quantitative impairment test is not necessary. For reporting units for which the qualitative assessment concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount and for reporting units for which the qualitative assessment is not performed, the Company will perform the quantitative impairment test, which compares the fair value of the reporting unit to its carrying amount. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not considered impaired. However, if the fair value of the reporting unit is lower than the carrying amount of the net assets assigned to the reporting unit, an impairment charge is recognized equal to the excess of the carrying amount over the fair value. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. The Company uses a combination of the income approach, which incorporates the use of the discounted cash flow (“DCF”) method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. The Company generally applies an equal weighting to the income and market approaches for the impairment test. The income approach and the market approach both require the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates. The DCF estimates incorporate expected cash flows that represent a spectrum of the amount and timing of possible cash flows of each reporting unit from a market participant perspective. The expected cash flows are developed from the Company’s long-range planning process using projections of operating results and related cash flows based on assumed long-term growth rates, demand trends and appropriate discount rates based on a reporting unit’s WACC as determined by considering the observable WACC of comparable companies and factors specific to the reporting unit. The terminal value is estimated using a constant growth method which requires an assumption about the expected long-term growth rate. The estimates are based on historical data and experience, industry projections, economic conditions, and the Company’s expectations. Definite Lived Intangible Assets . Definite lived intangible assets are subject to amortization over their useful lives. A straight-line amortization method is used over the estimated useful life which is representative of the pattern of how the economic benefits of the specific intangible asset is consumed. Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. The Company uses an income approach, which incorporates the use of the discounted cash flow (“DCF”) method. Business Combinations. Business combinations are accounted for using the acquisition method and accordingly, the assets acquired (including identified intangible assets), the liabilities assumed and any noncontrolling interest in the acquired business are recorded at their acquisition date fair values. For each acquisition, the Company undertakes a detailed review to identify other intangible assets and a valuation is performed for all such identified assets. The Company uses several market participant measurements to determine the estimated value. This approach includes consideration of similar and recent transactions, as well as utilizing discounted expected cash flow methodologies. A substantial portion of the intangible assets value that the Company acquires is the specialized know-how of the workforce, which is treated as part of goodwill and is not required to be valued separately. The majority of the value of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well as trade names and trademarks. Deferred Acquisition Consideration . Certain acquisitions include an initial payment at the time of closing and provide for future additional contingent purchase price payments. Contingent purchase price obligations for these transactions are recorded as deferred acquisition consideration liabilities on the balance sheet, at the acquisition date fair value and are remeasured at each reporting period. These liabilities are derived from the projected performance of the acquired entity. These arrangements may be dependent on future events, such as the growth rate of the earnings of the relevant subsidiary during the contractual period. At each reporting date, the Company models each business’ future performance, including revenue growth and free cash flows, to estimate the value of each deferred acquisition consideration liability. The liability is adjusted quarterly based on changes in current information affecting each subsidiary’s current operating results and the impact this information will have on future results included in the calculation of the estimated liability. These adjustments are recorded in the results of operations. In instances where such contingent payments require the sellers’ continuous employment with the Company after the transaction, they are recorded as compensation expense in the Audited Consolidated Statements of Operations. Redeemable Noncontrolling Interests . Many of the Company’s acquisitions include contractual arrangements where the noncontrolling shareholders have an option to purchase, or may require the Company to purchase, such noncontrolling shareholders’ incremental ownership interests under certain circumstances. The Company has similar call options under the same contractual terms. The amount of consideration under these contractual arrangements is not a fixed amount, but rather is dependent upon various valuation formulas, such as the average earnings of the relevant subsidiary through the date of exercise 71 Table of Contents or the growth rate of the earnings of the relevant subsidiary during that period. In the event that an incremental purchase may be required by the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity on the Audited Consolidated Balance Sheets at their acquisition date fair value and adjusted for changes to their estimated redemption value through Retained earnings or Paid-in capital (when at an accumulated deficit) in the Audited Consolidated Balance Sheets (but not less than their initial redemption value), except for foreign currency translation adjustments. These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. Control to Control Subsidiary Purchases. Transactions involving the purchase, sale or issuance of interests of a subsidiary where control is maintained are recorded as a reduction in the redeemable noncontrolling interests or noncontrolling interests, as applicable. Any difference between the purchase price and noncontrolling interest is recorded to Paid-in capital in the Audited Consolidated Balance Sheets. In circumstances where the purchase of shares of an equity investment results in obtaining control, the existing carrying value of the investment is remeasured to the acquisition date fair value and any gain or loss is recognized in the results of operations. Revenue Recognition . The Company’s revenue is recognized when control of the promised services are transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. See Note 5 of the Notes included herein for additional information. Cost of Services . Cost of services sold primarily consists of staff costs that are directly attributable to the Company’s client engagements, as well as third-party direct costs of production and delivery of services to its clients. Cost of services sold does not include depreciation, amortization, and other office and general expenses that are not directly attributable to the Company’s client engagements. Deferred Financing Costs . The Company uses the effective interest method to amortize deferred financing costs and any original issue premium or discount, if applicable. The Company also uses the straight-line method, which approximates the effective interest method, to amortize the deferred financing costs. Income Taxes. We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates and laws expected to be in effect when the differences are expected to reverse. The Company records associated interest and penalties as a component of income tax expense. The Company records a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Management evaluates on a quarterly basis all available positive and negative evidence considering factors such as the reversal of deferred income tax liabilities, taxable income in eligible carryback years, projected future taxable income, the character of the income tax asset, tax planning strategies, changes in tax laws and other factors. The periodic assessment of the net carrying value of the Company’s deferred tax assets under the applicable accounting rules requires significant management judgment. A change to any of these factors could impact the estimated valuation allowance and income tax expense. Stock-Based Compensation . Under the fair value method, compensation cost is measured at fair value at the date of grant and is expensed over the service period, generally the award’s vesting period. The Company uses its historical volatility derived over the expected term of the award to determine the volatility factor used in determining the fair value of the award. The Company recognizes forfeitures as they occur. Stock-based awards that are settled in cash or equity at the option of the Company are recorded at fair value on the date of grant. The fair value measurement of the compensation cost for these awards is based on using the Black-Scholes option pricing-model or other acceptable method and is recorded in Operating income (loss) over the service period, in this case the award’s vesting period. The Company has adopted the straight-line attribution method for determining the compensation cost to be recorded during each accounting period. The Company commences recording compensation expense related to awards that are based on performance conditions under the straight-line attribution method when it is probable that such performance conditions will be met. Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (“profits interests awards”). The profits interests awards are substantive equity, settled in cash and accounted for under ASC 718, Share Based Payments. The profits interests awards represent a liability that is remeasured at fair value at each reporting period. Retirement Costs . Several of the Company’s subsidiaries offer employees access to certain defined contribution retirement programs. Under the defined contribution plans, these subsidiaries, in some cases, make annual contributions to participants’ accounts which are subject to vesting. The Company’s contribution expense pursuant to these plans was $ 9,797 and $ 3,949 for the twelve months ended December 31, 2021 and 2020, respectively. The Company also has a defined benefit pension plan. See Note 12 of the Notes included herein for additional information on the defined benefit plan. 72 Table of Contents Income (Loss) per Common Share . Basic income (loss) per common share is based upon the weighted average number of common shares outstanding during each period. Diluted income (loss) per common share is based on the above, in addition, if dilutive, common share equivalents, which include outstanding options, stock appreciation rights, and unvested restricted stock units. In periods of net loss, all potentially issuable common shares are excluded from diluted net loss per common share because they are anti-dilutive. Foreign Currency Translation . The functional and reporting currency of the Company is the U.S. dollar. Generally, the Company’s subsidiaries use their local currency as their functional currency. Accordingly, the currency impacts of the translation of the Consolidated Balance Sheets of the Company and its non-U.S. dollar based subsidiaries to U.S. dollar statements are included as cumulative translation adjustments in Accumulated other comprehensive income (loss). Translation of intercompany debt, which is not intended to be repaid, is included in cumulative translation adjustments. Cumulative translation adjustments are not included in Net income (loss) unless they are actually realized through a sale or upon complete, or substantially complete, liquidation of the Company’s net investment in the foreign operation. Translation of current intercompany balances are included in Net income (loss). The balance sheets of non-U.S. dollar based subsidiaries are translated at the period end rate. The Consolidated Statements of Operations of the Company and its non-U.S. dollar based subsidiaries are translated at average exchange rates for the period. Gains and losses arising from the Company’s foreign currency transactions are reflected in Foreign exchange, net on the Consolidated Statements of Operations. 3. New Accounting Pronouncements In October 2021, the FASB issued ASU 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and other items. ASU 2021-08 is effective January 1, 2023; however, the Company has early adopted the standard and retrospectively applied it to the financial statements herein. In March 2020, the FASB issued ASU 2020-04, and in January subsequently issued ASU 2021-01, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective upon issuance, through December 31, 2022. The Company is evaluating the impact of the adoption of this guidance on the Company's financial statements and disclosures. 4. Acquisitions and Dispositions 2021 Acquisitions Acquisition of MDC Partners Inc. On December 21, 2020, MDC Partners Inc. (“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into the a transaction agreement, providing for the combination of MDC with the operating businesses and subsidiaries of Stagwell Media (the “Stagwell Subject Entities”) (the “Transaction Agreement”). The Stagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell Marketing or SMG”) and its direct and indirect subsidiaries. On August 2, 2021 (the “Closing Date”), we completed the combination of MDC and the Stagwell Subject Entities and a series of steps and related transactions (such combination and transactions, the “Transactions”). In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of the Company, converted into a Delaware limited liability company and changed its name to Midas OpCo Holdings LLC (“OpCo”); (ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo; and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc. In respect of the Transactions, the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). The Transactions were accounted for as a reverse acquisition using the acquisition method of accounting, pursuant to ASC 805-10, Business Combinations, with MDC treated as the legal acquirer and SMG treated as the accounting acquirer. In identifying SMG as the acquiring entity for accounting purposes, MDC and SMG took into account a number of factors, including the relative voting rights and the corporate governance structure of the Company. SMG is considered the accounting acquirer since Stagwell Media controls the board of directors of the Company following the Transactions and received an indirect ownership interest in the Company’s only operating subsidiary, OpCo, of 69.55 % ownership of OpCo’s common units. However, no single factor was the sole determinant in the overall conclusion that Stagwell is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion. Under the 73 Table of Contents acquisition method of accounting, the assets and liabilities of MDC, as the accounting acquiree, were recorded at their respective fair value as of the date the Transactions were completed. On August 2, 2021, an aggregate of 179,970,051 shares of the Company’s Class C Common Stock were issued to Stagwell Media in exchange for $ 1.8 (the “Stagwell New MDC Contribution”). The Class C Common Stock does not participate in the earnings of the Company. Additionally, an aggregate of 179,970,051 OpCo common units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities (the “Stagwell OpCo Contribution”). The fair value of the purchase consideration is $ 425,752 , consisting of approximately 80,000,000 shares of the Company’s Class A and B Common Stock and Common Stock equivalents based on a per share price of approximately $ 5.42 , the closing stock price on the date of the combination. ASC 805 requires the allocation of the purchase price consideration to the fair value of the identified assets acquired and liabilities assumed upon consummation of a business combination. For this purpose, fair value shall be determined in accordance with the fair value concepts defined in ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”). Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements can be highly subjective and can involve a high degree of estimation. The total purchase price to acquire MDC has been allocated to the assets acquired and assumed liabilities based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The fair value of the acquired assets and assumed liabilities as of the date of acquisition are based on preliminary estimates assisted, in part, by a third-party valuation expert. The estimates are subject to change upon the finalization of appraisals and other valuation analyses, which are expected to be completed no later than one year from the date of acquisition. Although the completion of the valuation activities may result in asset and liability fair values that are different from the preliminary estimates included herein, it is not expected that those differences would alter the understanding of the impact of this transaction on the consolidated financial position and results of operations of the Company. The preliminary purchase price allocation is as follows: Amount Cash and cash equivalents $ 130,153 Accounts receivable 413,839 Other current assets 41,736 Fixed Assets 80,047 Right-of-use lease assets - operating leases 253,629 Intangible assets 810,900 Other assets 16,818 Accounts payable ( 170,361 ) Accruals and other liabilities ( 309,081 ) Advance billings ( 211,403 ) Current portion of lease liabilities ( 48,517 ) Current portion of deferred acquisition consideration ( 53,054 ) Long-term debt ( 901,736 ) Revolving credit facility ( 109,954 ) Long-term portion of deferred acquisition consideration ( 8,056 ) Long-term portion of lease liabilities ( 289,128 ) Other liabilities ( 132,394 ) Redeemable noncontrolling interests ( 25,990 ) Preferred shares ( 209,980 ) Noncontrolling interests ( 151,090 ) Net liabilities assumed ( 873,622 ) Goodwill 1,299,374 Purchase price consideration $ 425,752 74 Table of Contents The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of MDC. Goodwill of $ 1,058,411 , $ 174,719 and $ 66,244 was assigned to the Integrated Agencies Network, the Media Network and the Communications Network reportable segments, respectively. The majority of the goodwill is non-deductible for income tax purposes. Goodwill has been updated from the previously reported amount of $ 1,270,081 to reflect a change in certain assets and liabilities, primarily the remeasurement of leases. There has been no change that impacts the Consolidated Statement of Operations. 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 thirteen years . The following table presents the details of identifiable intangible assets acquired. Estimated Fair Value Estimated Useful Life in Years Trade Names $ 98,000 10 Customer Relationships 712,900 6 - 20 Total Acquired Intangible Assets $ 810,900 MDC operating results are included in the Consolidated Statements of Operations from the date of the acquisition through December 31, 2021 with revenue of $ 605,448 and a nominal net loss. Transaction expenses were approximately $ 15,000 for the twelve months ended December 31, 2021. Pro Forma Financial Information (unaudited) The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2020. 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 acquisitions been consummated as of that time. Twelve Months Ended December 31, 2021 Twelve Months Ended December 31, 2020 Revenue $ 2,224,343 $ 2,087,025 The proforma net loss was nominal for the twelve months ended December 31, 2021 and 2020. Acquisition of Goodstuff Holdings Limited On December 31, 2021, the Company acquired GoodStuff Holdings Limited (“Goodstuff”) for approximately £ 21,000 (approximately $ 28,053 ) of cash consideration as well as contingent consideration up to a maximum of £ 22,000 . The cash consideration included an initial payment of £ 8,000 , an excess working capital payment of approximately £ 9,000 and approximately £ 4,000 of deferred payments. The contingent consideration is tied to employees’ service and therefore will be recognized as compensation expense through 2026. Therefore, only the cash consideration has been allocated to the assets acquired and assumed liabilities of Goodstuff based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The preliminary purchase price allocation is as follows: 75 Table of Contents Amount Cash and cash equivalents $ 30,985 Accounts receivable 28,685 Other current assets 3,207 Fixed Assets 237 Right-of-use lease assets - operating leases 2,060 Intangible assets 14,974 Other assets 55 Accounts payable ( 6,344 ) Accruals and other liabilities ( 27,353 ) Advance billings ( 15,956 ) Current portion of lease liabilities ( 857 ) Income taxes payable ( 967 ) Long-term portion of lease liabilities ( 3,744 ) Other liabilities ( 1,204 ) Net assets assumed 23,778 Goodwill 4,275 Purchase price consideration $ 28,053 The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of Goodstuff. Goodwill of $ 4,275 was assigned to the Media Network. The majority of the goodwill is non-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. Estimated Fair Value Estimated Useful Life in Years Trade Names $ 1,349 15 Customer Relationships 13,625 10 Total Acquired Intangible Assets $ 14,974 Pro Forma Financial Information (unaudited) The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2020. 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 acquisitions been consummated as of that time. Twelve Months Ended December 31, 2021 Twelve Months Ended December 31, 2020 Revenue $ 1,488,532 $ 902,577 Net Income 38,719 72,715 Purchases of noncontrolling interests 76 Table of Contents On October 1, 2021, the Company entered into an agreement to purchase the approximate 27 % remaining interest of Targeted Victory it did not already own, stipulating the purchase of 13.3 % on October 1, 2021 and the remaining 13.3 % on July 31, 2023, with the option for the seller to delay the second purchase until July 31, 2025. The purchase price of $ 73,898 , was comprised of a contingent deferred acquisition payment and redeemable noncontrolling interest with estimated present values at the acquisition date of $ 46,618 and $ 27,280 , respectively. The contingent deferred payment and redeemable noncontrolling interest were based on the financial results of the underlying business through 2025. In addition, at the option of the Company, up to 50 % of the total purchase price can be paid in shares of Class A Common Stock and in no event may the purchase price exceed $ 135,000 . On December 1, 2021, the Company acquired the approximate 27 % remaining interest of Concentric it did not already own for an aggregate purchase price of $ 8,058 , comprised of a closing cash payment of $ 1,581 in 2022 and contingent deferred acquisition payments with an estimated present value at the acquisition date of $ 6,477 . The contingent deferred payments were based on the financial results of the underlying business through 2022 with final payment due in 2023. On December 31, 2021, the Company acquired the approximate 49 % remaining interest of Instrument it did not already own for an aggregate purchase price of $ 157,072 , comprised of a closing payment of $ 37,500 in cash and $ 37,500 in shares of Class A Common Stock and deferred acquisition payments with an estimated present value at the acquisition date of $ 82,072 . The deferred payments are not contingent and will be paid in 2023 and 2024. 2020 Acquisitions On February 14, 2020, the Company acquired Sloane & Company (“Sloane”) from an affiliate of Stagwell for approximately $ 24,400 of total consideration. Total consideration included a cash payment of $ 18,900 made by Stagwell Media (Non-consolidated related party) which was accounted for as a non-cash contribution for the purposes of the Company’s Consolidated Statement of Cash Flows and Statement of Changes in Equity, the acquisition date fair value of the contingent deferred acquisition consideration of $ 4,800 , and $ 700 of cash paid by the Company. Sloane is an industry-leading strategic communications firm, based out of New York. Sloane will extend SKDK’s current suite of services and allow for the expansion into the capital markets and special situations verticals. On August 14, 2020, the Company acquired Kettle Solutions, LLC (“Kettle”) for approximately $ 5,400 of total consideration. Total consideration included a cash payment of $ 4,900 , plus an additional $ 500 due upon the finalization of Kettle’s working capital accounts, as outlined in the purchase agreement. The purchase agreement also offers the previous owners of Kettle an additional $ 11,900 in deferred consideration, and is dependent on Kettle reaching contractually defined operating goals in 2020, 2021, 2022 and 2023. Kettle is an industry recognized web design and content creation firm that assists its customers in developing and executing marketing campaigns, based out of New York. On October 30, 2020, the Company acquired Truelogic Software, LLC, Ramenu S.A., and Polar Bear Development S.R.L. (collectively referred to as “Truelogic”), for approximately $ 17,300 of total consideration. Total consideration included a cash payment of $ 8,900 , the acquisition date fair value of the contingent deferred acquisition consideration of $ 7,900 , and an additional $ 500 due upon the finalization of Truelogic’s working capital accounts, as outlined in the purchase agreement. Truelogic is a software development firm based in Buenos Aires that assists customers in sourcing top South American engineering talent and developing small-scale software projects. Truelogic is included in the Company’s Code and Theory Brand, which is part of its Integrated Agencies Reportable segment. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of each acquisition (in thousands): 77 Table of Contents 2020 Sloane Kettle Truelogic Total Cash, cash equivalents and restricted cash $ — $ 49 $ 90 $ 139 Accounts receivable and other current assets 2,768 2,732 2,958 8,458 Other noncurrent assets — 172 10 182 Intangible assets 5,900 1,930 9,500 17,330 Property and equipment 72 58 50 180 Right-of-use lease assets – operating leases — 533 201 734 Accounts payable and other current liabilities ( 469 ) ( 552 ) ( 1,063 ) ( 2,084 ) Advanced billings ( 130 ) ( 310 ) ( 429 ) ( 869 ) Operating lease liabilities — ( 533 ) ( 201 ) ( 734 ) Goodwill 16,275 1,323 6,184 23,782 Total net assets acquired $ 24,416 $ 5,402 $ 17,300 $ 47,118 Goodwill recognized on the Sloane, Kettle and Truelogic acquisitions is fully-deductible for income tax purposes. The following table reports the fair value of intangible assets acquired, including the corresponding weighted average amortization periods, as of the date of each acquisition (in thousands, except years): 2020 Weighted Average Amortization Period Sloane Kettle Truelogic Total Customer relationships 10 years $ 4,600 $ 1,600 $ 9,100 $ 15,300 Trade names and trademarks 11 years 1,300 330 400 2,030 Total $ 5,900 $ 1,930 $ 9,500 $ 17,330 The following table summarizes the total revenue and net income included in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the twelve months ended December 31, 2020 from the date of each acquisition (in thousands): Twelve Months Ended December 31, 2020 Revenue $ 22,381 Net Income 2,685 Pro Forma Financial Information (unaudited) The unaudited pro forma information for the periods set forth below gives effect to the 2020 acquisitions as if they had occurred as of January 1, 2020. 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 acquisitions been consummated as of that time (in thousands): Twelve Months Ended December 31, 2020 Revenue $ 911,203 Net Income 75,767 78 Table of Contents 2021 Disposition On September 15, 2021, the Company sold Reputation Defender to a strategic buyer for approximately $ 40,000 resulting in a gain of approximately $ 43,000 . The gain is recognized within the All Other category in Gain on sale of business and other, net within the Audited Consolidated Statements of Operations. 5. Revenue The Company’s revenue recognition policies are established in accordance with ASC 606, and accordingly, revenue is recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The Stagwell network provides an extensive range of services to our clients, offering a variety of marketing and communication capabilities including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast), public relations services including strategy, editorial, crisis support or issues management, media training, influencer engagement and events management. We also provide media buying and planning across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast), experiential marketing and application/website design and development. The primary source of the Company’s revenue is from agency arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses, depending on the terms of the client contract. In all circumstances, revenue is only recognized when collection is reasonably assured. Certain of the Company’s contractual arrangements have more than one performance obligation. For such arrangements, revenue is allocated to each performance obligation based on its relative stand-alone selling price. Stand-alone selling prices are determined based on the prices charged to clients or using expected cost plus margin. The determination of our performance obligations is specific to the services included within each contract. Based on a client’s requirements within the contract, and how these services are provided, multiple services could represent separate performance obligations or be combined and considered one performance obligation. Contracts that contain services that are not significantly integrated or interdependent, and that do not significantly modify or customize each other, are considered separate performance obligations. Typically, we consider media planning, media buying, creative (or strategy), production and experiential marketing services to be separate performance obligations if included in the same contract as each of these services can be provided on a stand-alone basis, and do not significantly modify or customize each other. Public relations services and application/website design and development are typically each considered one performance obligation as there is a significant integration of these services into a combined output. Certain of the Company’s contracts consist of a single performance obligation. In these instances, the Company does not consider the underlying activities as separate or distinct performance obligations because its services are highly interrelated, and the integration of the various components is essential to the overall promise to the Company’s customer. In certain of the Company’s client contracts, the performance obligation is a stand-ready obligation because the Company provides a constant level of similar services over the term of the contract. We typically satisfy our performance obligations over time, as services are performed. Fees for services are typically recognized using input methods (direct labor hours, materials and third-party costs) that correspond with efforts incurred to date in relation to total estimated efforts to complete the contract. To a lesser extent, revenue is recognized using output measures, such as impressions or ongoing reporting. For client contracts when the Company has a stand-ready obligation to perform services on an ongoing basis over the life of the contract, where the scope of these arrangements includes an undefined number of broad activities and there are no significant gaps in performing the services, the Company recognizes revenue ratably using a time-based measure. In addition, for client contracts where the Company is providing online subscription-based hosted services, it recognizes revenue ratably over the contract term. Point in time recognition primarily relates to certain commission-based contracts, which are recognized upon the placement of advertisements in various media when the Company has no further performance obligation. Revenue is recognized net of sales and other taxes due to be collected and remitted to governmental authorities. The Company’s contracts typically provide for termination by either party within 30 to 90 days. Although payment terms vary by client, they are typically within 30 to 60 days. In addition, the Company generally has the right to payment for all services provided through the end of the contract or termination date. Within each contract, we identify whether the Company is principal or agent at the performance obligation level. In arrangements where the Company has substantive control over the service before transferring it to the client, and is primarily responsible for integrating the services into the final deliverables, we act as principal. In these arrangements, revenue is recorded at the gross amount billed. Accordingly, for these contracts the Company has included reimbursed expenses in revenue. In other arrangements where a third-party supplier, rather than the Company, is primarily responsible for the integration of services into the final deliverables, and thus the Company is solely arranging for the third-party supplier to 79 Table of Contents provide these services to our client, we generally act as agent and record revenue equal to the net amount retained, when the fee or commission is earned. The role of Stagwell’s agencies under a production services agreement is to facilitate a client’s purchasing of production capabilities from a third-party production company in accordance with the client’s strategy and guidelines. The obligation of Stagwell’s agencies under media buying services is to negotiate and purchase advertising media from a third-party media vendor on behalf of a client to execute its media plan. We do not obtain control prior to transferring these services to our clients; therefore, we primarily act as agent for production and media buying services. A small portion of the Company’s contractual arrangements with clients include performance incentive provisions, which allow the Company to earn additional revenues as a result of its performance relative to both quantitative and qualitative goals. Incentive compensation is primarily estimated using the most likely amount method and is included in revenue up to the amount that is not expected to result in a reversal of a significant amount of cumulative revenue recognized. We recognize revenue related to performance incentives as we satisfy the performance obligation to which the performance incentives are related. 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 agency 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 twelve months ended December 31, 2021 and 2020: Twelve Months Ended December 31, Principal Capabilities Reportable Segment 2021 2020 Digital Transformation All Segments $ 400,857 $ 374,689 Creativity and Communications Integrated Agencies Network, Communications Network, Other 561,538 152,499 Performance Media and Data Media Network, Other 341,730 253,011 Consumer Insights and Strategy Integrated Agencies Network, Other 165,238 107,833 $ 1,469,363 $ 888,032 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 looking for help to grow their businesses in new markets. Stagwell’s Brands are located in the United States and United Kingdom, and more than thirty other countries around the world. In the past, 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 twelve months ended December 31, 2021 and 2020: Twelve Months Ended December 31, Geographical Location Reportable Segment 2021 2020 United States All $ 1,219,816 $ 804,418 United Kingdom All 105,961 41,489 Other All 143,586 42,125 $ 1,469,363 $ 888,032 80 Table of Contents 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 $ 116,558 and $ 30,570 at December 31, 2021 and 2020, respectively, and are included as a component of Accounts receivable on the Audited Consolidated Balance Sheets. Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $ 63,065 and $ 11,063 at December 31, 2021 and 2020, respectively, and are included on the Consolidated Balance Sheets as Expenditures billable to clients. Such amounts are invoiced to clients at various times over the course of providing services. Additions to contract assets of $ 99,853 were added during the period as a result of the acquisition of MDC. Contract liabilities consist of fees received from or billed to clients in excess of fees recognized. Such fees are classified as Advance billings presented on the Company’s 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 Consolidated Statements of Operations. Advance billings at December 31, 2021 and 2020 were $ 361,885 and $ 66,418 , respectively. The increase in the Advance billings balance of $ 295,467 for the twelve months ended December 31, 2021 was primarily driven by the acquisition of MDC, representing a 211,403 increase, and by cash payments received or due in advance of satisfying our performance obligations, partially offset by $ 64,446 recognized that were included in the Advance billings balances as of December 31, 2020 and reductions due to the incurrence of third-party costs. Changes in the contract asset and liability balances during the twelve months ended December 31, 2021 were not materially impacted by write offs, impairment losses or any other factors. 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 $ 22,812 of unsatisfied performance obligations as of December 31, 2021, of which we expect to recognize approximately 93 % in 2022 and 7 % in 2023. 6. Income (Loss) Per Common Share The following table sets forth the computations of basic and diluted income (loss) per common share: Twelve Months Ended December 31, 2021 Numerator: Net loss attributable to Stagwell Inc. common shareholders $ ( 3,706 ) Denominator: Weighted average number of common shares outstanding 90,426,215 Earnings Per Share - Basic & Diluted $ ( 0.04 ) Anti-dilutive: Class C shares 179,970,051 Stock Appreciation Rights and Restricted Awards 9,508,668 On September 23, 2021, the Company provided notices of conversion to each holder of record of each of the Company’s Series 6 and Series 8 Preferred Shares. Pursuant to the notices, the 50,000,000 issued and outstanding Series 6 Preferred Shares were converted into 12,086,700 Class A Common Shares, in the aggregate, on October 7, 2021, and the 73,849,000 issued and outstanding Series 8 Preferred Shares were converted into 20,948,746 Class A Common Shares, in the aggregate, on November 8, 2021. The combination of MDC and SMG was completed on August 2, 2021, which was treated as a reverse acquisition for financial reporting purposes. SMG was treated as the accounting acquirer and MDC was the accounting acquiree. Therefore, under applicable accounting principles, the historical financial results of SMG prior to August 2, 2021 are considered our historical financial results. Accordingly, historical information presented in this Form 10-K for events occurring or periods ending before August 2, 2021 does not reflect the impact of the Transactions or the financial results of MDC and may not be comparable with historical information for events occurring or periods ending on or after August 2, 2021. 81 Table of Contents SMG’s equity structure, prior to the combination with MDC , was a non-unitized single member limited liability company, resulting in all components of equity attributable to the member being reported within Members' Capital. Given that SMG was a non-unitized single member limited liability company, net income (loss) prior to the combination is not applicable for purposes of calculating earnings per share. Therefore, the net income (loss) in the table above includes the income or loss for the period beginning on the acquisition date through the end of the respective reporting period and as such will not reconcile to the respective amounts presented within th e Consolidated Statements of Operations . 7. Fixed Assets The following is a summary of the Company’s fixed assets as of December 31: 2021 2020 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value Computers, furniture and fixtures $ 41,839 $ ( 18,136 ) $ 23,703 $ 21,373 $ ( 13,210 ) $ 8,163 Leasehold improvements 91,572 ( 17,759 ) 73,813 22,689 ( 10,667 ) 12,022 Capitalized Software 29,844 ( 8,757 ) 21,087 19,916 ( 4,487 ) 15,429 $ 163,255 $ ( 44,652 ) $ 118,603 $ 63,978 $ ( 28,364 ) $ 35,614 Depreciation expense for the twelve months ended December 31, 2021 and 2020 was $ 19,696 and $ 10,144 , respectively. 8. Goodwill and Intangible Assets As of December 31, goodwill was as follows: Integrated Agencies Network Media Network Communication Network All Other Corporate Total Balance at December 31, 2019 $ 88,094 $ 177,073 $ 33,258 $ 26,760 $ — $ 325,185 Acquired goodwill 7,070 235 16,275 195 23,775 Foreign currency translation — 3,331 — ( 566 ) — 2,765 Balance at December 31, 2020 $ 95,164 $ 180,639 $ 49,533 $ 26,389 $ — $ 351,725 Acquired goodwill 1,058,411 178,994 66,244 — — 1,303,649 Disposition — — — ( 935 ) — ( 935 ) Foreign currency translation ( 502 ) ( 1,020 ) — ( 194 ) — ( 1,716 ) Balance at December 31, 2021 $ 1,153,073 $ 358,613 $ 115,777 $ 25,260 $ — $ 1,652,723 For the twelve months ended December 31, 2021 and 2020, no impairment loss was recognized. There were no accumulated goodwill impairment charges as of December 31, 2021 and 2020. 82 Table of Contents The gross and net amounts of intangible assets other than goodwill as of December 31, Intangible Assets 2021 2020 Customer relationships – gross $ 875,541 $ 154,510 Less accumulated amortization ( 92,746 ) ( 56,299 ) Customer relationships – net $ 782,795 $ 98,211 Trademarks – gross $ 190,162 $ 118,647 Less accumulated amortization ( 36,775 ) ( 32,431 ) Trademarks – net $ 153,387 $ 86,216 Noncompete – gross $ 3,989 $ 4,005 Less accumulated amortization ( 3,386 ) ( 2,980 ) Noncompete – net $ 603 $ 1,025 Other intangible assets – gross $ 3,717 $ 2,893 Less accumulated amortization ( 2,807 ) ( 2,310 ) Other intangible assets – net $ 910 $ 583 Total intangible assets $ 1,073,409 $ 280,055 Less accumulated amortization ( 135,714 ) ( 94,020 ) Total intangible assets – net $ 937,695 $ 186,035 For the twelve months ended December 31, 2021, the Company recognized an impairment charge of $ 16,187 to reduce the carrying values of intangible assets within the Integrated Agencies Network and Media Network reportable segments in connection with the abandonment of certain trade names as part of the rebranding of certain Brands. For the twelve months ended December 31, 2020, no impairment loss was recognized. The weighted average amortization period for customer relationships is eight years, trademarks is eleven years, noncompete is four years, and other intangible assets is two years. In total, the weighted average amortization period is ten years. Amortization expense related to amortizable intangible assets for the twelve months ended December 31, 2021 and 2020 was $ 56,774 and $ 30,881 , respectively. The estimated amortization expense for the five succeeding years is as follows: Year Amortization 2022 $ 92,616 2023 88,118 2024 84,880 2025 82,722 2026 80,466 Thereafter 508,893 9. Deferred Acquisition Consideration Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments, and to a lesser extent, 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 through operating income. The Company accounts for certain retention payments through operating income as compensation expense over the required retention period. 83 Table of Contents The following table presents changes in contingent deferred acquisition consideration, which is measured at fair value on a recurring basis using significant unobservable inputs, and a reconciliation to the amounts reported on the Audited Consolidated Balance Sheets as of December 31, 2021 and 2020: December 31, 2021 2020 Beginning balance of contingent payments $ 17,847 $ 65,792 Payments ( 12,431 ) ( 66,235 ) Adjustment to deferred acquisition consideration (1) 18,721 2,520 Additions (2) 198,937 15,717 Other ( 705 ) 53 Ending balance of contingent payments $ 222,369 $ 17,847 (1) Adjustment to deferred acquisition consideration contains fair value changes from the Company’s initial estimates of deferred acquisition payments. Redemption value adjustments are recorded within Office and general expenses on the Audited Consolidated Statements of Operations. (2) Approximately $ 61,000 of additions in 2021 represent deferred acquisition consideration acquired in connection with the acquisition of MDC. Approximately $ 136,000 of additions represent deferred acquisition consideration acquired in connection with the purchases of noncontrolling interests. See Note 4 of the Notes included herein for additional information related to the purchases of Concentric, Targeted Victory, and Instrument. 10. Leases The Company leases office space in North America, Europe, Asia, South America, 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 2022 through 2034. The Company’s finance leases are immaterial. The Company’s leasing policies are established in accordance with ASC 842, and accordingly, the Company recognizes on the balance sheet at the time of lease commencement a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments. Right-of-use lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. All right-of-use lease assets are reviewed for impairment. As the Company’s implicit rate in its leases is not readily determinable, in determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the commencement date. Lease payments included in the measurement of the lease liability are comprised of noncancelable lease payments, payments based upon an index or rate, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early. Lease costs are recognized in the 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 contain variable lease payments, including payments based upon an index or rate. Variable lease payments based upon an index or rate are initially measured using the index or rate in effect at the lease commencement date and are included within the lease liabilities. Lease liabilities are not remeasured as a result of changes in the index or rate, rather changes in these types of payments are recognized in the period in which the obligation for those payments is incurred. In addition, some of our leases contain variable payments for utilities, insurance, real estate tax, repairs and maintenance, and other variable operating expenses. Such amounts are not included in the measurement of the lease liability and are recognized in the period when the facts and circumstances which the variable lease payments are based upon occur. 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 2022 through 2027. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company subleases office space in North America, Asia, Europe and Australia. As of December 31, 2021, the Company has entered into eleven operating leases for which the commencement date has not yet occurred, primarily because the premises are in the process of being prepared for occupancy by the landlord or the space is being renewed. Accordingly, these eleven leases represent an obligation of the Company that is not reflected within the Audited 84 Table of Contents Consolidated Balance Sheets as of December 31, 2021. The aggregate future liability related to these leases is approximately $ 19,069 . The discount rate used for leases accounted for under ASC 842 is the Company’s collateralized credit adjusted borrowing rate. The following table presents lease costs and other quantitative information for the twelve months ended December 31, 2021 and 2020: Twelve Months Ended December 31, 2021 2020 Lease Cost: Operating lease cost $ 46,019 $ 25,507 Variable lease cost 10,685 3,843 Sublease rental income ( 7,367 ) ( 3,777 ) Total lease cost $ 49,337 $ 25,573 Additional information: Cash paid for amounts included in the measurement of lease liabilities for operating leases Operating cash flows $ 53,360 $ 20,942 Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments $ 373,179 $ 2,952 Weighted average remaining lease term (in years) - Operating leases 6.76 4.42 Weighted average discount rate - Operating leases 4.0 % 4.0 % Operating lease expense is included in office and general expenses in the Consolidated Statements of Operations. The Company’s lease expense for leases with a term of 12 months or less is immaterial. The following table presents minimum future rental payments under the Company’s leases at December 31, 2021 and their reconciliation to the corresponding lease liabilities: Maturity Analysis 2022 $ 86,291 2023 83,638 2024 69,328 2025 53,770 2026 39,994 2027 and thereafter 143,398 Total 476,419 Less: Present value discount ( 61,434 ) Lease liability $ 414,985 85 Table of Contents 11. Debt As of December 31, 2021 and 2020, the Company’s indebtedness was comprised as follows: December 31, 2021 December 31, 2020 Revolving credit facility (1) $ 110,165 $ 201,636 Term debt — 994 5.625 % Notes 1,100,000 — Debt issuance costs ( 18,564 ) ( 3,612 ) Total debt $ 1,191,601 $ 199,018 Less: Current maturities of long-term debt — ( 994 ) Long-term debt $ 1,191,601 $ 198,024 (1) Included in the repayment of the revolving credit facility are the repayments related to the acquired MDC credit facility of $ 109,954 . Interest expense related to long-term debt included in Interest expense, net on the Consolidated Statements of Operations for the twelve months ended December 31, 2021 and 2020 was $ 29,594 and $ 5,472 , respectively. The amortization of debt issuance costs included in Interest expense, net on the Consolidated Statements of Operations for the twelve months ended December 31, 2021 and 2020 was $ 2,693 and $ 831 , respectively. Revolving Credit Agreement On November 18, 2019, the Company entered into a debt agreement (“JPM Syndicated Facility”) with a syndicate of banks led by JPMorgan Chase Bank, N.A (“JPM”). The JPM Syndicated Facility consisted of a five-year revolving credit facility of $ 265,000 (“JPM Revolver”) with the right to be increased by an additional $ 150,000 . On March 18, 2020, the Company increased the commitments on the JPM Revolver by $ 60,000 to $ 325,000 . On August 2, 2021, in connection with the closing of the acquisition of MDC, the Company entered into an amended and restated credit agreement (the “Combined Credit Agreement”) with a syndicate of banks led by JPM to increase commitments on the existing JPM Revolver. The Combined Credit Agreement consists of a $ 500,000 senior secured revolving credit facility with a five-year maturity. The Combined Credit Agreement contains sub-limits for revolving loans and letters of credit of $ 50,000 for loans denominated in pounds sterling or euros. It also includes an accordion feature under which the Company may request, subject to lender approval and certain conditions, to increase the amount of the commitments to an aggregate amount not to exceed $ 650,000 . Borrowings under the Combined Credit Agreement bear interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest announced from time to time by JPM, (b) the federal funds effective rate from time to time plus 0.50 % and (c) the LIBOR rate plus 1 %, in each case, plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time or (ii) the LIBOR rate plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time. The Company is also required to pay an unused revolver fee to the lenders under the Combined Credit Agreement in respect of the unused commitments thereunder ranging from 0.15 % to 0.30 % of unused commitments depending on the total leverage ratio, as well as customary letter of credit fees. Advances under the Combined Credit Agreement may be prepaid in whole or in part from time to time without penalty or premium. The Combined Credit Agreement commitment may be reduced by the Company from time to time. Principal amounts outstanding under the Combined Credit Agreement are due and payable in full at maturity within five years of the date of the Combined Credit Agreement. If an event of default occurs under the Combined Credit Agreement or any future secured indebtedness, the holders of such secured indebtedness will have a prior right to our assets securing such indebtedness, to the exclusion of the holders of the 5.625 % Notes (as defined below), even if we are in default with respect to the 5.625 % Notes. In that event, our assets securing such indebtedness would first be used to repay in full all indebtedness and other obligations secured by them (including all amounts outstanding under the Combined Credit Agreement), resulting in all or a portion of our assets being unavailable to satisfy the claims of the holders of the 5.625 % Notes and other unsecured indebtedness. The Combined 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 at December 31, 2021. 86 Table of Contents A portion of the Combined Credit Agreement in an amount not to exceed $ 50,000 is available for the issuance of standby letters of credit. At December 31, 2021 and 2020, the Company had issued undrawn outstanding letters of credit of $ 24,332 and $ 5,500 , respectively. Term Loan On November 13, 2020, the Company, JPM as administrative agent, and a group of lenders entered into a term loan agreement that provided the Company with a delayed draw term loan in an aggregate principal amount of $ 90,000 (“DD Term Loan A”) with a maturity date of November 13, 2023. In connection with the acquisition of MDC, the Company drew down on the full amount of the DD Term Loan A, repaid the amount with the Combined Credit Agreement, and terminated the agreement. Line of Credit On August 2, 2021, the Company entered into an unsecured uncommitted line of credit in the aggregate amount of $ 30,000 with JPM (the “Line of Credit”) to meet certain short-term working capital needs. The Line of Credit expired on August 20, 2021. Senior Notes In August 2021, the Company issued $ 1,100,000 aggregate principal amount of 5.625 % senior notes (“ 5.625 % Notes”). A portion of the proceeds from the issuance of the 5.625 % Notes was used to redeem $ 870,300 aggregate principal amount of the outstanding 7.50 % Senior Notes due 2024 (the “Existing Notes”) for a price of $ 904,200 . This price is equal to 101.625 % of the outstanding principal amount of the Existing Notes being redeemed, plus, accrued, and unpaid interest on the principal amount of such Existing Notes. The Company did not recognize a gain or loss on redemption. 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 Combined 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 Combined 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 must 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. 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 at December 31, 2021. 87 Table of Contents Interest Rate Swap The Company also owns an interest rate swap maturing April 2022 with Bank of America to convert $ 10,469 of its variable rate debt as of December 31, 2021 to a fixed rate of 2.7 %. The fair value of the swap was $ 77 and $ 416 and is included in Accruals and other liabilities on the Audited Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively. 12. Employee Benefit Plan A subsidiary of the Company, sponsors a defined benefit plan with benefits based on each employee’s years of service and compensation. The benefits under the defined benefit pension plan are frozen. Net Periodic Pension Cost and Pension Benefit Obligation Net periodic pension cost consists of the following components for the years ended December 31: Pension Benefits 2021 Interest cost on benefit obligation 441 Expected return on plan assets ( 697 ) Net periodic benefit cost $ ( 256 ) The above costs are included within Other, net on the Audited Consolidated Statements of Operations. The following weighted average assumptions were used to determine net periodic costs at December 31: Pension Benefits 2021 Discount rate 2.62 % Expected return on plan assets 6.50 % The expected return on plan assets is a long-term assumption established by considering historical and anticipated returns of the asset classes invested in by the pension plan and the allocation strategy currently in place among those classes. Other changes in plan assets and benefit obligation recognized in Other comprehensive income (loss) consist of the following components for the year ended December 31: Pension Benefits 2021 Current year actuarial gain $ ( 722 ) Total recognized in other comprehensive (income) ( 722 ) Total recognized in net periodic benefit cost and other comprehensive loss $ ( 978 ) 88 Table of Contents The following table summarizes the change in benefit obligation and fair values of plan assets for the year ended December 31: Pension Benefits 2021 Change in benefit obligation: Benefit obligation, Beginning balance (1) $ 41,206 Interest Cost 441 Actuarial gains ( 1,091 ) Benefits paid ( 551 ) Benefit obligation, Ending balance 40,005 Change in plan assets: Fair value of plan assets, Beginning balance (1) 26,578 Actual return on plan assets 328 Benefits paid ( 551 ) Fair value of plan assets, Ending balance 26,355 Funded status $ 13,650 (1) Benefit obligation assumed in connection with the acquisition of MDC. Beginning balance is as of July 31, 2021. Amounts recognized on the balance sheet at December 31 consist of the following: Pension Benefits 2021 Non-current liability $ 13,650 Net amount recognized $ 13,650 Amounts recognized in Accumulated Other Comprehensive Loss before income taxes consists of the following components for the year ended December 31: Pension Benefits 2021 Accumulated net actuarial gains $ 722 Amount recognized $ 722 In 2022, the Company estimates that it will not recognize any amortization of net actuarial losses from accumulated other comprehensive loss, net into net periodic cost related to the pension plan. The following weighted average assumptions were used to determine benefit obligations as of December 31: Pension Benefits 2021 Discount rate 2.82 % The discount rate assumptions at December 31, 2021 was determined independently. The discount rate was derived from the effective interest rate of a hypothetical portfolio of high-quality bonds, whose cash flows match the expected future benefit payments from the plan as of the measurement date. 89 Table of Contents Fair Value of Plan Assets and Investment Strategy The fair value of the plan assets as of December 31, is as follows: December 31, 2021 Level 1 Level 2 Level 3 Asset Category: Money market fund – Short-term investments $ 937 $ 937 $ — $ — Mutual funds 25,418 25,418 — — Total $ 26,355 $ 26,355 $ — $ — The pension plans weighted-average asset allocation for the year ended December 31, 2021 is as follows: Target Allocation Actual Allocation 2021 2021 Asset Category: Equity securities 65.0 % 69.1 % Debt securities 30.0 % 27.3 % Cash/cash equivalents and Short-term investments 5.0 % 3.6 % 100.0 % 100.0 % The goals of the pension plan investment program are to fully fund the obligation to pay retirement benefits in accordance with the plan documents and to provide returns that, along with appropriate funding from the Company, maintain an asset/liability ratio that is in compliance with all applicable laws and regulations and assures timely payment of retirement benefits. Equity securities primarily include investments in large-cap and mid-cap companies located in the United States. Debt securities are diversified across different asset types with bonds issued in the United States as well as outside the United States. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the preceding tables. Cash Flows The pension plan contributions are deposited into a trust, and the pension plan benefit payments are made from trust assets. During 2021, the Company did not make any contributions to the pension plan. The Company does not expect that it will make any contributions to the pension plan in 2022. Fluctuations in actual market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefit costs and contributions in future periods. The following estimated benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the years ending December 31: Period Amount 2022 $ 1,698 2023 1,933 2024 2,167 2025 2,111 2026 2,087 Thereafter 10,721 13. Noncontrolling and Redeemable Noncontrolling Interests 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 in the equity section of the Company’s Audited Consolidated Balance Sheets. Where the incremental 90 Table of Contents purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity 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. Changes in the Company’s ownership interests in our less than 100% owned subsidiaries during the twelve months ended December 31, 2021 and 2020 were as follows: Twelve Months Ended December 31, 2021 2020 Net income attributable to Stagwell Inc. common shareholders $ 21,036 $ 56,356 Transfers from the noncontrolling interest: Decrease in Stagwell Inc. Paid-in capital for purchase of RNCI and noncontrolling interests ( 26,538 ) — Net transfers from noncontrolling interests $ ( 26,538 ) $ — Change from net income (loss) attributable to Stagwell Inc. and transfers to noncontrolling interests $ ( 5,502 ) $ 56,356 The following table presents net income attributable to noncontrolling interests between holders of Class C shares and other equity interest holders for the twelve months ended December 31, 2021 and 2020: Twelve Months Ended December 31, 2021 2020 Net income attribitable of Class C shareholders $ 6,126 $ — Net income attribitable of other equity interest holders 9,170 18,231 Net income attributable to noncontrolling interests $ 15,296 $ 18,231 The following table presents noncontrolling interests between holders of Class C shares and other equity interest holders as of December 31, 2021 and 2020: December 31, 2021 2020 Noncontrolling interest of Class C shareholders $ 475,373 $ — Noncontrolling interest of other equity interest holders 32,914 39,787 NCI attributable to noncontrolling interests $ 508,287 $ 39,787 91 Table of Contents Redeemable Noncontrolling Interests The following table presents changes in redeemable noncontrolling interests: December 31, 2021 2020 Beginning Balance $ 604 $ 3,602 Redemptions ( 15,231 ) — Acquisitions (1) 53,270 — Changes in redemption value 3,834 128 Net loss attributable to redeemable noncontrolling interests ( 412 ) ( 3,126 ) Other 1,299 — Ending Balance $ 43,364 $ 604 (1) Approximately $ 26,000 represents redeemable noncontrolling interests acquired in connection with the acquisition of MDC. Approximately $ 27,000 represents redeemable noncontrolling interests acquired in connection with the purchase of the noncontrolling interest of Targeted Victory. See Note 4 of the Notes included herein for additional information related to the purchase of Targeted Victory. 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 2021 to 2025. 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 $ 43,364 as of December 31, 2021, consists of $ 41,324 , assuming that the subsidiaries perform over the relevant periods at their current profit levels, $ 2,040 upon termination of such owner’s employment with the applicable subsidiary or death, and $ 0 representing the initial redemption value (required floor) recorded for certain acquisitions in excess of the amount the Company would have to pay should the Company acquire the remaining ownership interests for such subsidiaries. These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. There is no related impact on the Company’s income per share calculations. 14. 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 effect on the financial condition or results of operations of the Company cash flows. Deferred Acquisition Consideration and Options to Purchase. See Notes 9 and 13 of the Notes included herein for information regarding potential payments associated with deferred acquisition consideration and the acquisition of noncontrolling shareholders’ ownership interest in subsidiaries. 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 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 December 31, 2021, the Company had $ 24,332 of undrawn letters of credit. See Note 11 of the Notes included herein for additional information. The Company entered into operating leases for which the commencement date has not yet occurred as of December 31, 2021. See Note 10 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 92 Table of Contents Company. As of December 31, 2021, the Company estimates its future minimum commitments under these non-cancellable agreements to be: $ 11,304 , $ 5,945 , and $ 2,003 in 2022, 2023, and 2024, respectively. 15. Share Capital The authorized and outstanding share capital of the Company is below. Class A Common Stock (“Class A Shares”) There are 1,000,000,000 shares of Class A Common Stock authorized. There were 118,247,820 Class A Shares issued and outstanding as of December 31, 2021. The Class A Shares are an unlimited number of subordinate voting shares, carrying one vote each, with a par value of $ 0.001 ,entitled to dividends equal to or greater than Class B Shares, and convertible at the option of the holder into one Class B Share for each Class A Share after the occurrence of certain events related to an offer to purchase all Class B shares. Class B Common Stock (“Class B Shares”) There are 5,000 shares of Class B Common Stock authorized. There were 3,946 of Class B Shares issued and outstanding as of December 31, 2021. The Class B Shares are an unlimited number of voting shares, carrying twenty votes each, with a par value of $ 0.00 , convertible at any time at the option of the holder into one Class A share for each Class B share. Class C Common Stock (“Class C Shares”) There are 250,000,000 shares of Class C Common Stock authorized. There were 179,970.051 Class C Shares issued and outstanding as of December 31, 2021. The Class C shares do not participate in the earnings of the Company. In addition, an aggregate of 179,970,051 OpCo common units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities. Each Class C Share, together with the related Class C unit in OpCo, is convertible at any time, at the option of the holder, into one Class A Share. In February 2022, holders of Class C Common Stock and OpCo Units (the "Paired Units") exchanged 15,155,141 Paired Units for the same number of shares of Class A Common Stock. Convertible Preferred Stock (“Preferred Shares”) The Company had 50,000,000 Series 6 Preferred Shares (par value $ 0.001 per share) outstanding held by Stagwell Agency Holdings LLC and 73,849,000 Series 8 Preferred Shares (par value $ 0.001 per share) held by affiliates of The Goldman Sachs Group, Inc. (“Goldman”). The terms of the Preferred Shares provided the Company the option to convert the Preferred Shares to Class A Common Shares if Class A Common Shares traded above 125 % of the $ 5.00 per share conversion price for 30 consecutive trading days. The Company entered into an agreement with Goldman on August 4, 2021 to redeem $ 30,000 in liquidation value of the Series 8 Preferred Shares for $ 25,000 , resulting in the redemption of 21,151,000 shares. On September 23, 2021, the Company provided notices of conversion to each holder of record of each of the Company’s Series 6 and Series 8 Preferred Shares. Pursuant to the notices, the 50,000,000 issued and outstanding Series 6 Preferred Shares were converted into 12,086,700 Class A Common Shares, in the aggregate, on October 7, 2021, and the 73,849,000 issued and outstanding Series 8 Preferred Shares were converted into 20,948,746 Class A Common Shares, in the aggregate, on November 8, 2021. Shares-based Awards As of December 31, 2021, of the total number of shares authorized, 2,838,628 remain available to be issued for future awards. The following tables summarize share-based activity of awards authorized under our employee stock incentive plans and awards (such as inducement awards) and other share-based commitments that have met the requirements to be issued separate from shareholder-approved stock incentive plans. The following table summarizes information about financial performance-based and time-based restricted stock and restricted stock unit awards: 93 Table of Contents Performance-Based Awards Time-Based Awards Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Balance at December 31, 2020 — $ — — $ — Shares acquired concurrent with acquisition — — 3,326,021 5.42 Granted 1,048,000 8.68 12,658,713 5.51 Vested — — ( 281,743 ) 5.42 Forfeited — — ( 3,889 ) 5.42 Balance at December 31, 2021 1,048,000 $ 8.68 15,699,102 $ 5.49 The vesting of the performance-based awards is contingent upon the Company meeting cumulative earnings targets over three years and continued employment through the vesting date. The term of the time-based awards is generally three years with vesting up to generally three years . The vesting period of the time-based and performance-based awards is generally commensurate with the requisite service period. The total fair value of restricted stock and restricted stock unit awards, which vested during the twelve months ended December 31, 2021, was $ 1,527 . At December 31, 2021, the weighted average remaining contractual life for time-based and performance-based awards was 0.37 and 2.37 years, respectively. At December 31, 2021, the unrecognized compensation expense for performance-based awards was $ 8,221 to be recognized over a weighted average period of 2.37 years. At December 31, 2021, the unrecognized compensation expense for time-based awards was $ 15,376 to be recognized over a weighted average period of 0.37 years. The following table summarizes information about stock appreciation rights (“SAR”) awards: SAR Awards Shares Weighted Average Grant Date Fair Value Weighted Average Exercise Price Balance at December 31, 2020 — $ — $ — Shares acquired concurrent with acquisition 3,378,634 2.94 2.95 Granted 1,597,945 2.39 8.13 Forfeited ( 83,800 ) 1.35 6.60 Balance at December 31, 2021 4,892,779 $ 2.79 $ 4.58 We use the Black-Scholes option-pricing model to estimate the fair value of the SAR awards. The grant date fair values of the options granted in 2021 ranged from $ 2.20 to $ 3.66 . The assumptions for the model were as follows: expected life ranging from 2.8 to 4 years, risk free interest rate of approximately 1.0 %, expected volatility ranging from of 35.5 % to 38.1 %, and dividend yield of 0.0 %. Options granted in 2021 vest in 1 to 3 years. The term of these awards is 5 years. The vesting period of these awards is generally commensurate with the requisite service period. As of December 31, 2021, 1,950,000 SAR awards vested and were exercisable. The aggregate intrinsic value of the SAR awards outstanding as of December 31, 2021 was $ 19,677 . At December 31, 2021, the weighted average remaining contractual life for the SAR awards was 1.15 years. At December 31, 2021, the unrecognized compensation expense for these awards was $ 4,639 to be recognized over a weighted average period of 1.15 years. For the twelve months ended December 31, 2021, $ 75,032 was recognized in stock compensation related to all stock compensation awards. The related income tax benefit for the twelve months ended December 31, 2021 was $ 5,289 . 94 Table of Contents Subsidiary Awards 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 its profits interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, pay a profit share distribution. The profits interests awards are settled in cash and the corresponding liability at fair value was $ 36,418 at December 31, 2021 (Level 3 fair value model), and included as a component of Accruals and other liabilities and Other liabilities on the Audited Consolidated Balance Sheets. 16. Changes in Accumulated Other Comprehensive Income (Loss) The changes in accumulated other comprehensive income (loss) for the twelve months ended December 31 were: Defined Benefit Pension Foreign Currency Translation Total Balance December 31, 2020 — — — Other comprehensive loss before reclassifications — ( 6,000 ) ( 6,000 ) Amounts reclassified from accumulated other comprehensive loss 722 — 722 Other comprehensive loss 722 ( 6,000 ) ( 5,278 ) Balance December 31, 2021 $ 722 $ ( 6,000 ) $ ( 5,278 ) Prior to the merger with MDC, total equity was reported as Members' Equity. 17. Income Taxes On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law. The CARES Act includes provisions relating to delaying certain payroll tax payments, refundable payroll tax credits, net operating loss carryback periods, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property. The tax law changes in the CARES Act did not have a material impact on the Company’s income tax provision. The components of the Company’s income before income taxes and equity in earnings of non-consolidated affiliates by taxing jurisdiction for the years ended December 31, were: 2021 2020 Income (Loss): U.S. $ 38,717 $ 95,939 Non-U.S. 20,841 ( 18,599 ) $ 59,558 $ 77,340 The provision (benefit) for income taxes by taxing jurisdiction for the years ended December 31, were: 2021 2020 Current tax provision U.S. federal $ 7,259 $ 5,812 U.S. state and local 7,459 3,242 Non-U.S. 12,498 2,346 27,216 11,400 Deferred tax provision (benefit): U.S. federal ( 143 ) ( 1,951 ) U.S. state and local ( 2,521 ) 389 Non-U.S. ( 1,154 ) ( 3,901 ) ( 3,818 ) ( 5,463 ) Income tax expense $ 23,398 $ 5,937 95 Table of Contents A reconciliation of income tax expense (benefit) using the U.S. federal income tax rate compared with actual income tax expense for the years ended December 31, is as follows: 2021 2020 Income before income taxes, equity in non-consolidated affiliates and noncontrolling interest $ 59,558 $ 77,340 Statutory income tax rate 21.0 % 21.0 % Tax expense using U.S. statutory income tax rate $ 12,507 $ 16,241 Impact of disregarded entity structure ( 6,954 ) ( 16,049 ) Foreign, net 1,055 752 State taxes, net 4,359 1,980 Stock compensation 4,009 — Changes in tax rates 4,908 — Valuation allowance ( 15 ) 1,286 Other, net 3,529 1,727 Income tax expense $ 23,398 $ 5,937 Effective income tax rate 39.3 % 7.7 % Income tax expense for the twelve months ended December 31, 2021 was $ 23,398 (associated with a pre-tax income of $ 59,558 ) compared to an income tax expense of $ 5,937 (associated with pre-tax income of $ 77,340 ) for the twelve months ended December 31, 2020. Prior to merger on August 2, 2021, the Company was a limited liability company classified as a disregarded entity for U.S. federal income tax purposes, and as such was not subject to taxes from a U.S. federal income tax perspective. After the merger on August 2, 2021, the Company is a corporation with an investment in a limited liability company classified as a partnership for U.S. federal income tax purposes, and as such a portion of the consolidated income is not subject to taxes from a U.S. federal income tax perspective. The tax rate of 21% has been used to capture the U.S. federal taxes of the Company and the corporations owned by the Company and recorded in the Consolidated Statements of Operations and Comprehensive Income. The significant drivers of the effective tax rate for 2021 relate to the segmentation of the income between the portion subject to entity level tax and the portion of income reported directly by the non-controlling interests, state income taxes, and non-deductible stock based compensation. The significant drivers of the effective tax rate for 2020 relate to the segmentation of income between the portion subject to entity level tax and the portion of income reported directly by the Member, state income taxes, as well as valuation allowances established during the period. Income taxes receivable were $ 790 and $ 0 at December 31, 2021 and 2020, respectively, and were included in other current assets on the balance sheet. Income taxes payable were $ 24,643 and $ 4,244 at December 31, 2021 and 2020, respectively, and were included in accrued and other liabilities on the balance sheet. It is the Company’s policy to classify interest and penalties arising in connection with unrecognized tax benefits as a component of income tax expense. 96 Table of Contents The tax effects of significant temporary differences representing deferred tax assets and liabilities at December 31, were as follows: 2021 2020 Deferred tax assets: Net operating losses $ 33,112 $ 10,229 Tax credits 6,644 583 Operating lease liability 48,173 4,141 Interest deductions 30,760 — Accruals and other liabilities 3,720 — Other 15,160 3,344 Gross deferred tax asset 137,569 18,297 Less: valuation allowance ( 5,825 ) ( 5,551 ) Net deferred tax assets $ 131,744 $ 12,746 Deferred tax liabilities: Right of use asset - operating leases 37,001 3,577 Property and equipment, net 4,212 463 Goodwill and intangibles 83,607 21,959 Residual basis differences 102,297 — Other 6,854 2,639 Total deferred tax liabilities 233,971 28,638 Net deferred tax liability $ ( 102,227 ) $ ( 15,892 ) Deferred tax assets $ 866 $ 158 Deferred tax liabilities ( 103,093 ) ( 16,050 ) $ ( 102,227 ) $ ( 15,892 ) Stagwell Inc. itself has net operating loss carryforwards of $ 133,859 which expire years 2031 through 2041. These definite lived net operating loss carryforwards consist of $ 17,862 relating to U.S federal, and $ 115,997 relating to U.S. states. Stagwell Inc. also had indefinite net operating loss carryforwards of $ 119,415 which consist of $ 37,367 relating to U.S. federal, and $ 82,048 relating to U.S. states. Stagwell Inc. also has foreign tax credit and general business carryovers of $ 6,644 which expire between 2024 and 2031. Stagwell Inc.’s consolidated corporate subsidiaries also have net operating loss carryforwards of $ 49,026 which expire in years 2022 through 2044. These definite lived net operating loss carryforwards consist of $ 17,411 relating to U.S. federal, $ 28,879 relating to U.S. states and $ 2,736 relating to non-U.S. The corporate subsidiaries also have indefinite net operating loss carryforwards of $ 21,639 . These indefinite loss carryforwards consist of $ 8,840 relating to U.S. federal, and $ 12,799 relating to non-U.S. The majority of the consolidated corporate subsidiaries' U.S. tax attributes are subject to an annual limitation as a result of historic acquisitions which constituted a change of ownership as defined under Internal Revenue Code 382. The Company records a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Management evaluates all positive and negative evidence and considers factors such as the reversal of taxable temporary differences, taxable income in eligible carryback years, future taxable income, and tax planning strategies. A change to these factors could impact the estimated valuation allowance and income tax expense. The Company maintained a valuation allowance of $ 5,825 as of December 31, 2021 relating to both U.S. and foreign deferred tax assets, and $ 5,551 as of December 31, 2020 relating to U.S. and foreign deferred tax assets. The Company is permanently reinvested with respect to its foreign earnings in certain jurisdictions, and no deferred taxes have been recorded related to such earnings as the determination of the amount is not practicable. The Company currently does not intend to distribute previously taxed income. Upon distribution in the future, the Company may incur state and foreign withholding taxes on such income, the amount of which is not practicable to compute. As of December 31, 2021 and 2020, the Company recorded a liability for unrecognized tax benefits as well as applicable penalties and interest in the amount of $ 1,120 and $ 0 , respectively. As of December 31, 2021 and 2020, accrued penalties and 97 Table of Contents interest included in unrecognized tax benefits were approximately $ 82 and $ 0 , respectively. If these unrecognized tax benefits were to be recognized, it would affect the Company’s effective tax rate. 2021 2020 A reconciliation of the change in unrecognized tax benefits is as follows: Unrecognized tax benefit - Beginning Balance $ — $ — Current year positions — — Prior period positions 1,038 — Settlements — — Lapse of statute of limitations — — Unrecognized tax benefits - Ending Balance $ 1,038 $ — It is reasonably possible that the amount of unrecognized tax benefits could decrease by a range of $ 300 to $ 400 in the next twelve months as a result of expiration of certain statute of limitations. The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. The statute of limitations for tax years prior to 2018 are closed for U.S. federal purposes. The statute of limitations for tax years prior to 2011 have also expired in non-U.S. jurisdictions. 18. 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 at December 31, 2021 and 2020: December 31, 2021 December 31, 2020 Carrying Amount Fair Value Carrying Amount Fair Value 5.625 % Notes $ 1,100,000 $ 1,120,900 $ — $ — Our long-term debt includes fixed rate debt. 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. 98 Table of Contents Financial Instruments Measured at Fair Value on a Recurring Basis The following table presents certain information for our financial instruments that are measured at fair value on a recurring basis at December 31, 2021 and 2020: December 31, 2021 December 31, 2020 Carrying Amount Fair Value Carrying Amount Fair Value Interest Rate Swap $ 77 $ 77 $ 416 $ 416 Call Options — — 360 360 Preferred Shares — — 12,033 12,033 The interest rate swap and call options are classified as Level 3 within the fair value hierarchy. As of December 31, 2020, the Company owned preferred shares in a company called Finn Partners. The preferred shares had a cost basis of $ 10,000 , accrued non-cash dividends, on a cost basis, at a rate of 6 % annually. The shares were redeemable to cash in the amount of the cost-plus accrued interest at any time after February 28, 2021 or upon a liquidation event and were also convertible to common shares of Finn Partners at any time until February 28, 2021 using a conversion ratio of 1 % per $ 1,000 of preferred shares held including accrued dividends. The conversion feature was not bifurcated and was clearly and closely related to the host instrument, preferred shares. Management determined that the preferred shares were a debt-like financial instrument and should be accounted for as available-for-sale securities at their fair value at each reporting period. These preferred shares were considered to be a Level 3 fair value measurement since they utilize unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions. On March 11, 2021, the Company transferred all of its ownership in the preferred shares. The Company recognized a gain of $ 1,200 within Gain on sale of business and other, net on the Audited Consolidated Statements of Operations for the twelve months ended December 31, 2021 related to this transaction. Contingent deferred acquisition consideration (Level 3 fair value measurement) is 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 December 31, 2021, the discount rate used to measure these liabilities ranged from 3.5 % to 7.2 %. 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 Audited Consolidated Balance Sheets are subject to material uncertainty. See Note 9 of the Notes included herein for additional information regarding contingent deferred acquisition consideration. At December 31, 2021 and 2020, 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 measurement) 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 did not recognize an impairment of goodwill or right-of-use lease assets in the twelve months ended December 31, 2021 and 2020. The Company did recognize an impairment for intangible assets (Level 3 fair value measurement) of $ 16,187 in the twelve months ended December 31, 2021 and did not recognize an impairment for intangible assets in the twelve months ended December 31, 2020. See Note 8 of the Notes included herein for further detail. 19. 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. Below are the related party transactions that are significant in nature: In August 2016, a Brand of the Company entered into an arrangement to provide technology development services to a client in which several of Brand’s partners hold key leadership positions. Under the arrangement, the Brand is expected to receive from the client approximately $ 1,844 , which is expected to be fully recognized as of December 31, 2022. During the 99 Table of Contents twelve months ended December 31, 2021 and 2020, the Company recognized $ 950 and $ 1 , respectively, in revenue related to this transaction. As of December 31, 2021 and 2020, $ 506 and $ 134 , respectively, was due from the client. In December 2018, a Brand entered into a continuous arrangement to provide marketing services to a client in which a family member of one of the Brand’s partners holds an executive leadership position. During the twelve months ended December 31, 2021 and 2020, the Company recognized $ 243 and $ 522 , respectively, in revenue related to this transaction. As of December 31, 2021 and 2020, $ 88 and $ 109 , respectively, was due from the client. In December 2018, a Brand entered into a continuous arrangement with a third party in which the third party appointed the Brand as the manager of proprietary data to be used in the Brand’s ordinary course of business. A family member of one of the Brand’s partners holds an executive leadership position in this entity. Under the arrangement, the Brand is expected to pay the affiliate based upon the success of their services with no minimum or maximum spend. During the twelve months ended December 31, 2021 and 2020, the Company incurred $ 1,473 and $ 8,009 , respectively, in expenses related to this transaction. As of December 31, 2021 and 2020, $ 569 and $ 3,020 , respectively, was due to the vendor. In 2019, the Company entered into an arrangement to provide polling services to a client in which a family member of one of the Company’s Chief Executive Officer holds a key leadership position. Under the arrangement, the Company will receive from the client approximately $ 772 which is expected to be fully recognized as of December 2022. During the twelve months ended December 31, 2021 and 2020, the Company recognized revenue of $ 436 and $0, respectively, related to this arrangement. As of December 31, 2021 and 2020, $ 70 and $0 was due from the client, respectively. In March 2019, a Brand of the Company, entered into a loan agreement with a third party who holds a minority interest in the Brand. The loan receivable of $ 3,784 and $ 3,391 due from the third party is included within Other current assets in the Company’s Audited Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively. The Company recognized $ 307 and $ 249 of interest income within Interest expense, net on its Audited Consolidated Statements of Operations for the twelve months ended December 31, 2021 and 2020, respectively. In October 2020, a Brand entered into a continuous arrangement to provide marketing services to a client in which one of the Brand’s partners holds a key leadership position. During the twelve months ended December 31, 2021 and 2020, the Company recognized $ 5,146 and $ 4,866 , respectively, in revenue related to this transaction. As of December 31, 2021 and 2020, $ 0 and $ 7,125 , respectively, was due from the client related to this arrangement. In 2021, a Brand entered into an arrangement to provide marketing and website development services to a client that has a significant interest in the Company. The arrangement was for the Brand to provide marketing program campaign creative services. Under the arrangement, the Brand is expected to receive from the Stagwell affiliate approximately $ 944 which will be fully recognized in January 2022. The Company recorded $ 430 of related party revenue for the twelve months ended December 31, 2021. As of December 31, 2021, $ 238 was due from the related party. In 2021, a Brand entered into an arrangement to provide marketing and website development services to a client that has a significant interest in the Company. The arrangement was for the Brand to provide strategic communications support. Under the arrangement, the Brand is expected to receive from the Stagwell affiliate approximately $ 320 which has been fully recognized in December 2021. The Company recorded $ 207 of related party revenue for the twelve months ended December 31, 2021. As of December 31, 2021, $ 0 was due from the related party. In 2021, a Brand entered into an arrangement to provide marketing and website development services to a client that has a significant interest in the Company. Under the arrangement, the Brand is expected to receive from the Stagwell affiliate approximately $ 3,396 which will be fully recognized in April 2022. During the twelve months ended December 31, 2021, the Company recognized $ 3,132 in revenue related to this transaction. As of December 31, 2021, $ 3,132 was due from the client. In 2021, a Brand entered into an arrangement to obtain sales and management services from an affiliate for which the CEO of the Brand is a shareholder of the affiliate. Under the arrangement, the Brand has incurred $ 788 of related party expense for the twelve months ended December 31, 2021. As of December 31, 2021, $ 23 was due to the related party. In June 2021, a Brand entered into a continuous arrangement to provide marketing services to a client in which all of the Brand’s partners have an ownership interest. During the twelve months ended December 31, 2021, the Company recognized $ 4,814 in revenue related to this transaction. As of December 31, 2021, $ 4,033 was due from the client. The Stagwell Group LLC, the registered investment advisor of Stagwell Media, engaged certain of its Brands to provide services for the Stagwell Group for interagency customers. The Company recorded $ 0 and $ 900 of related party revenue for the twelve months ended December 31, 2021 and 2020, respectively. Stagwell Media made noncash investments in the Company of $ 12,400 and $ 93,900 during the twelve months ended December 31, 2021 and 2020, respectively. Additionally, during the twelve months ended December 31, 2021 and 2020, the Company made cash investments of $ 1,600 and $ 1,500 . On March 11, 2021, Stagwell Media received a Noncash distribution of $ 13,000 for the transfer of the Company’s ownership in the Finn Partners Preferred shares. 100 Table of Contents Additionally, the Company made cash distributions to Stagwell Media of $ 191,900 and $ 108,500 during the twelve months ended December 31, 2021 and 2020, respectively. 20. Segment Information 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 (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 has three reportable segments as follows: “Integrated Agencies Network,” “Media Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria 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 Audited Consolidated Financial Statements included herein. • The Integrated Agencies Network includes four integrated operating segments: the Anomaly Alliance, Constellation, the Code and Theory Network, and the Doner Partner Network. These operating networks are organized for go-to-market and collaboration incentive purposes and to facilitate integrated and flexible offerings for our clients. Each integrated network consists of agencies that offer an array of complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications. The Agencies included in the operating segments that comprise the Integrated Agencies Network reportable segment are as follows: Anomaly Alliance (Anomaly, Concentric, Hunter, Mono, YML and Scout agencies), the Code & Theory Network (Code and Theory, Forsman & Bodenfors, National Research Group, Observatory, Hello Design and Colle McVoy agencies), Constellation (72andSunny, Crispin Porter Bogusky, Instrument, Team Enterprises, Harris and Redscout agencies) and the Doner Partner Network (Doner, KWT Global, Bruce Mau Design, Vitro, Harris X, Northstar, Veritas and Yamamoto agencies). These integrated network 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 Media Network reportable segment is comprised of a single operating segment, our specialist network branded the Stagwell Media Network (“SMN”). SMN serves as a unified media and data management structure with omni-channel media placement, creative media consulting, influencer and business-to-business marketing capabilities. Our Agencies in this segment aim to provide scaled creative performance through developing and executing sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data. SMN’s Agencies combine media buying and planning 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 agencies Assembly, Goodstuff, MMI Agency, 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 (including Sloane & Company), and Targeted Victory Agencies. • All Other  consists of the Company’s digital innovation group, Reputation Defender (which was sold in September 2021) and Stagwell Marketing Cloud products such as PRophet. • 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, 101 Table of Contents 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. Twelve Months Ended December 31, 2021 2020 Revenue: (Dollars in Thousands) Integrated Agencies Network $ 819,758 $ 229,646 Media Network 374,930 254,311 Communications Network 248,832 382,815 All Other 25,843 21,260 Total Revenue $ 1,469,363 $ 888,032 Adjusted EBITDA: Integrated Agencies Network $ 166,768 $ 42,360 Media Network 62,770 27,669 Communications Network 45,527 78,562 All Other ( 769 ) ( 1,893 ) Corporate ( 20,644 ) ( 3,530 ) Total Adjusted EBITDA $ 253,652 $ 143,168 Depreciation and amortization $ ( 77,503 ) $ ( 41,025 ) Impairment and other losses ( 16,240 ) — Stock-based compensation ( 75,032 ) — Deferred acquisition consideration ( 18,721 ) ( 4,497 ) Other items, net ( 21,430 ) ( 13,906 ) Total Operating Income $ 44,726 $ 83,740 102 Table of Contents Twelve Months Ended December 31, 2021 2020 (Dollars in Thousands) Other Income (expenses): Interest expense, net $ ( 31,894 ) $ ( 6,223 ) Foreign exchange, net ( 3,332 ) ( 721 ) Gain on sale of business and other, net 50,058 544 Income before income taxes and equity in earnings of non-consolidated affiliates 59,558 77,340 Income tax expense 23,398 5,937 Income before equity in earnings of non-consolidated affiliates 36,160 71,403 Equity in (income) losses of non-consolidated affiliates ( 240 ) 58 Net income 35,920 71,461 Net income attributable to noncontrolling and redeemable noncontrolling interests ( 14,884 ) ( 15,105 ) Net income attributable to Stagwell Inc. common shareholders $ 21,036 $ 56,356 Depreciation and amortization: Integrated Agencies Network $ 40,087 $ 9,616 Media Network 23,590 19,861 Communications Network 7,553 5,903 All Other 2,498 3,681 Corporate 3,775 1,964 Total $ 77,503 $ 41,025 Stock-based compensation: Integrated Agencies Network $ 47,584 $ — Media Network 4,857 — Communications Network 15,928 — All Other 39 — Corporate 6,624 — Total $ 75,032 $ — 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 5 of the Notes included herein for a summary of the Company’s revenue by geographic region for the twelve months ended December 31, 2021 and 2020. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures Not Applicable.