What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-06 compared with 2022-03-17 · 860 added, 531 removed, 913 unchanged (60% of the section changed)

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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.

and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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 6, 2023, expressed an adverse opinion on the Company’s internal control over financial reporting because of material weaknesses.

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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.

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, online fundraising, media training, influencer engagement and events management, media-based solutions to drive brand performance, including 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.

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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.

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• 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

Goodwill — Refer to Notes 2 and 8 to 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.

The Company’s goodwill has been derived from numerous acquisitions, including but not limited to the merger with MDC Partners in August 2021.

As a result, the Company has over 30 reporting units, each having similar but different revenue streams and business models.

Management performed a quantitative impairment analysis for a number of reporting units to determine their fair values using the income approach and market approach.

This determination of the fair value requires management to make significant estimates and assumptions.

Such assumptions include forecasted business performance (both revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) based on the strategic operating plan), discount rates, and market multiples.

Given the volume of reporting units where a quantitative impairment analysis was performed and differences in their underlying revenue streams and business models, performing audit procedures to evaluate the reasonableness of the Company’s estimates and assumptions within the goodwill impairment assessment required a high degree of auditor judgment and an increased extent of effort and is therefore considered a critical audit matter.

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.

Our audit procedures related to the testing of the Company’s goodwill impairment assessment included the following, among others:

• Assessed the amount of goodwill by reporting unit and evaluated the sensitivity of changes in the assumptions on the results of the impairment test for the reporting unit,

• Based on this assessment, within certain reporting units, we

◦ Assessed the reasonableness of the Company’s forecasted revenue growth and EBITDA margin by comparing the forecasts to historical results and external economic data including peers, industry data and wider economic forecasts,

◦ Evaluated the Company’s ability to accurately forecast future revenue and EBITDA by comparing actual results to the Company's historical forecasts,

◦ Evaluated whether the forecasts were consistent with evidence obtained in other areas of the audit,

◦ With the assistance of our fair value specialists, evaluated the reasonableness of the discount rates and market multiples used by evaluating the methodology selected by the Company and by:

◦ Testing the source information underlying the determination of the market multiples and discount rates and testing the mathematical accuracy of the calculations.

◦ Developing a range of independent estimates and comparing those to the discount rate selected by the Company.

◦ Assessing the methodology applied in the discount rate calculation against market practice valuation techniques.

◦ Comparing the market multiples selected for each reporting unit to that of its guideline peer companies.

/s/ Deloitte & Touche LLP

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STAGWELL INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements:

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Statements of Operations for each of the T wo Years in the Period Ended December 31, 20 2 1

Consolidated Statements of Comprehensive Income (Loss) for each of the Two Years in the Period Ended December 31, 202 1

Consolidated Statements of Operations for each of the T hree Years in the Period Ended December 31, 20 2 2

Consolidated Statements of Comprehensive Income ( Loss ) for each of the T hree Years in the Period Ended December 31, 202 2

Consolidated Balance Sheets as of December 31, 202 2 and 202 1

Consolidated Statements of Cash Flows for each of the Two Years in the Period Ended December 31, 202 1

Consolidated Statements of Shareholders’ Equity for each of the Two Years in the Period Ended December 31, 2021

Notes to Consolidated Financial Statements

Consolidated Statements of Cash Flows for each of the T hree Years in the Period Ended December 31, 20 2 2

Consolidated Statements of Shareholders’ Equity for each of the T hree Years in the Period Ended December 31, 202 2

Notes to Audited Consolidated Financial Statements

Financial Statement Schedules:

Schedule II — Valuation and Qualifying Accounts for each of the Two Years in the Period Ended December 31, 2021

Financial Statements

Schedule II — Valuation and Qualifying Accounts for each of the T hree Years in the Period Ended December 31, 202 2

STAGWELL INC.

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CONSOLIDATED STATEMENTS OF OPERATIONS

(thousands of United States dollars, except per share amounts)

Twelve Months Ended December 31,

(amounts in thousands, except per share amounts)

Year Ended December 31,

2022 2021 2020

Revenue $ 2,687,792 $ 1,469,363 $ 888,032

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Foreign exchange, net ( 2,606 ) ( 3,332 ) ( 721 )

Gain on sale of business and other, net 50,058 544

Other, net ( 7,059 ) 50,058 544

( 85,727 ) 14,832 ( 6,400 )

Income before income taxes and equity in earnings of non-consolidated affiliates

73,501 59,558 77,340

Income tax expense 7,580 23,398 5,937

Income before equity in earnings of non-consolidated affiliates 65,921 36,160 71,403

Equity in (income) losses of non-consolidated affiliates ( 240 ) 58

Net income 35,920 71,461

Equity in income (loss) of non-consolidated affiliates ( 79 ) ( 240 ) 58

65,842 35,920 71,461

Net income attributable to noncontrolling and redeemable noncontrolling interests

( 38,573 ) ( 14,884 ) ( 15,105 )

Net income attributable to Stagwell Inc.

common shareholders $ 27,269 $ 21,036 $ 56,356

Loss Per Common Share:

Net loss attributable to Stagwell Inc.

Income Per Common Share:

Net income attributable to Stagwell Inc.

common shareholders $ 0.22 $ ( 0.04 ) N/A

Net loss attributable to Stagwell Inc.

Net income attributable to Stagwell Inc.

common shareholders $ 0.17 $ ( 0.04 ) N/A

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(thousands of United States dollars)

Twelve Months Ended December 31,

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands)

Year Ended December 31,

2022 2021 2020

COMPREHENSIVE INCOME

Net income $ 65,842 $ 35,920 $ 71,461

Other comprehensive income (loss)

Other comprehensive loss

Foreign currency translation adjustment ( 37,751 ) ( 6,000 ) 2,371

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Net unrealized loss on available for sale investment — — ( 5,156 )

Other comprehensive income (loss) ( 5,278 ) ( 2,785 )

Other comprehensive loss ( 33,663 ) ( 5,278 ) ( 2,785 )

Comprehensive income for the period 32,179 30,642 68,676

Comprehensive income attributable to the noncontrolling interests ( 14,884 ) ( 15,105 )

Comprehensive income attributable to Stagwell Inc.

Comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests

( 38,573 ) ( 14,884 ) ( 15,105 )

Comprehensive income (loss) attributable to Stagwell Inc.

common shareholders $ ( 6,394 ) $ 15,758 $ 53,571

See notes to the audited Consolidated Financial Statements .

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CONSOLIDATED BALANCE SHEETS

(thousands of United States dollars, except share amounts)

December 31, 2021 December 31, 2020

(amounts in thousands)

2022 December 31, 2021

Current Assets

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Fixed assets, net 98,878 97,516

Right-of-use assets - operating leases 311,654 57,752

Right-of-use lease assets - operating leases 273,567 311,654

Goodwill 1,566,956 1,652,723

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Accounts payable $ 357,253 $ 271,769

Accrued media 240,506 237,794

Accruals and other liabilities 248,477 272,533

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Shareholders' Equity

Members' capital — 358,756

Common shares - Class A & B 132 118

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Paid-in capital 491,899 382,893

Accumulated deficit ( 6,982 ) —

Accumulated income (deficit) 29,445 ( 6,982 )

Accumulated other comprehensive loss ( 38,941 ) ( 5,278 )

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(thousands of United States dollars)

Twelve Months Ended December 31,

(amounts in thousands)

Year Ended December 31,

2022 2021 2020

Cash flows from operating activities:

Net income $ 65,842 $ 35,920 $ 71,461

Adjustments to reconcile net income to cash provided by (used in) operating activities:

Adjustments to reconcile net income to cash provided by operating activities:

Stock-based compensation 33,152 75,032 —

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Impairment and other losses 122,179 16,240 —

Provision for bad debt 2,031 6,222

Provision for bad debt expense 7,755 2,031 6,222

Deferred income taxes ( 18,319 ) ( 3,818 ) ( 5,463 )

Adjustment to deferred acquisition consideration ( 13,405 ) 18,721 4,520

Gain on sale of asset — ( 43,440 ) —

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 ) —

Other, net ( 5,692 ) ( 1,463 ) 1,271

Changes in working capital:

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Accounts payable 98,871 ( 46,356 ) 5,606

Accruals and other liabilities 61,974 22,922

Accrued expenses and other liabilities ( 42,808 ) 61,974 22,922

Advance billings ( 27,062 ) 76,021 7,423

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Net cash provided by operating activities

347,586 200,856 138,080

Cash flows from investing activities:

Capital expenditures ( 22,663 ) ( 8,797 ) ( 4,690 )

Current period acquisitions, net of cash acquired ( 74,234 ) 150,346 ( 14,732 )

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 )

Capitalized software and other ( 19,378 ) ( 14,829 ) ( 9,599 )

Net cash (used in) provided by investing activities

( 116,275 ) 163,952 ( 29,021 )

Cash flows from financing activities:

Repayment of borrowings under revolving credit facility and term loan ( 719,088 ) ( 126,994 )

Repayment of borrowings under revolving credit facility ( 1,266,000 ) ( 719,088 ) ( 126,994 )

Proceeds from borrowings under revolving credit facility 1,255,500 516,669 167,000

Shares acquired and cancelled ( 18,729 ) ( 841 ) —

Payment of deferred consideration and other — ( 1,000 )

Distributions to noncontrolling interests and other ( 39,197 ) — —

Payment of deferred consideration ( 63,170 ) — ( 1,000 )

Contributions — — 1,554

Proceeds from issuance of the 5.625% Notes 1,100,000 —

Purchase of noncontrolling interest ( 3,600 ) ( 37,500 ) ( 1,559 )

Proceeds from issuance of the 5.625% Notes — 1,100,000 —

Debt issuance costs — ( 15,053 ) ( 3,099 )

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CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)

(thousands of United States dollars)

Twelve Months Ended December 31,

(amounts in thousands)

Year Ended December 31,

2022 2021 2020

Repurchase of 7.50% Senior Notes — ( 884,398 ) —

Repurchase of Common Stock ( 51,540 ) — —

Net cash used in financing activities

( 186,736 ) ( 273,414 ) ( 80,141 )

Effect of exchange rate changes on cash and cash equivalents ( 7,995 ) 158 ( 321 )

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Cash and cash equivalents at end of period $ 220,589 $ 184,009 $ 92,457

Supplemental disclosures:

Supplemental Cash Flow Information:

Cash income taxes paid $ 46,275 $ 58,578 $ 10,714

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Net unrealized gain on available for sale investment — — 5,156

Establishment of a deferred tax asset related to the exchange 32,890 — —

Establishment of Tax Receivables Agreement liability 28,694 — —

Conversion of Class C to Class A shares 47,930 — —

Finalization of Stagwell, Inc’s tax basis in Stagwell Global, LLC 119,470 — —

Non-cash contributions — 12,372 93,880

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(thousands of United States dollars, except share amounts)

Twelve Months Ended

December 31, 2021

(amounts in thousands)

Year Ended December 31, 2022

Common Shares -

Class A & B Common Shares -

Class C Paid-in Capital Accumulated Income (Deficit) Accumulated Other Comprehensive Loss Stagwell Inc.

Shareholders' Equity Noncontrolling Interests Shareholders' Equity

Shares Amount Shares Amount

Balance at December 31, 2021

118,252 $ 118 179,970 $ 2 $ 382,893 $ ( 6,982 ) $ ( 5,278 ) $ 370,753 $ 508,287 $ 879,040

Net income — — — — — 27,269 — 27,269 30,438 57,707

Other comprehensive loss

— — — — — — ( 33,663 ) ( 33,663 ) — ( 33,663 )

Distributions to noncontrolling interests — — — — — — — — ( 29,957 ) ( 29,957 )

Purchases of noncontrolling interests — — — — ( 1,000 ) — — ( 1,000 ) ( 3,600 ) ( 4,600 )

Acquisition of noncontrolling interest — — — — — — — — 2,667 2,667

Shares issued (Acquisition) 175 — — — 1,178 — — 1,178 — 1,178

Changes in redemption value of RNCI — — — — 8,711 — 8,711 — 8,711

Restricted awards granted or vested 3,940 4 — — ( 4 ) — — — — —

Shares repurchased and cancelled (withheld for payroll taxes) ( 2,531 ) ( 3 ) — — ( 18,729 ) — — ( 18,732 ) — ( 18,732 )

Restricted shares forfeited ( 221 ) — — — — — — — — —

Shares repurchased and cancelled (Approved plan) ( 7,194 ) ( 7 ) — — ( 51,540 ) — — ( 51,547 ) — ( 51,547 )

Stock-based compensation — — — — 34,974 — — 34,974 — 34,974

Conversion of Class C to Class A shares 19,061 19 ( 19,061 ) — 47,911 — — 47,930 ( 47,930 ) —

Finalization of Stagwell, Inc’s tax basis in Stagwell Global, LLC — — — — 119,470 — — 119,470 — 119,470

Finalization of MDC acquisition accounting and associated impact on Stagwell Inc.

— — — — ( 16,294 ) — — ( 16,294 ) 2,301 ( 13,993 )

Other 242 1 — — ( 6,960 ) 447 — ( 6,512 ) ( 109 ) ( 6,621 )

Balance at December 31, 2022

131,724 $ 132 160,909 $ 2 $ 491,899 $ 29,445 $ ( 38,941 ) $ 482,537 $ 462,097 $ 944,634

See notes to the audited Consolidated Financial Statements .

STAGWELL INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)

(amounts in thousands)

Year 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.

Class C Paid-in Capital Accumulated Income (Deficit) Other Comprehensive Loss Stagwell Inc.

Shareholders' Equity Noncontrolling Interests Shareholders' Equity

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Balance at December 31, 2020 $ 358,756 — $ — — $ — — $ — $ — $ — $ — $ 358,756 $ 39,787 $ 398,543

$ 358,756 — $ — — $ — — $ — $ — $ — $ — $ 358,756 $ 39,787 $ 398,543

Net income prior to reorginization 24,742 — — — — — — — — — 24,742 2,693 27,435

Net income prior to reorganization 24,742 — — — — — — — — — 24,742 2,693 27,435

Other comprehensive loss ( 375 ) — — — — — — — — — ( 375 ) — ( 375 )

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Changes in redemption value of RNCI — — — — — — — — ( 3,834 ) — ( 3,834 ) — ( 3,834 )

Grants of restricted awards — — — 1,961,588 2 — — ( 2 ) — — — — —

Restricted awards granted or vested — — — 1,962 2 — — ( 2 ) — — — — —

Shares acquired and cancelled — — — ( 14 ) — — — ( 841 ) — — ( 841 ) — ( 841 )

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Balance at December 31, 2021 $ — — $ — 118,252 $ 118 179,970 $ 2 $ 382,893 $ ( 6,982 ) $ ( 5,278 ) $ 370,753 $ 508,287 $ 879,040

$ — — $ — 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

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)

(thousands of United States dollars, except share amounts)

Twelve Months Ended

December 31, 2020

(amounts in thousands)

Year 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.

Class C Paid-in Capital Accumulated Income (Deficit) Other Comprehensive Income Stagwell Inc.

Shareholders' Equity Noncontrolling Interests Shareholders' Equity

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Balance at December 31, 2019 $ 316,960 — $ — — $ — — $ — $ — $ — $ — $ 316,960 $ 31,577 $ 348,537

$ 316,960 — $ — — $ — — $ — $ — $ — $ — $ 316,960 $ 31,577 $ 348,537

Net income attributable to Stagwell Inc.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

(amounts in thousands, unless otherwise stated)

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.

(the “Company,” “we,” 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.

The accompanying audited 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”).

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(“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.

The Stagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell Marketing” or “SMG”) and its direct and indirect subsidiaries.

On August 2, 2021, we completed the combination of MDC and the operating businesses and subsidiaries of Stagwell Media and a series 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 treated as the accounting acquirer.

The results of MDC are included within the 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 included herein for information in connection with the acquisition of MDC.

The accompanying financial statements reflect all adjustments, consisting of normal 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.

We have revised the presentation of Current Liabilities to separately present Accrued media, which was previously included in Accruals and other liabilities, of $ 237,794 as of December 31, 2021.

As a result, the accompanying Consolidated Balance Sheet has been revised to correct the immaterial classification error by decreasing the previously reported amount for Accruals and other liabilities as of December 31, 2021, by the $ 237,794 of Accrued media.

The revision had no effect on our previously reported Total Current Liabilities, or on any other previously reported amounts in our Audited Consolidated Financial Statements for the year ended December 31, 2021.

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.

On March 1, 2023, the board of directors authorized an extension and a $ 125,000 increase in the size of the stock repurchase program (the “Repurchase Program”) to an aggregate of $ 250,000 , with any previous purchases under the Repurchase Program continuing to count against that limit.

The Repurchase Program, as amended, will expire on March 1, 2026.

Significant Accounting Policies

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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

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.

The preparation of the audited 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 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.

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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.

No sales to an individual client accounted for more than 7 % of revenue for the years ended December 31, 2022, 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’s cash equivalents may comprise 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.

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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.

Allowance for doubtful accounts was $ 10,369 and $ 5,638 at December 31, 2022 and December 31, 2021, respectively.

Sale of Accounts Receivable.

The Company transfers certain of its trade receivable assets to third parties under agreements to sell certain of its accounts receivables.

Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer.

Accordingly, the Company accounts for the transfers as sales of trade receivables by recognizing an increase to cash and a decrease to accounts receivable when the receivables are transferred, with the proceeds being included in cash flows from operating activities in the Consolidated Statements of Cash Flows.

The trade receivables transferred to the third parties under these arrangements were $ 176,497 , $ 42,097 and $ 44,172 , during the years ended December 31, 2022, 2021 and 2020, respectively.

The amount collected and due to the third parties under these arrangements was $ 5,703 as of December 31, 2022.

No amounts were collected and due to third parties as of December 31, 2021 and 2020.

Fees for these arrangements were recorded in Office and general expenses in the Consolidated Statements of Operations and totaled $ 1,817 , $ 110 , and $ 185 for the years ended December 31, 2022, 2021 and 2020, respectively.

Expenditures Billable to Clients .

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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 .

Computers and furniture and fixtures 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.

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.

Accumulated depreciation was $ 59,445 and $ 35,895 at December 31, 2022 and December 31, 2021, respectively.

The Company recognizes on the Consolidated Balance Sheets, 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.

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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 (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.

Goodwill (the excess of the acquisition cost over the fair value of the net assets acquired) acquired as a result of a business combination is not amortized but rather 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

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.

Qualitative factors considered in the assessment include industry and market considerations, the competitive 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.

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, 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.

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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.

Recoverability is measured by a comparison of the carrying amount of an intangible asset to estimated undiscounted future cash flows expected to be generated from use of the asset and its eventual disposition.

If the total of the undiscounted future cash flows is less than the carrying amount of those assets, a quantitative assessment is performed using an income approach, which incorporates the use of the DCF method.

Business Combinations.

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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.

The majority of the value of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well as 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.

Contingent purchase price obligations for these transactions are recorded as deferred acquisition consideration liabilities on the Consolidated Balance Sheets, 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.

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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.

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 deferred acquisition consideration expense within Office and general expenses in the Consolidated Statement 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 Office and general expenses in the 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

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.

Many of the Company’s acquisitions include contractual arrangements where the noncontrolling shareholders may require the Company to purchase such noncontrolling shareholders’ incremental ownership interests under certain circumstances.

The Company may have similar call options under the same contractual terms.

In the event that an incremental purchase may be required by the Company, the amounts are recorded in Redeemable Noncontrolling Interests in mezzanine equity on the 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 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.

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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.

Any difference between the purchase price and noncontrolling interest is recorded to Paid-in capital in the Consolidated Balance Sheets.

Revenue Recognition .

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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.

The Company uses the straight-line method, which approximates the effective interest method, to amortize deferred financing costs.

Income Taxes.

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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.

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.

Certain of our awards are settled in cash (stock appreciation awards) and are recorded at fair value on the date of grant and remeasured at each reporting period.

The measurement of the compensation cost for these awards is based on using the Black-Scholes option pricing model and is recorded in Operating income over the service period, in this case the award’s vesting period.

The assumption for expected volatility is based on the historical volatility of a peer group of market participants as the Company has limited historical volatility.

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.

Share Buybacks .

In 2022, the Company began repurchasing its own Class A common stock, par value $.001 per share (the “Class A Common Stock”), as part of a publicly announced stock repurchase plan.

The Company accounts for these

repurchases by reducing the value of our Class A Common Stock for the par value of the shares repurchased and account for the difference between the price paid for the Class A Common Stock, excluding fees, and the par value of such stock to Paid-in capital.

See Note 15 of the Notes included herein for further details of our share buyback plan .

Retirement Costs .

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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’s contribution expense pursuant to these plans was approximately $ 19,000 , $ 10,000 , and $ 4,000 for the years ended December 31, 2022, 2021, and 2020, respectively.

The Company also has a defined benefit pension plan.

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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.

Diluted income (loss) per common share is based on the above, in addition, if dilutive, common share equivalents, which include stock appreciation rights, and unvested restricted stock and restricted stock units as well as shares of Class C Common Stock.

In periods of net loss, all potentially issuable common shares are excluded from diluted net loss per common share because they are anti-dilutive.

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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.

Assets and liabilities are translated at the exchange rates in effect at the balance sheet date, and revenues and expenses are translated at the average exchange rates during the period presented.

The resulting translation adjustments are recorded as a component of Accumulated other comprehensive income (loss) in the Shareholders’ equity section of our Consolidated Balance Sheets.

Foreign currency transaction unrealized and realized gains or losses are recognized as incurred in the Consolidated Statements of Operations in Foreign, exchange, net.

Translation of intercompany transactions, which are not intended to be settled, are included in cumulative translation adjustments.

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.

In March 2020, the Financial Accounting Standards Board, (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, and in January 2021 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.

Acquisitions and Dispositions

The Combined Credit Agreement (as defined in Note 11 of the Notes included herein) is the Company’s only contractual arrangement that referenced LIBOR and is impacted by ASU 2020-04.

On April 28, 2022, the Company amended the Combined Credit Agreement.

Among other things, this amendment replaced any references to LIBOR with references to the Secured Overnight Financing Rate (“SOFR”).

Based on the Company’s assessment, the Company has elected to apply the optional expedient and treat the contract modifications as a continuation of an existing contract.

This election does not have a material effect on our results of operations or financial position.

See Note 11 of the Notes included herein for more information.

2022 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.

Acquisition of Brand New Galaxy

On April 19, 2022, the Company acquired Brand New Galaxy (“BNG”), for approximately $ 20,695 of cash consideration, as well as contingent consideration up to a maximum value of $ 50,000 .

The contingent consideration is due upon meeting certain future earnings targets through 2024, with approximately 67 % payable in cash and 33 % payable in Stagwell Inc.

Class A Common Stock.

The consideration has been allocated to the assets acquired and assumed liabilities of BNG based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill.

The preliminary purchase price allocation is as follows:

Cash and cash equivalents $ 2,766

Accounts receivable 10,147

Other current assets 671

Fixed assets 1,587

Identifiable intangible assets 12,740

Other assets 1,583

Accounts payable ( 4,771 )

Accruals and other liabilities ( 6,880 )

Advance billings ( 1,159 )

Other liabilities ( 3,642 )

Net assets assumed 13,042

Goodwill 24,423

Purchase price consideration $ 37,465

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 BNG.

Goodwill of $ 24,423 was assigned to the Brand Performance Network reportable segment.

The majority of the goodwill is non-deductible for income tax purposes.

Intangible assets consist of trade names, customer relationships and developed technology.

We amortize purchased intangible assets on a straight-line basis over their respective useful lives.

The weighted average life of the total acquired identifiable intangible assets is approximately ten years .

The following table presents the details of identifiable intangible assets acquired:

Estimated Fair Value Estimated Useful Life in Years

Customer relationships $ 6,150 10

Trade names 5,500 10

Developed technology 1,090 7

Total acquired intangible assets $ 12,740

Pro Forma Financial Information (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, 2021.

The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.

Year Ended December 31,

Revenue $ 2,698,018 $ 1,501,568

Net income 65,097 36,863

Revenue and net loss attributable to BNG, included within the year ended December 31, 2022 Consolidated Statements of Operations was $ 20,544 and $ 67 , respectively.

The purchase price accounting is not yet final as the Company may still make adjustments due to changes in working capital.

Acquisition of TMA Direct, Inc.

On May 31, 2022, the Company acquired approximately 87 % of TMA Direct, Inc.

(“TMA Direct”) for approximately $ 17,247 of cash consideration and approximately $ 457 of deferred acquisition payments.

The Company was also granted an option to purchase the remaining 13 % minority interest in TMA Direct for up to approximately $ 13,330 .

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

The purchase price allocation is as follows:

Accounts receivable $ 582

Other current assets 669

Identifiable intangible assets 13,200

Accounts payable ( 379 )

Other liabilities ( 270 )

Noncontrolling interests ( 2,667 )

Net assets assumed 11,135

Goodwill 6,569

Purchase price consideration $ 17,704

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of TMA Direct.

Goodwill of $ 6,569 was assigned to the Communications Network reportable segment.

The majority of the goodwill is deductible for income tax purposes.

Intangible assets consist of trade names and customer relationships.

We amortize purchased intangible assets on a straight-line basis over their respective useful lives.

The weighted average life of the total acquired identifiable intangible assets is ten years .

The following table presents the details of identifiable intangible assets acquired:

Fair Value Estimated Useful Life in Years

Customer relationships $ 11,400 10

Trade names 1,800 10

Total acquired intangible assets $ 13,200

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, 2021.

Year Ended December 31,

Revenue $ 2,691,622 $ 1,481,727

Net income 67,195 39,386

Revenue and net income attributable to TMA Direct, included within the year ended December 31, 2022 Consolidated Statements of Operations was $ 7,659 and $ 889 , respectively.

Acquisition of Maru Group Limited Ltd.

On October 3, 2022, the Company acquired Maru Group Limited Ltd.

(“Maru”) for approximately £ 23,000 (approximately $ 25,793 ) in cash consideration.

The consideration has been allocated to the assets acquired and assumed liabilities of Maru based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill.

The preliminary purchase price allocation is as follows:

Cash and cash equivalents $ 1,033

Accounts receivable 7,374

Other current assets 899

Fixed assets 157

Identifiable intangible assets 13,500

Other assets 1,920

Accounts payable ( 4,087 )

Accruals and other liabilities ( 9,154 )

Advance billings ( 6,462 )

Other liabilities ( 3,591 )

Net assets assumed 1,589

Goodwill 24,204

Purchase price consideration $ 25,793

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 Maru and the expected growth related to new customer relationships and geographic expansion.

Goodwill of $ 24,204 was assigned to the All Other reportable segment.

The goodwill is partially deductible for income tax purposes.

Intangible assets consist of trade names, customer relationships, and developed technology.

We amortize purchased intangible assets on a straight-line basis over their respective useful lives.

The weighted average life of the total acquired identifiable intangible assets is approximately eight years .

The following table presents the details of identifiable intangible assets acquired:

Estimated Fair Value Estimated Useful Life in Years

Customer relationships $ 4,700 10

Trade names 3,500 10

Developed technology 5,300 2 - 7

Total acquired intangible assets $ 13,500

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, 2021.

Year Ended December 31,

Revenue $ 2,717,667 $ 1,512,791

Net Income 51,841 15,167

Revenue and net loss attributable to Maru, included within the year ended December 31, 2022 Consolidated Statements of Operations was $ 8,786 and $ 2,135 , respectively.

Acquisition of Wolfgang, LLC.

On October 3, 2022, the Company acquired the remaining 80 % interest that it did not already own in Wolfgang, LLC., (“Wolfgang”) for approximately $ 3,750 in cash consideration and 175 shares of Class A Common Stock with a fair value of $ 1,178 , subject to post-closing adjustments.

The consideration has been allocated to the assets acquired and assumed liabilities of Wolfgang based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill.

The preliminary purchase price allocation is as follows:

Cash and cash equivalents $ 1,606

Accounts receivable 1,180

Other current assets 100

Identifiable intangible assets 1,055

Other assets 46

Current liabilities ( 278 )

Net assets assumed 3,709

Goodwill 2,451

Purchase price consideration including fair value of previously owned interest $ 6,160

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of Wolfgang.

Goodwill of $ 2,451 was assigned to the Integrated Agencies Network reportable segment.

The majority of the goodwill is deductible for income tax purposes.

Intangible assets consist of customer relationships.

We amortize purchased intangible assets on a straight-line basis over their respective useful lives.

The weighted average life of the total acquired identifiable intangible assets is five years .

The following table presents the details of identifiable intangible assets acquired:

Estimated Fair Value Estimated Useful Life in Years

Customer relationships $ 1,055 5

Total acquired intangible assets $ 1,055

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, 2021.

Year Ended December 31,

Revenue $ 2,696,733 $ 1,474,303

Net income 67,196 36,538

Revenue and net loss attributable to Wolfgang, included within the year ended December 31, 2022 Consolidated Statements of Operations was $ 2,072 and $ 297 , respectively.

Acquisition of Epicenter Experience LLC.

On October 3, 2022, the Company acquired the assets of Epicenter Experience LLC., (“Epicenter”) for approximately $ 9,864 in cash consideration, subject to post-closing adjustments, as well as contingent consideration up to a maximum value of $ 5,000 .

The contingent consideration is subject to meeting certain future earnings targets through 2024 and can be paid up to 25% in Class A Common Stock.

The consideration has been allocated to the assets acquired and assumed liabilities of Epicenter based upon preliminary estimated fair values.

The preliminary purchase price allocation is as follows:

Accounts receivable $ 901

Other current assets 45

Identifiable intangible assets 7,300

Accounts payable ( 148 )

Other current liabilities ( 650 )

Net assets assumed 7,448

Goodwill 4,416

Purchase price consideration $ 11,864

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of Epicenter.

Goodwill of $ 4,416 was assigned to the All Other reportable segment.

The majority of the goodwill is deductible for income tax purposes.

The intangible asset acquired was developed technology.

We amortize purchased intangible assets on a straight-line basis over their respective useful lives.

The weighted average life of the total acquired identifiable intangible assets is five years .

The following table presents the details of identifiable intangible assets acquired:

Estimated Fair Value Estimated Useful Life in Years

Developed technology $ 7,300 5

Total acquired intangible assets $ 7,300

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, 2021.

Year Ended December 31,

Revenue $ 2,690,969 $ 1,473,183

Net income 65,450 35,810

Revenue and net loss attributable to Epicenter, included within the year ended December 31, 2022 Consolidated Statements of Operations was $ 1,028 and $ 1,183 , respectively.

Other Acquisitions

On July 12, 2022, the Company acquired PEP Group Holdings B.V.

(“PEP Group”), an omnichannel content creation and adaption production company for approximately $ 521 in cash consideration, subject to post-closing adjustments, as well as contingent consideration up to a maximum value of € 2,553 .

The contingent consideration is subject to meeting certain future earnings targets through 2025.

On July 15, 2022, the Company acquired Apollo Program II Inc.

(“Apollo”), a real-time artificial intelligence-powered software-as-a-service platform, for approximately $ 2,300 in cash consideration, subject to post-closing adjustments, as well as guaranteed deferred payments of $ 1,000 and $ 1,500 on or prior to July 1, 2023 and July 1, 2024, respectively.

2021 Acquisitions

Acquisition of MDC

On December 21, 2020, MDC and Stagwell Media announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of the Stagwell Subject Entities.

The Stagwell Subject Entities comprised Stagwell Marketing 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 respect of the Transactions, the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in the FASB’s 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 Topic 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.

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rather all factors were considered in arriving at such conclusion.

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”).

Under the 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 shares of the Company’s Class C common stock, par value $0.00001 per share (the “Class C Common Stock”), were issued to Stagwell Media in exchange for $ 1.80 .

The Class C Common Stock does not participate in the earnings of the Company.

Additionally, an aggregate of 179,970 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.

The fair value of the purchase consideration was $ 429,062 , consisting of approximately 80,000 shares of the Company’s Class A Common Stock, Class B common stock, par value $ 0.001 per share (the “Class 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.

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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:

The purchase price valuation was completed during the third quarter of 2022.

The purchase price allocation is as follows:

Cash and cash equivalents $ 130,197

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Right-of-use lease assets - operating leases 252,739

Intangible assets 810,900

Identifiable intangible assets 810,900

Other assets 18,282

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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.

Goodwill of $ 932,582 , $ 285,396 and $ 72,369 was assigned to the Integrated Agencies Network, the Brand Performance 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.

Goodwill has been updated from the previously reported amount of $ 1,299,374 as of December 31, 2021 to reflect a change in certain assets and liabilities.

There has been no change that impacts the Consolidated Statement of Operations.

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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 weighted average life of the total acquired identifiable intangible assets is approximately thirteen years .

The following table presents the details of identifiable intangible assets acquired:

Estimated Fair Value Estimated Useful Life in Years

Fair Value Estimated Useful Life in Years

Trade Names $ 98,000 10

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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)

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Twelve Months Ended December 31, 2021 Twelve Months Ended December 31, 2020

Years Ended December 31,

Revenue $ 2,224,343 $ 2,087,025

The proforma net loss was nominal for the twelve months ended December 31, 2021 and 2020.

The pro forma net loss was nominal for the years ended December 31, 2021 and 2020.

Revenue attributable to MDC, included within the year ended December 31, 2021 Consolidated Statements of Operations was $ 605,448 .

The net loss included within the year ended December 31, 2021 Consolidated Statements of Operations was nominal.

Transaction expenses were approximately $ 15,000 for the twelve months ended December 31, 2021.

Acquisition of GoodStuff Holdings Limited

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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:

The contingent consideration is tied to employees’ service and will be recognized as deferred acquisition consideration expense through 2026.

Therefore, only the cash consideration has been allocated to the assets acquired and assumed liabilities of Goodstuff based upon their fair values, with any excess purchase price allocated to goodwill.

The purchase price allocation is as follows:

Cash and cash equivalents $ 30,985

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Right-of-use lease assets - operating leases 2,060

Intangible assets 14,974

Identifiable intangible assets 14,974

Other assets 55

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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.

Goodwill of $ 4,410 was assigned to the Brand Performance Network reportable segment.

The majority of the goodwill is non-deductible for income tax purposes.

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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 weighted average life of the total acquired identifiable intangible assets is approximately ten years.

The following table presents the details of identifiable intangible assets acquired:

Estimated Fair Value Estimated Useful Life in Years

Fair Value Estimated Useful Life in Years

Trade Names $ 1,349 15

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Twelve Months Ended December 31, 2021 Twelve Months Ended December 31, 2020

Years Ended December 31,

Revenue $ 1,488,532 $ 902,577

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2022 Purchases of Noncontrolling Interests

On April 1, 2022, the Company acquired the remaining interest in Hello Design, LLC (“Hello Design”) that it did not already own for an aggregate purchase price of $ 4,600 , comprised of a closing cash payment of $ 3,600 and a contingent deferred acquisition payment of $ 1,000 .

The contingent deferred payment was based on the financial results of the underlying business through the end of 2022 with the payment due in 2023.

2021 Purchases of Noncontrolling Interests

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.

The contingent deferred payment and redeemable noncontrolling interest were based on the financial results of the underlying business through July 2023 and July 2025, respectively.

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 .

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 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.

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 was recognized within Other, net within the Consolidated Statements of Operations.

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 February 14, 2020, the Company acquired Sloane & Company (“Sloane”) for approximately $ 24,400 of total consideration.

Total consideration included a cash payment of $ 19,600 and contingent deferred acquisition consideration of $ 4,800 .

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.

The purchase agreement also offers the previous owners of Kettle an additional $ 11,900 in deferred consideration.

On October 30, 2020, the Company acquired TrueLogic Software, LLC, Ramenu S.A., and Polar Bear Development S.R.L.

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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):

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of each acquisition:

Sloane Kettle Truelogic Total

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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):

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:

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

Trade names 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

The following table summarizes the total revenue and net income included in the Consolidated Statements of Operations for the year ended December 31, 2020 from the date of each acquisition:

Year Ended December 31, 2020

Revenue $ 22,381

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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.

Twelve Months Ended December 31, 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:

Year Ended December 31, 2020

Revenue $ 911,203

Net Income 75,767

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.

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.

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, online fundraising, media training, influencer engagement and events management.

We also provide media-based solutions to drive brand performance, including 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 Brand 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.

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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.

Contracts that contain services that can be provided on a stand-alone basis, that are not significantly integrated or interdependent, and that do not significantly modify or customize each other, are typically considered separate performance obligations.

Typically, these services are creative (or strategy), production, experiential marketing, media planning and media buying.

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.

Typically, these services are public relations, and application/website design and development.

In other instances, the Company is engaged to provide marketing services, such online fundraising and brand performance media solutions, that include a variety of distinct activities performed throughout the contract term that are substantially the same and that are satisfied over time, and therefore the Company considers these to be one performance obligation.

We typically satisfy our performance obligations over time, as services are performed.

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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.

For client contracts when the Company has a stand-ready obligation to perform 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.

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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.

Within each contract, we identify whether the Company is principal or agent at the service 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.

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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

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;

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 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 Brands 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 Brands 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.

Typically, 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.

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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.

The primary source of revenue is from Brand arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses.

Certain clients may engage with the Company in various geographic locations, across multiple disciplines, and through multiple Brands.

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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,

The following table presents revenue disaggregated by our principal capabilities for the years ended December 31, 2022, 2021, and 2020:

Year Ended December 31,

Principal Capabilities Reportable Segment 2022 2021 2020

Digital Transformation All Segments $ 784,667 $ 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

Creativity and Communications Integrated Agencies Network, Brand Performance Network, Communications Network 1,221,855 561,538 152,499

Performance Media and Data Brand Performance Network 456,640 341,730 253,011

Consumer Insights and Strategy Integrated Agencies Network 224,630 165,238 107,833

$ 2,687,792 $ 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.

The Company has expanded its global footprint to support clients in international markets.

Stagwell’s Brands are located in the United States and United Kingdom, and more than 32 other countries around the world.

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,

The following table presents revenue disaggregated by geography for the years ended December 31, 2022, 2021, and 2020:

Year Ended December 31,

Geographical Location Reportable Segment 2022 2021 2020

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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.

Unbilled service fees were $ 116,381 and $ 116,558 at December 31, 2022 and December 31, 2021, respectively, and are included as a component of Accounts receivable, net on the Consolidated Balance Sheets.

Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $ 93,077 and $ 63,065 at December 31, 2022 and December 31, 2021, 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.

Contract liabilities represent advanced billings to customers for fees and reimbursements of third-party costs, whether we act as principal or agent.

Such fees and reimbursements of third-party costs are classified as Advance billings on the Company’s 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.

Advance billings at December 31, 2022 and December 31, 2021 were $ 337,034 and $ 361,885 , respectively.

The decrease in Advance billings of $ 24,851 for the year ended December 31, 2022 was primarily driven by $ 345,277 of revenues recognized that were included in the Advance billings balances as of December 31, 2021 and reductions due to the incurrence of third-party costs, partially offset by the acquisition of certain contract liabilities (as detailed below) and cash payments received or due in advance of satisfying our performance obligations.

In 2022, the Company acquired $ 3,195 in contract assets and $ 7,620 in contract liabilities in connection with the acquisitions of BNG, Wolfgang, and Maru.

See Note 4 of the Notes included herein for additional information related to these acquisitions.

Changes in the contract asset and liability balances during the year ended December 31, 2022 were not materially impacted by write offs, impairment losses or any other factors outside of the above acquisitions.

Unsatisfied Performance Obligations

The majority of our contracts are for periods of one year or less.

For those contracts with a term of more than one year , we had approximately $ 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.

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

For those contracts with a term of more than one year, we had approximately $ 52,613 of unsatisfied performance obligations as of December 31, 2022 of which we expect to recognize approximately 82 % in 2023, 16 % in 2024 and 2 % in 2025.

Income (Loss) Per Share

The following table sets forth the computations of basic and diluted income per common share for the year ended December 31, 2022:

Year Ended December 31,

Income Per Share - Basic

Net income $ 65,842

Net income attributable to Class C shareholders ( 24,452 )

Net income attributable to other equity interest holders

Net income attributable to noncontrolling and redeemable noncontrolling interests ( 38,573 )

Net income attributable to Stagwell Inc.

common shareholders $ 27,269

Weighted Average number of common shares outstanding 124,262

Income Per Share - Basic

Income Per Share - Diluted

Net income attributable to Stagwell Inc.

common shareholders $ 27,269

Net income attributable to Class C shareholders 24,452

Basic - Weighted Average number of common shares outstanding 124,262

Dilutive shares:

Stock appreciation rights 1,896

Restricted share and restricted unit awards 4,467

Class C shares 165,971

Diluted - Weighted average number of common shares outstanding 296,596

Income Per Share - Diluted

Restricted stock awards of 2,292 as of December 31, 2022 are excluded from the computation of diluted income per common share because the performance contingency necessary for vesting had not been met as of the reporting date.

The following table sets forth the computations of basic and diluted loss per common share for the year ended December 31, 2021:

Year Ended December 31,

Net loss attributable to Stagwell Inc.

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Weighted average number of common shares outstanding 90,426

Earnings Per Share - Basic & Diluted $ ( 0.04 )

Loss Per Share - Basic & Diluted $ ( 0.04 )

Anti-dilutive:

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Stock Appreciation Rights and Restricted Awards 9,509

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.

On September 23, 2021, the Company provided notices of conversion to each holder of record of each share of the Company’s Series 6 and Series 8 Preferred Stock.

Pursuant to the notices, the 50,000 issued and outstanding shares of Series 6 Preferred Stock were converted into 12,087 shares of Class A Common Stock, in the aggregate, on October 7, 2021, and the 73,849 issued and outstanding shares of Series 8 Preferred Stock were converted into 20,949 shares of Class A Common Stock, in the aggregate, on November 8, 2021.

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 .

The following is a summary of the Company’s fixed assets as of December 31:

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Leasehold improvements 101,535 ( 31,756 ) 69,779 91,572 ( 17,759 ) 73,813

Capitalized Software 29,844 ( 8,757 ) 21,087 19,916 ( 4,487 ) 15,429

$ 158,323 $ ( 59,445 ) $ 98,878 $ 133,411 $ ( 35,895 ) $ 97,516

Depreciation expense for the twelve months ended December 31, 2021 and 2020 was $ 19,696 and $ 10,144 , respectively.

The table above has been revised to reclassify previously reported gross capitalized software and accumulated amortization of $ 29,844 and $ 8,757 , respectively, as of December 31, 2021 that should have been classified within intangible assets rather than fixed assets to more closely align these net assets with the category of assets they represent.

Depreciation expense for the years ended December 31, 2022, 2021, and 2020 was $ 26,510 , $ 15,416 and $ 7,026 , respectively.

Goodwill and Intangible Assets

As of December 31, goodwill was as follows:

Integrated Agencies Network Media Network Communication Network All Other Corporate Total

Integrated Agencies Network Brand Performance Network Communications Network All Other Total

Balance at December 31, 2019 $ 88,094 $ 177,073 $ 33,258 $ 26,760 $ 325,185

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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.

The gross and net amounts of intangible assets other than goodwill as of December 31,

Acquired goodwill (1)

3,330 26,176 6,569 29,387 65,462

Impairment ( 49,840 ) ( 49,314 ) — ( 17,560 ) ( 116,714 )

Transfer of goodwill between segments (2)

( 111,065 ) 111,065 — — —

Foreign currency translation ( 11,422 ) ( 13,467 ) ( 753 ) — ( 25,642 )

( 15,682 ) 685 6,124 — ( 8,873 )

Balance at December 31, 2022 $ 968,394 $ 433,758 $ 127,717 $ 37,087 $ 1,566,956

(1) For the year ended December 31, 2022, the Company’s acquisitions resulted in goodwill of $ 65,462 .

See Note 4 of the Notes included herein for information related to the acquisitions.

(2) Due to changes in the Company’s internal management and reporting structure in the second quarter of 2022, reportable segment results for periods presented prior to the second quarter of 2022 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

Specifically, Forsman & Bodenfors, Observatory, Crispin Porter Bogusky, Bruce Mau and Vitro Brands, previously within the Integrated Agencies Network, are now within the Brand Performance Network.

See Note 20 of the Notes included herein for additional information related to these changes.

(3) Other represents adjustments associated with the finalization of purchase price accounting for acquisitions occurring in 2021.

The Company recognized an impairment and other losses charge of $ 122,179 for the year ended December 31, 2022, primarily related to the impairment of goodwill totaling $ 116,714 .

The goodwill impairment was to write-down the carrying value in excess of the fair value at eight reporting units, two in the Integrated Agencies Network, five in the Brand Performance Network and one within the All Other category.

The charge was recorded within Impairment and other losses on the Consolidated Statements of Operations.

At each reporting period, the Company assesses whether it is more likely than not that the carrying amount of its reporting units exceed their fair value.

As of October 1, 2022 (the annual impairment test date) and December 31, 2022, the Company performed this assessment and determined that certain reporting units’ carrying values exceeded their fair value.

As of October 1, 2022, the Company performed a quantitative impairment test for all reporting units and as of December 31, 2022, the Company performed a quantitative impairment test for certain reporting units that were determined to be more likely than not impaired.

As a result of these tests, management concluded there to be certain reporting units with a carrying value in excess of their fair value resulting in an impairment of $ 116,714 in 2022.

The difference in carrying value and fair value was primarily due to a combination of changes in fair value measures such as an increase in interest rates and decrease in market multiples of comparable public companies, as well as current financial forecasts below the previous forecast.

In its assessment, the Company uses a combination of the income approach, which incorporates the use of the discounted cash flow 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.

There was $ 116,714 of accumulated goodwill impairment charges as of December 31, 2022.

The gross and net amounts of intangible assets other than goodwill as of December 31, are as follows:

Intangible Assets 2022 2021

Customer relationships – gross $ 875,160 $ 875,541

Less accumulated amortization ( 92,746 ) ( 56,299 )

Accumulated amortization ( 150,655 ) ( 92,746 )

Customer relationships – net $ 724,505 $ 782,795

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

Trade names – gross $ 197,037 $ 190,162

Accumulated amortization ( 53,150 ) ( 36,775 )

Trade names – net $ 143,887 $ 153,387

Developed technology and other intangible assets – gross $ 63,565 $ 37,550

Accumulated amortization ( 24,428 ) ( 14,950 )

Developed technology and other intangible assets – net $ 39,137 $ 22,600

Total intangible assets $ 1,135,762 $ 1,103,253

Less accumulated amortization ( 135,714 ) ( 94,020 )

Accumulated amortization ( 228,233 ) ( 144,471 )

Total intangible assets – net $ 907,529 $ 958,782

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.

For the year ended December 31, 2022, the Company recognized an impairment charge of $ 1,400 to reduce the carrying values of intangible assets within the Integrated Agencies Network and Brand Performance Network reportable segments primarily in connection with the abandonment of certain trade names as part of the integration of certain entities.

For the year 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 Brand Performance Network reportable segments in connection with the abandonment of certain trade names as part of the rebranding of certain Brands.

These charges were recorded as Impairment and other losses on the Consolidated Statements of Operations.

The weighted average amortization period for customer relationships is fourteen years , trade names is twelve years , and developed technology and other intangible assets is three years .

In total, the weighted average amortization period is thirteen years .

Amortization expense related to amortizable intangible assets for the years ended December 31, 2022, 2021, and 2020 was $ 103,060 , $ 61,054 , and $ 33,999 , respectively.

The estimated amortization expense for the five succeeding years is as follows:

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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.

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:

Beginning balance of contingent payments $ 17,847 $ 65,792

Deferred acquisition consideration on the Consolidated Balance Sheets consists of deferred obligations related to contingent and fixed purchase price payments, and contingent and fixed retention payments tied to continued employment of specific personnel.

Contingent deferred acquisition consideration is recorded at the acquisition date fair value and adjusted at each reporting period within Office and general expenses on the Consolidated Statements of Operations.

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 Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021:

2022 December 31, 2021

Beginning balance $ 222,369 $ 17,847

Payments ( 73,963 ) ( 12,431 )

Adjustment to deferred acquisition consideration (1)

Adjustments to deferred acquisition consideration (1)

(12,779) 18,721

Additions (2)

26,594 198,937

Currency translation adjustment ( 759 ) —

Other ( 139 ) ( 705 )

Ending balance of contingent payments $ 222,369 $ 17,847

Ending balance (3)

$ 161,323 $ 222,369

(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.

Adjustments to deferred acquisition consideration are recorded within Office and general expenses on the Consolidated Statements of Operations.

(2) In 2021, approximately $ 61,000 of additions 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.

The Company leases office space in North America, Europe, Asia, South America, and Australia.

In 2022, approximately $ 24,000 of additions represent deferred acquisition consideration acquired in connection with the acquisitions of BNG, Apollo, PEP Group and Epicenter.

See Note 4 of the Notes included herein for additional information related to these acquisitions.

(3) As of December 31, 2022, approximately, $ 51,000 of the deferred acquisition consideration is expected to be settled in the Company’s Class A Common Stock.

The Company leases office space in North America, Europe, Asia, South America, Africa, and Australia.

This space is primarily used for office and administrative purposes by the Company’s employees in performing professional services.

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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 payments included in the measurement of the lease liability are comprised of non-cancellable 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.

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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

Consolidated Balance Sheets as of December 31, 2021.

Currently, the Company subleases office space in North America and Europe.

As of December 31, 2022, the Company has entered into two operating leases for which the commencement date has not yet occurred primarily because of the premises being prepared for occupancy by the landlord.

Accordingly, these two leases represent an obligation of the Company that is not reflected within the Consolidated Balance Sheets as of December 31, 2022.

The aggregate future liability related to these leases is approximately $ 3,266 .

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,

The following table presents lease costs and other quantitative information for the years ended December 31, 2022, 2021, and 2020:

Year Ended December 31,

2022 2021 2020

Operating lease cost $ 75,190 $ 46,019 $ 25,507

6 unchanged sentences

Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments $ 27,761 $ 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 %

As of December 31, 2022, the weighted average remaining lease term (in years) and weighted average discount rate were 6.4 and 4.5 %, respectively.

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.

In the year ended December 31, 2022, the Company recorded a charge of $ 2,582 to reduce the carrying value of three of its right-of-use lease assets and related leasehold improvements.

These right-of-use lease assets related to agencies within the Integrated Agencies Network and the Brand Performance Network.

As a result of subleasing or abandoning the space, the Company evaluated the facts and circumstances related to the use of the assets which indicated that they may not be recoverable.

Using the sublease income to develop expected future cash flows, it was determined that the fair value of the assets were less than their carrying value.

This impairment charge is included in Impairment and other losses within the Consolidated Statements of Operations.

The following table presents minimum future rental payments under the Company’s leases at December 31, 2022 and their reconciliation to the corresponding lease liabilities:

1 unchanged sentence

2023 $ 91,084

2027 and thereafter 143,398

Thereafter 119,119

Total 432,241

1 unchanged sentence

Lease liability $ 370,398

As of December 31, 2021 and 2020, the Company’s indebtedness was comprised as follows:

December 31, 2021 December 31, 2020

As of December 31, 2022 and December 31, 2021, the Company’s indebtedness was comprised as follows:

2022 December 31, 2021

Revolving credit facility

$ 100,000 $ 110,165

Term debt — 994

5.625 % Notes

1,100,000 1,100,000

Debt issuance costs ( 15,293 ) ( 18,564 )

Total debt $ 1,191,601 $ 199,018

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.

Total long-term debt $ 1,184,707 $ 1,191,601

Interest expense related to long-term debt included in Interest expense, net on the Consolidated Statements of Operations for the years ended December 31, 2022, 2021, and 2020 was $ 73,788 , $ 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 years ended December 31, 2022, 2021, and 2020 $ 2,358 , $ 2,693 , and $ 831 , respectively.

Revolving Credit Agreement

2 unchanged sentences

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.

On August 2, 2021, in connection with the closing of the acquisition of MDC, the Company entered into an amended and restated credit agreement (as further amended on April 28, 2022 and December 14, 2022, 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.

The Combined Credit Agreement contains sub-limits for revolving loans denominated in pounds and euros not to exceed U.S.

dollar equivalent of $ 50,000 in pounds and $ 50,000 in euros and $ 100,000 in the aggregate.

Additionally, the Combined Credit Agreement contains a $ 15,000 sub-limit for letters of credits denominated in pounds 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.

On April 28, 2022, the Company amended the Combined Credit Agreement.

Among other things, this amendment replaced any references to LIBOR with references to SOFR.

Borrowings pursuant to the Combined Credit Agreement, as amended, bear interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest in effect on such day, (b) the federal funds effective rate plus 0.50 % and (c) SOFR plus 1 % in each case, plus the applicable margin (calculated based on the Company’s Total Leverage Ratio, as defined in the Combined Credit Agreement) at that time.

Additionally, the Combined Credit Agreement was amended to remove certain pre-commencement notice provisions for certain acquisitions under $ 50,000 in the aggregate, increased the amount permitted for certain investments allowed under the Combined Credit Agreement, and, subject to certain conditions, to allow for the repurchase of Stagwell Inc.

stock in an amount not to exceed $ 100,000 in any fiscal year.

All other substantive terms of the Combined Credit Agreement remain unchanged.

Prior to April 28, 2022, borrowings under the Combined Credit Agreement bore 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 transfers certain of its trade receivable assets to third parties under sales agreements.

On December 14, 2022, the Company amended its Combined Credit Agreement to allow for the sale of accounts receivable with JPM.

Refer to Note 2 of the Notes included herein for further detail of this agreement.

All other substantive terms of the Combined Credit Agreement remained unchanged.

Advances under the Combined Credit Agreement may be prepaid in whole or in part from time to time without penalty or premium.

1 unchanged sentence

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.

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.

2 unchanged sentences

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.

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.

At December 31, 2022 and December 31, 2021, the Company had issued undrawn outstanding letters of credit of $ 25,305 and $ 24,332 , respectively.

In August 2021, the Company issued $ 1,100,000 aggregate principal amount of 5.625 % senior notes (“ 5.625 % Notes”).

23 unchanged sentences

The Company was in compliance with all covenants at December 31, 2022.

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.

Employee Benefit Plan

2 unchanged sentences

Net Periodic Pension Cost and Pension Benefit Obligation

Net periodic pension cost consists of the following components for the years ended December 31:

Net periodic pension benefit consists of the following components for the years ended December 31:

Pension Benefits

1 unchanged sentence

Expected return on plan assets ( 1,659 ) ( 697 )

Net periodic benefit cost $ ( 256 )

The above costs are included within Other, net on the Audited Consolidated Statements of Operations.

Net periodic benefit income $ ( 555 ) $ ( 256 )

Settlement gain ( 198 ) —

Total periodic benefit income $ ( 753 ) $ ( 256 )

The above components are included within Other, net on the Consolidated Statements of Operations.

The following weighted average assumptions were used to determine net periodic costs at December 31:

2 unchanged sentences

Expected return on plan assets 6.50 % 6.50 %

Rate of compensation increase N/A N/A

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:

Other changes in plan assets and benefit obligation recognized in Other comprehensive income (loss) consist of the following components for the years ended December 31:

Pension Benefits

1 unchanged sentence

Total recognized in other comprehensive (income) ( 4,088 ) ( 722 )

Total recognized in net periodic benefit cost and other comprehensive loss $ ( 978 )

The following table summarizes the change in benefit obligation and fair values of plan assets for the year ended December 31:

Total recognized in net periodic benefit income and other comprehensive loss $ ( 4,841 ) $ ( 978 )

The following table summarizes the change in benefit obligation and fair values of plan assets for the years ended December 31:

Pension Benefits

1 unchanged sentence

Benefit obligation, beginning balance (1)

$ 40,005 $ 41,206

Interest cost 1,104 441

4 unchanged sentences

Fair value of plan assets, beginning balance (1)

Actual return on plan assets 328

26,355 26,578

Actual loss on plan assets ( 4,985 ) 328

Benefits paid ( 2,135 ) ( 551 )

3 unchanged sentences

Beginning balance is as of July 31, 2021.

Amounts recognized on the balance sheet at December 31 consist of the following:

Amounts recognized in the Consolidated Balance Sheets at December 31 consist of the following:

Pension Benefits

1 unchanged sentence

Net amount recognized $ 8,809 $ 13,650

Amounts recognized in Accumulated Other Comprehensive Loss before income taxes consists of the following components for the year ended December 31:

Amounts recognized in Accumulated other comprehensive loss before income taxes consists of the following components for the years ended December 31:

Pension Benefits

1 unchanged sentence

Amount recognized $ 4,810 $ 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.

In 2023, the Company estimates that it will recognize $ 66 in amortization of net actuarial gains 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:

1 unchanged sentence

Discount rate 5.47 % 2.82 %

The discount rate assumptions at December 31, 2021 was determined independently.

Rate of compensation increase N/A N/A

The discount rate assumptions at December 31, 2022 and 2021 were 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.

1 unchanged sentence

The fair value of the plan assets as of December 31, is as follows:

December 31, 2021 Level 1 Level 2 Level 3

2022 Level 1 Level 2 Level 3

Asset Category:

Receivables $ 15 $ 15 $ — $ —

Money market fund – Short-term investments 804 804 — —

1 unchanged sentence

Total $ 19,235 $ 19,235 $ — $ —

The pension plans weighted-average asset allocation for the year ended December 31, 2021 is as follows:

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 $ — $ —

See Note 18 of the Notes included herein for additional information regarding the fair value hierarchy.

The pension plan’s weighted average asset allocation for the years ended December 31, 2022 and 2021 were as follows:

Target Allocation Actual Allocation

2022 2022 2021

Asset Category:

2 unchanged sentences

Cash/cash equivalents and Short-term investments 5.0 % 4.2 % 3.6 %

100.0 % 100.0 %

Total 100.0 % 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.

4 unchanged sentences

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.

During 2022 and 2021, the Company did not make any contributions to the pension plan.

The Company estimates that it will make approximately $ 787 in contributions to the pension plan in 2023.

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.

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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

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,

Where the option to purchase the incremental ownership is within the Company’s control, the amounts are recorded as Noncontrolling interests within Shareholder’s Equity in the Consolidated Balance Sheets.

Where the incremental purchase may be required of the Company, the amounts are recorded as Redeemable noncontrolling interests in mezzanine equity in the Consolidated Balance Sheets at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through Retained earnings (but not less than their initial redemption value), except for foreign currency translation adjustments.

Changes in the Company’s ownership interests in its less than 100% owned subsidiaries during the years ended December 31, 2022, 2021, and 2020 were as follows:

Year Ended December 31,

2022 2021 2020

Net income attributable to Stagwell Inc.

1 unchanged sentence

Transfers from the noncontrolling interest:

Decrease in Stagwell Inc.

Paid-in capital for purchase of RNCI and noncontrolling interests ( 26,538 ) —

Change in Stagwell Inc.

Paid-in capital for purchase of redeemable noncontrolling interests and noncontrolling interests ( 1,000 ) ( 26,538 ) —

Change in Stagwell Inc.

Paid-in-Capital for conversion of Class C to Class A shares 47,911 — —

Net transfers from noncontrolling interests 46,911 ( 26,538 ) —

1 unchanged sentence

and transfers to noncontrolling interests $ 74,180 $ ( 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,

Net income attribitable of Class C shareholders $ 6,126 $ —

Net income attribitable of other equity interest holders 9,170 18,231

The following table presents net income attributable to noncontrolling interests between holders of Class C Common Stock and other equity interest holders for the years ended December 31, 2022, 2021, and 2020:

Year Ended December 31,

2022 2021 2020

Net income attributable to Class C shareholders

$ 24,452 $ 6,126 $ —

Net income attributable to other equity interest holders

5,986 9,170 18,231

Net income attributable to noncontrolling interests

The following table presents noncontrolling interests between holders of Class C shares and other equity interest holders as of December 31, 2021 and 2020:

$ 30,438 $ 15,296 $ 18,231

The following table presents noncontrolling interests between holders of Class C Common Stock and other equity interest holders as of December 31, 2022 and December 31, 2021:

2022 December 31, 2021

Noncontrolling interest of Class C shareholders $ 428,406 $ 475,373

1 unchanged sentence

NCI attributable to noncontrolling interests $ 462,097 $ 508,287

The table above has been revised to reclassify approximately $45,422 from previously reported non-controlling interests to additional paid-in capital that should have been recognized as a result of the exchange of Paired Units for shares of the Company’s Class A common stock in February 2022.

Redeemable Noncontrolling Interests

The following table presents changes in redeemable noncontrolling interests:

2022 December 31, 2021

Beginning balance $ 43,364 $ 604

2 unchanged sentences

Changes in redemption value ( 8,711 ) 3,834

Net loss attributable to redeemable noncontrolling interests ( 412 ) ( 3,126 )

Net income (loss) attributable to redeemable noncontrolling interests 8,135 ( 412 )

Other 545 1,299

Ending balance $ 39,111 $ 43,364

(1) Approximately $ 26,000 represents redeemable noncontrolling interests acquired in connection with the acquisition of MDC.

(1) In 2021, 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.

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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.

The redeemable noncontrolling interest of $ 39,111 as of December 31, 2022, consists of $ 35,206 , assuming that the subsidiaries perform over the relevant periods at their current profit levels, and $ 3,905 upon termination of such owner’s employment with the applicable subsidiary or death.

These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values.

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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.

While any litigation contains an element of uncertainty, the Company has no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on the financial condition or results of operations of the Company.

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.

Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying audited 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.

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.

At December 31, 2022, the Company had $ 25,305 of undrawn letters of credit outstanding.

The Company entered into two operating leases for which the commencement date has not yet occurred as of December 31, 2022.

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

These contracts may also include provisions that require the partner associations to meet certain performance targets prior to any obligation to the Company.

As of December 31, 2022, 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.

$ 5,893 , $ 1,804 , $ 1,304 , $ 1,066 , and $ 44 for 2023, 2024, 2025, 2026, and 2027, respectively.

Share Capital

On March 23, 2022, the board of directors authorized the Repurchase Program under which we may repurchase up to $ 125,000 of shares of our outstanding Class A Common Stock.

Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices (including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, in privately negotiated transactions, or through other means.

The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant.

The Repurchase Program may be suspended, modified or discontinued at any time without prior notice.

Our board of directors will review the Repurchase Program periodically and may authorize adjustments of its terms.

As of December 31, 2022, there were 7,194 shares of Class A Common Stock repurchased under the Repurchase Program at an aggregate value, excluding fees, of $ 51,547 .

These were purchased at an average share price of $ 7.17 per share.

The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $ 73,309 as of December 31, 2022.

On March 1, 2023, the Board authorized an extension and a $ 125,000 increase in the size of the Repurchase Program to an aggregate of $ 250,000 , with any previous purchases under the Repurchase Program continuing to count against that limit.

The Repurchase Program, as amended, will expire on March 1, 2026.

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.

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.

Class A Common Stock

There are 1,000,000 shares of Class A Common Stock, authorized, of which 131,720 shares were issued and outstanding as of December 31, 2022.

Each share of Class A Common Stock carries one vote and entitles its holder to dividends equal to or greater than each share of Class B Common Stock.

Class B Common Stock

There are 5 shares of Class B Common Stock authorized, of which 4 shares were issued and outstanding as of December 31, 2022.

Each share of Class B Common Stock carries twenty votes and is convertible at any time at the option of the holder into one share of Class A Common Stock.

Class C Common Stock

There are 250,000 shares of Class C Common Stock authorized, of which 160,909 shares were issued and outstanding as of December 31, 2022.

Each share of Class C Common Stock carries one vote and does not represent an economic interest in the Company.

Each share of Class C Common Stock is paired with a corresponding common unit of OpCo (each such paired share of Class C Common Stock and common unit of OpCo, a “Paired Unit”).

Each holder of Paired Units may, at its option, exchange such Paired Units for shares of Class A Common Stock on a one-to-one basis (i.e., one Paired Unit for one share of Class A Common Stock).

In 2021, an aggregate of 179,970 Paired Units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities.

In the year ended December 31, 2022, holders of Paired Units exchanged 19,061 Paired Units for the same number of shares of Class A Common Stock.

Of these 19,061 Paired Units, approximately 5,000 triggered an employee tax withholding obligation of $ 14,900 .

The Company repurchased approximately 2,000 of the 5,000 shares of Class A Common Stock issued to the employees to satisfy its employee tax withholding obligation.

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.

As of December 31, 2022 and 2021, of the total number of shares authorized, 12,858 and 2,839 , respectively, 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:

The following table summarizes information about performance-based and time-based restricted stock and restricted stock unit awards:

Performance-Based Awards Time-Based Awards

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Balance at December 31, 2021 1,048 $ 8.68 15,699 $ 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 .

Granted 1,372 7.03 5,075 7.38

Vested — — ( 14,182 ) 5.45

Forfeited ( 34 ) 7.79 ( 323 ) 6.20

Balance at December 31, 2022 2,386 $ 7.74 6,269 $ 7.07

The vesting of the performance-based awards is contingent primarily upon the Company meeting certain cumulative revenue and earnings targets, primarily ranging over two to three years, and continued employment through the vesting date.

The term of the time-based awards is generally three years with vesting generally one to 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 .

The total fair value of restricted stock and restricted stock unit awards, which vested during the years ended December 31, 2022 and 2021, was $ 77,332 and $ 1,527 , respectively.

At December 31, 2022, the weighted average remaining contractual life for time-based and performance-based awards was 0.65 and 1.86 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.

At December 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, 2022 and 2021, the unrecognized compensation expense for time-based awards was $ 16,449 and $ 15,376 , respectively, and will be recognized over a weighted average period of 0.65 years and 0.37 years, respectively.

At December 31, 2022 and 2021, the unrecognized compensation expense for performance-based awards was $ 12,781 and $ 8,221 , respectively, and will be recognized over a weighted average period of 1.86 and 2.37 years, respectively.

The following table summarizes information about stock appreciation rights (“SAR”) awards:

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Balance at December 31, 2021 4,893 $ 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:

Granted — — —

Forfeited — — —

Exercised ( 48 ) 3.66 6.00

Balance at December 31, 2022 4,845 $ 2.78 $ 4.57

We use the Black-Scholes option-pricing model to estimate the fair value of SAR awards.

The grant date fair value of the SARs granted in 2021 ranged from $ 2.20 to $ 3.66 .

SARs granted in 2021 vest in 1 to 3 years.

The vesting period of these awards is generally commensurate with the requisite service period.

The assumptions used to value these awards 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 .

Certain of the Company’s SAR awards are settled in cash.

These awards are liability classified and remeasured at each reporting period.

As of December 31, 2022, the assumptions for the Black-Scholes model for these awards were as follows:

expected life ranging from 2 to 3 years, risk free interest rate of approximately 4 %, expected volatility ranging from of 37.0 % to 41.4 %, and dividend yield of 0.0 %.

The remaining term of these awards as of December 31, 2022, is approximately 4 years.

For the years ended December 31, 2022 and 2021, the number of SAR awards that vested were 1,943 and 1,950 , respectively.

As of December 31, 2022 and 2021, 3,845 and 1,950 SAR awards had vested and were exercisable, respectively.

The aggregate intrinsic value of the SAR awards outstanding as of December 31, 2022 and 2021 was $ 11,063 and $ 19,677 respectively.

At December 31, 2022 and 2021, the weighted average remaining contractual life for the SAR awards was 1.45 years and 1.15 years, respectively.

At December 31, 2022 and 2021, the unrecognized compensation expense for these awards was $ 1,175 and $ 4,639 , respectively, to be recognized over a weighted average period of 1.45 and 1.15 years, respectively.

For the years ended December 31, 2022 and 2021, the total recognized in stock-based compensation related to all stock compensation awards was $ 36,663 and $ 75,032 , respectively.

The related income tax benefit for the years ended December 31, 2022 and 2021 was $ 4,106 and $ 5,289 , respectively.

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.

The profits interests 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, receive a profit share distribution.

The profits interests awards are settled in cash and the corresponding liability was $ 20,961 and $ 36,418 at December 31, 2022 and 2021, respectively and is included as a component of Accruals and other liabilities and Other liabilities on the Consolidated Balance Sheets.

The change in the profits interest liabilities for the years ended December 31, 2022 and 2021 was a decrease of $ 4,179 and an increase of $ 536 , respectively and was recorded as stock-based compensation in Office and general expenses within the Statements of Operations.

Changes in Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) for the twelve months ended December 31 were:

The changes in accumulated other comprehensive income (loss) for the years ended December 31 were:

Defined Benefit Pension Foreign Currency Translation Total

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Other comprehensive loss before reclassifications — ( 6,000 ) ( 6,000 )

Amounts reclassified from accumulated other comprehensive loss 722 — 722

Amounts reclassified from accumulated other comprehensive income 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.

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.

Other comprehensive loss before reclassifications 4,088 (37,751) ( 33,663 )

Other comprehensive loss 4,088 ( 37,751 ) ( 33,663 )

Balance December 31, 2022 $ 4,810 $ ( 43,751 ) $ ( 38,941 )

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:

2022 2021 2020

Income (Loss):

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The provision (benefit) for income taxes by taxing jurisdiction for the years ended December 31, were:

2022 2021 2020

Current tax provision

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16,398 12,498 2,346

25,899 27,216 11,400

Deferred tax provision (benefit):

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federal income tax rate compared with actual income tax expense for the years ended December 31, is as follows:

2022 2021 2020

Income before income taxes, equity in non-consolidated affiliates and noncontrolling interest $ 73,501 $ 59,558 $ 77,340

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Stock compensation ( 1,342 ) 4,009 —

Changes in tax rates 4,908 —

Valuation allowance 2,760 ( 15 ) 1,286

Revaluation of TRA step up ( 6,952 ) — —

Return to provision adjustments ( 16,159 ) — —

Goodwill impairments 14,645 — —

Other, net 1,287 3,529 1,727

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Effective income tax rate 10.3 % 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.

Prior to merger, 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.

After the merger, 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.

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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.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law.

The tax law changes in the CARES Act did not have a material impact on the Company’s income tax provision.

In August 2022, the United States enacted to the Inflation Reduction Act of 2022 (“IRA”), which creates a new book minimum tax of at least 15% of consolidated GAAP pre-tax income for corporations with average book income in excess of $1 billion.

We do not expect an increase in our tax liability from this new book minimum tax in 2023.

Income taxes receivable were $ 15,191 and $ 790 at December 31, 2022 and 2021, respectively, and were included in other current assets on the balance sheet.

Income taxes payable were $ 6,850 and $ 24,643 at December 31, 2022 and 2021, 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.

The tax effects of significant temporary differences representing deferred tax assets and liabilities at December 31, were as follows:

2022 2021 2020

Deferred tax assets:

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Accruals and other liabilities 2,794 3,720 —

TRA and related step-up, net of amortization 32,890 — —

Other 14,557 15,160 3,344

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Deferred tax liabilities:

Right of use asset - operating leases 37,001 3,577

Right-of-use lease asset - operating leases 40,012 37,001 3,577

Property and equipment, net 6,839 4,212 463

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Total deferred tax liabilities 138,390 233,971 28,638

Net deferred tax liability $ ( 102,227 ) $ ( 15,892 )

Net deferred tax asset (liability) $ 27,575 $ ( 102,227 ) $ ( 15,892 )

Deferred tax assets $ 67,684 $ 866 $ 158

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$ 27,575 $ ( 102,227 ) $ ( 15,892 )

The preliminary deferred tax liability for the Company’s residual basis difference in OpCo of $ 102,297 reflected in the table above as of December 31, 2021 was adjusted to zero as of December 31, 2022 to reflect the finalization of the Company’s book and tax basis in OpCo.

This deferred tax liability had a balance of $ 119,470 as of September 30, 2022 that should have been zero.

In addition, a deferred tax liability of $ 16,700 , and the associated reduction to additional paid-in-capital was not recorded when the exchanges of Paired Units for Class A Common Stock occurred in February 2022.

The correction has been reflected as of December 31, 2022.

Tax Receivables Agreement

In connection with the closing of the Transaction, we entered into the Tax Receivables Agreement (“TRA”) with OpCo and Stagwell Media, pursuant to which we are required to make cash payments to Stagwell Media equal to 85% of certain U.S.

federal, state and local income tax or franchise tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (i) increases in the tax basis of OpCo’s assets resulting from exchanges of Paired Units (defined in Note 11) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to us making payments under the TRA.

The Company accounts for amounts payable under the TRA in accordance with ASC 450-Contingencies.

We will evaluate the likelihood that we will realize the benefit represented by the deferred tax asset and, to the extent that we estimate that it is more likely than not that we will not realize the benefit, we will reduce the carrying amount of the deferred tax asset with a valuation allowance and a corresponding reduction to the TRA liability.

The amounts to be recorded for both the deferred tax assets and the liability under the TRA will be estimated at the time of any purchase or exchange as a reduction to shareholders’ equity, and the effects of changes in any of our estimates after this date will be included in net income or loss.

Similarly, the effect of subsequent changes in the enacted tax rates will be included in net income or loss.

In the first quarter of 2022, the Company had its first exchange of Paired Units for shares of Class A Common Stock and recorded its initial TRA liability.

Further exchanges have been made in the subsequent quarters.

As of December 31, 2022 the

Company has recorded a TRA liability of $ 28,694 and a deferred tax asset, net of amortization of $ 32,890 in connection with the exchanges of the Paired Units and the projected obligations under the TRA.

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.

itself has net operating loss carryforwards of $ 57,553 relating to U.S.

states which expire years 2024 through 2042.

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.

also had indefinite net operating loss carryforwards which consist of $ 44,048 relating to U.S.

federal, and $ 140,608 relating to states.

Stagwell Inc.

also has foreign tax credit and general business carryovers of $ 7,104 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.

Stagwell Inc.’s consolidated corporate subsidiaries also have net operating loss carryforwards which expire in years 2022 through 2044.

These definite lived net operating loss carryforwards consist of $ 18,730 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, $ 21,403 relating to states and $ 20,099 relating to non-U.S.

The corporate subsidiaries also have indefinite net operating loss carryforwards which consist of $ 10,555 relating to U.S.

federal, and $ 15,363 relating to non-U.S.

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As of December 31, 2022 and 2021, the Company recorded a liability for unrecognized tax benefits as well as applicable penalties and interest in the amount of $ 2,159 and $ 1,120 , respectively.

As of December 31, 2021 and 2020, accrued penalties and

interest included in unrecognized tax benefits were approximately $ 82 and $ 0 , respectively.

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.

As of December 31, 2022 and 2021, accrued penalties and interest included in unrecognized tax benefits were approximately $ 23 and $ 82 , respectively.

If these unrecognized tax benefits were to be recognized, it would affect the Company’s effective tax rate.

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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:

The following table presents certain information for our financial liability that is not measured at fair value on a recurring basis at December 31:

December 31, 2022 December 31, 2021

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5.625% Notes $ 1,100,000 $ 902,000 $ 1,100,000 $ 1,120,900

$ 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.

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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

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.

Contingent deferred acquisition consideration (Level 3 fair value measurement) is initially recorded at the acquisition date fair value and adjusted at each reporting period.

The estimated liability is determined in accordance with models of each business’ future performance, including revenue growth and free cash flows.

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As of December 31, 2022, the discount rate used to measure these liabilities ranged from 5.2 % to 5.4 %.

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.

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 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.

At December 31, 2022 and December 31, 2021, 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).

Certain non-financial assets are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value measurements) and right-of-use lease assets (Level 2 fair value measurement).

Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment.

The Company 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.

See Note 10 of the Notes included herein for additional information regarding the impairment of right-of-use lease assets and Note 8 of the Notes included herein for additional information regarding the impairment of goodwill and intangible assets.

Related Party Transactions

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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.

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.

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.

The following table presents significant related party transactions where a third party receives services from the Company:

Total Transaction Value Revenues Due From

Related Party

Year Ended December 31, December 31,

2022 December 31, 2021

Services 2022 2021 2020

Technological and production services (1)

$ 227 $ 91 $ 60 $ 50 $ 42 $ 10

Marketing services (2)

Ongoing arrangement (7)

3,387 243 522 493 88

Polling services (3)

1,481 718 436 — 380 70

Marketing and website development services (4)

6,204 7,185 9,647 — 488 979

Marketing and advertising services (5)

3,576 1,930 950 — 1,506 506

Marketing and advertising services (8)

Ongoing arrangement (7)

1,418 299 — 1,072 153

Marketing services (8)

603 418 — — 30 —

Marketing services (8)

Ongoing arrangement (7)

5,564 4,814 — 3,476 4,033

Polling services (6)

3,450 2,365 — — — —

Total $ 23,076 $ 16,449 $ 572 $ 7,487 $ 5,839

(1) Client was founded by the Company’s Chief Executive Officer.

(2) Family member of one of the Brands’ partners holds an executive leadership position in the client.

(3) Family members of certain of the Company’s executives hold key leadership positions in the client

(4) Client has significant interest in the Company.

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

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

(7) This arrangement was entered into for an indefinite term and is invoiced as services are provided.

(8) A member of the Company’s board of directors holds an executive leadership position or are in the board of directors of the client.

The following table presents significant related party transactions in which the Company receives services from a third party:

Total Transaction Value Expenses Due to Related Party

Year Ended December 31, December 31,

2022 December 31, 2021

Services 2022 2021 2020

Data management services (1)

Ongoing arrangement (4)

$ 2,138 $ 1,473 $ 8,009 $ 1,295 $ 623

Sales and management services (2)

Ongoing arrangement (4)

2,006 788 — 1,416 442

Marketing services (3)

$ 40 40 — — 40 —

Marketing services (5)

365 181 — — — —

Total $ 4,365 $ 2,261 $ 8,009 $ 2,751 $ 1,065

(1) Family member of one of the Brand’s partners holds an executive leadership position in the third party.

(2) Chief Executive Officer of the Brand is a shareholder of the affiliate providing the services.

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

(4) This arrangement was entered into for an indefinite term and is invoiced as services are provided.

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

In 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 $ 3,611 and $ 3,784 due from the third party is included within Other current assets in the Company’s Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021, respectively.

The Company recognized $ 464 , $ 307 , and $ 249 for the years ended December 31, 2022, 2021, and 2020, respectively, of interest income within Interest expense, net on its Consolidated Statements of Operations.

The Company made loans to three employees of a subsidiary each in the amount of approximately $ 889 , together with interest on the unpaid principal balance at a fixed interest rate equal to 3.5 % per annum, compounding quarterly.

The cash from the loan was used by the employees to purchase the noncontrolling interest of 13.3% in TMA Direct.

Prior Period Transactions

In October 2020, a Brand entered into an arrangement to provide marketing services to a client in which one of the Brand’s partners holds a key leadership position.

During the years 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, 2022 and 2021, there were no balances due from the client related to this arrangement.

This transaction was fully recognized in 2021.

During the years ended December 31, 2021 and 2020, Stagwell Media made additional non-cash investments in the Company of $ 12,400 , and $ 93,900 respectively.

Additionally, during the years ended December 31, 2021 and 2020, the Company made cash investments of $ 1,600 and $ 1,500 , respectively.

In March 2021, the Company made a non-cash distribution to Stagwell Media of $ 13,000 .

Additionally, the Company made cash distributions to Stagwell Media of $ 191,900 and $ 108,500 for the years ended December 31, 2021 and 2020, respectively.

Segment Information

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Other items include restructuring costs, acquisition-related expenses, and non-recurring items.

Due to changes in the Company’s internal management and reporting structure in the second quarter of 2022, reportable segment results for periods presented prior to the second quarter of 2022 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

The changes in reportable segments were that the Forsman & Bodenfors, Observatory, Crispin Porter Bogusky, Bruce Mau and Vitro Brands, previously within the Integrated Agencies Network, are now within the Brand Performance Network.

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;

“Integrated Agencies Network,” “Brand Performance Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria 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 included herein.

• The Integrated Agencies Network includes five operating segments:

the Anomaly Alliance, Constellation, the Doner Partner Network, Code and Theory, and National Research Group.

The operating segments offer an array of complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications.

The Brands included in the operating segments that comprise the Integrated Agencies Network reportable segment are as follows:

Anomaly Alliance (Anomaly, Concentric, Hunter, Mono, YML and Scout (Brands), Constellation (72andSunny, Colle McVoy, Instrument,

Redscout, Hello Design, Team Enterprises, and Harris Insights), the Doner Partner Network (Doner, KWT Global, Harris X, Veritas, Doner North, Northstar, which is currently sunsetting, and Yamamoto (Brands)), Code and Theory and National Research Group.

These operating segments share similar characteristics related to (i) the nature of their services;

(ii) the type of clients and the methods used to provide services;

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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.

• The Brand Performance Network (“BPN”), previously referred to as the “Media Network” reportable segment, is comprised of a single operating segment.

BPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities.

Our Brands in this segment aim to provide scaled creative performance through developing and executing sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data.

BPN’s Brands provide media solutions such as audience analysis, media planning, and buying across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast, among others) and includes multichannel Brands Assembly, Brand New Galaxy, Crispin Porter Bogusky, Forsman & Bodenfors, Bruce Mau Design, Goodstuff, MMI Agency, digital creative & transformation consultancy Gale, B2B specialist Multiview, Observatory, Vitro, CX specialists Kenna, and travel media experts Ink.

• All Other consists of the Company’s digital innovation group and Stagwell Marketing Cloud, including Maru and Epicenter, and products such as PRophet, ARound and Reputation Defender (which was sold in September 2021).

• Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments.

These office and general expenses include (i) salaries and related expenses for corporate office employees,

including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office.

These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office.

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

Twelve Months Ended December 31,

(Dollars in Thousands)

Year Ended December 31,

2022 2021 2020

Integrated Agencies Network $ 1,479,802 $ 770,056 $ 221,595

Media Network 374,930 254,311

Brand Performance Network 757,208 424,632 262,362

Communications Network 430,820 248,832 382,815

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Integrated Agencies Network $ 293,643 $ 163,596 $ 42,332

Media Network 62,770 27,669

Brand Performance Network 115,835 65,942 27,697

Communications Network 85,684 45,527 78,562

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$ 159,228 $ 44,726 $ 83,740

Twelve Months Ended December 31,

(Dollars in Thousands)

Year Ended December 31,

2022 2021 2020

Other Income (expenses):

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Foreign exchange, net ( 2,606 ) ( 3,332 ) ( 721 )

Gain on sale of business and other, net 50,058 544

Other, net ( 7,059 ) 50,058 544

Income before income taxes and equity in earnings of non-consolidated affiliates 73,501 59,558 77,340

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Income before equity in earnings of non-consolidated affiliates 65,921 36,160 71,403

Equity in (income) losses of non-consolidated affiliates ( 240 ) 58

Equity in income (loss) of non-consolidated affiliates ( 79 ) ( 240 ) 58

Net income 65,842 35,920 71,461

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Integrated Agencies Network $ 74,609 $ 37,646 $ 9,360

Media Network 23,590 19,861

Brand Performance Network 33,674 26,031 20,117

Communications Network 10,831 7,553 5,903

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Corporate 6,925 3,775 1,964

Total $ 77,503 $ 41,025

Total depreciation and amortization $ 131,273 $ 77,503 $ 41,025

Stock-based compensation:

Integrated Agencies Network $ 13,774 $ 47,190 $ —

Media Network 4,857 —

Brand Performance Network 5,830 5,251 —

Communications Network 1,797 15,928 —

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Corporate 11,710 6,624 —

Total $ 75,032 $ —

Total stock-based compensation $ 33,152 $ 75,032 $ —

The Company recognized a severance charge of approximately $ 10,600 in 2022, the majority of which was at the Brand Performance Network.

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.

See Note 5 of the Notes included herein for a summary of the Company’s revenue by geographic region for the years ended December 31, 2022, 2021, and 2020.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data