−Removed: You should carefully consider the risk factors set forth below, as well as the other information contained in this Form 10-K, including our consolidated financial statements and related notes.
+Added: You should carefully consider the risk factors set forth below, as well as the other information contained in this Form 10-K, including our Audited Consolidated Financial Statements and related notes.
This Form 10-K contains forward-looking statements that involve risks and uncertainties.
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Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, results of operations, financial condition, cash flows, projected results and future prospects.
−Removed: These risks are not exclusive and additional risks to which we are subject include the factors listed under “Note About Forward-Looking Statements” and the risks described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K.
+Added: These risks are not exclusive and additional risks to which we are subject include the factors listed under “Note About Forward-Looking Statements” and the risks discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K.
Risk Factor Summary
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• we face significant competition, and a failure to compete successfully in the markets we serve could harm our business;
−Removed: • maintaining and enhancing our and our Brands’ brands and reputation is critical to our business prospects, and harm to our or our Brands’ brands and reputations may limit our ability to acquire new clients, retain existing clients and attract and retain qualified personnel;
−Removed: • our existing client relationships could impair our ability to generate new business or attract and retain qualified personnel;
−Removed: • if we are unable to adapt and expand our services and solutions in response to ongoing changes in technology and offerings by new entrants, our results of operations and ability to grow could be impaired;
+Added: • maintaining and enhancing our and our Brands’ brands and reputations is critical to our business prospects, and harm to our or our Brands’ brands and reputations may limit our ability to acquire new clients, retain existing clients and attract and retain qualified personnel;
• if we do not successfully manage and develop our relationships with our Global Affiliate partners or if we fail to anticipate and establish new alliances in new technologies, our results of operations could be adversely affected;
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These new ventures are inherently risky, and we may never realize any expected benefits from them;
+Added: • we are subject to risks related to our use of AI, including generative AI;
• as a global business, we are substantially dependent on operations outside the United States, and any failure to manage the risks presented by our international operations could have a material adverse effect on our business, results of operations, financial condition and prospects;
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• natural disasters, terrorist attacks, war, civil disturbances and infrastructure breakdowns could disrupt our business and harm our results of operations;
−Removed: • we are consolidating our real estate footprint and may incur significant costs in doing so;
• seasonal fluctuations in marketing, research, communications and advertising activity could have a negative impact on our revenue, cash flow and operating results;
−Removed: • we may not realize the benefits we expect from past acquisitions, including the Transactions;
−Removed: • we have allocated significant management time and resources to, and expect to incur non-recurring costs for, our ongoing integration efforts in connection with the Transactions;
−Removed: • in the future, we may acquire other companies in pursuit of growth, which may divert our management’s attention, result in dilution to our shareholders and consume resources that are necessary to sustain our business;
+Added: • we may not realize the benefits we expect from past and future acquisitions and other strategic transactions, including the Transactions;
+Added: • in the future, we may acquire other companies in pursuit of growth, which may divert our management’s attention, result in dilution to our stockholders and consume resources that are necessary to sustain our business;
• our business is highly dependent on the services of Mark Penn, our CEO and Chairman;
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• we are subject to extensive data privacy laws and regulations;
−Removed: • litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business;
+Added: • litigation, investigations, or other legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business;
• we are subject to industry regulations and other legal or reputational risks that could restrict our activities or negatively impact our performance or financial condition;
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• our Tax Receivables Agreement with Stagwell Media requires us to make cash payments to Stagwell Media in respect of certain tax benefits to which we may become entitled, and we expect the payments we are required to make to be substantial, may be required to be made prior to the time that we recognize any associated tax benefits and may make our company a less attractive target to potential acquirers;
−Removed: • our results of operations are subject to currency fluctuation risks;
−Removed: • our goodwill, intangible assets and right-of-use assets may become impaired;
−Removed: • material weaknesses in our internal control over financial reporting were identified as of December 31 2021, and remain unremediated at December 31, 2022.
+Added: • our results of operations are subject to foreign currency exchange fluctuation risks;
+Added: • our goodwill, intangible assets and right-of-use lease assets may become impaired;
+Added: • material weaknesses in our internal control over financial reporting were identified as of December 31, 2023.
If our remediation of these material weaknesses is not effective, or if we fail to maintain effective internal control over financial reporting in the future, we may not be able to accurately or timely report our financial results, which could adversely affect investor confidence in our company, our results of operation and our stock price;
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• a significant portion of our Class A Common Stock is restricted from immediate resale but may be sold into the market in the future, which could negatively affect the market price of our Class A Common Stock.
−Removed: • we are a “controlled company” within the meaning of the applicable rules of Nasdaq and, as a result, qualify for exemptions from certain corporate governance requirements.
−Removed: Our stockholders will not have the same protections afforded to stockholders of companies that are not controlled companies, and the interests of our controlling stockholder may differ from the interests of other stockholders;
−Removed: • there is no guarantee that an active and liquid public market for our securities will be sustained;
−Removed: • we do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of the Class A Common Stock;
−Removed: • we may issue additional shares of our Class A Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares;
−Removed: • some provisions of Delaware law and our certificate of incorporation and bylaws may deter third parties from acquiring us and diminish the value of our Class A Common Stock;
−Removed: • our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders and designates the United States federal district courts as the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, which could limit the ability of our stockholders to obtain a favorable judicial forum for disputes with us or with our directors, officers or employees and may discourage stockholders from bringing such claims;
−Removed: • the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and officers.
Risks Related to Our Business and Industry
As a marketing services company, our revenues are highly susceptible to declines as a result of unfavorable economic conditions and future economic conditions could adversely impact our financial condition and results.
−Removed: Advertising, marketing and communications expenditures are sensitive to global, national and regional macroeconomic conditions, including inflationary pressures, currency fluctuations, geopolitical uncertainty, increased interest rates, as well as specific budgeting levels and buying patterns.
−Removed: Adverse developments such as inflation or heightened economic uncertainty could reduce the demand for our services and pose a risk that clients may reduce, postpone or cancel spending on advertising, marketing and corporate communications projects.
−Removed: For example, inflation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflation may result in decreased demand for our products and services, increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital.
−Removed: In addition, the Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.
−Removed: In the past, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which include discretionary components that are easier to reduce in the short term than other operating expenses.
+Added: Advertising, marketing and communications expenditures are sensitive to global, national and regional macroeconomic conditions, including inflationary pressures, currency fluctuations, geopolitical uncertainty and elevated interest rates, as well as specific budgeting levels and buying patterns.
+Added: Adverse developments such as inflation or heightened economic uncertainty can reduce the demand for our services and pose a risk that clients may reduce, postpone or cancel spending on advertising, marketing and corporate communications projects..
+Added: For example, inflation rates, particularly in the United States, have increased in recent years, and the effects of increased inflation and other adverse conditions on our customers have resulted and may continue to result in decreased demand for our products and services, decreased revenue, increases in our operating costs (including our labor costs), and decreased profitability, and may result in reduced liquidity and limits on our ability to access credit or otherwise raise capital.
+Added: In cases of sustained inflation across several of our major markets, it becomes increasingly difficult to effectively control increases to our costs.
+Added: If we are unable to increase our fees or take other actions to mitigate the effect of the resulting higher costs, our business, results of operations and financial position could be negatively impacted.
+Added: In addition, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which include discretionary components that are easier to reduce in the short term than other operating expenses.
+Added: For example, our revenue and profitability declined in 2023, in part as a result of certain clients pausing projects and reducing spending in the uncertain macroeconomic environment.
This pattern may recur in the future and could have a material adverse effect on our revenue, results of operations, cash flows and financial condition.
+Added: In addition, elevated interest rates have had and may continue to have the effect of further increasing economic uncertainty and heightening these risks, as well as increasing the cost of capital.
Turmoil in the credit markets or a contraction in the availability of credit would make it more difficult for businesses to meet their capital requirements and could lead clients to change their financial relationship with their vendors, including us, which could negatively affect our working capital.
−Removed: In such circumstances, we may need to obtain additional financing to fund our day-to-day working capital requirements, which may not be available on favorable terms or at all, including as a result of Federal Reserve interest rate increases.
+Added: In such circumstances, we may need to obtain additional financing to fund our day-to-day working capital requirements, which may not be available on favorable terms or at all, including as a result of elevated interest rates.
Even if we take action to respond to adverse economic conditions, reductions in revenue and disruptions in the credit markets by aligning our cost structure and more efficiently managing our working capital, such actions may not be effective.
Our business depends on generating and maintaining ongoing, profitable client demand for our services and solutions, and a significant reduction in such demand could materially affect our results of operations.
−Removed: Our revenue and profitability depend on the demand for our services and favorable margins, which could be negatively affected by numerous factors, many of which are beyond our control and unrelated to our work product.
+Added: Our revenue and profitability depend on the demand for our services and favorable margins, which have been and may continue to be negatively affected by numerous factors, many of which are beyond our control and unrelated to our work product.
To increase our revenues and achieve favorable margins, we will need to attract additional clients or generate demand for additional services and products from existing clients, and such demand will depend on factors including clients’ and potential clients’ requirements, pre-existing vendor relationships, financial condition, strategic plans, internal resources and satisfaction with our work product and services, as well as broader economic conditions, competition and the quality of our Brands’ employees, services and reputation and the breadth of our services.
−Removed: As described above, volatile, negative or uncertain global economic and political conditions can adversely affect client demand for our services and solutions.
+Added: As described above, volatile, negative or uncertain global economic and political conditions have adversely affected client demand for our services and solutions.
In addition, developments in the markets we serve, which may be rapid, could shift demand to services and solutions where we are less competitive, or might require significant investment by us to upgrade, enhance or expand our services and solutions to meet that demand.
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If one of our current clients merges or consolidates with a company that relies on another provider for its marketing and related services, we may lose work from that client or lose the opportunity to gain additional work if we are not successful in generating new opportunities from the merger or consolidation.
−Removed: To the extent that we are unable generate sufficient and profitable new business from new and existing clients, our ability to grow our business, increase our revenues and achieve favorable margins will be limited, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
+Added: To the extent that we are unable to generate sufficient and profitable new business from new and existing clients, our ability to grow our business, increase our revenues and achieve favorable margins will be limited, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Our business could be adversely affected if we fail to retain our existing clients.
Our clients may terminate or reduce the scope of their relationships with us on short notice.
−Removed: As a services business, our ability to attract and retain clients is an important aspect of our competitiveness, and client loss, including due to competitors, as a consequence of client consolidation, insolvency or a reduction in marketing budgets due to recessionary economic conditions, or a shift in client spending could have a material adverse effect on our business, results of operations, financial condition and prospects.
+Added: As a services business, our ability to attract and retain clients is an important aspect of our competitiveness, and client loss, including due to competitors, as a consequence of client consolidation, insolvency or a reduction in marketing budgets due to recessionary economic conditions,
+Added: or a shift in client spending could have a material adverse effect on our business, results of operations, financial condition and prospects.
Many companies, including companies with which we have long-standing relationships, put their advertising and marketing communications business up for competitive review from time to time, and we have lost client accounts in the past as a result of such reviews.
Our clients may choose to terminate their contracts, or reduce their relationships with us, on a relatively short time frame and for any reason, including as a result of such competitive reviews, external factors such as economic conditions or their own financial distress, competition from other marketing services providers or clients’ dissatisfaction with our services, reputation or personnel.
+Added: For example, the loss of clients and reduced spending among existing clients contributed to the decline in our revenue in 2023.
A relatively small number of clients contributes a significant portion of our revenue, which magnifies this risk.
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When contracts are terminated or not renewed, we lose the anticipated revenues, and it may take significant time to replace the lost revenues or we may be unsuccessful in our attempt to recover such revenues.
−Removed: Consequently, our results of operations in subsequent periods could be materially lower than expected.
The specific business or financial condition of a client, changes in management and changes in a client’s strategy are also factors that can result in terminations, cancellations or delays, and in pressure to reduce costs.
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The advertising and marketing services business is highly competitive and constantly changing.
−Removed: We compete on the basis of many factors, including the quality (and clients’ perceptions of the quality) of our work, our ability to protect the confidentiality of clients’ and their customers’ data, our relationships with key client personnel, our expertise in particular niche areas or disciplines and our ability to provide integrated services at the scale clients require.
+Added: We compete on the basis of many factors, including the quality (and clients’ perceptions of the quality) of our work, our ability to protect the confidentiality of clients’ and their customers’ data, our relationships with key client personnel, our expertise in particular niche areas or disciplines, the differentiation of our offerings and our ability to provide integrated services at the scale clients require.
Our Brands compete with a diverse and growing set of marketing services firms and consultancies to maintain existing client relationships and to win new business.
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If we are unable to compete successfully, we could lose market share and clients to competitors or be forced to accept engagements with unfavorable economic terms, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
−Removed: Maintaining and enhancing our and our Brands’ brands and reputations is critical to our business prospects, and harm to our Brands’ brands and reputations may limit our ability to acquire new clients, retain existing clients and attract and retain qualified personnel.
+Added: Maintaining and enhancing our and our Brands’ brands and reputations is critical to our business prospects, and harm to our or our Brands’ brands and reputations may limit our ability to acquire new clients, retain existing clients and attract and retain qualified personnel.
We believe our and our Brands’ brand names and reputations are important corporate assets that help distinguish our services from those of our competitors and also contribute to our efforts to recruit and retain talented employees.
However, our Brands’ corporate reputations are potentially susceptible to material damage by events such as disputes with clients, information technology security breaches or service outages, or other delivery failures.
−Removed: Similarly, our or our Brands’ reputation could be damaged by actions or statements of current or former clients, employees, competitors, vendors, as well as members of the investment community and the media.
+Added: Similarly, our or our Brands’ reputation could be damaged by actions or statements of current or former clients, employees, competitors or vendors, as well as members of the investment community and the media.
Such negative attention could adversely affect our business, and damage to our reputations could be difficult and time-consuming to repair, could make potential or existing clients reluctant to select us for new engagements or cause existing clients to terminate their relationships with us, resulting in a loss of business, and could adversely affect our recruitment and employee retention efforts.
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Current areas of significant change include search engine optimization, bots, search engine marketing, social media and influencer and affiliate marketing, email marketing, AR and VR applications, customer relationship and programmatic advertising, which involve the use of mobility-based software platforms, cloud computing, SaaS, and DaaS solutions, AI and generative AI content creation tools, machine learning and the processing and analyzing of large amounts of data.
−Removed: Technological developments such as these may materially affect the cost and use of technology by our clients and demand for our services, and if we do not sufficiently invest in new technology and industry developments, or if we do not make the right strategic investments to respond to these developments and successfully drive innovation, our services and solutions, our ability to generate demand for our services, attract and retain clients, and our ability to develop and achieve a competitive advantage and continue to grow could be negatively affected.
+Added: Technological developments such as these may materially affect the cost and use of technology by our clients and demand for our services, and if we do not sufficiently invest in new technology and industry developments, or if we do not make the right strategic investments to respond to these developments and successfully drive innovation, our services and solutions, our ability to generate demand for our services, and to attract and retain clients, and our ability to develop and achieve a competitive advantage and growth could be negatively affected.
In addition, we operate in a quickly evolving environment in which there currently are, and we expect will continue to be, numerous new technology entrants.
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Our growth strategy has included partnering with independent marketing services agencies, which we refer to as Global Affiliates, in certain jurisdictions, rather than operating in those markets independently.
−Removed: A portion of our revenue is derived from client engagements that involve services by our Global Affiliates, and we believe our Global Affiliates program is a critical element of our strategy to compete with large incumbent marketing services companies and provide scaled global marketing services to our clients.
+Added: A portion of our revenue is derived from client engagements that involve services by our Global Affiliates, and we believe our Global Affiliates program is a
+Added: significant element of our strategy to compete with large incumbent marketing services companies and provide scaled global marketing services to our clients.
If we are unable to maintain our relationships with current Global Affiliates partners and identify new and emerging partners to expand our Global Affiliates network of alliance partners, we may not be able to provide the kinds of scaled global services that we believe clients require or compete effectively in the market.
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We are not represented on the management teams, boards of directors or other governing bodies of our Global Affiliates, and therefore do not participate in the day-to-day management of such entities.
−Removed: Because we do not control our Global Affiliates, they may take actions with which we or our clients disagree, which could expose us to reputational damage or impair our ability to attract and retain clients and generate demand for our services and solutions.
−Removed: Moreover, our Global Affiliates may not be subject to or follow the same requirements regarding compliance, internal controls and internal control over financial reporting that we follow.
−Removed: To the extent control issues arise within the Global Affiliate partners’ business, it could lead to further reputational and operational damage to our business.
+Added: Because we do not control our Global Affiliates, they may take actions with which we or our clients disagree, which could expose us to reputational damage or which could impair our ability to attract and retain clients and generate demand for our services and solutions.
+Added: Moreover, our Global Affiliates may not be subject to or follow the same requirements regarding compliance, internal controls and internal control over financial reporting as us and may not adhere to their contractual representations to us regarding such matter.
+Added: To the extent control or compliance issues arise within the Global Affiliate partners’ businesses, such issues could lead to further reputational and operational damage to our business.
Additionally, our Global Affiliates are generally not prohibited from competing with us or forming closer or preferred arrangements with our competitors and may expand their own offerings and geographic presence, which could lead them to compete with us in various markets around the world.
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These new ventures are inherently risky, and we may never realize any expected benefits from them.
−Removed: We have made investments to develop new marketing services products and technologies, including the Stagwell Marketing Cloud and other marketing data, campaign martech, AR and VR applications, and we intend to continue investing significant resources in developing and/or acquiring new technologies, tools, features, services, products and offerings.
+Added: We have made investments to develop new marketing services products and technologies, including the Stagwell Marketing Cloud and other marketing data, campaign martech, AR and VR applications, and AI and generative AI offerings, and we intend to continue investing significant resources in developing and/or acquiring new technologies, tools, features, services, products and offerings.
If we do not spend our development budget efficiently or effectively on commercially successful and innovative technologies, or if we encounter significant technical or other challenges with respect to the development of our anticipated product offerings, we may not realize the expected benefits of our strategy.
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Because such offerings and technologies are new, they may involve additional claims and liabilities (including, but not limited to, intellectual property claims), expenses, regulatory challenges, and other risks that we do not currently anticipate.
−Removed: There can be no assurance that client demand for new products, including the Stagwell Marketing Cloud and other marketing data, campaign martech, AR and VR martech applications, will exist or be sustained at the levels that we anticipate, or that any of these initiatives will gain sufficient traction or market acceptance to generate sufficient revenue to offset any new expenses or liabilities associated with these new investments.
+Added: There can be no assurance that client demand for new products, including the Stagwell Marketing Cloud and other marketing data, campaign martech, AR and VR martech applications, and AI and generative AI offerings, will exist or be sustained at the levels that we anticipate, or that any of these initiatives will gain sufficient traction or market acceptance to generate sufficient revenue to offset any new expenses or liabilities associated with these new investments.
It is also possible that products and offerings developed by others will render our products and offerings noncompetitive or obsolete.
Further, our development efforts with respect to new products, offerings and technologies could distract management from current operations, and will divert capital and other resources from our more established products, offerings and technologies.
−Removed: Even if we are successful in developing new products, offerings or technologies, regulatory authorities may subject us to new rules or restrictions in response to our innovations that could increase our expenses or prevent us from successfully commercializing new products, offerings or technologies.
+Added: Even if we are successful in developing new products, offerings or technologies, such developments may be subject to new or existing rules or restrictions that could increase our expenses or prevent us from successfully commercializing new products, offerings or technologies.
If we do not realize the expected benefits of our investments, our business, financial condition, results of operations and prospects may be harmed.
+Added: We are subject to risks related to our use of AI, including generative AI.
+Added: We are increasingly building generative AI features into some of our offerings, such as generative AI content creation tools, and are making investments in expanding our generative AI capabilities.
+Added: As part of this process, we also utilize generative AI tools offered by third-party providers in the development and testing of our offerings.
+Added: Generative AI is a new and emerging technology in its early stages of commercial use and presents certain inherent risks.
+Added: Generative AI algorithms are based on machine learning and predictive analytics, which can create unintended biases and discriminatory outcomes, and outputs can be completely fabricated or false.
+Added: There is a risk that our algorithms could produce such outcomes or other unexpected results or behaviors that could harm our reputation, business, or clients.
+Added: In addition, the use of AI and generative AI involves significant technical complexity and requires specialized expertise.
+Added: Any disruption or failure in our AI and generative AI offerings, or those of our third-party providers, could result in delays or errors in our operations, which could harm our business and financial results.
+Added: The use of generative AI tools could also result in a greater likelihood of cybersecurity incidents, privacy violations and inadvertent disclosures of our intellectual property or other confidential information, any of which could directly or indirectly harm our business, operations and reputation.
+Added: The AI regulatory landscape is still uncertain and evolving, and the development and use of AI technologies, including generative AI, in new or existing content creation tools and other offerings may result in new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns or other complications that could be costly and time-consuming and could adversely affect our business, reputation or financial results.
+Added: For example, some jurisdictions are currently considering AI specific laws and regulations.
+Added: Such laws and regulations, if enacted, could increase our compliance costs or require us to limit or modify our use of AI or our AI-enabled offerings in certain jurisdictions.
+Added: In addition, the intellectual property ownership and license rights, including copyrights, surrounding AI technologies, including generative AI, have not been fully addressed by U.S.
+Added: courts or other federal, state or international laws or regulations, and the use or adoption of third-party generative AI technologies into our offerings may result in exposure to claims of copyright infringement or other intellectual property misappropriation, which could harm our business, reputation and financial results.
As a global business, we are substantially dependent on operations outside the United States, and any failure to manage the risks presented by our international operations could have a material adverse effect on our business, results of operations, financial condition and prospects.
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• the resources required to adapt our operations to local practices, laws, and regulations and any changes in such practices, laws, and regulations;
−Removed: • laws and regulations that may be more restrictive than those in the United States, including commercial laws that can be undeveloped, vague, inconsistently enforced, retroactively applied or frequently changed, laws governing competition, pricing, payment methods, Internet activities, real estate tenancy laws, tax and social security laws, employment and labor laws, email messaging, privacy, location services, collection, use, processing, or sharing of personal information, ownership of intellectual property, and other activities important to our business;
+Added: • laws and regulations that may be more restrictive than those in the United States, including commercial laws that can be undeveloped, vague, inconsistently enforced, retroactively applied or frequently changed, laws governing competition, pricing, payment methods, Internet activities, real estate tenancy laws, tax and social security laws, employment and labor laws, email messaging, privacy, location services, collection, use, processing, or sharing of personal data, ownership of intellectual property, and other activities important to our business;
• competition with companies or other services that understand local markets better than we do or that have pre-existing relationships with potential clients in those markets;
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• import and export restrictions, changes in trade regulation and economic sanctions compliance;
−Removed: • public health concerns or emergencies, such as pandemics or other outbreaks of communicable disease, which have
−Removed: occurred in parts of the world in which we operate;
−Removed: • war, geopolitical tensions and other political, social, and economic instability abroad, terrorist attacks and security concerns;
+Added: • public health concerns or emergencies, such as the COVID-19 pandemic or other outbreaks of communicable disease, which have occurred in parts of the world in which we operate;
+Added: • war, geopolitical tensions and other political, social, and economic instability abroad, terrorist attacks and security concerns, such as escalating tensions in the Taiwan Strait and the ongoing conflicts between Russia and Ukraine and in Israel and Gaza;
• reduced or varied protection for intellectual property rights in some markets.
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In addition, in developing countries or regions, we may face further risks, such as slower receipt of payments, nationalization, social and economic instability, currency repatriation restrictions and undeveloped or inconsistently enforced commercial laws.
−Removed: For example, we have exited our operations in Russia.
−Removed: However, despite our efforts taken to ensure compliance with applicable law, it is difficult to anticipate the effect sanctions and other laws and regulations may have on us, and compliance with any sanctions imposed or actions taken by the United States or other countries, as well as the effect of current or further economic sanctions (and any retaliatory responses thereto) may have an adverse effect on our operations.
+Added: In addition, it is difficult to anticipate the effect sanctions and other laws and regulations may have on us, and compliance with any sanctions imposed or actions taken by the United States or other countries, as well as the effect of current or further economic sanctions (and any retaliatory responses thereto) may have an adverse effect on our operations.
These risks may limit our ability to grow our business and effectively manage our operations in the countries that are affected.
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The difference between the gross production costs and media purchases and the revenue earned by us can be significant, and primarily affects our levels of accounts receivable, expenditures billable to clients, accounts payable and accrued liabilities.
−Removed: While we take precautions against default on payment for these services (such as credit analysis, advance billing of clients, and in some cases acting as an agent for a disclosed principal), such precautions may fail to mitigate our exposure to clients’ credit risk, and we may experience significant uncollectible receivables from our clients.
+Added: While we take precautions against default on payment for these services (such as credit analysis, advance billing of clients, purchasing credit insurance and in some cases acting as an agent for a disclosed principal), such precautions may fail to mitigate our exposure to clients’ credit risk, and we may experience significant uncollectible receivables from our clients.
In addition, in periods of severe economic downturn, our methods of managing the risk of payment default may be less available or unavailable and the risk of a material loss could significantly increase.
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If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges.
−Removed: We have experienced significant growth in recent periods, including as a result of the Transactions, and we intend to continue to expand our business in the future.
−Removed: This growth has placed, and any future growth may continue to place, a significant strain on our management, operational and financial infrastructure.
−Removed: Our management will also be required to maintain and expand our relationships with clients, Global Affiliates partners and other third parties and attract new clients, as well as to manage multiple geographic locations.
−Removed: In addition, our current and planned operations, personnel, systems and procedures might be inadequate to support our future growth and may require us to make additional unanticipated investment in our infrastructure, including additional costs for the expansion of our employee base and our global operations and partnerships as well as marketing and branding costs.
−Removed: Our success and ability to further scale our business will depend, in part, on our ability to manage these changes in a cost-effective and efficient manner.
−Removed: If we cannot manage our growth, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures.
+Added: We have experienced significant growth and revenue declines in recent periods, and we intend to continue to expand our business in the future.
+Added: These fluctuations have placed, and any future growth may continue to place, a significant strain on our management, operational and financial infrastructure.
+Added: In order to support future growth, our management will also be required to maintain and expand our relationships with clients, Global Affiliates partners and other third parties and attract new clients, as well as to manage multiple geographic locations.
+Added: In addition, our current and planned operations, personnel, systems and procedures might be inadequate to support our future growth and may require us to make additional unanticipated investments in our infrastructure, including additional costs for the expansion of our employee base and our global operations and partnerships as well as marketing and branding costs.
+Added: Our success and ability to scale our business will depend, in part, on our ability to manage these changes in a cost-effective and efficient manner.
+Added: If we cannot manage our planned growth, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures.
This could also result in declines in quality or customer satisfaction, increased costs, difficulties in introducing new marketing services or product offerings or other operational difficulties.
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Natural disasters, terrorist attacks, war, civil disturbances and infrastructure breakdowns could disrupt our business and harm our results of operations.
−Removed: Our corporate headquarters is located in New York City, which has experienced terrorist attacks, civil disturbance, natural disasters and extreme weather events including hurricanes, floods and fires, and critical resources shortages and infrastructure
−Removed: disruptions, such as localized extended outages of critical utilities or transportation systems.
+Added: Our corporate headquarters is located in New York City, which has experienced terrorist attacks, civil disturbance, natural disasters and extreme weather events including hurricanes, floods and fires, and critical resources shortages and infrastructure disruptions, such as localized extended outages of critical utilities or transportation systems.
If any such natural disaster or other disturbance or interruption, such as terrorist attacks or war, were to occur, such event could prevent us from using all or a significant portion of our headquarters or other facilities, damaged critical infrastructure or otherwise disrupt our operations, which could make it difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time and could require us to make capital expenditures even though we may not have sufficient available resources at such time.
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We are consolidating our real estate footprint and may incur significant costs in doing so.
−Removed: In 2020, we consolidated the real estate occupancy of our advertising and marketing agencies in New York City, in order to lower our leasing costs and improve collaboration among our Brands.
−Removed: In connection with this consolidation, many of our properties have been or will be subleased or abandoned, and we are exploring opportunities for real estate consolidation in other markets.
+Added: We have continued to consolidate the real estate occupancy of our advertising and marketing agencies in order to lower our leasing costs and improve collaboration among our Brands.
+Added: In connection with this consolidation, many of our properties have been or are expected to be subleased or abandoned.
We may not be able to sublease the vacated office spaces on expected terms or at all.
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For example, clients tend to devote more of their advertising budgets to the fourth calendar quarter to coincide with consumer holiday spending, and we typically generate our highest quarterly revenue during the fourth quarter in each year.
−Removed: Political advertising and related activity have also historically caused our revenue to increase during election cycles, which is most pronounced in even years, in particular during the third and fourth quarters of such years, and decrease during other periods.
−Removed: If our growth rate declines or seasonal spending becomes more pronounced, seasonality could have a more significant impact on our revenue, cash flow and operating results from period to period.
+Added: Political advertising and related activity have also historically caused our revenue to increase during election cycles, which is most pronounced in even years, in particular during the third and fourth quarters of such years, and to decrease during other periods.
+Added: Seasonality could have a more significant impact on our revenue, cash flow and operating results from period to period as a result of declines in our growth rate or if seasonal spending becomes more pronounced.
Risks Related to Strategic Transactions
−Removed: We may not realize the benefits we expect from past acquisitions, including the Transactions.
−Removed: We may be unable to realize the benefits we expect from our past strategic transactions, including the Transactions and other recent acquisitions, such as Brand New Galaxy, TMA Direct, Inc., Maru Group Limited, Wolfgang, LLC., and Epicenter Experience LLC., for a variety of reasons, including due to our failure to effectively integrate newly acquired businesses into our operations, because of errors in our forecasting or for numerous other reasons, including factors that we do not control, such as the reactions of existing and potential clients, employees, regulators and investors.
−Removed: Our ongoing integration efforts following the Transactions are subject to significant risks and uncertainties, including with respect to our ability to realize our anticipated synergies and cost savings, our ability to retain and attract executives, employees
−Removed: and clients, the diversion of management’s attention from other business concerns, and undisclosed, unknown or potential legal liabilities of the acquired company.
−Removed: Our failure to address these risks or other problems encountered in connection with the Transactions and any past or future acquisitions and other strategic transactions could cause us to fail to realize their anticipated benefits, incur unanticipated liabilities and harm our business generally.
−Removed: Even if we are able to integrate the combined businesses successfully, this integration may not result in the realization of the full benefits of the growth and other opportunities, or the synergies and cost savings, that we currently expect from the Transactions within the anticipated time frame, or at all.
−Removed: Furthermore, the anticipated benefits or value of our acquisitions and other strategic transactions, including the Transactions, may not be achievable, particularly as the achievement of the benefits are in many important respects subject to factors that we do not and cannot control, including the reaction of third parties with whom we do business and the reactions of investors.
−Removed: As a result of the Transactions, we have significantly more revenue, expenses, assets and employees than prior to the Transactions, and we assumed certain liabilities and other obligations of the pre-merger entities.
−Removed: The Company may not successfully or cost-effectively integrate the combined businesses.
−Removed: We have allocated significant management time and resources to, and expect to incur non-recurring costs for, our ongoing integration efforts in connection with the Transactions.
−Removed: We and our management have allocated and continue to allocate time and resources to our ongoing integration efforts following the Transactions, including related and incidental activities.
−Removed: Integration of the legacy SMG and MDC businesses has been and is expected to continue to be complex, costly and time-consuming, requires significant management attention and resources, may disrupt our business, and may ultimately be unsuccessful.
−Removed: Risks and difficulties of integration include, among others, the diversion of management attention to integration matters, increased difficulty retaining existing clients and obtaining new customers, difficulties attracting and retaining employees and the added strain on our executives of managing the expanded operations of a significantly larger company, any of which could adversely impact the effectiveness of our management team, the effectiveness of our integration efforts and the future performance of our combined company, which could harm our business, prospects, results of operations and financial condition.
−Removed: In addition, we have incurred or expect to incur a number of non-recurring costs associated with our integration efforts, including costs associated with our pursuit of synergies and cost efficiencies following the Transactions.
−Removed: While we expect the benefits of such efforts to offset these costs over time, this net benefit may not be achieved in the short term or at all, and the actual costs we incur in connection with our integration efforts could exceed our estimates.
−Removed: These combined factors could adversely affect our business, results of operations and financial condition.
−Removed: In the future, we may acquire other companies in pursuit of growth, which may divert our management’s attention, result in dilution to our shareholders and consume resources that are necessary to sustain our business.
+Added: We may not realize the benefits we expect from past and future acquisitions and other strategic transactions, including the Transactions.
+Added: We may be unable to realize the benefits we expect from our past and future acquisitions and other strategic transactions, including the Transactions, for a variety of reasons, including due to our failure to effectively integrate newly acquired businesses into our operations, because of errors in our forecasting or for numerous other reasons, including factors that we do not control, such as the reactions of existing and potential clients, employees, investors and regulators.
+Added: Our integration efforts are subject to significant risks and uncertainties, including with respect to our ability to realize our anticipated synergies and cost savings, our ability to retain and attract executives, employees and clients, the diversion of management’s attention from other business concerns, and undisclosed, unknown or potential legal liabilities of the acquired companies.
+Added: Our failure to address these risks or other problems encountered in connection with any past or future acquisitions and other strategic transactions could cause us to fail to realize their anticipated benefits, incur unanticipated liabilities and harm our business generally.
+Added: Even if we are able to complete the integration of acquired businesses successfully, this integration may not result in the realization of the full benefits of the growth and other opportunities, or the synergies and cost savings, that we expect within the anticipated time frame, or at all.
+Added: Furthermore, the anticipated benefits or value of our acquisitions and other strategic transactions may not be achievable, particularly as the achievement of the benefits are in many important respects subject to factors that we do not and cannot control, including the reaction of third parties with whom we do business and the reactions of investors.
+Added: In the future, we may acquire other companies in pursuit of growth, which may divert our management’s attention, result in dilution to our stockholders and consume resources that are necessary to sustain our business.
Our business strategy includes engaging in strategic mergers, acquisitions and investments to bolster our capabilities or expand our reach in particular areas.
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Management succession at our Brands is very important to the ongoing results of our company because, as in any service business, the success of a particular Brand depends in part upon the leadership of key executives and management.
−Removed: If we are unable to manage management succession at the Brand level, our ability to innovate, generate new business opportunities and effectively lead large and complex client relationships and marketing services projects could be jeopardized.
+Added: If we are unable to manage management succession at the Brand level, our ability to innovate, generate new business opportunities and
+Added: effectively lead large and complex client relationships and marketing services projects could be jeopardized.
We depend on identifying, developing and retaining top talent to innovate and lead our businesses.
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SAG-AFTRA has recently persuaded the principal signatory service companies to change the way such signatory service companies do business.
−Removed: These changes may make it more cumbersome and expensive for advertising agencies which have not
−Removed: entered into the SAG-AFTRA Commercials Contract to produce advertisements using SAG-AFTRA members, and in some cases may preclude the use of SAG-AFTRA members in the production of commercials by certain of our Brands.
+Added: These changes may make it more cumbersome and expensive for advertising agencies which have not entered into the SAG-AFTRA Commercials Contract to produce advertisements using SAG-AFTRA members, and in some cases may preclude the use of SAG-AFTRA members in the production of commercials by certain of our Brands.
Because SAG-AFTRA members comprise a significant proportion of performing talent available for commercials, any inability of our Brands to produce commercials using union performers could materially limit such Brands’ access to qualified performing talent, reduce the amount of business conducted by such Brands and impair their ability to compete with agencies that are able to employ union performers, which could in turn have a material adverse effect on our business, results of operations, financial condition and prospects.
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Furthermore, mitigating the risk of future cybersecurity threats or attacks could result in additional operating and capital costs in systems technology, personnel, monitoring and other investments.
−Removed: We have experienced, and may again experience, data security incidents resulting from unauthorized access to our and our service providers’ systems and unauthorized acquisition of our data and our clients’ data, including inadvertent disclosure, misconfiguration of systems, phishing ransomware or malware attacks.
+Added: We have experienced, and may again experience, data security
+Added: incidents resulting from unauthorized access to our and our service providers’ systems and unauthorized acquisition of our data and our clients’ data, including inadvertent disclosure, misconfiguration of systems, phishing ransomware or malware attacks.
In addition, certain of our clients may experience breaches of systems and cloud-based services enabled by or provided by us.
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We are subject to extensive data privacy laws and regulations.
−Removed: In addition, laws and regulations related to consumer privacy, use of personal data and digital tracking technologies have been proposed or enacted in the United States and certain international markets (including the European Union’s General Data Protection Regulation, or “GDPR,” the proposed updated European Union “ePrivacy Regulation” and the California Consumer Privacy Act, as amended by the California Privacy Rights Act, or “CCPA”).
−Removed: Further in the United States, both Congress and
−Removed: state legislatures, along with federal regulatory authorities, have continued to increase their attention on advertising and the collection and use of data, including personal data.
+Added: In addition, laws and regulations related to consumer privacy, processing of personal data and use of digital tracking technologies have been proposed or enacted in the United States and certain international markets (including the European Union’s General Data Protection Regulation, or “GDPR,” the proposed updated European Union “ePrivacy Regulation” and the California Consumer Privacy Act, as amended by the California Privacy Rights Act, or “CCPA”).
+Added: Further in the United States, both Congress and state legislatures, along with federal regulatory authorities, have continued to increase their attention on advertising and the collection and use of data, including personal data.
At the federal level, while to date there has not been any successful efforts in enacting comprehensive data privacy legislation, if successfully introduced, such legislation would create additional regulatory and compliance obligations, legal risk exposure, and could significantly impact our business activities.
−Removed: At the state level, in California, updates to the CCPA took effect on January 1, 2023.
−Removed: The updates to the CCPA, include additional data privacy and protection obligations on covered companies and expanding rights for California residents, including with respect to certain sensitive personal data.
−Removed: The CCPA will now be enforced by a California data protection agency specifically tasked to enforce the law, which will likely result in increased regulatory scrutiny of covered businesses in the areas of data protection and security.
−Removed: Similar consumer data privacy laws have been passed in four other states, and more are continuing to be proposed in other states.
+Added: The SEC also recently issued rules governing disclosures regarding cybersecurity incident response, governance and risk management.
+Added: At the state level, consumer data privacy laws continue to be proposed and passed in a number of states across the country.
As more privacy legislation continues to be introduced, the Company could be subject to such laws regardless of whether the Company has operations or a physical presence in the applicable state.
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Furthermore, these laws and regulations may impact the efficacy and profitability of certain digital marketing and analytics services we provide to clients, making it difficult to achieve our clients’ goals.
+Added: In the United States, the Federal Trade Commission (the “FTC”) and other regulators at both the federal and state levels continue to seek greater regulation of the collection and processing of personal data, as well as restrictions and requirements for certain targeted advertising practices.
+Added: Continuing developments in regulatory enforcement and future changes in laws and regulations throughout the United States could impact our ability to collect data, commercialize the data we do collect, limit the extent to which we can monetize or utilize that data, give rise to additional compliance costs, require us to make substantial investments to satisfy new regulatory rules, and expose us to potential non-compliance liability.
+Added: We are also subject to evolving privacy laws on data processing activities related to cookies and online marketing.
+Added: In the European Union, regulators actively enforce privacy requirements related to online behavioral advertising, and the forthcoming ePrivacy Regulation is anticipated to significantly increase fines for non-compliance.
+Added: The text of the ePrivacy Regulation is still under development, and recent European Union regulatory guidance and court decisions have created uncertainty about the manner in which such laws and regulations will be enforced, which may require us to review our compliance approach and data processing activities, including related to data processing for marketing purposes.
These and other related factors could affect our business and reduce demand for certain of our services, which could have a material adverse effect on our results of operations and financial condition.
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In the event that we are found or suspected to have violated data privacy laws, we may be subject to additional potential private consumer, business partner or securities litigation, regulatory inquiries, governmental investigations and proceedings and we may incur damage to our reputation.
−Removed: Any such developments may subject us to material fines and other monetary penalties and damages, divert management’s time and attention, and lead to enhanced regulatory oversight, all of which could have a material adverse effect on our business and results of operations.
+Added: Any such developments
+Added: may subject us to material fines and other monetary penalties and damages, divert management’s time and attention, and lead to enhanced regulatory oversight, all of which could have a material adverse effect on our business and results of operations.
Risks Related to Litigation and Regulation
−Removed: Litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business.
−Removed: From time to time, we have been and may in the future be party to various claims and litigation proceedings.
+Added: Litigation, investigations or other legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business.
+Added: From time to time, we have been and may in the future be party to various claims, litigation proceedings and regulatory inquiries.
We evaluate these claims and litigation proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses.
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Although we are not currently party to any litigation that we consider material, actual outcomes or losses may differ materially from our assessments and estimates.
+Added: In addition, from time to time we receive and respond to regulatory inquiries and may be subject to regulatory or other government investigations, the outcomes of which are inherently uncertain.
We and certain of our Brands produce software and e-commerce tools for clients, including the Stagwell Marketing Cloud and other martech products, and such types of software and e-commerce product offerings have become increasingly subject to litigation based on allegations of patent infringement or other violations of intellectual property rights.
+Added: In addition, the intellectual property ownership and license rights, including copyrights, surrounding AI technologies, including generative AI, have not been fully addressed by U.S.
+Added: courts or other federal, state, or international laws or regulations, and the use or adoption of third-party generative AI technologies into our offerings may result in exposure to claims of copyright infringement or other intellectual property misappropriations, which could harm our business and financial results.
As we expand these product offerings, the possibility of an intellectual property claim against us grows.
−Removed: In addition, securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other business combination agreements.
−Removed: We have been and may in the future be the target of securities and shareholder litigation.
−Removed: Any such claims or other claims against us, with or without merit, could result in costly litigation and divert management from day-to-day operations and resources from our business.
−Removed: We cannot be certain that we would be successful in defending against any such claims.
−Removed: Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be reversed on appeal, or we may decide to settle lawsuits on similarly unfavorable terms.
−Removed: If we are not successful in defending such claims, we could be required to rebrand, redesign or stop offering these products or services, pay monetary damages or fines, enter into royalty or licensing arrangements, satisfy indemnification obligations that we have with some of our clients or make changes to our business practices, any of which could have an adverse effect on our business, reputation, results of operations, financial condition and prospects.
−Removed: Even when these claims are not meritorious, the defense of these claims may divert our management’s attention and may result in significant expenses.
−Removed: The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against us, which could have a material adverse effect on our financial condition, cash flows or results of operations.
−Removed: claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.
+Added: In addition, putative securities class action lawsuits and derivative lawsuits and other stockholder claims are often brought against public companies for a variety of reasons, including but not limited to claims arising out of stock price declines and acquisition, merger or other business combination agreements.
+Added: We have been and may in the future be the target of securities and stockholder litigation or regulatory investigations.
+Added: Any such claims or investigations or other claims against us, with or without merit, could result in costly litigation or other proceedings and divert management from day-to-day operations and resources from our business.
+Added: We cannot be certain that we would be successful in defending against or resolving any such claims or other proceedings.
+Added: Any such matters may result in an onerous or unfavorable judgment that may not be reversed on appeal, or we may decide to settle such matters on similarly unfavorable terms.
+Added: If we are not successful in defending or resolving such matters, we could be required to rebrand, redesign or stop offering these products or services, pay monetary damages or fines, enter into royalty or licensing arrangements, satisfy indemnification obligations that we have with some of our clients or make changes to our business practices, any of which could have an adverse effect on our business, reputation, results of operations, financial condition and prospects.
+Added: Even when these matters are without basis, the defense of these matters may divert our management’s attention and may result in significant expenses.
+Added: The results and timing of litigation, investigations and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these matters may result in adverse monetary damages, penalties or injunctive relief against us, as well as adverse publicity and reputational harm, which could have a material adverse effect on our financial condition, cash flows or results of operations.
+Added: Any such matters, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future.
Furthermore, while we maintain insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable.
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Governmental entities, self-regulatory bodies and consumer groups may also challenge advertising through legislation, regulation, judicial actions or otherwise, for example on the grounds that the advertising is false and deceptive or injurious to public welfare.
−Removed: Moreover, there has recently been an expansion of specific rules, prohibitions, media restrictions, labeling disclosures, and warning requirements with respect to advertising for certain products.
+Added: Moreover, there has recently been an expansion of
+Added: specific rules, prohibitions, media restrictions, labeling disclosures, and warning requirements with respect to advertising for certain products.
Any regulatory or judicial action that affects our ability to meet our clients’ needs or reduces client spending on our services could have a material adverse effect on our business, results of operations, financial condition and prospects.
−Removed: Existing and proposed laws and regulations, in particular in the European Union and the United States, concerning user privacy, use of personal information and online tracking technologies could also affect the efficacy and profitability of internet-based, digital and targeted marketing.
+Added: Existing and proposed laws and regulations, in particular in the European Union and the United States, concerning user privacy, use of personal data and online tracking technologies could also affect the efficacy and profitability of internet-based, digital and targeted marketing.
We are subject to laws and regulations that govern whether and how we can transfer, process or receive certain data that we use in our operations.
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Laws of foreign jurisdictions, such as Canada’s Anti-Spam Law and Personal Information Protection and Electronic Documents Act, and the GDPR similarly apply to our collection, processing, storage, use, and transmission of protected data.
−Removed: The European Union, for example, has recently tightened its rules on the transferability of data to the United States.
+Added: The European Union, for example, has tightened its rules on the transferability of data to the United States.
Collection, processing, and storage of biometric identifiers has come under increasing regulation and is the subject of class action litigation.
−Removed: The costs of compliance with these laws and regulations may increase in the future as a result of the implementation of new laws or regulations, such as the GDPR and the CCPA, or changes in interpretations of current ones, such as the interpretation of existing consumer protection laws as imposing restrictions on the online collection, storage and use of personal data.
+Added: The costs of compliance with these laws and regulations may increase in the future as a result of the implementation or changes in interpretation of laws or regulations such as the GDPR and the CCPA.
See “—Risks Related to Data Privacy and Cybersecurity—We are subject to extensive data privacy laws and regulations.” Any failure on our part to comply with these legal requirements, or their application in an unanticipated manner, could harm our business and result in penalties or significant legal liability.
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Office of Foreign Assets Control (“OFAC”), and other international bodies have imposed sanctions that prohibit us from engaging in trade or financial transactions with certain countries, businesses, organizations and individuals.
−Removed: For example, in February 2022, following Russia’s invasion of Ukraine and the imposition of economic sanctions
−Removed: targeting Russia by the United States and other countries, we exited our operations in Russia.
+Added: For example, in February 2022, following Russia’s invasion of Ukraine and the imposition of economic sanctions targeting Russia by the United States and other countries, we exited our operations in Russia.
Despite our efforts to ensure compliance with applicable law, it is difficult to anticipate the effect such sanctions may have on us, and compliance with any further sanctions imposed or actions taken by the United States or other countries, as well as the effect of current or further economic sanctions (and any retaliatory responses thereto) may otherwise have an adverse effect on our operations.
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The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records, which in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the corporation, including international subsidiaries, if any, and to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements.
−Removed: Globally, other countries have enacted anti-bribery and anti-corruption laws similar to the FCPA, such as the Anti-Graft and Corrupt Practices Act in the Philippines and the U.K.
+Added: Globally, other countries have enacted anti-bribery and anti-corruption laws similar to the FCPA, such as the U.K.
Bribery Act 2010, all of which prohibit companies and their intermediaries from bribing government officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment.
−Removed: We operate in many parts of the world that have experienced government corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices, although adherence to local customs and practices is generally not a defense under U.S.
+Added: We operate in many parts
+Added: of the world that have experienced government corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices, although adherence to local customs and practices is generally not a defense under U.S.
and other anti-bribery laws.
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However, our efforts may not be effective in controlling access to our proprietary information, and we may not have adequate remedies for the misappropriation of such information.
−Removed: Furthermore, even if we successfully maintain the confidentiality of our trade secrets and
−Removed: other proprietary information, competitors may independently develop products or technologies that are substantially equivalent or superior to our own.
+Added: Furthermore, even if we successfully maintain the confidentiality of our trade secrets and other proprietary information, competitors may independently develop products or technologies that are substantially equivalent or superior to our own.
As we expand our service offerings and the geographic scope of our sales and marketing, we may face additional intellectual property challenges.
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We cannot guarantee we comply with all obligations under these licenses.
−Removed: If the owner of the copyright in the relevant open source software were to allege that we had not complied with the conditions of one or more open source licenses, we could be required to incur significant expenses defending against such allegations, may be subject to the payment of damages, enjoined from further use of the software, required to comply with conditions of the license (which may include releasing the source code of our proprietary software to third parties without charge), or forced to devote additional resources to re-engineer all or a portion of our solutions to avoid using the open source software.
−Removed: Any of these events could create liability for us, damage our reputation, and have an adverse effect on our revenue, and operations.
+Added: If the owner of the copyright in the relevant open source software were to allege that we had not complied with the conditions of one or more open source licenses, we could be required to incur significant expenses defending against such allegations and could be subject to the payment of damages, enjoined from further use of the software, required to comply with conditions of the license (which may include releasing the source code of our proprietary software to third parties without charge), or forced to devote additional resources to re-engineer all or a portion of our solutions to avoid using the open source software.
+Added: Any of these events could create liability for us, damage our reputation, and have an adverse effect on our business, result of operations, financial condition and prospects.
Risks Related to Our Capital Structure and Financing
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If we cannot make scheduled payments on our debt, we will be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable;
−Removed: the lenders under our outstanding credit agreement could terminate their commitments to
−Removed: loan us money and foreclose against the assets securing our borrowings;
+Added: the lenders under our outstanding credit agreement could terminate their commitments to loan us money and foreclose against the assets securing our borrowings;
and we could be forced into bankruptcy or liquidation, which could adversely affect our business, results of operations, financial condition and prospects.
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If interest rates increase, our debt service obligations on such indebtedness will increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.
−Removed: We may also elect to enter into swaps to reduce our exposure to floating interest rates, but we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.
In addition, we may be able to incur substantial additional indebtedness in the future.
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Accordingly, we may need to engage in equity, equity-linked or debt financings to secure additional funds.
−Removed: If we raise additional funds through further issuances of equity or convertible debt
−Removed: securities, our existing stockholders could suffer dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our Class A Common Stock.
+Added: If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our Class A Common Stock.
Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
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Any credit rating initially assigned to our debt that is subsequently lowered or withdrawn for any reason could harm our ability to raise additional capital at acceptable cost and as a result adversely affect our business, results of operations, financial condition and prospects.
−Removed: Our clients and vendors may also consider our credit profile when considering whether to contract with us or negotiating contract terms, and if they were to change the terms on which they deal with us, it could have a further adverse effect on our business, prospects, results of operations and financial condition.
+Added: Our clients and vendors may also
+Added: consider our credit profile when considering whether to contract with us or negotiating contract terms, and if they were to change the terms on which they deal with us, it could have a further adverse effect on our business, prospects, results of operations and financial condition.
If our available liquidity is insufficient, our financial condition could be adversely affected and we may be unable to fund contingent deferred acquisition liabilities, and any put options if exercised.
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We have made acquisitions for which we have deferred payment of a portion of the purchase price, with the deferred acquisition consideration generally payable based on achievement of certain thresholds of future earnings of the acquired company.
−Removed: In addition, a noncontrolling equityholder in an acquired business often has the right to require the us to purchase all or part of such holder’s interest, either at specified dates or upon the termination of such holder’s employment with the subsidiary or death (put rights).
+Added: In addition, a noncontrolling equityholder in an acquired business sometimes has the right to require the us to purchase all or part of such holder’s interest, either at specified dates or upon the termination of such holder’s employment with the subsidiary or death (put rights).
Payments we are required to make in respect of deferred acquisition consideration and noncontrolling equityholder put rights may be significantly higher than the amounts we estimate because the actual obligation adjusts based on the performance of the acquired businesses over time.
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Our Up-C structure places significant limitations on our cash flow because our principal asset is our interest in OpCo, and, accordingly, we depend on distributions from OpCo to pay our taxes and expenses, including payments under the Tax Receivables Agreement.
−Removed: As part of our umbrella partnership-C corporation (“Up-C”) structure, we are a holding company and our principal asset is our ownership of common units of our operating subsidiary, Stagwell Global LLC (“OpCo”).
+Added: As part of our umbrella partnership-C corporation (“Up-C”) structure, we are a holding company and our principal asset is our ownership of common units of our operating subsidiary, OpCo.
This structure is designed to enable us to obtain certain tax benefits, and 85% of such tax benefits are payable to Stagwell Media under our Tax Receivables Agreement with Stagwell Media and OpCo.
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OpCo’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement to which OpCo is then a party, or any applicable law, or that would have the effect of rendering OpCo insolvent or exceed the amounts that OpCo is permitted to distribute under the agreements governing our indebtedness.
−Removed: If we do not have sufficient funds to pay tax or other liabilities or to fund our operations, we may have to borrow
−Removed: funds, which could materially and adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such indebtedness.
+Added: If we do not have sufficient funds to pay tax or other liabilities or to fund our operations, we may have to borrow funds, which could materially and adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such indebtedness.
To the extent that we are unable to make payments under the Tax Receivables Agreement for any reason, such payments generally will be deferred and will accrue interest until paid, but nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivables Agreement and therefore accelerate payments due under the Tax Receivables Agreement.
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We have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders.
−Removed: No adjustments to the redemption or exchange ratio of common units of OpCo, together with shares of our Class C Common Stock, for shares of our Class A Common Stock or cash, as applicable, will be made as a result of either any cash distribution we receive from OpCo or
−Removed: any cash that we retain and do not distribute to our stockholders.
+Added: No adjustments to the redemption or exchange ratio of common units of OpCo, together with shares of our Class C Common Stock, for shares of our Class A Common Stock or cash, as applicable, will be made as a result of either any cash distribution we receive from OpCo or any cash that we retain and do not distribute to our stockholders.
To the extent that we do not utilize any excess cash to fund our other expenditures, the other members of OpCo would benefit from any value attributable to such cash balances as a result of their ownership of shares of our Class A Common Stock following a redemption or exchange of their common units of OpCo and shares of our Class C Common Stock.
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Risks Related to Accounting and Tax Issues
−Removed: Our results of operations are subject to currency fluctuation risks.
+Added: Our results of operations are subject to foreign currency exchange fluctuation risks.
Although our financial results are reported in U.S.
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As a result, fluctuations in the exchange rate between the U.S.
−Removed: dollar and other currencies, particularly the Canadian dollar, the Euro and the British Pound, may affect our financial results and competitive position.
−Removed: Because our consolidated financial statements are presented in U.S.
+Added: dollar and other currencies, particularly the Canadian
+Added: dollar, the British Pound and the Euro, may affect our financial results and competitive position.
+Added: Because our Audited Consolidated Financial Statements are presented in U.S.
dollars, we must translate revenues and expenses, as well as assets and liabilities, into U.S.
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This could result in a decrease in the profitability of our contracts that are denominated in such currencies.
−Removed: Our goodwill, intangible assets and right-of-use assets may become impaired.
−Removed: We have recorded a significant amount of goodwill and, intangible assets in our consolidated financial statements resulting from our acquisition activities, and we have in the past recorded, and may in the future record, significant charges for impairment of goodwill and intangible assets.
−Removed: We also have recorded a significant amount of right-of-use lease assets in our consolidated financial statements and we have in the past recorded, and may in the future record charges for impairment of these assets.
+Added: Our goodwill, intangible assets and right-of-use lease assets may become impaired.
+Added: We have recorded a significant amount of goodwill and, intangible assets in our Audited Consolidated Financial Statements resulting from our acquisition activities, and we have in the past recorded, and may in the future record, significant charges for impairment of goodwill and intangible assets.
+Added: We also have recorded a significant amount of right-of-use lease assets in our Audited Consolidated Financial Statements and we have in the past recorded, and may in the future record charges for impairment of these assets.
We test, at least annually, the carrying value of goodwill for impairment.
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For example, in the year ended December 31, 2022, we recorded an impairment charge of $116.7 million after concluding that the carrying value of eight reporting units exceeded their fair value.
−Removed: See Note 8 of the Notes to the Consolidated Financial Statements for details on goodwill and intangible asset impairment recorded in the year ended December 31, 2022.
+Added: In addition, in the year ended December 31, 2023, we recognized an impairment charge of $10.0 million to reduce the carrying value of four of our right-of-use lease assets and related leasehold improvements and recognized an impairment charge of $1.4 million to reduce the carrying value of an intangible asset in connection with the abandonment of a trade name.
+Added: See Note 8 of the Notes to the Audited Consolidated Financial Statements for details on asset impairments recorded in the years ended December 31, 2023 and December 31, 2022.
If we conclude that any further intangible asset and goodwill values are impaired, whether as a result of underperformance in one or more reporting units, a potential recession or other disruption, interest rate increases or other factors, any resulting non-cash impairment charge could have a material adverse effect on our business, results of operations and financial condition.
−Removed: Material weaknesses in our internal control over financial reporting were identified as of December 31 2021, and remain unremediated as of December 31, 2022.
+Added: Material weaknesses in our internal control over financial reporting were identified as of December 31, 2023.
If our remediation of these material weaknesses is not effective, or if we fail to maintain effective internal control over financial reporting in the future, we may not be able to accurately or timely report our financial results, which could adversely affect investor confidence in our company, our results of operation and our stock price.
As discussed in Item 9A.
−Removed: “Controls and Procedures” of this Form 10-K, management identified material weaknesses in our internal control over financial reporting for the fiscal year ended December 31, 2021 that remained unremediated as of December 31, 2022.
+Added: “Controls and Procedures” of this Form 10-K, management identified material weaknesses in our internal control over financial reporting for the fiscal year ended December 31, 2023.
Any failure to remediate the material weaknesses or to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations.
−Removed: In addition, any testing by us, as and when required, conducted in accordance with Section 404 of the Sarbanes-Oxley Act (“Section 404”), or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal further deficiencies in our internal control over financial reporting that are deemed to be significant deficiencies or material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.
−Removed: If we are unable to implement and maintain effective internal control over financial reporting, our ability to record, process and report financial information timely and accurately could be adversely affected.
−Removed: In addition, any such failure, or any misstatement or restatement of financial information, could also cause investors to lose confidence in the accuracy and
−Removed: completeness of our reported financial information, which could negatively affect the market price of our Class A Common Stock.
+Added: For example, our material weaknesses contributed to our failure to prevent or detect misstatements requiring adjustments to our income tax expense and related accounts, accumulated other comprehensive loss, noncontrolling interest and related disclosures for each of the interim periods of 2023 and resulted in the revision of our consolidated financial statements for the annual period of 2022.
+Added: These material weaknesses also resulted in immaterial adjustments to multiple accounts and related disclosures for the annual and each of the interim periods of 2023.
+Added: If we are unable to remediate our existing material weaknesses and implement and maintain effective internal control over financial reporting, or if future testing by us or our independent registered public accounting firm reveals further material weaknesses or other deficiencies in our internal control over financial reporting, our ability to record, process and report financial information timely and accurately could be adversely affected, and we may fail to detect or prevent material misstatements in our annual or interim consolidated financial statements that may require prospective or retrospective changes to our financial statements.
+Added: In addition, our past and any future misstatements or restatements of financial information could also expose us to increased risk of litigation or regulatory inquiries and could cause investors to lose confidence in the accuracy and completeness of our reported financial information, which could negatively affect the market price of our Class A Common Stock.
Our disclosure controls and procedures and internal controls may not prevent or detect all errors or acts of fraud.
We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
−Removed: We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
+Added: We believe that any disclosure controls and
+Added: procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
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If our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in our stock price.
−Removed: The preparation of our financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
−Removed: We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the results of which form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
+Added: The preparation of our financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that affect the amounts reported in the Audited Consolidated Financial Statements and accompanying notes.
+Added: We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A Common Stock.
−Removed: Significant judgments, estimates, and assumptions used in preparing our consolidated financial statements include, or may in the future include, those related to revenue recognition, business combinations, deferred acquisition consideration, noncontrolling and redeemable noncontrolling interests, goodwill and intangible assets, right-of-use lease assets, and income taxes.
+Added: Significant judgments, estimates, and assumptions used in preparing our Audited Consolidated Financial Statements include, or may in the future include, those related to revenue recognition, business combinations, deferred acquisition consideration, noncontrolling and redeemable noncontrolling interests, goodwill and intangible assets, right-of-use lease assets, and income taxes.
We may be subject to adverse tax consequences, such as those related to changes in tax laws or tax rates or their interpretations, and the related application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax.
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corporate income tax rate and greater taxation of international income, which, if enacted, could adversely affect our tax liability, and governmental tax authorities are increasingly scrutinizing the tax positions of companies.
−Removed: The United States has also enacted the Inflation Reduction Act of 2022 (“IRA”) in August 2022, which, among other changes, introduced a new 1% exercise tax on certain net share repurchases and equivalent redemptions.
+Added: The United States also enacted the Inflation Reduction Act of 2022 in August 2022, which, among other changes, introduced a 1% exercise tax on certain net share repurchases and equivalent redemptions.
Many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development (the “OECD”), are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business.
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In December 2022, the European Union member states formally adopted the European Commission’s proposal for a directive ensuring a 15% minimum effective tax rate for large multinational groups (the “Pillar Two Directive”).
−Removed: The Pillar Two Directive is expected to be implemented in the national law of the European Union
−Removed: member states by December 31, 2023.
−Removed: If Pillar Two is implemented in the European Union or any other jurisdictions in which we operate, we expect these rules would apply to our subsidiaries in those jurisdictions and could impact our consolidated effective corporate income tax rate as well as increase our tax compliance costs.
+Added: A number of European Union member states have either published proposed legislation or enacted final legislation implementing Pillar Two effective as of 2024.
+Added: A number of other countries, including the United Kingdom, Switzerland, South Korea and Japan, have enacted Pillar Two legislation or are currently in the process of enacting proposed legislation to implement core elements of Pillar Two effective as of 2024.
+Added: To the extent Pillar Two is implemented by a jurisdiction in which our subsidiaries operate, we expect that Pillar Two would apply to those subsidiaries and could impact our consolidated effective corporate income tax rate as well as increase our tax compliance costs.
or other foreign tax authorities change applicable tax laws, our overall taxes could increase, as well as OpCo’s obligations to make tax distributions, and our business, financial condition or results of operations may be adversely impacted.
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federal income tax purposes, as if MDC (i) transferred all of its assets and liabilities to a new U.S.
−Removed: corporation (“New MDC”) in exchange for all of such new corporation’s outstanding stock and (ii) then distributed the stock of New MDC that it received in the transaction to its shareholders in liquidation of MDC.
+Added: corporation (“New MDC”) in exchange for all of such new corporation’s outstanding stock and (ii) then distributed the stock of New MDC that it received in the transaction to its stockholders in liquidation of MDC.
Additionally, we believe the Transactions should be treated for tax purposes as a deemed transfer by New MDC of its assets to OpCo and an assumption of New MDC’s liabilities by OpCo in a transaction intended to qualify as a contribution to OpCo in exchange for OpCo’s common units or preferred units under section 721 of the Code, and that Stagwell Media’s contribution of its businesses to OpCo is similarly subject to section 721 of the Code.
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tax laws significantly limit our ability to redomicile outside of the United States.
−Removed: In addition, as a result of the Redomiciliation, we incurred a significant Canadian corporate tax liability and recorded a tax receivable of $12 million included in Other Assets in our consolidated financial statements.
+Added: In addition, as a result of the Redomiciliation, we incurred a significant Canadian corporate tax liability and recorded a tax receivable of $12 million included in Other Assets in our Audited Consolidated Financial Statements.
For purposes of the Canadian Tax Act, MDC’s taxation year was deemed to have ended immediately prior to it ceasing to be a resident of Canada as a result of the Redomiciliation.
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The quantum of Canadian federal income tax payable by MDC as a result of the Redomiciliation depends upon a number of considerations including the fair market value of its properties, the amount of its liabilities, the Canada-U.S.
−Removed: dollar exchange rate, MDC’s shareholder composition, as well as certain Canadian tax attributes, accounts and balances of the Company, each as of the effective time of the Redomiciliation.
+Added: dollar exchange rate, MDC’s stockholder composition, as well as certain Canadian tax attributes, accounts and balances of the Company, each as of the effective time of the Redomiciliation.
We have not applied to the Canadian federal tax authorities for a tax ruling relating to the Redomiciliation and do not intend to do so, and the Canadian federal tax authorities may not agree with or may otherwise challenge our position on the tax treatment of the Redomiciliation, which could result in higher Canadian corporate tax liabilities than we anticipate.
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Our stock price may be volatile.
−Removed: The trading price of our Class A Common Stock may fluctuate substantially and may be lower than its current price.
−Removed: This may be especially true for companies like ours with a small public float.
−Removed: If an active market for our securities develops and continues, the trading price of our securities could be volatile and subject to wide fluctuations.
+Added: The trading price of our Class A Common Stock has fluctuated and may in the future fluctuate substantially and may be lower than its current price.
+Added: For example, since August 2, 2021 (the closing date of the Transactions), the trading price of our Class A Common Stock on the Nasdaq Global Select Market has ranged from a low of $3.83 per share to a high of $11.04 per share.
The trading price of our securities depends on many factors, including those described elsewhere in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance.
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In such circumstances, the trading price of our securities may not recover and may experience a further decline.
−Removed: Factors affecting the trading price of our securities may include (but are not limited to):
+Added: Factors affecting the trading price of our securities include (but are not limited to):
• market conditions in the broader stock market in general or in our industry in particular;
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• changes in the market’s expectations about our operating results;
−Removed: • the public’s reaction to our press releases, other public announcements and filings with the Securities and Exchange Commission;
+Added: • the public’s reaction to our press releases, other public announcements and filings with the SEC;
• rumors and speculation in the press or investment community or on social media about us, our clients or companies perceived to be similar to us;
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The trading prices and valuations of these stocks, and of our Class A Common Stock, may not be predictable.
−Removed: A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to ours could depress our stock price regardless of our business, prospects, financial condition or results of operations.
−Removed: Broad market and industry factors and any other global pandemics, as well as general economic, political and market conditions such as recessions or interest rate changes, may seriously affect the market price of our Class A Common Stock, regardless of our actual operating performance.
+Added: A loss of investor confidence in the market for the stocks of other companies that investors perceive to be similar to ours could depress our stock price regardless of our business, prospects, financial condition or results of operations.
+Added: Broad market and industry factors and any other global pandemics, as well as general economic, political and market conditions such as recessions or interest rate changes, may significantly depress the market price of our Class A Common Stock, regardless of our actual operating performance.
In addition, the trading price of our Class A Common Stock may be adversely affected by third parties trying to drive down or drive up the market price.
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We have in the past provided, and may from time to time provide, guidance regarding our future performance that represents our management’s estimates as of the date such guidance is provided.
−Removed: Any such guidance is based upon a number of assumptions with respect to future business decisions (some of which may change) and estimates that, while presented with
−Removed: numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies (many of which are beyond our control).
+Added: Any such guidance is based upon a number of assumptions with respect to future business decisions (some of which may change) and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies (many of which are beyond our control).
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions that inform such guidance will not materialize or will vary significantly from actual results.
Accordingly, our guidance is only an estimate of what management believes is realizable as of the date such guidance is provided.
−Removed: Actual results may vary from such guidance, and the variations may be material.
+Added: Actual results have in the past varied, and may in the future vary from such guidance, and the variations may be material.
Investors should also recognize that the reliability of any forecasted financial data diminishes the farther in the future that the data is forecast.
−Removed: In light of the foregoing, investors should not place undue reliance on our financial guidance and should carefully consider any guidance we may publish in context.
−Removed: In addition, in prior periods our operating or financial results have not met our guidance, or we have reduced our guidance.
−Removed: If in the future our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our Class A Common Stock may decline.
+Added: In light of the foregoing, investors should not place undue reliance on our financial guidance and should carefully
+Added: consider any guidance we may publish in context.
+Added: In addition, in recent periods our operating or financial results have not met our guidance, or we have reduced our guidance.
+Added: If in the future our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our Class A Common Stock may decline significantly.
In addition, even though we have issued public guidance in the past, we are not obligated to and may determine not to continue to do so in the future.
−Removed: A significant portion of our Class A Common Stock is restricted from immediate resale but may be sold into the market in the future, which could negatively affect the market price of our Class A Common Stock.
+Added: A significant portion of our Class A Common Stock may be sold into the market in the future, which could negatively affect the market price of our Class A Common Stock.
As of December 31, 2023, Stagwell Media beneficially owned approximately 56% of our outstanding shares of Class A Common Stock on an as-converted basis.
−Removed: Although the shares held by Stagwell Media are subject to securities law restrictions on sales by affiliates, we, Stagwell Media and certain other parties are party to a registration rights agreement pursuant to which, among other things and subject to certain restrictions, we are required to file with the Securities and Exchange Commission a registration statement registering for resale the shares of our Class A Common Stock that are held by, or are issuable upon exchange of units of OpCo (in combination with corresponding shares of our Class C Common Stock) held by, such parties, and to conduct certain underwritten offerings upon the request of holders of registrable securities, including direct and indirect transferees of such holders.
−Removed: In addition, we are party to a securities purchase agreement pursuant to which we are required to register for resale the shares of Class A Common Stock issued upon the conversion of our previously outstanding Series 8 convertible preferred stock.
+Added: Although the shares held by Stagwell Media are subject to securities law restrictions on sales by affiliates, we, Stagwell Media and certain other parties are party to a registration rights agreement pursuant to which, among other things and subject to certain restrictions, we are required to file (and have filed) with the SEC a registration statement registering for resale the shares of our Class A Common Stock that are held by, or are issuable upon exchange of units of OpCo (in combination with corresponding shares of our Class C Common Stock) held by, such parties, and to conduct certain underwritten offerings upon the request of holders of registrable securities, including direct and indirect transferees of such holders.
+Added: In addition, we are party to a securities purchase agreement pursuant to which we are required to register for resale the shares of Class A Common Stock issued to certain of our stockholders upon the conversion of our previously outstanding Series 8 convertible preferred stock.
As such, sales of a substantial number of shares of Class A Common Stock in the public market could occur at any time.
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and (d) director nominees selected, or recommended for the selection by the Board, either by a majority of the independent directors or a nominating committee comprised solely of independent directors.
−Removed: Although as of the date of this prospectus, we do not utilize any of these exemptions, we may elect to utilize one or more of these exemptions for so long as we remain a “controlled company.” As a result, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.
+Added: Although we do not utilize any of these exemptions, we may elect to utilize one or more of these exemptions for so long as we remain a “controlled company.” As a result, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.
In addition, this concentration of ownership and voting power allows Mr.
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Such concentration of voting power could also have the effect of delaying, deterring or precluding a change of control or other business combination that might otherwise be beneficial to our stockholders, could deprive our stockholders of an opportunity to receive a premium for their Class A Common Stock as part of a sale of our company and might ultimately affect the market price of our Class A Common Stock.
−Removed: Securities or industry analysts may cease publishing research or reports about us, our business, or our market, or publish negative opinions about our company or the price of our Class A Common Stock, which could cause the price and trading volume of our Class A Common Stock to decline.
+Added: Securities or industry analysts may cease publishing research or reports about us, our business, or our market, or publish negative opinions about us or the price of our Class A Common Stock, which could cause the price and trading volume of our Class A Common Stock to decline.
The trading market for our Class A Common Stock is influenced by the research and reports that industry or securities analysts publish (or may publish ) about us, our business and operations, our market or our competitors.
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In addition, we have no control over equity research analysts or the content of their reports, and if any of the analysts who cover, or may cover us in the future, make negative recommendations regarding our stock or issue other unfavorable commentary or research.
−Removed: or provide more favorable relative recommendations about our competitors, the price and trading volume of our Class A Common Stock could decline.
+Added: or provide more favorable relative recommendations about our competitors, including as a result of any failure to meet our guidance or errors in our financial statements or other disclosure, the price and trading volume of our Class A Common Stock could decline.
There is no guarantee that an active and liquid public market for our securities will be sustained.
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The market price of shares of our Class A Common Stock may never appreciate and may decrease.
−Removed: We may issue additional shares of our Class A Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.
−Removed: We may issue additional shares of our Class A Common Stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or under our equity incentive plans, without stockholder approval, in a number of circumstances.
−Removed: Our issuance of additional shares of our Class A Common Stock or other equity securities of equal or senior rank could have the following effects:
+Added: We may issue additional shares of our Class A Common Stock or other equity securities without stockholder approval, which would dilute your ownership interests and may depress the market price of your shares.
+Added: We may issue additional shares of our Class A Common Stock or other equity securities in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or under our equity incentive plans, without stockholder approval, in a number of circumstances.
+Added: Our issuance of additional shares of our Class A Common Stock or other equity securities could have the following effects:
• your proportionate ownership interest in us will decrease;
• the relative voting strength of each previously outstanding share of Class A Common Stock may be diminished;
−Removed: • the market price of our stock may decline.
+Added: • the market price of our Class A Common Stock may decline.
Some provisions of Delaware law and our certificate of incorporation and bylaws may deter third parties from acquiring us and diminish the value of our Class A Common Stock.
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These provisions in our certificate of incorporation and our bylaws, as well as provisions of Delaware law, may discourage, delay or prevent a transaction involving a change in our control that is in the best interest of our minority stockholders.
−Removed: the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our Class A Common Stock if they are viewed as discouraging future takeover attempts.
+Added: Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our Class A Common Stock if they are viewed as discouraging future takeover attempts.
These provisions could also make it more difficult for stockholders to nominate directors for election to our Board and take other corporate actions and may also discourage acquisition proposals, or delay or prevent a change in control, which could depress the trading price of our Class A Common Stock.
−Removed: Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders and designates the United States federal district courts as the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, which could limit the ability of our stockholders to obtain a favorable judicial forum for disputes with us or with our directors, officers or employees and may discourage stockholders from bringing such claims.
+Added: Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders and designates the United States federal district courts as the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities
+Added: Act, which could limit the ability of our stockholders to obtain a favorable judicial forum for disputes with us or with our directors, officers or employees and may discourage stockholders from bringing such claims.
Our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the exclusive forum for:
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The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified Board members and officers.
−Removed: We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the listing requirements of the Nasdaq Stock Market and other applicable securities rules and regulations.
+Added: We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the listing requirements of Nasdaq and other applicable securities rules and regulations.
Compliance with these rules and regulations has increased our legal and financial compliance costs, made some activities more difficult, time-consuming or costly and increased demand on our systems and resources.
The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal controls over financial reporting.
−Removed: Maintaining our disclosure controls and procedures and internal controls over financial reporting in accordance with this standard requires significant resources and management oversight.
+Added: Strengthening our disclosure controls and procedures and internal controls over financial reporting in accordance with this standard requires significant resources and management oversight.
As a result, management’s attention may be diverted from other business concerns, which could harm our business and results of operations.
Although we have already hired additional employees to comply with these requirements, we may need to hire more employees in the future, which will increase our costs and expenses.
−Removed: Unresolved Staff Comments
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.