What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-11 compared with 2023-03-06 · 272 added, 242 removed, 359 unchanged (59% of the section changed)

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A description of the non-GAAP financial measures discussed in this section and reconciliations to the comparable GAAP measures are below.

In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” refer (i) with respect to events occurring or periods ending before August 2, 2021, to Stagwell Marketing Group LLC and its direct and indirect subsidiaries and (ii) with respect to events occurring or periods ending on or after August 2, 2021, to Stagwell Inc.

In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” refer (i) with respect to events occurring or periods ending before August 2, 2021, to Stagwell Marketing Group LLC (“Stagwell Marketing” or ”SMG”) and its direct and indirect subsidiaries and (ii) with respect to events occurring or periods ending on or after August 2, 2021, to Stagwell Inc.

and its direct and indirect subsidiaries.

References to a “fiscal year” mean the Company’s year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal 2023 means the period beginning January 1, 2023, and ending December 31, 2023).

For similar operating and financial data and discussion of the Company’s year ended December 31, 2021, refer to Part II Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K that was filed with the SEC on March 6, 2023.

Executive Summary

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Stagwell leverages its range of services in an integrated manner, offering strategic, creative and innovative solutions that are technologically forward and media-agnostic.

The Company’s work is designed to challenge the industry status quo, realize outsized returns on investment, and drive transformative growth and business performance for its clients and stakeholders.

The Company’s strategy is intended to challenge the industry status quo, realize returns on investment, and drive transformative growth and business performance for its clients and stakeholders.

Stagwell manages its business by monitoring several financial and non-financial performance indicators.

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and the relative strength of the network’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.

Business Combination

On December 21, 2020, MDC and Stagwell Media LP announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the “Stagwell Subject Entities.” The Stagwell Subject Entities comprised Stagwell Marketing and its direct and indirect subsidiaries.

On August 2, 2021 (the “Closing Date”), we completed the Transactions.

In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of the Company, converted into OpCo;

(ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo;

and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc.

The Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing treated as the accounting acquirer.

As a result of the Transactions and the change in our business and operations, under applicable accounting principles, the historical financial results of Stagwell Marketing prior to August 2, 2021 are considered our historical financial results.

Accordingly, historical information presented in this Form 10-K for events occurring or periods ending before August 2, 2021 does not reflect the impact of the Transactions and may not be comparable with historical information for events occurring or periods ending on or after August 2, 2021, which do not include the financial results of MDC.

See Note 4 of the Notes included herein for additional information regarding the Transactions.

Revision of Previously Issued Consolidated Financial Statem ents

In connection with the preparation of the consolidated financial statements during 2023, the Company identified errors in the areas of income taxes, noncontrolling interests, and accumulated other comprehensive loss related to its previously filed 2022 financial statements.

The Company revised the 2022 annual financial statements in its 2023 Form 10-K.

See Notes 1, 21 and 22 of the Notes included herein for additional information regarding the correction of the errors.

Recent Developments

On March 1, 2023, the Board authorized an extension and a $125.0 million increase in the size of the Repurchase Program to an aggregate of $250.0 million, with any previous purchases under the Repurchase Program continuing to count against that limit.

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

On January 2, 2024, the Company acquired 100% of the interests in Team Epiphany, LLC., for $15.8 million of which $10.8 million was paid in cash and 798,000 shares of Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”), subject to post-closing adjustments.

In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of $17.0 million, subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion.

On March 1, 2024, the Company acquired 100% of the interests in Sidekick Live Limited., for £4.5 million of which £3.6 million (approximately $4.6 million) was paid in cash and 195,000 shares of Class A Common Stock, par value $0.001 per share, subject to post-closing adjustments.

In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of £8.0 million (approximately $10.2 million), subject to continued employment requirements and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion.

Significant Factors Affecting our Business and Results of Operations

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New business wins and client losses occur due to a variety of factors.

The two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the digital and data-driven products that our Brands offer.

The two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the digital and data-driven products that our portfolio of marketing services firms, which we refer to as “Brands,” offer.

A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain a Brand that it may have previously worked with.

In addition, if

the client is merged or acquired by another company, the marketing communication firm is often changed.

In addition, if the client is merged or acquired by another company, the marketing communication firm is often changed.

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

Historically, we typically generate the highest quarterly revenue during the fourth quarter in each year.

In addition, client concentration increases during election years due to the cyclical nature of our advocacy Brands.

In addition, within our Communications Network, client concentration increases during election years due to the cyclical nature of our advocacy Brands.

The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season.

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These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP.

The non-GAAP financial measures included are “organic revenue growth or decline,” “Adjusted EBITDA,” and “Adjusted Diluted EPS.”

“Organic revenue growth” and “organic revenue decline” refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth.

The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period.

The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the Brands that the Company has held throughout each of the comparable periods presented, and (b) “Net acquisitions (divestitures).” Net acquisitions (divestitures) consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or the same prior year period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year.

The non-GAAP financial measures included are “net revenue,” “organic net revenue growth (decline),” “Adjusted EBITDA,” and “Adjusted Diluted EPS.”

“Net revenue” refers to revenue excluding billable costs.

The Company believes billable costs and their fluctuations are not indicative of the operating performance of its underlying business.

“Organic net revenue growth (decline)” reflects the year-over-year change in the Company’s reported net revenue attributable to the Company’s management of the entities it owns.

We calculate organic net revenue growth (decline) by subtracting the net impact of acquisitions (divestitures) and the impact of foreign currency exchange fluctuations from the aggregate year-over-year increase or decrease in the Company’s reported net revenue.

The net impact of acquisitions (divestitures) reflects the year-over-year change in the Company’s reported net revenue attributable to the impact of all individual entities that were acquired or divested in the current and prior year.

We calculate impact of an acquisition as follows:

(a) for an entity acquired during the current year, we present the entity’s prior year net revenue for the same period during which we owned it in the current year as impact of the acquisition in the current year;

and (b) for an entity acquired in the prior year, we present the entity’s prior year net revenue for the period during which we did not own the entity in the prior year as impact of the acquisition in the current year.

We calculate impact of a divestiture as follows:

(a) for a divestiture in the current year, we present the entity’s prior year net revenue for the same period during which we no longer owned it in the current year as impact of the divestiture in the current year;

and (b) for a divestiture in the prior year, we present the entity’s prior year net revenue for the period during which we owned it in the prior year as impact of the divestiture in the current year.

We calculate the impact of any acquisition or divestiture without adjusting for foreign currency exchange fluctuations.

The impact of foreign currency exchange fluctuations reflects the year-over-year change in the Company’s reported net revenue attributable to changes in foreign currency exchange rates.

We calculate the impact of foreign currency exchange fluctuations for the portion of the reporting period in which we recognized revenue from a foreign entity in both the current year and the prior year.

The impact is calculated as the difference between (1) reported prior period net revenue (converted to U.S.

dollars at historical foreign currency exchange rates) and (2) prior period net revenue converted to U.S.

dollars at current period foreign exchange rates.

“Adjusted EBITDA” is defined as Net income (loss) attributable to Stagwell Inc.

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

Adjusted EBITDA for our reportable segments is reconciled to Operating Income (Loss), as Net Income (Loss) is not a relevant reportable segment financial metric.

“Adjusted Diluted EPS” is defined as (i) Net income (loss) attributable to Stagwell Inc.

common shareholders, plus net income attributable to Class C shareholders, excluding the impact of amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, based on total consolidated amounts, then allocated to Stagwell Inc.

common shareholders, plus net income (loss) attributable to Class C shareholders, excluding the impact of amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, based on total consolidated amounts, then allocated to Stagwell Inc.

common shareholders and Class C shareholders, based on their respective income allocation percentage using a normalized effective income tax rate divided by (ii) (a) the weighted average number of common shares outstanding plus (b) the weighted average number of shares of Class C Common Stock outstanding.

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

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

The diluted weighted average shares outstanding include shares of Class C Common Stock as if converted to shares of Class A Common Stock to calculate Adjusted Diluted EPS.

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

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

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

The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks).

The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network.

Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

The Company has three reportable segments as follows:

“Integrated Agencies Network,” “Brand Performance Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies.

See Note 2 of the Notes included herein for the Company’s significant accounting policies.

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

In addition, Stagwell reports its corporate office expenses incurred in connection with the strategic resources provided to the networks, as well as certain other centrally managed expenses that are not fully allocated to the operating segments as Corporate.

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The following discussion focuses on the operating performance of the Company for the years ended December 31, 2023 and 2022 and the financial condition of the Company as of December 31, 2023.

For similar operating and financial data and discussion of the Company’s year ended December 31, 2021 results compared to the Company’s year ended December 31, 2020 results, refer to Part II.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K that was filed with the SEC on March 17, 2022, including the sections entitled “Result of Operations — Twelve Months Ended December 31, 2021 Compared to Twelve Months Ended December 31, 2020” and “Liquidity — Cash Flows”.

Results of Operations:

Year Ended December 31,

2022 2021 2020

(dollars in thousands)

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Foreign exchange, net (2,960) (2,606)

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

Gain on sale of business

(359) (4,975)

Income before income taxes and equity in earnings of non-consolidated affiliates 91,069 75,585

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Income before equity in earnings of non-consolidated affiliates

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

Net income 65,842 35,920 71,461

Net income attributable to noncontrolling and redeemable noncontrolling interests (38,573) (14,884) (15,105)

50,512 50,123

Equity in (loss) of non-consolidated affiliates

41,642 50,044

Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests (41,508) (30,125)

Net income attributable to Stagwell Inc.

common shareholders

$ 134 $ 19,919

Reconciliation to Adjusted EBITDA:

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common shareholders

$ 134 $ 19,919

Non-operating items (1)

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Adjusted EBITDA $ 360,139 $ 451,118

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

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

common shareholders.

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Depreciation and amortization 142,831 131,273 11,558 8.8 %

Impairment and other losses 122,179 16,240 105,939 NM

Impairment and other losses 11,395 122,179 (110,784) (90.7) %

$ 2,436,650 $ 2,528,564 $ (91,914) (3.6) %

Operating income $ 159,228 $ 44,726 $ 114,502 NM

Operating Income $ 90,527 $ 159,228 $ (68,701) (43.1) %

Year Ended December 31,

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Net Revenue $ 2,146,652 $ 2,222,153 $ (75,501) (3.4) %

Billable costs 465,639 200,426 265,213 NM

Billable costs 380,525 465,639 (85,114) (18.3) %

Revenue 2,527,177 2,687,792 (160,615) (6.0) %

Billable costs 465,639 200,426 265,213 NM

Billable costs 380,525 465,639 (85,114) (18.3) %

Staff costs 1,389,168 1,394,317 (5,149) (0.4) %

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Deferred acquisition consideration 13,060 (13,405) 26,465 NM

Impairment and other losses 122,179 16,240 105,939 NM

Other items, net 18,691 21,430 (2,739) (12.8) %

Impairment and other losses 11,395 122,179 (110,784) (90.7) %

Other items, net 45,147 18,691 26,456 NM

Operating Income (1)

$ 159,228 $ 44,726 $ 114,502 NM

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

$ 90,527 $ 159,228 $ (68,701) (43.1) %

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

common shareholders.

Revenue for the year ended December 31, 2022 was $2,687.8 million compared to $1,469.4 million for the year ended December 31, 2021, an increase of $1,218.4 million.

Revenue for the year ended December 31, 2023 was $2,527.2 million, compared to $2,687.8 million for the year ended December 31, 2022, a decrease of $160.6 million.

The components of the fluctuations in net revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 were as follows:

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Communications Network 293,844 (169) 1,918 (50,333) (48,584) 245,260 (17.1)% (16.5)%

All Other 25,843 (835) (4,616) (430) (5,881) 19,962 (1.7) % (22.8) %

All Other 19,962 (354) 35,135 (8,157) 26,624 46,586 (40.9)% NM

$2,222,153 $(1,941) $57,107 $(130,667) $(75,501) $2,146,652 (5.9)% (3.4)%

Component % change (0.1)% 2.6% (5.9)% (3.4)%

For the year ended December 31, 2022, organic net revenue increased $274.8 million, or 21.7%.

The organic revenue growth was primarily attributable to increased spending by existing clients and business with new clients, as well as higher public relations business due to advocacy services, as these are typically higher during election years.

The increase in net acquisitions (divestitures) was primarily driven by the acquisition of MDC.

For the year ended December 31, 2023, organic net revenue decreased $130.7 million, or 5.9%.

Overall, the macroeconomic uncertainty challenged the industry in 2023.

This contributed to certain clients pausing projects and reducing spend, specifically in the communications, retail, and technology sectors.

In addition, the loss of clients also contributed to the decline in organic net revenue.

The increase in net acquisitions (divestitures) was primarily driven by the acquisitions of Maru Group Limited Ltd.(“Maru”), Epicenter Experience LLC, (“Epicenter”), TMA Direct, Inc.

(“TMA Direct”), Brand New Galaxy (“BNG”), Huskies, Ltd.

(“Huskies”), Left Field Labs, LLC (“LFL”) and Wolfgang, LLC (“Wolfgang”), partially offset by the sale of ConcentricLife.

The geographic mix in net revenues for the years ended December 31, 2023 and 2022 was as follows:

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Impairment and Other Losses

The Company recognized an impairment and other losses charge of $122.2 million for the year ended December 31, 2022, primarily related to the impairment of goodwill, right-of-use leases assets and intangible assets.

The Company recognized a charge of $116.7 million of goodwill impairment to write-down the carrying value in excess of the fair value of eight reporting units, two within the Integrated Agencies Network, five within the Brand Performance Network and one within the All Other category.

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

The Company recognized a charge of $2.6 million to reduce the carrying value of three of its right-of-use lease assets and related leasehold improvements.

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

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

The Company recognized a charge of $1.4 million to reduce the carrying values of intangible assets within the Integrated Agencies Network and Brand Performance Network reportable segments primarily in connection with the abandonment of certain trade names as part of the integration of certain entities.

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

During the year ended December 31, 2021, the Company recognized an impairment and other loss of $16.2 million in connection with a write-down of trade names no longer in use.

Impairment and Other Losses for the year ended December 31, 2023 was $11.4 million.

This was primarily attributable to a charge of $10.0 million to reduce the carrying value of four of its right-of-use lease assets and related leasehold improvements.

The right-of-use lease assets and related leasehold improvements related to three agencies within the Integrated Agencies Network and one agency within the Brand Performance Network.

The Company recognized an impairment and other losses charge of $122.2 million for the year ended December 31, 2022, primarily related to the impairment of goodwill totaling $116.7 million, and impairment of right-of-use lease assets and related leasehold improvements totaling $2.6 million.

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

The right-of-use lease assets and related leasehold improvements impairment was to write-down the carrying value in excess of the fair value of three agencies, one within the Integrated Agencies Network and two within the Brand Performance Network.

Operating Income

Operating income for the year ended December 31, 2022 was $159.2 million compared to $44.7 million for the year ended December 31, 2021, representing an increase of $114.5 million.

Operating income for the year ended December 31, 2022 was impacted primarily by an increase in revenue and expenses from existing operations and due to the acquisition of MDC.

Stock-based compensation expense decreased, primarily driven by awards issued to employees in the third quarter of 2021, in connection with the acquisition of MDC, that fully vested in the third quarter of 2021 and the first quarter of 2022, partially offset by awards issued in 2022.

Deferred acquisition consideration decreased primarily due to a decline in fair value associated with a Brand in which the deferred acquisition consideration liability originated in the fourth quarter of 2021 from the purchase of the remaining interest we did not already own.

Depreciation and amortization increased primarily due to the recognition of depreciable fixed assets and amortizable intangible assets in connection with the acquisitions of MDC and GoodStuff Holdings Limited (“Goodstuff”).

Impairment and other losses increased primarily due to the impairment of goodwill, intangible assets and right-of-use lease assets in 2022.

Other, net, for the year ended December 31, 2022 was expense of $7.1 million, compared to income of $50.1 million for the year ended December 31, 2021 a decrease of $57.1 million, primarily due to a gain of approximately $43.0 million in connection with the sale of Reputation Defender in the third quarter of 2021.

Foreign Exchange Transaction Gain (Loss)

The foreign exchange loss for the year ended December 31, 2022 was $2.6 million compared to a loss of $3.3 million for the year ended December 31, 2021.

Operating Income for the year ended December 31, 2023 was $90.5 million, compared to $159.2 million for the year ended December 31, 2022, representing a decrease of $68.7 million.

The change in Operating Income was primarily attributable to a decrease in Revenue, Cost of services, and Impairment and other losses, partially offset by an increase in Office and general expenses, and Depreciation and amortization.

The decrease in Cost of services was primarily attributable to lower billable costs commensurate with lower revenues, partially offset by an increase in unbillable costs primarily due to the acquisition of Maru, and an increase in stock-based compensation expense.

The increase in Office and general expenses was primarily attributable to an increase in stock-based compensation expense, occupancy-related expenses, deferred acquisition consideration, and computer software and licensing fees, partially offset by a decrease in bad debt expense.

Bad debt expense decreased primarily due to recovered funds that were previously written off.

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

Deferred acquisition consideration increased $26.5 million, primarily attributable to acquisitions of Tinsel, Left Field Labs, and Movers and Shakers.

In addition, deferred acquisition consideration increased due to the reduction in the fair value of the deferred acquisition consideration liability that occurred in 2022, associated with a certain Brand.

The total increase in the deferred acquisition consideration was partially offset by the reduction in fair value of certain Brands in 2023.

Stock-based compensation increased $24.0 million primarily attributable to new awards granted in 2023, the modification of certain stock-appreciation rights, and the increase in the fair value of certain profits interest awards.

Depreciation and amortization expense increased $11.6 million, primarily attributable to the acceleration of amortization associated with the discontinuation of certain trade names, the purchase of internally developed software in 2023, and the recognition of intangible assets in connection with the acquisitions in 2022.

Gain on Sale of Business

The Company recognized a pre-tax gain of $94.5 million related to the sale of ConcentricLife for the year ended December 31, 2023.

Other, net for the year ended December 31, 2023 was $0.4 million of a loss, compared to a loss of $5.0 million for the year ended December 31, 2022.

The loss in 2022 is primarily attributable to the Tax Receivables Agreement.

Foreign Exchange, Net

The foreign exchange loss for the year ended December 31, 2023 was $3.0 million, compared to a loss of $2.6 million for the year ended December 31, 2022, primarily attributable due to the U.S.

dollar strengthening against the Euro and British Pound.

Interest Expense, Net

Interest expense, net, for the year ended December 31, 2022 was $76.1 million compared to $31.9 million for the year ended December 31, 2021, an increase of $44.2 million, primarily driven by a higher level of debt due to the issuance of $1,100.0 million aggregate principal amount of 5.625% senior notes due 2029 (“5.625% Notes”) in August 2021.

Interest expense, net for the year ended December 31, 2023 was $90.6 million compared to $76.1 million for the year ended December 31, 2022, an increase of $14.6 million, primarily attributable to higher levels of debt outstanding under the Credit Agreement (as defined and discussed in Note 11 of the Notes to the Audited Consolidated Financial Statements included herein), and a higher interest rate of borrowings on amounts outstanding under the Credit Agreement.

Income Tax Expense

The Company had an income tax expense for the year ended December 31, 2023 of $40.6 million (on a pre-tax income of $91.1 million resulting in an effective tax rate of 44.5%) compared to income tax expense of $25.5 million (on pre-tax income of $75.6 million resulting in an effective tax rate of 33.7%) for the year ended December 31, 2022.

The difference in the effective tax rate of 10.3% in the year ended December 31, 2022 as compared to 39.3% in the year ended December 31, 2021 was primarily related to share-based compensation, revaluation of the TRA step up, and return to provision adjustments in the year ended December 31, 2022 and a change in ownership of OpCo, offset in part by the impact of non-deductible goodwill impairments in the year ended December 31, 2022.

The difference in the effective tax rate of 44.5% in the year ended December 31, 2023 as compared to 33.7% in the year ended December 31, 2022 was primarily due to the change in pre-tax income, tax expense on gain on sale of business in 2023, tax benefit of impairments in 2022, increase in valuation allowance in 2023, lower share-based compensation windfalls, and unfavorable return to provision adjustments in 2023 offset by an increase in tax benefit from disregarded entity structure in 2023, and out-of-period adjustments in 2022.

See Note 1 in the Notes to the Audited Consolidated Financial Statements.

Noncontrolling and Redeemable Noncontrolling Interests

The effect of noncontrolling and redeemable noncontrolling interests for the year ended December 31, 2022 was $38.6 million compared to $14.9 million for the year ended December 31, 2021.

The increase is primarily related to noncontrolling interest income associated with holders of Class C Common Stock.

The effect of noncontrolling and redeemable noncontrolling interests for the year ended December 31, 2023 was income of $41.5 million compared to income of $30.1 million for the year ended December 31, 2022, representing an increase of

$11.4 million.

The change was attributable to an increase in net income allocated to the holders of Class C Common Stock, partially offset by a decrease in net income associated with other redeemable noncontrolling interest holders.

Net Income (Loss) Attributable to Stagwell Inc.

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As a result of the foregoing, net income attributable to Stagwell Inc.

common shareholders for the year ended December 31, 2022 was $27.3 million compared to net income attributable to Stagwell Inc.

common shareholders of $21.0 million for the year ended December 31, 2021.

Earnings Per Share

Diluted EPS and Adjusted Diluted EPS for the year ended December 31, 2022 was as follows:

Reported (GAAP) Adjustments (1)

(dollars in thousands, except per share amounts)

common shareholders for the year ended December 31, 2023 was $0.1 million compared to net income of $19.9 million for the year ended December 31, 2022.

Earnings (Loss) Per Share

Diluted EPS and Adjusted Diluted EPS for the year ended December 31, 2023 were as follows:

GAAP Adjustments (1)

(amounts in thousands, except per share amounts)

Net income attributable to Stagwell Inc.

common shareholders

$ 134 $ 52,712 $ 52,846

Net income attributable to Class C shareholders — 106,153 106,153

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and Class C and adjusted net income

$ 134 $ 158,865 $ 158,999

Weighted average number of common shares outstanding 122,170 3,628 125,798

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Diluted EPS and Adjusted Diluted EPS

Adjustments to Net Income (1)

Pre-Tax Tax Net

(dollars in thousands)

Amortization $ 104,763 $ (20,953) $ 83,810

$ 0.00 $ 0.57

Adjustments to Net Income (loss) (1)

Impairment and other losses 11,395

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Deferred acquisition consideration 13,060

Gain on sale of business

Other items, net 45,147

Tax adjustments 7,482 (27,327) (19,845)

$ 272,862 $ (57,060) $ 215,802

Adjusted tax expense

Net loss attributable to Class C shareholders 39,066

Allocation of adjustments to net income

Net income attributable to Stagwell Inc.

common shareholders $ 52,712

Net income attributable to Class C shareholders 67,087

Net income attributable to Class C shareholders

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

Diluted EPS and Adjusted Diluted EPS for the year ended December 31, 2022 were as follows:

GAAP Adjustments (1)

(amounts in thousands, except per share amounts)

Net income attributable to Stagwell Inc.

common shareholders $ 19,919 $ 102,123 $ 122,042

Net income attributable to Class C shareholders 16,004 129,500 145,504

Net income attributable to Stagwell Inc.

and Class C and adjusted net income $ 35,923 $ 231,623 $ 267,546

Weighted average number of common shares outstanding 130,625 — 130,625

Weighted average number of common Class C shares outstanding 165,971 — 165,971

Weighted average number of shares outstanding 296,596 — 296,596

Diluted EPS and Adjusted Diluted EPS $ 0.12 $ 0.90

Adjustments to Net income (loss) (1)

Impairment and other losses 122,179

Stock-based compensation 33,152

Deferred acquisition consideration (13,405)

Other items, net 18,691

Adjusted tax expense

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

Adjusted EBITDA

Adjusted EBITDA for the year ended December 31, 2022 was $451.1 million, compared to $253.7 million for the year ended December 31, 2021, representing an increase of $197.5 million, primarily driven by the increase in revenue from existing operations and the acquisitions of MDC and Goodstuff, partially offset by higher operating expenses.

Adjusted EBITDA for the year ended December 31, 2023 was $360.1 million, compared to $451.1 million for the year ended December 31, 2022, representing a decrease of $91.0 million, primarily driven by a decrease in Operating Income, as discussed above.

Integrated Agencies Network

8 unchanged sentences

Depreciation and amortization 80,864 74,492 6,372 8.6 %

Impairment and other losses 52,360 1,394 50,966 NM

Impairment and other losses 9,912 52,360 (42,448) (81.1) %

$ 1,256,525 $ 1,336,805 $ (80,280) (6.0) %

Operating income $ 139,270 $ 56,828 $ 82,442 NM

Operating Income $ 121,584 $ 138,165 $ (16,581) (12.0) %

Year Ended December 31,

2 unchanged sentences

Net Revenue $ 1,186,705 $ 1,240,465 $ (53,760) (4.3) %

Billable costs 232,434 86,493 145,941 NM

Billable costs 191,404 234,505 (43,101) (18.4) %

Revenue 1,378,109 1,474,970 (96,861) (6.6) %

Billable costs 232,434 86,493 145,941 NM

Billable costs 191,404 234,505 (43,101) (18.4) %

Staff costs 735,998 762,332 (26,334) (3.5) %

2 unchanged sentences

Adjusted EBITDA 271,322 292,293 (20,971) (7.2) %

Stock-based compensation 13,774 47,190 (33,416) (70.8) %

Stock-based compensation 27,806 13,774 14,032 NM

Depreciation and amortization 80,864 74,492 6,372 8.6 %

Deferred acquisition consideration 11,931 9,157 2,774 30.3 %

Impairment and other losses 52,360 1,394 50,966 NM

Impairment and other losses 9,912 52,360 (42,448) (81.1) %

Other items, net 19,225 4,345 14,880 NM

Operating Income $ 139,270 $ 56,828 $ 82,442 NM

Revenue for the year ended December 31, 2022 was $1,479.8 million compared to $770.1 million for the year ended December 31, 2021, an increase of $709.7 million.

Operating Income $ 121,584 $ 138,165 $ (16,581) (12.0) %

Revenue for the year ended December 31, 2023 was $1,378.1 million compared to $1,475.0 million for the year ended December 31, 2022, a decrease of $96.9 million.

The components of the fluctuations in net revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 were as follows:

4 unchanged sentences

Component % change (0.2)% 0.5% (4.7)% (4.3)%

The growth in organic net revenue was primarily attributable to increased spending by existing and new clients, primarily driven by creative, digital transformation and consumer insights services.

The increase in net acquisitions (divestitures) was primarily driven by the acquisition of MDC.

The decrease in organic net revenue was primarily attributable to the retail, financial, and communications sector due to the loss of clients, clients who withheld spending due to uncertain macroeconomic factors, turmoil from the collapse of regional banks, and the writer and actor strikes.

The increase in net acquisitions (divestitures) was primarily driven by a $11.2 million increase in revenue from the acquisitions of LFL and Wolfgang, partially offset by a $10.1 million decrease in revenue from the divestiture of ConcentricLife.

Operating Income

The increase in expenses was primarily driven by higher costs associated with providing services as well as the acquisition of MDC.

Stock-based compensation expense decreased, primarily driven by awards issued to employees in the third quarter of 2021 in connection with the acquisition of MDC that fully vested in the third quarter of 2021 and the first quarter of 2022 as well as a net decrease in the value of profits interests awards in 2022.

Depreciation and amortization grew due to the recognition of depreciable fixed assets and amortizable intangible assets primarily in connection with the acquisition of MDC.

Deferred acquisition consideration decreased primarily due to the earn-out periods for certain of our Brands ending in the second quarter of 2022 and thus the final payments being made to those Brands at that time.

Impairment and other losses for the year ended December 31, 2022 of $52.4 million relates to the impairment of goodwill, an intangible asset, and right-of-use lease assets in 2022.

Operating income and Adjusted EBITDA were higher driven by the increase in revenues, partially offset by higher expenses as detailed above.

Operating Income for the year ended December 31, 2023 was $121.6 million, compared to $138.2 million for the year ended December 31, 2022, representing a decrease of $16.6 million.

The change in Operating Income was primarily attributable to a decrease in Revenue, Cost of services, and Impairment and other losses, and an increase in Office and general expenses, and Depreciation and amortization.

The decrease in Cost of services was primarily attributable to lower billable and unbillable costs, commensurate with lower revenue, and lower staff costs associated with cost savings initiatives, partially offset by an increase in stock-based compensation expense.

Stock-based compensation expense increased $14.0 million primarily attributable to new awards granted in 2023 and an increase in the fair value of certain profits interest awards.

The increase in Office and general expenses was primarily attributable to an increase in stock-based compensation expense, partially offset by a decrease in staff costs due to cost saving initiatives.

Depreciation and amortization expense increased $6.4 million, primarily attributable to the acceleration of amortization associated with the discontinuation of a certain trade name.

Impairment and other losses decreased $42.4 million primarily due to the impairment of goodwill, right-of-use lease assets and the related leasehold improvements in 2022.

Adjusted EBITDA decreased $21.0 million, primarily driven by a decrease in Operating Income, as discussed above.

Brand Performance Network

5 unchanged sentences

Operating Expenses

Cost of services 439,814 219,492 220,322 NM

Cost of services 469,203 439,814 29,389 6.7 %

Office and general expenses 225,498 217,254 8,244 3.8 %

Depreciation and amortization 34,343 33,674 669 2.0 %

Impairment and other losses 50,778 14,846 35,932 NM

Impairment and other losses 1,483 50,778 (49,295) (97.1) %

$ 730,527 $ 741,520 $ (10,993) (1.5) %

Operating income $ 15,688 $ 15,502 $ 186 1.2 %

Operating Income $ 38,249 $ 15,688 $ 22,561 NM

Year Ended December 31,

2 unchanged sentences

Net Revenue $ 668,101 $ 667,882 $ 219 — %

Billable costs 89,326 31,151 58,175 NM

Billable costs 100,675 89,326 11,349 12.7 %

Revenue 768,776 757,208 11,568 1.5 %

Billable costs 89,326 31,151 58,175 NM

Billable costs 100,675 89,326 11,349 12.7 %

Staff costs 419,651 408,968 10,683 2.6 %

4 unchanged sentences

Depreciation and amortization 34,343 33,674 669 2.0 %

Deferred acquisition consideration 1,736 184 1,552 NM

Impairment and other losses 50,778 14,846 35,932 NM

Deferred acquisition consideration 2,851 1,736 1,115 64.2 %

Impairment and other losses 1,483 50,778 (49,295) (97.1) %

Other items, net 13,206 8,129 5,077 62.5 %

Operating Income $ 15,688 $ 15,502 $ 186 1.2 %

Operating Income $ 38,249 $ 15,688 $ 22,561 NM

Revenue for the year ended December 31, 2023 was $768.8 million, compared to $757.2 million for the year ended December 31, 2022, an increase of $11.6 million.

5 unchanged sentences

Component % change 0.1% 2.0% (2.1)% —%

The increase in organic net revenue was primarily attributable to new clients and increased spending by existing clients.

The increase in net acquisitions (divestitures) was primarily driven by the acquisitions of MDC and Goodstuff.

The decline in organic net revenue was primarily attributable to lower spending and client losses in the retail, consumer products, transportation and travel, and healthcare sectors.

The increase in net acquisitions (divestitures) was primarily driven by a $12.5 million increase in revenue from the acquisitions of BNG and Huskies.

Operating Income

The increase in expenses was primarily driven by an increase in the costs associated with providing services as well as the impact of the acquisitions of MDC and Goodstuff.

Depreciation and amortization expense increased primarily due to the recognition of depreciable fixed assets and amortizable intangible assets in connection with the acquisitions of MDC and Goodstuff.

Impairment and other losses for the year ended December 31, 2022 of $50.8 million, relates to the impairment of goodwill, intangible assets, and one right-of-use lease asset.

Impairment and other losses of $14.8 million for the year ended December 31, 2021 relates to the write-down of certain trade names no longer in use.

Deferred acquisition consideration increased primarily due to the acquisition of Goodstuff in the fourth quarter of 2021, partially offset by a decrease in the fair value of deferred acquisition consideration for the year ended 2022.

Operating income and Adjusted EBITDA were driven by an increase in revenues, partially offset by higher expenses as detailed above.

Operating Income for the year ended December 31, 2023 was $38.2 million, compared to $15.7 million for the year ended December 31, 2022, representing an increase of $22.6 million.

The change in Operating Income was primarily attributable to an increase in Revenue, Costs of services, and Office and general expenses, and a decrease in Impairment and other losses.

The increase in Cost of services was primarily attributable to higher billable and unbillable costs, commensurate with the increase in revenues and an increase in staff costs due to the acquisition of BNG in 2022.

The increase in Office and general expenses was primarily attributable to an increase in staff costs primarily associated with an increased headcount and increased occupancy-related expenses, partially offset by a decrease in bad debt expense primarily attributable to recovered funds that were previously written off.

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

Impairment and other losses decreased $49.3 million, primarily due to the impairment of goodwill in 2022.

Adjusted EBITDA decreased $19.8 million, primarily driven by an increase in expenses, partially offset by higher revenues as discussed above.

Communications Network

9 unchanged sentences

$ 297,803 $ 337,950 $ (40,147) (11.9) %

Operating income $ 96,599 $ 21,870 $ 74,729 NM

Operating Income $ 35,904 $ 97,702 $ (61,798) (63.3) %

Year Ended December 31,

12 unchanged sentences

Deferred acquisition consideration 30 (24,298) 24,328 NM

Other items, net 755 96 659 NM

Operating Income $ 96,599 $ 21,870 $ 74,729 NM

Revenue for the year ended December 31, 2022 was $430.8 million compared to $248.8 million for the year ended December 31, 2021, an increase of $182.0 million.

Other items, net 1,535 883 652 73.8 %

Operating Income $ 35,904 $ 97,702 $ (61,798) (63.3) %

Revenue for the year ended December 31, 2023 was $333.7 million, compared to $435.7 million for the year ended December 31, 2022, a decrease of $101.9 million.

The components of the fluctuations in net revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 were as follows:

4 unchanged sentences

Component % change (0.1)% 0.7% (17.1)% (16.5)%

The increase in organic net revenue was primarily attributable to increased spending by existing and new clients, primarily driven by higher public relations as well as advocacy services, as these are higher during election years.

The increase in net acquisitions (divestitures) was driven by the acquisition of MDC.

The decline in organic net revenue was attributable to lower spending in public relations and related advocacy services as compared to higher spending in the prior year associated with the 2022 elections as well as decreased spending in the technology sector due to a reduction in budgets stemming from macroeconomic conditions.

The increase in net acquisitions (divestitures) was driven by a $1.9 million increase in revenue from the acquisition of TMA.

Operating Income

The increase in expenses was primarily driven by an increase in the costs associated with providing services as well as the impact of the acquisition of MDC.

Deferred acquisition consideration decreased primarily due to the reduction in fair value associated with the deferred acquisition consideration assumed in connection with the purchase of a portion of the remaining interest in one of our Brands in the fourth quarter of 2021.

Stock-based compensation expense decreased primarily due to awards issued to employees in the third quarter of 2021 in connection with the acquisition of MDC that fully vested in the third quarter of 2021 and the first quarter of 2022, partially offset by awards issued to employees in 2022.

Depreciation and amortization increased primarily due to the recognition of amortizable intangible assets in connection with the acquisition of MDC.

Operating income and Adjusted EBITDA were driven by an increase in revenues, partially offset by higher expenses as detailed above.

Operating income for the year ended December 31, 2023 was $35.9 million compared to $97.7 million for the year ended December 31, 2022, representing a decrease of $61.8 million.

The change in Operating Income was primarily attributable to a decrease in Revenue and Cost of services, and an increase in Office and general expenses.

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

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

Deferred acquisition consideration increased $24.3 million, primarily attributable to a significant reduction in the fair value of the deferred acquisition consideration liability that occurred in the third quarter of 2022 associated with a certain Brand.

Adjusted EBITDA decreased $35.2 million, primarily driven by a decrease in Operating Income, partially offset by an increase in expenses added-back to EBITDA, primarily Deferred acquisition consideration as discussed above.

The components of operating results for the year ended December 31, 2023 compared to the year ended December 31, 2022 were as follows:

2 unchanged sentences

(dollars in thousands)

Revenue $ 19,962 $ 25,843 $ (5,881) (22.8) %

Revenue $ 46,585 $ 19,962 $ 26,623 NM

Operating Expenses

Cost of services 10,007 13,866 (3,859) (27.8) %

Office and general expenses 10,951 12,785 (1,834) (14.3) %

Depreciation and amortization 5,234 2,498 2,736 NM

Cost of services 32,484 10,006 22,478 NM

Office and general expenses 24,648 10,950 13,698 NM

Depreciation and amortization 8,390 5,234 3,156 60.3 %

Impairment and other losses — 19,041 (19,041) (100.0) %

$ 65,522 $ 45,231 $ 20,291 44.9 %

Operating loss $ (25,271) $ (3,306) $ (21,965) NM

Operating Loss $ (18,937) $ (25,269) $ 6,332 (25.1) %

Year Ended December 31,

1 unchanged sentence

(dollars in thousands)

Net Revenue $ 19,962 $ 25,843 $ (5,881) (22.8) %

Revenue 19,962 25,843 (5,881) (22.8) %

Staff costs 14,011 16,454 (2,443) (14.8) %

Net Revenue $ 46,585 $ 19,962 $ 26,623 NM

46,585 19,962 26,623 NM

Staff costs 37,416 13,963 23,453 NM

Administrative costs (1)

4,689 3,940 749 19.0 %

Unbillable and other costs, net 15,087 2,990 12,097 NM

Adjusted EBITDA (933) (769) (164) 21.3 %

Stock-based compensation 41 39 2 5.1 %

Depreciation and amortization 5,234 2,498 2,736 NM

Adjusted EBITDA (10,607) (931) (9,676) NM

Stock-based compensation 518 41 477 NM

Depreciation and amortization 8,390 5,234 3,156 60.3 %

Deferred acquisition consideration (1,752) — (1,752) (100.0) %

Impairment and other losses — 19,041 (19,041) (100.0) %

Other items, net 22 — 22 100.0 %

Operating Loss $ (25,271) $ (3,306) $ (21,965) NM

Revenue for the year ended December 31, 2022 was $20.0 million compared to $25.8 million for the year ended December 31, 2021, a decrease of $5.9 million.

Other items, net 1,174 22 1,152 NM

Operating Loss $ (18,937) $ (25,269) $ 6,332 (25.1) %

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

Revenue for the year ended December 31, 2023 was $46.6 million, compared to $20.0 million for the year ended December 31, 2022, an increase of $26.6 million.

The components of the fluctuations in net revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 were as follows:

2 unchanged sentences

(dollars in thousands)

All Other $ 25,843 $ (835) $ (4,616) $ (430) $ (5,881) $ 19,962 (1.7) % (22.8) %

Component % change (3.2)% (17.9)% (1.7)% (22.8)%

Organic net revenue remained relatively flat.

The decrease related to net acquisitions (divestitures) was primarily attributable to the sale of Reputation Defender in 2021.

All Other $19,962 $(354) $35,135 $(8,157) $26,624 $46,586 (40.9)% NM

Component % change (1.8)% NM (40.9)% NM

The decline in organic net revenue was primarily attributable to budget cuts and client losses from clients in the communications industry ($2.0 million), with the remaining amount ($6.1 million) representing the elimination of intercompany revenue during the year ended December 31, 2023.

The increase in net acquisitions (divestitures) was primarily driven by a $33.1 million increase in revenue from the acquisitions of Maru and Epicenter.

Operating Loss

The increase in operating loss was primarily driven by a decrease in revenues and an increase in impairment and other losses due to the impairment of goodwill.

The decrease in Adjusted EBITDA was primarily driven by a decrease in revenue.

Operating Loss for the year ended December 31, 2023 was $18.9 million compared to $25.3 million for the year ended December 31, 2022, representing a decrease of $6.3 million.

The change in Operating Loss was primarily attributable to an increase in Revenue, Cost of services, Office and general expenses and Depreciation and amortization, partially offset by a decrease in Impairment and other losses.

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

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

The increase in Depreciation and amortization was primarily attributable to the recognition of intangible assets in connection with the acquisition of Maru.

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

Adjusted EBITDA decreased $9.7 million, primarily driven by a decrease in Operating Loss, offset by a significant decrease in expenses added-back to EBITDA, primarily Impairment and other losses as discussed above.

The components of operating results for the year ended December 31, 2023 compared to the year ended December 31, 2022 were as follows:

3 unchanged sentences

Staff costs $ 36,938 $ 36,456 $ 482 1.3 %

Administrative costs 18,002 817 17,185 NM

Adjusted EBITDA (43,111) (20,644) (22,467) NM

Administrative costs 11,472 6,655 4,817 72.4 %

Adjusted EBITDA (48,410) (43,111) (5,299) 12.3 %

Stock-based compensation 19,638 11,710 7,928 67.7 %

2 unchanged sentences

Operating Loss $ (86,273) $ (67,058) $ (19,215) 28.7 %

Operating expenses increased primarily in connection with the acquisition of MDC.

In addition, stock-based compensation expense increased, primarily driven by awards issued to employees in the first quarter of 2022.

Other items, net decreased primarily due to professional fees associated with the acquisition of MDC in 2021.

Operating Loss for the year ended December 31, 2023 was $86.3 million compared to $67.1 million for the year ended December 31, 2022, representing an increase of $19.2 million.

Administrative costs increased by $4.8 million primarily attributable to computer software and licensing fees.

Stock-based compensation expense increased $7.9 million, primarily attributable to the modification of certain share-based payment awards and the granting of awards in 2023.

Other items, net increased $4.7 million, primarily attributable to professional fees incurred related to the Company’s acquisitions.

Liquidity and Capital Resources:

3 unchanged sentences

Net cash provided by operating activities $ 81,007 $ 347,586

Net cash (used in) provided by investing activities (116,275) 163,952

Net cash provided by (used in) investing activities 155,951 (116,275)

Net cash used in financing activities (339,864) (186,736)

1 unchanged sentence

The Company expects to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months and subsequent periods.

The Company has historically maintained and expanded its business using cash generated from operating activities, funds available under its revolving credit agreement, and other initiatives, such as obtaining additional debt and equity financing.

On December 31, 2022, the Company had $100.0 million of borrowings outstanding, $25.3 million of outstanding and undrawn letters of credit resulting in $374.7 million available under its $500.0 million Combined Credit Agreement (as defined and discussed in Note 11 of the Notes to the Audited Consolidated Financial Statements included herein).

The Company enters into agreements with third parties to accelerate the collection of certain accounts receivable by transferring ownership of those receivables to the third parties.

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

The amount transferred to the third parties under these arrangements was $176.5 million, $42.1 million and $44.2 million during the years ended December 31, 2022, 2021 and 2020, respectively.

The amount collected and due to the third parties under the arrangements was $5.7 million as of December 31, 2022.

No amounts were collected and due to third parties during the years ended December 31, 2021 and 2020.

Fees for the arrangements were recorded in Office and general expenses in the Consolidated Statements of Operations and totaled $1.8 million, $0.1 million, and $0.2 million for the years ended December 31, 2022, 2021 and 2020.

The fees are almost entirely offset by reduced interest expense from lower borrowings driven by the acceleration of cash collections.

On March 23, 2022, the Board authorized the Repurchase Program under which we may repurchase up to $125.0 million of shares of our outstanding Class A Common Stock.

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

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

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

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

See Note 1 of the Notes included herein for information regarding amendments to the Repurchase Program.

As of December 31, 2022, there were 7.2 million shares of Class A Common Stock repurchased under the Repurchase Program at an aggregate value, excluding fees, of $51.5 million.

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

The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $73.3 million as of December 31, 2022.

The Company has historically maintained and expanded its business using cash generated from operating activities, funds available under the Credit Agreement, and other initiatives, such as obtaining additional debt and equity financing.

On May 4, 2023, as discussed in Note 11 of the Notes included herein, the Company amended the Credit Agreement to, among other things, increase the revolving commitments under the Credit Agreement by $140.0 million from $500.0 million to $640.0 million and permit restricted payments for share repurchases or redemptions from certain of its stockholders in an aggregate principal amount of up to $150.0 million.

As of December 31, 2023, the Company had $59.0 million of borrowings outstanding and $16.2 million of outstanding and undrawn letters of credit resulting in $564.8 million under the Credit Agreement.

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

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

The trade receivables transferred to the third parties were $393.9 million, $176.5 million, and $42.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The amount collected and due to the third parties under these arrangements was $1.8 million as of December 31, 2023 and $5.7 million as of December 31, 2022.

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

Fees for these arrangements were recorded in Office and general expenses in the Consolidated Statements of Operations and totaled $5.4 million, $1.8 million, and $0.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

On March 1, 2023, the Board authorized an extension and a $125.0 million increase in the size of our stock repurchase program ( the “Repurchase Program”) to an aggregate of $250.0 million, with any previous purchases under the Repurchase Program continuing to count against that limit.

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

The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition consideration payments, purchases of noncontrolling interests, subsidiary awards, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company’s 5.625% Notes and Combined Credit Agreement.

The Company expects to make estimated cash payments in the future to satisfy obligations under the Tax Receivables Agreement (“TRA”) (see Note 17 of the Notes included herein for additional details).

the Notes included herein) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to the Company making payments under the TRA.

Based on the current outlook, the Company believes future cash flows from operations, together with the Company’s existing cash balance and availability of funds under the Combined Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the next twelve months and subsequent periods.

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

During the year ended December 31, 2023, 9.9 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an aggregate value, excluding fees, of $59.5 million.

These shares were repurchased at an average price of $6.00 per share.

The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $138.6 million as of December 31, 2023.

The Board will review the Repurchase Program periodically and may authorize adjustments of its terms.

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

On May 23, 2023, the Company repurchased 23.3 million shares of Class A Common Stock from certain entities affiliated with AlpInvest Partners B.V.

at a price of $6.43 per share, for an aggregate total repurchase price of $150.0 million.

The Company expects to make estimated cash payments in the future to satisfy obligations under our Tax Receivables Agreement with Stagwell Media LP and OpCo (“TRA”) (see Note 17 of the Notes included herein for additional details).

The amount and timing of payments are contingent on the Company achieving certain tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize as a result of (i) increases in the tax basis of OpCo’s assets resulting from exchanges of Paired Units (each as defined in Note 15 of the Notes included herein) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to the Company making payments under the TRA.

Based on the current outlook, the Company believes future cash flows from operations, together with the Company’s existing cash balance and availability of funds under

the Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the next twelve months and subsequent periods.

The Company’s ability to make payments will depend on future performance, which is subject to general economic conditions, the competitive environment and other factors, including those described in this Form 10-K and in the Company’s other SEC filings.

Operating Activities

Cash flows provided by operating activities for the year ended December 31, 2022 were $347.6 million, primarily driven by earnings as well as favorable working capital requirements.

Cash flows provided by operating activities for the year ended December 31, 2023, were $81.0 million, primarily driven by earnings, partially offset by unfavorable working capital requirements, including the timing of media supplier payments.

Cash flows provided by operating activities for the year ended December 31, 2022, were $347.6 million, primarily driven by earnings and favorable working capital requirements.

Investing Activities

Cash flows used in investing activities were $116.3 million for the year ended December 31, 2022, primarily driven by $74.2 million in acquisitions and $22.7 million in capital expenditures.

Cash flows provided by investing activities were $164.0 million for the year ended December 31, 2021, primarily driven by the addition of $150.3 million of cash in connection with the acquisition of MDC, and $37.2 million from the sale of Reputation Defender, partially offset by capital expenditures of $8.8 million.

Cash flows provided by investing activities were $156.0 million for the year ended December 31, 2023, primarily driven by $229.5 million in proceeds from the sale of ConcentricLife, partially offset by $28.2 million in capitalized software spend, $14.2 million in capital expenditures, and $23.3 million for acquisitions, net of cash acquired.

Cash flows used in investing activities were $116.3 million for the year ended December 31, 2022, primarily driven by $12.8 million in capital capitalized software spend, $22.7 million in capital expenditures, and $74.2 million in acquisitions, net of cash acquired.

Financing Activities

During the year ended December 31, 2022, cash flows used in financing activities were $186.7 million, primarily driven by $63.2 million of deferred acquisition consideration payments, $39.2 million of distributions to noncontrolling interests, $51.5 million in stock repurchases under the Repurchase Program, and $18.7 million related to shares acquired and cancelled in connection with the vesting of stock awards.

During the year ended December 31, 2021, cash flows used in financing activities were $273.4 million, which primarily consisted of $884.4 million for the repurchase of the Company’s 7.50% Senior Notes due 2024, $202.4 million in net payments under the Company’s previous revolving credit agreement, and distributions of $233.2 million to Stagwell Media, offset by receipt of $1.1 billion from the issuance of the 5.625% Notes.

During the year ended December 31, 2023, cash flows used in financing activities were $339.9 million, primarily driven by $41.0 million in net borrowings under the Credit Agreement, shares repurchased and cancelled of $223.8 million, payments of deferred consideration of $49.2 million, and distributions to noncontrolling interests of $25.0 million.

Debt, net of debt issuance costs, as of December 31, 2023, was $1,145.8 million as compared to $1,184.7 million outstanding at December 31, 2022.

See Note 11 to the Audited Consolidated Financial Statements included herein for information regarding the Company’s 5.625% Notes, and the Combined Credit Agreement, which provides for a $500.0 million senior secured revolving credit facility with a five-year maturity.

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

If the Company loses all or a substantial portion of its lines of credit under the Combined Credit Agreement, or if the Company uses the maximum available amount under the agreement, it will be required to seek other sources of liquidity.

See Note 11 to the Audited Consolidated Financial Statements included herein for information regarding the Company’s 5.625% Notes, and the Credit Agreement, which provides for a $640.0 million senior secured revolving credit facility maturing on August 3, 2026.

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

If the Company loses all or a substantial portion of its lines of credit under the Credit Agreement, or if the Company uses the maximum available amount under the agreement, it will be required to seek other sources of liquidity.

If the Company were unable to find these sources of liquidity, for example through an equity offering or access to the capital markets, the Company’s ability to fund its working capital needs and any contingent obligations with respect to acquisitions and redeemable noncontrolling interests would be adversely affected.

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

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

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

Additionally, the Combined Credit Agreement was amended to remove certain pre-commencement notice provisions for certain acquisitions under $50.0 million in the aggregate, to increase the amount permitted for certain investments allowed under the Combined Credit Agreement, and, subject to certain conditions, to allow for the repurchase of

Stagwell Inc.

stock in an amount not to exceed $100.0 million in any fiscal year.

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

On December 14, 2022, the Company amended the Combined Credit Agreement to allow for the sale of accounts receivable summarized above and in Note 2 of the Notes included herein.

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

Pursuant to the Combined Credit Agreement, the Company must maintain a Total Leverage Ratio (as defined in the Combined Credit Agreement) below a threshold established in the Combined Credit Agreement.

For the period ended December 31, 2022, the Company’s calculation of each of this ratio, and the maximum permitted under the Combined Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:

Pursuant to the Credit Agreement, the Company must maintain a Total Leverage Ratio (as defined in the Credit Agreement) below an established threshold.

For the period ended December 31, 2023, the Company’s calculation of this ratio, and the maximum permitted under the Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:

December 31, 2023

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These ratios and measures are not based on GAAP and are not presented as alternative measures of operating performance or liquidity.

Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one-time charges, and other items, as defined in the Combined Credit Agreement.

They are presented here to demonstrate compliance with the covenants in the Combined Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.

Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one-time charges, and other items, as defined in the Credit Agreement.

They are presented here to demonstrate compliance with the

covenants in the Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.

Material Cash Requirements

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These commitments are included in Accounts payable and Accrued media when the media services are delivered by the media providers.

Stagwell takes precautions against default on payment for these services and has historically had a very low incidence of default.

Stagwell takes precautions against default on payment for these services including the procurement of credit insurance and has historically had a very low incidence of default.

Stagwell is still exposed to the risk of significant uncollectible receivables from our clients.

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Deferred acquisition consideration (2)

71,787 48,375 21,757 1,167 488

Total $ 1,960,500 $ 188,983 $ 271,121 $ 225,931 $ 1,274,465

(1) Includes the principal amount of the 5.625% Notes which are due in 2029 and does not include borrowings under the Combined Credit Agreement.

(1) Includes the principal amount of the 5.625% Notes which are due in 2029 and does not include borrowings under the Credit Agreement.

(2) Does not include amounts expected to be paid in shares of Class A Common Stock.

As of December 31, 2023, $29.3 million of the deferred acquisition consideration is expected to be settled in shares of Class A Common Stock.

Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments.

See Note 9 of the Notes included herein for additional information regarding contingent deferred acquisition consideration.

As of December 31, 2022, approximately, $51.0 million of the deferred acquisition consideration is expected to be settled in shares of Class A Common Stock.

When acquiring less than 100% ownership of an entity, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances.

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Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”).

The awards generally provide the employee the right, but not the

obligation, to sell its interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution.

The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the Combined Credit Agreement (or any refinancings thereof), and, if necessary, through the incurrence of additional debt and/or issuance of additional equity.

The awards generally provide the employee the right, but not the obligation, to sell its interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution.

The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the Credit Agreement (or any refinancings thereof), and, if necessary, through the incurrence of additional debt and/or issuance of additional equity.

The ultimate amount payable in the future relating to these transactions will vary because it is dependent on the future results of operations of the subject businesses and the timing of when these rights are exercised.

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An understanding of our critical accounting estimates is necessary to analyze our financial results.

Our critical accounting estimates include our accounting for revenue recognition, business combinations, deferred acquisition consideration, redeemable noncontrolling interests, goodwill and intangible assets, income taxes and stock-based compensation.

Our critical accounting estimates include our accounting for revenue recognition, business combinations, deferred acquisition consideration, goodwill and intangible assets, and income taxes.

The financial statements are evaluated on an ongoing basis and estimates are based on historical experience, current conditions and various other assumptions believed to be reasonable under the circumstances.

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Certain acquisitions include an initial payment at the time of closing and provide for future additional contingent purchase price payments.

Contingent purchase price obligations for these transactions are recorded as deferred acquisition consideration liabilities on the balance sheet, at the acquisition date fair value and are remeasured at each reporting period.

Contingent purchase price obligations for these transactions are recorded as deferred acquisition consideration liabilities on the balance sheet.

Arrangements that are not contingent upon future employment are initially measured at the acquisition date fair value and are remeasured at each reporting period.

Arrangements that are contingent upon future employment are expensed as earned over the respective vesting (employment) period.

These liabilities are derived from the projected performance of the acquired entity.

These arrangements may be dependent on future events, such as the growth rate of the earnings of the relevant subsidiary during the contractual period.

At each reporting date, the Company models each business’ future performance, including revenue growth and free cash flows, to estimate the value of each deferred acquisition consideration liability.

At each reporting date, the Company models each business’ future performance, including revenue and EBITDA growth, net liquid assets and working capital, to estimate the value of each deferred acquisition consideration liability.

The liability is adjusted quarterly based on changes in current information affecting each subsidiary’s current operating results and the impact this information will have on future results included in the calculation of the estimated liability.

These adjustments are recorded in the Consolidated Statements of Operations.

In instances where such contingent payments require the sellers’ continuous employment with the Company after the transaction, they are recorded as compensation expense in the Consolidated Statements of Operations.

Redeemable Noncontrolling Interests .

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

The Company has similar call options under the same contractual terms.

The amount of consideration under these contractual arrangements is not a fixed amount, but rather is dependent upon various valuation formulas, such as the average earnings of the relevant subsidiary through the date of exercise or the growth rate of the earnings of the relevant subsidiary during that period.

In the event that an incremental purchase may be required by the Company, the amounts are recorded in Redeemable Noncontrolling Interests in mezzanine equity on the Consolidated Balance Sheets at their acquisition date fair value and adjusted for changes to their estimated redemption value through Retained earnings or Paid-in capital (when at an accumulated deficit) in the Consolidated Balance Sheets (but not less than their initial redemption value),

except for foreign currency translation adjustments.

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

Goodwill (the excess of the acquisition cost over the fair value of the net assets acquired) acquired as a result of a business combination which is not subject to amortization is tested for impairment, at the reporting unit level, annually as of October 1st of each year, or more frequently if indicators of potential impairment exist.

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Determining the fair value of a reporting unit involves the use of significant estimates and assumptions.

The Company uses a combination of the income approach, which incorporates the use of the discounted cash flow (“DCF”) method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data.

The Company generally applies an equal weighting to the income and market approaches for the impairment test.

The Company generally uses a combination of the income approach, which incorporates the use of the discounted cash flow (“DCF”) method, and the market approach, which incorporates the use of earnings multiples based on market data and comparable companies.

The Company applies an equal weighting to the income and market approaches for the impairment test.

The income approach and the market approach both require the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates.

The DCF estimates incorporate expected cash flows that represent a spectrum of the amount and timing of possible cash flows of each reporting unit from a market participant perspective.

The expected cash flows are developed from the Company’s long-range planning process using projections of operating results and related cash flows based on assumed long-term growth rates, demand trends and appropriate discount rates based on a reporting unit’s weighted average cost of capital (“WACC”) as determined by considering the observable WACC of comparable companies and factors specific to the reporting unit.

The expected cash flows are developed from the Company’s long-range planning process using projections of operating results and related cash flows based on assumed revenue growth rates, EBITDA margin, long-term growth rates, and appropriate discount rates based on a reporting unit’s weighted average cost of capital (“WACC”) as determined by considering the observable WACC of comparable companies and factors specific to the reporting unit.

The terminal value is estimated using a constant growth method which requires an assumption about the expected long-term growth rate.

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

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

As of October 1, 2022, the Company performed a quantitative impairment test for all reporting units (37) and as of December 31, 2022, the Company performed a quantitative impairment test for certain reporting units that were determined to be more likely than not impaired.

As a result of these tests, management concluded there to be 8 reporting units with a carrying value in excess of their fair value resulting in an impairment of $116.7 million in 2022.

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

As of October 1, 2023 (the annual impairment test date), the Company performed this assessment and determined that all reporting units (11) did not have an impairment.

The Company utilized a long-term average growth rate ranging from 1% to 4% and a WACC ranging from 11.50% to 20.00%.

Of the remaining reporting units, approximately 50% have fair values that are substantially in excess of the carrying amounts.

For the other reporting units, we performed a sensitivity analysis using the latest impairment assessment performed, which included an approximate 2% increase in the WACC (with the exception of one reporting unit where we utilized 1%), and concluded that this would not result in an impairment.

Based on our December 31, 2022 assessment, the fair value of two reporting units, with goodwill of approximately $13 million, exceeded their carrying value by less than 20%.

The Company believes the estimates and assumptions used in the calculations are reasonable.

However, if there were an adverse change in the facts and circumstances, then an impairment charge may be necessary in the future.

As a result, to the extent that, among other factors, (i) there is underperformance in one or more reporting units, (ii) a potential recession further disrupts the economic environment or (iii) interest rates continue to rise in response to persistent inflation, the fair value of one or more of these reporting units could fall below their carrying value, resulting in a goodwill impairment charge.

As a result, to the extent that, among other factors, (i) there is underperformance in one or more reporting units, or (ii) disruptions in the macroeconomic environment, the fair value of one or more of these reporting units could fall below their carrying value, resulting in a goodwill impairment charge.

The Company monitors its reporting units to determine if there is an indicator of potential impairment.

Based on the annual assessment performed, a certain reporting unit, with goodwill of $31.0 million as of December 31, 2023, did not have a substantial fair value in excess of its carrying value.

This reporting unit included certain recent acquisitions of the Company and, accordingly, has a higher risk of impairment in future periods.

Income Taxes.

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A change to any of these factors could impact the estimated valuation allowance and income tax expense.

Stock-Based Compensation .

Compensation cost is measured at fair value at the date of grant and is expensed over the service period, generally the award’s vesting period.

The Company recognizes forfeitures as they occur.

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

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

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

The Company has adopted the straight-line attribution method for determining the compensation cost to be recorded during each accounting period.

The Company commences recording compensation expense related to awards that are based on performance conditions under the straight-line attribution method when it is probable that such performance conditions will be met.

New Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-04, and in January 2021 subsequently issued ASU 2021-01, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

ASU 2020-04 is effective upon issuance, through December 31, 2022.

The Combined Credit Agreement is the Company’s only contractual arrangement that referenced LIBOR and is impacted by ASU 2020-04.

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

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

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

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

See Note 2 of the Company’s Audited Consolidated Financial Statements included in this Form 10-K.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis