Stagwell Inc 10-K

Item 8. Financial Statements and Supplementary Data STAGWELL INC. INDEX TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS Page Financial Statements: Report of Independent Registered Public Accounting Firm (PCAOB ID No. 238 ) 63 R eport of Independent Registered Public Accounting Firm (P CAOB ID No. 34 ) 66 Consolidated Statements of Operations for each of the Three Years in the Period Ended December 31, 202 3 67 Consolidated Statements of Comprehensive Income (Loss) for each of the Three Years in the Period Ended December 31, 202 3 68 Consolidated Balance Sheets as of December 31, 202 3 and 202 2 69 Consolidated Statements of Cash Flows for each of the Three Years in the Period Ended December 31, 202 3 70 Consolidated Statements of Shareholders’ Equity for each of the Three Years in the Period Ended December 31, 202 3 72 Notes to Audited Consolidated Financial Statements 75 Financial Statement Schedules: Schedule II — Valuation and Qualifying Accounts for each of the Three Years in the Period Ended December 31, 202 3 128 62 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Stagwell Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheet of Stagwell Inc. and subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for the year ended December 31, 2023, including the related notes and schedule of valuation and qualifying accounts for the year ended December 31, 2023 appearing under Item 15(a) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date as the Company (i) lacked a sufficient complement of resources with an appropriate level of accounting knowledge, experience and training; (ii) did not design and maintain an effective risk assessment process at a precise enough level; (iii) did not design and maintain effective controls over information and communication; (iv) did not design and maintain effective monitoring controls; and (v) did not design and maintain effective control activities that address relevant risks across all business processes covering all significant accounts, including controls over the review of journal entries, account reconciliations and segregation of duties in the finance and accounting functions. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. 63 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Goodwill Impairment Assessments – Brand Performance Network Reporting Unit and Certain Reporting Units in the Integrated Agencies Network, Communications Network, and All Other Segments As described in Notes 2 and 8 to the consolidated financial statements, the Company’s goodwill balance was $1,499 million as of December 31, 2023, and the goodwill associated with the Brand Performance Network Reporting Unit, Integrated Agencies Network segment, Communications Network segment, and All Other segment was $442 million, $881 million, $137 million, and $39 million, respectively. Management tests goodwill for impairment, at the reporting unit level, annually as of October 1st of each year, or more frequently if indicators of potential impairment exist. For reporting units for which the qualitative assessment concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, management performs a quantitative impairment test, which compares the fair value of the reporting unit to its carrying amount. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not considered impaired. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. Management generally uses a combination of the income approach, which incorporates the use of the discounted cash flow method, and the market approach, which incorporates the use of earnings multiples based on market data and comparable companies, and 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 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 discount rates based on a reporting unit’s weighted average cost of capital. The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments for the Brand Performance Network reporting unit and certain reporting units in the Integrated Agencies Network, Communications Network, and All Other segments (collectively the “aforementioned reporting units”) is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the aforementioned reporting units; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, EBITDA margin, long-term growth rates, discount rates, comparable companies, and earnings multiples for the aforementioned reporting units; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, material weaknesses were identified that impacted this matter. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) evaluating and determining the nature and extent of audit procedures performed and evidence obtained that are responsive to the material weaknesses identified; (ii) testing management’s process for developing the fair value estimate of the aforementioned reporting units; (iii) evaluating the appropriateness of the income and market approaches used by management; (iv) testing the completeness and accuracy of underlying data used in the income and market approaches; and (v) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, EBITDA margin, long-term growth rates, discount rates, 64 comparable companies, and earnings multiples. Evaluating management’s assumptions related to revenue growth rates, EBITDA margin, and long-term growth rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the aforementioned reporting units; (ii) the consistency with external market and industry data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the income and market approaches; (ii) the weighting of the approaches; and (iii) the reasonableness of the long-term growth rates, discount rates, comparable companies, and earnings multiples assumptions for each of the reporting units. /s/ PricewaterhouseCoopers LLP New York, NY March 11, 2024 We have served as the Company’s auditor since 2023. 65 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Stagwell, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Stagwell, Inc. and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes and schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP New York, NY March 6, 2023 (March 11, 2024 as to the effects of the restatement discussed in Note 21) We began serving as the Company’s auditor in 2020. In 2023 we became the predecessor auditor. 66 STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share amounts) Year Ended December 31, 2023 2022 2021 Revenue $ 2,527,177 $ 2,687,792 $ 1,469,363 Operating Expenses Cost of services 1,621,174 1,673,576 906,856 Office and general expenses 661,250 601,536 424,038 Depreciation and amortization 142,831 131,273 77,503 Impairment and other losses 11,395 122,179 16,240 2,436,650 2,528,564 1,424,637 Operating Income 90,527 159,228 44,726 Other income (expenses): Interest expense, net ( 90,644 ) ( 76,062 ) ( 31,894 ) Foreign exchange, net ( 2,960 ) ( 2,606 ) ( 3,332 ) Gain on sale of business 94,505 — 43,038 Other, net ( 359 ) ( 4,975 ) 7,020 542 ( 83,643 ) 14,832 Income before income taxes and equity in earnings of non-consolidated affiliates 91,069 75,585 59,558 Income tax expense 40,557 25,462 23,398 Income before equity in earnings of non-consolidated affiliates 50,512 50,123 36,160 Equity in (loss) of non-consolidated affiliates ( 8,870 ) ( 79 ) ( 240 ) Net income 41,642 50,044 35,920 Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests ( 41,508 ) ( 30,125 ) ( 14,884 ) Net income attributable to Stagwell Inc. common shareholders $ 134 $ 19,919 $ 21,036 Earnings (Loss) Per Common Share: Basic $ — $ 0.16 $ ( 0.04 ) Diluted $ — $ 0.12 $ ( 0.04 ) Weighted Average Number of Common Shares Outstanding: Basic 117,259 124,262 90,426 Diluted 122,170 296,596 90,426 See Notes to the Audited Consolidated Financial Statements . 67 STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (amounts in thousands) Year Ended December 31, 2023 2022 2021 COMPREHENSIVE INCOME (LOSS) Net income $ 41,642 $ 50,044 $ 35,920 Other comprehensive (loss) - Foreign currency translation adjustment 7,996 ( 37,773 ) ( 6,000 ) Other comprehensive income - Benefit plan adjustment 338 4,088 722 Other comprehensive (loss) 8,334 ( 33,685 ) ( 5,278 ) Comprehensive income for the period 49,976 16,359 30,642 Comprehensive (income) loss attributable to the noncontrolling and redeemable noncontrolling interests ( 47,431 ) ( 6,640 ) ( 14,884 ) Comprehensive income (loss) attributable to Stagwell Inc. common shareholders $ 2,545 $ 9,719 $ 15,758 See Notes to the Audited Consolidated Financial Statements . 68 STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (amounts in thousands) December 31, 2023 December 31, 2022 ASSETS Current Assets Cash and cash equivalents $ 119,737 $ 220,589 Accounts receivable, net 697,178 645,846 Expenditures billable to clients 114,097 93,077 Other current assets 94,054 74,011 Total Current Assets 1,025,066 1,033,523 Fixed assets, net 77,825 98,878 Right-of-use lease assets - operating leases 254,278 273,567 Goodwill 1,498,815 1,566,956 Other intangible assets, net 818,220 907,529 Other assets 92,843 116,138 Total Assets $ 3,767,047 $ 3,996,591 LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable $ 414,980 $ 357,253 Accrued media 291,777 240,506 Accruals and other liabilities 233,046 268,871 Advance billings 301,674 337,034 Current portion of lease liabilities - operating leases 65,899 76,349 Current portion of deferred acquisition consideration 66,953 90,183 Total Current Liabilities 1,374,329 1,370,196 Long-term debt 1,145,828 1,184,707 Long-term portion of deferred acquisition consideration 34,105 71,140 Long-term lease liabilities - operating leases 281,307 294,049 Deferred tax liabilities, net 40,509 40,879 Other liabilities 54,905 67,695 Total Liabilities 2,930,983 3,028,666 Redeemable Noncontrolling Interests 10,792 39,111 Commitments, Contingencies and Guarantees (Note 14) Shareholders' Equity Common shares - Class A & B 118 132 Common shares - Class C 2 2 Paid-in capital 348,494 491,899 Retained earnings 21,148 22,095 Accumulated other comprehensive loss ( 13,067 ) ( 15,478 ) Stagwell Inc. Shareholders' Equity 356,695 498,650 Noncontrolling interests 468,577 430,164 Total Shareholders' Equity 825,272 928,814 Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity $ 3,767,047 $ 3,996,591 See Notes to the Audited Consolidated Financial Statements . 69 Table of Contents STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) Year Ended December 31, 2023 2022 2021 Cash flows from operating activities: Net income $ 41,642 $ 50,044 $ 35,920 Adjustments to reconcile net income to cash provided by operating activities: Stock-based compensation 57,179 33,152 75,032 Depreciation and amortization 142,831 131,273 77,503 Amortization of right-of-use lease assets and lease liability interest 76,653 77,368 58,982 Impairment and other losses 11,395 122,179 16,240 Deferred income taxes 19,443 ( 18,241 ) ( 3,818 ) Adjustment to deferred acquisition consideration 13,060 ( 13,405 ) 18,721 Gain on sale of business ( 94,505 ) — ( 43,440 ) Other, net 8,313 ( 22 ) 568 Changes in working capital: Accounts receivable ( 58,704 ) 37,780 ( 30,784 ) Expenditures billable to clients ( 21,477 ) ( 32,366 ) ( 35,371 ) Other assets 1,153 ( 1,388 ) 3,997 Accounts payable 52,837 108,028 ( 51,978 ) Accrued expenses and other liabilities ( 24,647 ) ( 22,436 ) 61,974 Advance billings ( 41,137 ) ( 27,062 ) 76,021 Current portion of lease liabilities - operating leases ( 87,629 ) ( 86,525 ) ( 53,360 ) Deferred acquisition related payments ( 15,400 ) ( 10,793 ) ( 5,351 ) Net cash provided by operating activities 81,007 347,586 200,856 Cash flows from investing activities: Capital expenditures ( 14,238 ) ( 22,663 ) ( 8,797 ) Acquisitions, net of cash acquired ( 23,339 ) ( 74,234 ) 150,346 Capitalized software ( 28,175 ) ( 12,774 ) ( 13,829 ) Proceeds from sale of business, net 229,484 — 37,232 Other ( 7,781 ) ( 6,604 ) ( 1,000 ) Net cash provided by (used in) investing activities 155,951 ( 116,275 ) 163,952 Cash flows from financing activities: Repayment of borrowings under revolving credit facility 1,945,500 ( 1,266,000 ) ( 719,088 ) Proceeds from borrowings under revolving credit facility ( 1,986,500 ) 1,255,500 516,669 Shares repurchased and cancelled ( 223,835 ) ( 70,269 ) ( 841 ) Distributions to noncontrolling interests ( 24,964 ) ( 39,197 ) — Payment of deferred consideration ( 49,221 ) ( 63,170 ) — Purchase of noncontrolling interest — ( 3,600 ) ( 37,500 ) Proceeds from issuance of the 5.625% Notes — — 1,100,000 Debt issuance costs ( 844 ) — ( 15,053 ) Distributions — — ( 233,203 ) Repurchase of 7.50% Senior Notes — — ( 884,398 ) Net cash used in financing activities ( 339,864 ) ( 186,736 ) ( 273,414 ) Effect of exchange rate changes on cash and cash equivalents 2,054 ( 7,995 ) 158 Net increase (decrease) in cash and cash equivalents ( 100,852 ) 36,580 91,552 70 Table of Contents STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued) (amounts in thousands) Year Ended December 31, 2023 2022 2021 Cash and cash equivalents at beginning of period 220,589 184,009 92,457 Cash and cash equivalents at end of period $ 119,737 $ 220,589 $ 184,009 Supplemental Cash Flow Information: Cash income taxes paid $ 45,538 $ 41,235 $ 58,578 Cash interest paid 87,068 70,935 23,528 Non-cash investing and financing activities: Acquisitions of business 8,332 1,178 425,752 Acquisitions of noncontrolling interest 22,172 1,000 170,266 Issuance of redeemable noncontrolling interest — — 27,820 Establishment of a deferred tax asset related to the exchange — 30,556 — Establishment of Tax Receivables Agreement liability — 26,610 — Conversion of Class C to Class A shares — 47,930 — Finalization of Stagwell Inc’s tax basis in Stagwell Global, LLC — 119,470 — Non-cash contributions — — 12,372 Non-cash distributions to Stagwell Media LP — — 13,000 Non-cash payment of deferred acquisition consideration 32,820 989 7,080 Conversion of preferred shares — — 209,947 See Notes to the Audited Consolidated Financial Statements . 71 Table of Contents STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (amounts in thousands) STGMDC1201 Year Ended December 31, 2023 Common Shares - Class A & B Common Shares - Class C Paid-in Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Stagwell Inc. Shareholders' Equity Noncontrolling Interests Shareholders' Equity Shares Amount Shares Amount Balance at December 31, 2022 131,724 $ 132 160,909 $ 2 $ 491,899 $ 22,095 $ ( 15,478 ) $ 498,650 $ 430,164 $ 928,814 Net income — — — — — 134 — 134 41,508 41,642 Other comprehensive income — — — — — — 2,411 2,411 5,923 8,334 Total other comprehensive income — — — — — 134 2,411 2,545 47,431 49,976 Distributions to noncontrolling interests — — — — — — — — ( 19,164 ) ( 19,164 ) Purchases of noncontrolling interest — — — — 3,257 — — 3,257 — 3,257 Changes in redemption value of RNCI — — — — — ( 442 ) — ( 442 ) — ( 442 ) Restricted awards granted or vested 5,548 6 — — 462 — — 468 — 468 Shares repurchased and cancelled ( 35,527 ) ( 36 ) — — ( 225,469 ) — — ( 225,505 ) — ( 225,505 ) Restricted shares forfeited ( 67 ) — — — — — — — — — Stock-based compensation — — — — 49,674 — — 49,674 — 49,674 Change in ownership held by Class C holders — — — — ( 10,858 ) — — ( 10,858 ) 10,858 — Shares issued, acquisitions 7,530 8 — — 41,152 — — 41,160 — 41,160 Conversion of Class C to Class A shares 9,260 9 ( 9,260 ) — ( 9 ) — — — — — Other (1) 1 ( 1 ) — — ( 1,614 ) ( 639 ) ( 2,254 ) ( 712 ) ( 2,966 ) Balance at December 31, 2023 118,469 $ 118 151,649 $ 2 $ 348,494 $ 21,148 $ ( 13,067 ) $ 356,695 $ 468,577 $ 825,272 (1) The Other line within Paid-in Capital includes $ 1.6 million resulting from the modification of certain stock-appreciation rights from equity to cash settled that were subsequently exercised in equity. See Notes to the Audited Consolidated Financial Statements . 72 Table of Contents STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued) (amounts in thousands) Year Ended December 31, 2022 Common Shares - Class A & B Common Shares - Class C Paid-in Capital Retained Earnings Accumulated Other ComprehensiveLoss Stagwell Inc. Shareholders' Equity Noncontrolling Interests Shareholders' Equity Shares Amount Shares Amount Balance at December 31, 2021 118,252 $ 118 179,970 $ 2 $ 382,893 $ ( 6,982 ) $ ( 5,278 ) $ 370,753 $ 508,287 $ 879,040 Net income — — — — — 19,919 — 19,919 30,125 50,044 Other comprehensive loss — — — — — — ( 10,200 ) ( 10,200 ) ( 23,485 ) ( 33,685 ) Total other comprehensive income (loss) — — — — — 19,919 ( 10,200 ) 9,719 6,640 16,359 Distributions to noncontrolling interests — — — — — — — — ( 29,957 ) ( 29,957 ) Purchases of noncontrolling interests — — — — ( 1,000 ) — — ( 1,000 ) ( 3,600 ) ( 4,600 ) Acquisition of noncontrolling interest — — — — — — — — 2,667 2,667 Changes in redemption value of RNCI — — — — 8,711 — 8,711 — 8,711 Restricted awards granted or vested 3,940 4 — — ( 4 ) — — — — — Shares repurchased and cancelled ( 9,725 ) ( 10 ) — — ( 70,269 ) — — ( 70,279 ) — ( 70,279 ) Restricted shares forfeited ( 221 ) — — — — — — — — — Stock-based compensation — — — — 34,974 — — 34,974 — 34,974 Shares issued, acquisitions 175 — — — 1,178 — — 1,178 — 1,178 Conversion of Class C to Class A shares 19,061 19 ( 19,061 ) — 47,911 — — 47,930 ( 47,930 ) — Finalization of Stagwell Inc’s tax basis in Stagwell Global, LLC — — — — 119,470 — — 119,470 — 119,470 Finalization of MDC acquisition accounting and associated impact on Stagwell Inc. — — — — ( 16,294 ) — — ( 16,294 ) 2,301 ( 13,993 ) Other 242 1 — — ( 6,960 ) 447 — ( 6,512 ) ( 8,244 ) ( 14,756 ) Balance at December 31, 2022 131,724 $ 132 160,909 $ 2 $ 491,899 $ 22,095 $ ( 15,478 ) $ 498,650 $ 430,164 $ 928,814 See Notes to the Audited Consolidated Financial Statements 73 Table of Contents STAGWELL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued) (amounts in thousands) Year Ended December 31, 2021 Members' capital Convertible Preference Shares Common Shares - Class A & B Common Shares - Class C Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Stagwell Inc. Shareholders' Equity Noncontrolling Interests Shareholders' Equity Shares Amount Shares Amount Shares Amount Balance at December 31, 2020 $ 358,756 — $ — — $ — — $ — $ — $ — $ — $ 358,756 $ 39,787 $ 398,543 Net income prior to reorganization 24,742 — — — — — — — — — 24,742 14,884 39,626 Other comprehensive loss ( 375 ) — — — — — — — — — ( 375 ) — ( 375 ) Total other comprehensive income 24,367 — — — — — — — — — 24,367 14,884 39,251 Contributions 250 — — — — — — — — — 250 — 250 Distributions, net ( 204,929 ) — — — — — — — — — ( 204,929 ) — ( 204,929 ) Distributions to noncontrolling interests — — — — — — — — — — — ( 11,936 ) ( 11,936 ) Changes in redemption value of RNCI ( 72 ) — — — — — — — — — ( 72 ) — ( 72 ) Other — — — — — — — — — — — ( 300 ) ( 300 ) Effect of reorganization ( 178,372 ) 123,849 209,980 78,794 77 179,970 2 110,555 — — 142,242 636,416 778,658 Reclass NCI to liability — — — — — — — — — — ( 8,475 ) ( 8,475 ) Impact of PPA adjustment to noncontrolling interests — — — — 1 — — 8,845 — — 8,846 ( 1,549 ) 7,297 Net income (loss) attributable to Stagwell Inc. — — — — — — — — ( 3,706 ) — ( 3,706 ) 12,602 8,896 Other comprehensive loss — — — — — — — — — ( 5,278 ) ( 5,278 ) — ( 5,278 ) Distributions to noncontrolling interests — — — — — — — — — — — ( 16,338 ) ( 16,338 ) Changes in redemption value of RNCI — — — — — — — — ( 3,834 ) — ( 3,834 ) — ( 3,834 ) Restricted awards granted or vested — — — 1,962 2 — — ( 2 ) — — — — — Shares acquired and cancelled — — — ( 14 ) — — — ( 841 ) — — ( 841 ) — ( 841 ) Stock-based compensation — — — — — — — 70,427 — — 70,427 — 70,427 Reclass noncontrolling interests to RNCI — — — — — — — ( 25,236 ) — — ( 25,236 ) ( 2,719 ) ( 27,955 ) Purchases of noncontrolling interests — — — 4,476 5 — — ( 14,138 ) — — ( 14,133 ) ( 143,134 ) ( 157,267 ) Tax impact on step up transactions — — — — — — — 23,108 — — 23,108 — 23,108 Conversion of shares — ( 123,849 ) ( 209,980 ) 33,035 33 — — 209,947 — — — — — Other — — — — — — — 228 558 — 786 ( 10,951 ) ( 10,165 ) Balance at December 31, 2021 $ — — $ — 118,252 $ 118 179,970 $ 2 $ 382,893 $ ( 6,982 ) $ ( 5,278 ) $ 370,753 $ 508,287 $ 879,040 See Notes to the Audited Consolidated Financial Statements 74 STAGWELL INC. AND SUBSIDIARIES NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. Business and Basis of Presentation Stagwell Inc. (the “Company,” “we,” or “Stagwell”), incorporated under the laws of Delaware, conducts its business through its networks and its portfolio of marketing services firms (“Brands”), which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment. The accompanying Audited Consolidated Financial Statements include the accounts of Stagwell and its subsidiaries. Stagwell has prepared the Audited Consolidated Financial Statements included herein in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting financial information on this Annual Report on Form 10-K (this “Form 10-K”). The preparation of financial statements in conformity with GAAP requires us to make judgments, assumptions and estimates about current and future results of operations and cash flows that affect the amounts reported and disclosed. Actual results could differ from these estimates and assumptions. On December 21, 2020, MDC Partners Inc. (“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of Stagwell Media (the “Stagwell Subject Entities”). The Stagwell Subject Entities comprised Stagwell Marketing and its direct and indirect subsidiaries. On August 2, 2021, we completed the combination of MDC and the operating businesses and subsidiaries of Stagwell Media and a series of related transactions (such combination and transactions, the “Transactions”). The Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing treated as the accounting acquirer. The results of MDC are included within the Consolidated Statements of Operations for the period beginning on the date of the acquisition through the end of the respective period presented and the results of SMG are included for the entire period presented. See Note 4 of the Notes included herein for information in connection with the acquisition of MDC. Revision of Previously Issued Consolidated Financial Statements In connection with the preparation of the consolidated financial statements during 2023, the Company identified the following errors in the areas of income taxes, noncontrolling interests, and accumulated other comprehensive loss related to its previously filed 2022 annual consolidated financial statements. • In the first quarter of 2023, we identified an error related to foreign currency gains and losses not being allocated from Accumulated other comprehensive loss to noncontrolling interest shareholders. Noncontrolling interests and Accumulated other comprehensive loss was overstated by approximately $ 23.5 million . There was no impact to Total Shareholders’ Equity as of December 31, 2022. Also, we identified a $ 2.1 million understatement of income tax expense, and overstatement to income tax payable (Accruals and Other Liabilities) and deferred tax asset (Other Current Assets) of $ 2.4 million and $ 4.5 million , respectively, relating to an error in the calculation of valuation allowances. These errors were originally corrected within the first quarter of 2023 as management determined the errors were not material to the quarterly financial statements as of and for the three months ended March 31, 2023. • In the second quarter of 2023, we identified an error related to an understatement of income tax expense and income tax payable (Accruals and Other Liabilities) by $ 5.3 million due to incorrect applications of tax payments. The Company also identified a misclassification of $ 12.9 million as a result of improper netting of income tax receivables (Other Current Assets) and payables (Accruals and Other Liabilities). This error resulted in an incremental $ 7.3 million misclassification of income tax receivables and payables as of March 31, 2023, which was originally corrected within the second quarter of 2023 as management determined the errors were not material to the quarterly financial statements as of and for the three and six months ended June 30, 2023. • In the fourth quarter of 2023, we identified an incremental $ 10.4 million understatement of tax expense as well as balance sheet misclassification between income tax accounts included within Other Current Assets, Other Assets, Accruals and Other Liabilities, and Deferred Tax Liabilities. These errors were related to the incorrect applications of tax payments, and the incorrect calculation of deferred tax balances for items mainly associated with interest expense, intangible assets, fixed assets, state tax, basis adjustment for partnership, and the related valuation allowance. We also identified an error in our tax receivable agreement (TRA) liability calculation which resulted in a $ 2.1 million overstatement of other expenses and of Other Liabilities. 75 The Company evaluated the impact of all errors identified throughout 2023 individually and in the aggregate and concluded they are not material to its previously issued 2022 annual consolidated financial statements. As a result, the Company has revised its 2022 consolidated financial statements to reflect the effects of these adjustments, which were originally recorded out-of-period in the 2023 interim financial statements. See Note 21 of the Notes included herein for additional information. The 2022 balances presented within the 2023 Form 10-K reflect the effects of the corrections. The Company will effect the revision of the 2023 interim consolidated financial statements the next time such financial statements are presented. See Note 22 of the Notes included herein for additional information regarding the unaudited quarterly financial information. The 2022 interim consolidated financial statements previously issued through September 30, 2022 were not affected by these errors. Recent Developments 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. 2. Significant Accounting Policies The Company’s significant accounting policies are summarized as follows: Principles of Consolidation . The accompanying Audited Consolidated Financial Statements include the accounts of Stagwell Inc. and its domestic and international controlled subsidiaries that are not considered variable interest entities, and variable interest entities for which the Company is the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation. Use of Estimates . The preparation of the Audited Consolidated Financial Statements in conformity with GAAP requires management to make judgments, estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities including goodwill, intangible assets, contingent deferred acquisition consideration, redeemable noncontrolling interests, deferred tax assets, right-of-use lease assets and the amounts of revenue and expenses reported during the period. These estimates are evaluated on an ongoing basis and are based on historical experience, current conditions and various other assumptions believed to be reasonable under the circumstances. These estimates require the use of assumptions about future performance, which are uncertain at the time of estimation. As of December 31, 2023, the effects of global macroeconomic and geopolitical uncertainty on the Company’s business, results of operations and financial condition continue to evolve. As a result, many of the Company’s estimates and assumptions continue to require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, the Company’s estimates may change materially in the future. Fair Value . The Company applies the fair value measurement guidance for financial assets and liabilities that are required to be measured at fair value and for non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis, including goodwill, right-of-use lease assets and other identifiable intangible assets. See Note 18 of the Notes included herein for additional information regarding fair value measurements. Concentration of Credit Risk . Credit is granted to qualified clients in the ordinary course of business. Due to the diversified nature of the Company’s client base, the Company does not believe that it is exposed to a concentration of credit ris k. No sales to an individual client accounted for more than 4 % of revenue for the years ended December 31, 2023 and 2022. Cash and Cash Equivalents . The Company’s cash equivalents may comprise investments in overnight interest-bearing deposits, money market instruments and other short-term investments with original maturity dates of three months or less at the time of purchase. The Company has a concentration of credit risk in that there are cash deposits in excess of federally insured amounts and international cash balances that may not qualify for foreign government insurance programs. To date, the Company has not experienced any losses on cash and cash equivalents. 76 Allowance for Doubtful Accounts . Trade receivables are stated at invoiced amounts less allowances for doubtful accounts. The allowances represent expected losses using a current expected credit loss model. The Allowance for doubtful accounts is based on expected future uncollectible accounts receivable and is estimated considering forecasts of future economic conditions in addition to information about past events and current conditions. Allowance for doubtful accounts was $ 7.1 million and $ 10.4 million at December 31, 2023 and December 31, 2022, respectively. Transfer of Accounts Receivable. 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. Accordingly, the Company accounts for the transfers as sales of trade receivables by recognizing an increase to cash and a decrease to accounts receivable when the receivables are transferred, with the proceeds being included in cash flows from operating activities in the Consolidated Statements of Cash Flows. The trade receivables transferred to the third parties were $ 393.9 million, $ 176.5 million and $ 42.1 million, during 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. Expenditures Billable to Clients . Expenditures billable to clients consist principally of outside vendor costs incurred on behalf of clients when providing services that have not yet been invoiced to clients. Such amounts are invoiced to clients at various times over the course of the period. Fixed Assets . Fixed assets are stated at cost, net of accumulated depreciation. Computers and furniture and fixtures are depreciated on a straight-line basis over periods of three to ten years . Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset. Repairs and maintenance costs are expensed as incurred. Leases . The Company recognizes on the Consolidated Balance Sheets, at the time of lease commencement, a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments. All right-of-use lease assets are reviewed for impairment. See Note 10 of the Notes included herein for further information on leases. Impairment of Long-lived Assets . A long-lived asset or asset group is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such events occur, the Company compares the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of such asset or asset group. If this comparison indicates that there is an impairment, the amount of the impairment is typically calculated using discounted expected future cash flows where observable fair values are not readily determinable. The discount rate applied to these cash flows is based on the Company’s weighted average cost of capital (“WACC”), risk adjusted where appropriate, or other appropriate discount rate. Goodwill . Goodwill (the excess of the acquisition cost over the fair value of the net assets acquired) acquired as a result of a business combination is not amortized but rather tested for impairment, at the reporting unit level, annually as of October 1st of each year, or more frequently if indicators of potential impairment exist. For the annual impairment test, the Company has the option of assessing qualitative factors to determine whether it is more likely than not that the carrying amount of a reporting unit exceeds its fair value or performing a quantitative goodwill impairment test. Qualitative factors considered in the assessment include industry and market considerations, the competitive environment, overall financial performance, changing cost factors such as labor costs, and other factors specific to each reporting unit such as change in management or key personnel. If the Company elects to perform the qualitative assessment and concludes that it is more likely than not that the fair value of the reporting unit is more than its carrying amount, then goodwill is not considered impaired and the quantitative impairment test is not necessary. For reporting units for which the qualitative assessment concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company will perform the quantitative impairment test, which compares the fair value of the reporting unit to its carrying amount. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not considered impaired. However, if the fair value of the reporting unit is lower than the carrying amount of the net assets assigned to the reporting unit, an impairment charge is recognized equal to the excess of the carrying amount over the fair value. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. The Company 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 77 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 revenue growth rates, EBITDA margin, long-term growth rates, and appropriate discount rates based on a reporting unit’s WACC as determined by considering the observable WACC of comparable companies and factors specific to the reporting unit. The terminal value is estimated using a constant growth method which requires an assumption about the expected long-term growth rate. The estimates are based on historical data and experience, industry projections, economic conditions, and the Company’s expectations . Definite Lived Intangible Assets . Definite lived intangible assets are subject to amortization over their useful lives. A straight-line amortization method is used over the estimated useful life which is representative of the pattern of how the economic benefits of the specific intangible asset is consumed. Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an intangible asset to estimated undiscounted future cash flows expected to be generated from use of the asset and its eventual disposition. If the total of the undiscounted future cash flows is less than the carrying amount of those assets, a quantitative assessment is performed using an income approach, which incorporates the use of the DCF method. Business Combinations. Business combinations are accounted for using the acquisition method and accordingly, the assets acquired (including identified intangible assets), the liabilities assumed and any noncontrolling interest in the acquired business are recorded at their acquisition date fair values. For each acquisition, the Company undertakes a detailed review to identify other intangible assets and a valuation is performed for all such identified assets. The Company uses several market participant measurements to determine the estimated value. This approach includes consideration of similar and recent transactions, as well as utilizing discounted expected cash flow methodologies. A substantial portion of the intangible assets value that the Company acquires is the specialized know-how of the workforce, which is treated as part of goodwill and is not required to be valued separately. The majority of the value of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well as trademarks. Deferred Acquisition Consideration . Certain acquisitions include an initial payment at the time of closing and provide for future additional contingent purchase price payments. Contingent purchase price obligations for these transactions are recorded as deferred acquisition consideration liabilities on the balance sheet. 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, such as revenue and EBITDA growth, 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 Office and general expenses in the Consolidated Statements of Operations. Redeemable Noncontrolling Interests . Certain 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 sometimes 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 (if 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. Control to Control Subsidiary Purchases. Transactions involving the purchase, sale or issuance of interests of a subsidiary where control is maintained are recorded as a reduction in the redeemable noncontrolling interests or noncontrolling interests, as applicable. Any difference between the purchase price and noncontrolling interest is recorded to Paid-in capital in the Consolidated Balance Sheets. In circumstances where the purchase of shares of an equity investment results in obtaining 78 control, the existing carrying value of the investment is remeasured to the acquisition date fair value and any gain or loss is recognized in the Consolidated Statement of Operations. Revenue Recognition . The Company’s revenue is recognized when control of the promised services are transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. See Note 5 of the Notes included herein for additional information. Cost of Services . Cost of services sold primarily consists of staff costs that are directly attributable to the Company’s client engagements, as well as third-party direct costs of production and delivery of services to its clients. Cost of services sold does not include depreciation, amortization, and other office and general expenses that are not directly attributable to the Company’s client engagements. Deferred Financing Costs . The Company uses the straight-line method, which approximates the effective interest method, to amortize deferred financing costs. Income Taxes. The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying value of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates and laws expected to be in effect when the differences are expected to reverse. The Company records associated interest and penalties as a component of income tax expense. The Company records a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Management evaluates on a quarterly basis all available positive and negative evidence considering factors such as the reversal of deferred income tax liabilities, taxable income in eligible carryback years, projected future taxable income, the character of the income tax asset, tax planning strategies, changes in tax laws and other factors. The periodic assessment of the net carrying value of the Company’s deferred tax assets under the applicable accounting rules requires significant management judgment. A change to any of these factors could impact the estimated valuation allowance and income tax expense. Stock-Based Compensation . Compensation cost is measured at fair value at the date of grant and is expensed over the service period, generally the award’s vesting period. Certain of our awards are settled in cash (stock appreciation awards) and are recorded at fair value on the date of grant and remeasured at each reporting period. The measurement of the compensation cost for these awards is based on using the Black-Scholes option pricing model and is recorded in Operating income over the service period, in this case the award’s vesting period. The assumption for expected volatility is based on a blended rate which includes historical volatility of a peer group of market participants and historical volatility of the Company 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. Forfeitures for all awards are recognized as they occur. The Company commences recording compensation expense related to awards that are based on performance conditions under the straight-line attribution method when it is probable that such performance conditions will be met. Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”). The awards generally provide the employee the right, but not the obligation, to sell their profits interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are primarily settled in cash, with certain awards having stock-settlement provisions at the Company’s discretion. The corresponding liability associated with these profits interests awards is included as a component of Accruals and other liabilities and Other liabilities on the Consolidated Balance Sheets. See Note 15 of the Notes included herein for further details on these awards. Share Buybacks . The Company may purchase shares of Class A Common Stock under its stock repurchase program (the “Repurchase Program”) as well as repurchases outside of the Repurchase Program. The Company accounts for these repurchases by reducing the value of our Class A Common Stock for the par value of the shares repurchased and account for the difference between the price paid for the Class A Common Stock, excluding fees, and the par value of such stock to Paid-in capital. See Note 15 of the Notes included herein for further details of our share buyback plan . Retirement Costs . Several of the Company’s subsidiaries offer employees access to certain defined contribution retirement programs. Under the defined contribution plans, these subsidiaries, in some cases, make annual contributions to participants’ accounts which are subject to vesting. The Company’s contribution expense pursuant to these plans was $ 20.5 million, $ 19.0 million, and $ 10.0 million for the years ended December 31, 2023, 2022, and 2021, respectively. The Company also has a defined benefit pension plan. See Note 12 of the Notes included herein for additional information on the defined benefit plan. Earnings (Loss) per Common Share . Basic earnings (loss) per common share is based upon the weighted average number of common shares outstanding during each period. Diluted earnings (loss) per common share is based on the above, in addition, 79 if dilutive, common share equivalents, which include stock appreciation rights, and unvested restricted stock and restricted stock units as well as shares of Class C Common stock, par value $0.00001 per share (the “Class C Common Stock”). In periods of net loss, all potentially issuable common shares are excluded from diluted net loss per common share because they are anti-dilutive. Foreign Currency Translation . The functional and reporting currency of the Company is the U.S. dollar. Generally, the Company’s subsidiaries use their local currency as their functional currency. Assets and liabilities are translated at the exchange rates in effect at the balance sheet date, and revenues and expenses are translated at the average exchange rates during the period presented. The resulting translation adjustments are recorded as a component of Accumulated other comprehensive income (loss) in the Shareholders’ equity section of our Consolidated Balance Sheets. Foreign currency transaction unrealized and realized gains or losses are recognized as incurred in the Consolidated Statements of Operations in Foreign, exchange, net. Translation of intercompany transactions, which are not intended to be settled, are included in cumulative translation adjustments. 3. New Accounting Pronouncements In December 2023, the Financial Accounting Standards Board, (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures (“ASU 2023-09”), to enhance the transparency and decision usefulness of income tax disclosures by requiring disaggregated information about an entity’s effective tax rate reconciliation, as well as information on taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company is evaluating the impact of the adoption of this guidance on the Company’s financial statements and disclosures. In November 2023, the FASB issued Accounting Standards Update ASU 2023-07, Segment Reporting (Topic 280) Improvements to Segment Disclosures (“ASU 2023-07”), to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the impact of the new requirements, effective for the Company’s 2024 Financial Statements, to determine the level of disclosure of segment expenses. 4. Acquisitions 2023 Acquisitions On November 1, 2023, the Company acquired Movers and Shakers, a digital creative company, for $ 15.0 million, of which $ 10.2 million was paid in cash and 1.0 million 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 $ 35.0 million, subject to meeting certain future earnings targets and continued employment, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Movers and Shakers and expected growth related to new customer relationships. Goodwill of $ 8.2 million was assigned to the Integrated Agencies Network reportable segment. The goodwill is fully deductible for income tax purposes. The purchase price accounting is not yet final as the Company may still make adjustments due to changes in post-closing adjustments. On October 2, 2023, the Company acquired Left Field Labs (“LFL”), a digital experience design and strategy company, for $ 13.2 million, of which $ 9.4 million was paid in cash and 825 thousand shares of Class A Common Stock, subject to post-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of $ 51.0 million, subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of LFL and expected growth related to new customer relationships. Goodwill of $ 8.7 million was assigned to the Integrated Agencies Network reportable segment. The goodwill is fully deductible for income tax purposes. The purchase price accounting is not yet final as the Company may still make adjustments due to changes in post-closing adjustments. 80 On July 3, 2023, the Company acquired Tinsel Experiential Design LLC (“Tinsel”), a marketing and design company, for $ 2.5 million in cash consideration, subject to post-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration, subject to continued employment, and meeting certain future earnings targets. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Tinsel and expected growth related to new customer relationships. Goodwill of $ 1.6 million was assigned to the Integrated Agencies Network reportable segment. The goodwill is fully deductible for income tax purposes. The purchase price accounting is not yet final as the Company may still make adjustments due to changes in post-closing adjustments. On April 25, 2023, the Company acquired Huskies, Ltd. (“Huskies”), for € 5.2 million ($ 5.6 million) of cash consideration, of which € 0.9 million ($ 1.0 million) is deferred, subject to post-closing adjustments. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Huskies and expected growth related to new customer relationships and geographic expansion. Goodwill of $ 2.6 million was assigned to the Brand Performance Network reportable segment. The goodwill is non-deductible for income tax purposes. The purchase price accounting is not yet final as the Company may still make adjustments due to changes in post-closing adjustments. 2022 Acquisitions Acquisition of Brand New Galaxy On April 19, 2022, the Company acquired Brand New Galaxy (“BNG”), for $ 20.9 million of cash consideration, as well as contingent consideration up to a maximum value of $ 50.0 million. The contingent consideration is due upon meeting certain future earnings targets through 2024, with approximately 67 % payable in cash and 33 % payable in shares of Class A Common Stock. The consideration has been allocated to the assets acquired and assumed liabilities of BNG based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows: Amount (dollars in thousands) Cash and cash equivalents $ 2,766 Accounts receivable 10,147 Other current assets 671 Fixed assets 1,587 Identifiable intangible assets 12,740 Other assets 1,583 Accounts payable ( 4,771 ) Accruals and other liabilities ( 6,880 ) Advance billings ( 1,159 ) Other liabilities ( 3,642 ) Net assets assumed 13,042 Goodwill 24,643 Purchase price consideration $ 37,685 The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of BNG. Goodwill of $ 24.6 million was assigned to the Brand Performance Network reportable segment. The majority of the goodwill is non-deductible for income tax purposes. Intangible assets consist of trade names, customer relationships and developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately ten years . The following table presents the details of identifiable intangible assets acquired: 81 Fair Value Estimated Useful Life in Years (dollars in thousands) Customer relationships $ 6,150 10 Trade names 5,500 10 Developed technology 1,090 7 Total acquired intangible assets $ 12,740 Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time. Year Ended December 31, 2022 Year Ended December 31, 2021 (dollars in thousands) Revenue $ 2,698,018 $ 1,501,568 Net income $ 49,299 $ 36,864 Revenue attributable to BNG, included within the Consolidated Statements of Operations for the year ended December 31, 2023 was $ 30.1 million, and Net loss was $ 1.5 million. Revenue attributable to BNG, included within the Consolidated Statements of Operations for the year ended December 31, 2022 was $ 20.5 million, and Net income was $ 0.1 million. Acquisition of TMA Direct, Inc. On May 31, 2022, the Company acquired approximately 87 % of TMA Direct, Inc. (“TMA Direct”) for $ 17.2 million of cash consideration and $ 0.5 million of deferred acquisition payments. The Company was also granted an option to purchase the remaining 13 % minority interest in TMA Direct for up to $ 13.3 million. The consideration has been allocated to the assets acquired and assumed liabilities of TMA Direct based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows: Amount (dollars in thousands) Accounts receivable $ 582 Other current assets 669 Identifiable intangible assets 13,200 Accounts payable ( 379 ) Other liabilities ( 270 ) Noncontrolling interests ( 2,667 ) Net assets assumed 11,135 Goodwill 6,569 Purchase price consideration $ 17,704 The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of TMA Direct. Goodwill of $ 6.6 million was assigned to the Communications Network reportable segment. The majority of the goodwill is deductible for income tax purposes. Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is ten years . The following table presents the details of identifiable intangible assets acquired: 82 Fair Value Estimated Useful Life in Years (dollars in thousands) Customer relationships $ 11,400 10 Trade names 1,800 10 Total acquired intangible assets $ 13,200 Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time. Year Ended December 31, 2022 Year Ended December 31, 2021 (dollars in thousands) Revenue $ 2,691,622 $ 1,481,727 Net income $ 51,397 $ 39,386 Revenue attributable to TMA Direct, included within the Consolidated Statements of Operations for the year ended December 31, 2023 was $ 11.0 million, and Net income was $ 1.1 million. Revenue attributable to TMA Direct, included within the Consolidated Statements of Operations for the year ended December 31, 2022 was $ 7.7 million, and Net income was $ 0.9 million. Acquisition of Maru Group Limited Ltd. On October 3, 2022, the Company acquired Maru Group Limited Ltd. (“Maru”) for £ 23.0 million ($ 25.8 million) in cash consideration. The consideration has been allocated to the assets acquired and assumed liabilities of Maru based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows: Amount (dollars in thousands) Cash and cash equivalents $ 1,033 Accounts receivable 7,374 Other current assets 899 Fixed assets 157 Identifiable intangible assets 14,300 Other assets 1,920 Accounts payable ( 4,087 ) Accruals and other liabilities ( 9,154 ) Advance billings ( 6,462 ) Deferred tax liability ( 3,328 ) Other liabilities ( 2,891 ) Net assets assumed ( 239 ) Goodwill 26,033 Purchase price consideration $ 25,794 The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Maru and expected growth related to new customer relationships and geographic expansion. Goodwill of $ 26.0 million was assigned to the All Other reportable segment. The goodwill is partially deductible for income tax purposes. 83 Intangible assets consist of trade names, customer relationships, and developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately eight years . The following table presents the details of identifiable intangible assets acquired: Fair Value Estimated Useful Life in Years (dollars in thousands) Customer relationships $ 4,900 10 Trade names 4,000 10 Developed technology 5,400 2 - 7 Total acquired intangible assets $ 14,300 Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time. Year Ended December 31, 2022 2021 (dollars in thousands) Revenue $ 2,717,667 $ 1,512,791 Net income $ 36,043 $ 15,167 Revenue attributable to Maru, included within the Consolidated Statements of Operations for the year ended December 31, 2023 was $ 32.1 million and Net loss was $ 10.8 million. Revenue attributable to Maru, included within the Consolidated Statements of Operations for the year ended December 31, 2022 was $ 8.8 million, and Net loss was $ 2.1 million. Acquisition of Wolfgang, LLC. On October 3, 2022, the Company acquired the remaining 80 % interest that it did not already own in Wolfgang, LLC (“Wolfgang”) for $ 3.8 million in cash consideration and 175 thousand shares of Class A Common Stock with a fair value of $ 1.2 million. The consideration has been allocated to the assets acquired and assumed liabilities of Wolfgang based upon fair values, with any excess purchase price allocated to goodwill. The purchase price allocation is as follows: Amount (dollars in thousands) Cash and cash equivalents $ 1,606 Accounts receivable 1,180 Other current assets 100 Identifiable intangible assets 1,055 Other assets 46 Current liabilities ( 278 ) Net assets assumed 3,709 Goodwill 2,451 Purchase price consideration including fair value of previously owned interest $ 6,160 84 The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Wolfgang. Goodwill of $ 2.5 million was assigned to the Integrated Agencies Network reportable segment. The majority of the goodwill is deductible for income tax purposes. Intangible assets consist of customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately five years . Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time. Year Ended December 31, 2022 2021 (dollars in thousands) Revenue $ 2,696,733 $ 1,474,303 Net income $ 51,398 $ 36,538 Revenue attributable to Wolfgang, included within the Consolidated Statements of Operations for the year ended December 31, 2023 was $ 5.7 million, and Net income was $ 0.7 million. Revenue attributable to Wolfgang, included within the Consolidated Statements of Operations for the year ended December 31, 2022 was $ 2.1 million, and Net loss was $ 0.3 million. Acquisition of Epicenter Experience LLC. On October 3, 2022, the Company acquired the assets of Epicenter Experience LLC (“Epicenter”) for $ 9.9 million in cash consideration, as well as contingent consideration up to a maximum value of $ 5.0 million. The contingent consideration is subject to meeting certain future earnings targets through 2024 and can be paid up to 25% in shares of Class A Common Stock. The consideration has been allocated to the assets acquired and assumed liabilities of Epicenter based upon fair values. The purchase price allocation is as follows: Amount (dollars in thousands) Accounts receivable $ 901 Other current assets 45 Identifiable intangible assets 7,300 Accounts payable ( 148 ) Other current liabilities ( 650 ) Net assets assumed 7,448 Goodwill 4,416 Purchase price consideration $ 11,864 The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Epicenter. Goodwill of $ 4.4 million was assigned to the All Other reportable segment. The majority of the goodwill is deductible for income tax purposes. The intangible asset acquired was developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately five years . 85 Pro Forma Financial Information The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time. Year Ended December 31, 2022 2021 (dollars in thousands) Revenue $ 2,690,969 $ 1,473,183 Net income $ 49,652 $ 35,810 Revenue attributable to Epicenter, included within the Consolidated Statements of Operations for the year ended December 31, 2023 was $ 4.3 million, and Net loss was $ 0.7 million. Revenue attributable to Epicenter, included within the Consolidated Statements of Operations for the year ended December 31, 2022 was $ 1.0 million, and Net loss was $ 1.2 million. 2021 Acquisitions Acquisition of MDC On December 21, 2020, MDC and Stagwell Media announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of the Stagwell Subject Entities. The Stagwell Subject Entities comprised Stagwell Marketing and its direct and indirect subsidiaries. On August 2, 2021 (the “Closing Date”), we completed the combination of MDC and the Stagwell Subject Entities and a series of steps and related transactions (such combination and transactions, the “Transactions”). In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of the Company, converted into a Delaware limited liability company and changed its name to Midas OpCo Holdings LLC (“OpCo”), (which name was subsequently to Stagwell Global LLC); (ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo; and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc. In respect of the Transactions, the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in the FASB’s Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). The Transactions were accounted for as a reverse acquisition using the acquisition method of accounting, pursuant to ASC Topic 805-10, Business Combinations, with MDC treated as the legal acquirer and SMG treated as the accounting acquirer. In identifying SMG as the acquiring entity for accounting purposes, MDC and SMG took into account a number of factors, including the relative voting rights and the corporate governance structure of the Company. SMG is considered the accounting acquirer since Stagwell Media controls the board of directors of the Company following the Transactions and received an indirect ownership interest in the Company’s only operating subsidiary, OpCo, of 69.55 % ownership of OpCo’s common units. However, no single factor was the sole determinant in the overall conclusion that Stagwell is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion. Under the acquisition method of accounting, the assets and liabilities of MDC, as the accounting acquiree, were recorded at their respective fair value as of the date the Transactions were completed. On August 2, 2021, an aggregate of 180.0 million shares of the Company’s Class C Common Stock were issued to Stagwell Media in exchange for $ 1.80 . The Class C Common Stock does not participate in the earnings of the Company. Additionally, an aggregate of 180.0 million OpCo common units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities (the “Stagwell OpCo Contribution”). The fair value of the purchase consideration was $ 429.1 million, consisting of 80.0 million shares of the Company’s Class A Common Stock, Class B common stock, par value $ 0.001 per share (the “Class B Common Stock”), and common stock equivalents based on a per share price of $ 5.42 , the closing stock price on the date of the combination. ASC 805 requires the allocation of the purchase price consideration to the fair value of the identified assets acquired and liabilities assumed upon consummation of a business combination. For this purpose, fair value shall be determined in accordance with the fair value concepts defined in ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”). Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements can be highly subjective and can involve a high degree of estimation. The purchase price valuation was completed during the third quarter of 2022. 86 The purchase price allocation is as follows: Amount (dollars in thousands) Cash and cash equivalents $ 130,197 Accounts receivable 398,736 Other current assets 41,291 Fixed assets 81,343 Right-of-use lease assets - operating leases 252,739 Identifiable intangible assets 810,900 Other assets 18,282 Accounts payable ( 139,590 ) Accruals and other liabilities ( 307,439 ) Advance billings ( 211,212 ) Current portion of lease liabilities ( 54,009 ) Current portion of deferred acquisition consideration ( 53,054 ) Long-term debt ( 901,736 ) Revolving credit facility ( 109,954 ) Long-term portion of deferred acquisition consideration ( 8,056 ) Long-term portion of lease liabilities ( 283,637 ) Other liabilities ( 139,026 ) Redeemable noncontrolling interests ( 25,990 ) Preferred shares ( 209,980 ) Noncontrolling interests ( 151,090 ) Net liabilities assumed ( 861,285 ) Goodwill 1,290,347 Purchase price consideration $ 429,062 The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of MDC. Goodwill of $ 932.6 million, $ 285.4 million and $ 72.4 million was assigned to the Integrated Agencies Network, the Brand Performance Network and the Communications Network reportable segments, respectively. The majority of the goodwill is non-deductible for income tax purposes. Goodwill has been updated from the previously reported amount of $ 1,299.4 million as of December 31, 2021 to reflect a change in certain assets and liabilities. There has been no change that impacts the Consolidated Statement of Operations. Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately thirteen years . The following table presents the details of identifiable intangible assets acquired: Fair Value Estimated Useful Life in Years (dollars in thousands) Trade Names $ 98,000 10 Customer Relationships 712,900 6 - 15 Total Acquired Intangible Assets $ 810,900 87 Pro Forma Financial Information (unaudited) The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2020. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time. Years Ended December 31, 2021 2020 (dollars in thousands) Revenue $ 2,224,343 $ 2,087,025 The pro forma net loss was nominal for the years ended December 31, 2021 and 2020. Revenue attributable to MDC, included within the year ended December 31, 2021 Consolidated Statements of Operations was $ 605.4 million. The net loss included within the year ended December 31, 2021 Consolidated Statements of Operations was nominal. Transaction expenses were $ 15.0 million for the twelve months ended December 31, 2021. Acquisition of GoodStuff Holdings Limited On December 31, 2021, the Company acquired GoodStuff Holdings Limited (“Goodstuff”) for £ 21.0 million ($ 28.2 million) of cash consideration as well as contingent consideration up to a maximum of £ 22.0 million. The cash consideration included an initial payment of £ 8.0 million, an excess working capital payment of £ 9.0 million and £ 4.0 million of deferred payments. The contingent consideration is tied to employees’ service and will be recognized as deferred acquisition consideration expense through 2026. Therefore, only the cash consideration has been allocated to the $ 23.8 million of assets acquired and assumed liabilities of Goodstuff based upon their fair values, with any excess purchase price allocated to goodwill. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of Goodstuff. Goodwill of $ 4.4 million was assigned to the Brand Performance Network reportable segment. The majority of the goodwill is non-deductible for income tax purposes. Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately ten years. Trade names had a fair value of $ 1.3 million with an estimated useful life of fifteen years , and customer relationships had a fair value of $ 13.6 million with an estimated useful life of ten years . Pro Forma Financial Information (unaudited) The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2020. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time. For the years ended December 31, 2021 and 2020, pro forma revenue was $ 1,488.5 million and $ 902.6 million, respectively, and net income was $ 38.7 million and $ 72.7 million, respectively. Other Acquisitions On July 12, 2022, the Company acquired PEP Group Holdings B.V., an omnichannel content creation and adaption production company for $ 0.5 million in cash consideration, as well as contingent consideration up to a maximum value of € 2.6 million. The contingent consideration is subject to meeting certain future earnings targets through 2025. On July 15, 2022, the Company acquired Apollo Program II Inc., a real-time artificial intelligence-powered software-as-a-service platform, for $ 2.3 million in cash consideration, as well as guaranteed deferred payments of $ 1.0 million and $ 1.5 million on or prior to July 1, 2023 and July 1, 2024, respectively. Dispositions On October 31, 2023, the Company sold ConcentricLife, which was included in Integrated Agencies Network, to a strategic buyer for $ 245.0 million in cash resulting in a pre-tax gain of $ 94.5 million. The gain was recognized within Gain on sale of business within the Consolidated Statements of Operations. The divestiture did not represent a strategic shift that would have a major effect on the Company’s consolidated results of operations, and therefore its results of operations were not reported as discontinued operations. 88 On September 15, 2021, the Company sold Reputation Defender, which was included in All Other Network, to a strategic buyer for $ 40.0 million resulting in a gain of $ 43.0 million. The gain was recognized within Gain on sale of business within the Consolidated Statements of Operations. The divestiture did not represent a strategic shift that would have a major effect on the Company’s consolidated results of operations, and therefore its results of operations were not reported as discontinued operations. 2022 Purchases of Noncontrolling Interests On April 1, 2022, the Company acquired the remaining interest in Hello Design, LLC (“Hello Design”) that it did not already own for an aggregate purchase price of $ 4.6 million, comprised of a closing cash payment of $ 3.6 million and a contingent deferred acquisition payment of $ 1.0 million. The contingent deferred payment of $ 1.0 million was paid in the second quarter of 2023. 2021 Purchases of Noncontrolling Interests On October 1, 2021, the Company entered into an agreement to purchase the approximate 27 % remaining interest of Targeted Victory it did not already own, stipulating the purchase of 13.3 % on October 1, 2021 and the remaining 13.3 % on July 31, 2023. The purchase price of $ 73.9 million was comprised of a contingent deferred acquisition payment and redeemable noncontrolling interest with estimated present values at the acquisition date of $ 46.6 million and $ 27.3 million, respectively. The contingent deferred payment and redeemable noncontrolling interest were based on the financial results of the underlying business through July 2023 and July 2025, respectively. In addition, at the option of the Company, up to 50 % of the total purchase price can be paid in shares of Class A Common Stock and in no event may the purchase price exceed $ 135.0 million. On December 1, 2021, the Company acquired the approximate 27 % remaining interest of ConcentricLife it did not already own for an aggregate purchase price of $ 8.1 million, comprised of a closing cash payment of $ 1.6 million and contingent deferred acquisition payments with an estimated present value at the acquisition date of $ 6.5 million. The contingent deferred payments were based on the financial results of the underlying business. On December 31, 2021, the Company acquired the approximate 49 % remaining interest of Instrument it did not already own for an aggregate purchase price of $ 157.1 million, comprised of a closing payment of $ 37.5 million in cash and $ 37.5 million in shares of Class A Common Stock and deferred acquisition payments with an estimated present value at the acquisition date of $ 82.1 million, with approximately 40 % to be paid in shares of Class A Common Stock. The deferred payments are not contingent. 5. Revenue The Company’s revenue recognition policies are established in accordance with ASC 606, and accordingly, revenue is recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The Stagwell network provides an extensive range of services to our clients, offering a variety of marketing and communication capabilities including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast), public relations services including strategy, editorial, crisis support or issues management, online fundraising, media training, influencer engagement and events management, and subscription-based software-as-a-service and data-as-a service models. We also provide media-based solutions to drive brand performance, including buying and planning across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast), experiential marketing and application/website design and development. The primary source of the Company’s revenue is from Brand arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses, depending on the terms of the client contract. In all circumstances, revenue is only recognized when collection is reasonably assured. Certain of the Company’s contractual arrangements have more than one performance obligation. For such arrangements, revenue is allocated to each performance obligation based on its relative stand-alone selling price. Stand-alone selling prices are determined based on the prices charged to clients on a stand-alone basis or using expected cost plus margin. The determination of our performance obligations is specific to the services included within each contract. Based on a client’s requirements within the contract, and how these services are provided, multiple services could represent separate performance obligations or be combined and considered one performance obligation. Contracts that contain services that can be provided on a stand-alone basis, that are not significantly integrated or interdependent, and that do not significantly modify or customize each other, are typically considered separate performance obligations. Typically, these services are creative (or strategy), production, experiential marketing and media planning and media buying arrangements. 89 Certain of the Company’s contracts consist of a single performance obligation. In these instances, the Company does not consider the underlying activities as separate or distinct performance obligations because its services are highly interrelated, and the integration of the various components is essential to the overall promise to the Company’s customer. Typically, these services are public relations, and application/website design and development. In other instances, the Company is engaged to provide marketing services, such online fundraising and brand performance media solutions, that include a variety of distinct activities performed throughout the contract term that are substantially the same and that are satisfied over time, and therefore the Company considers these to be one performance obligation. We typically satisfy our performance obligations over time, as services are performed. Fees for services are typically recognized using input methods (direct labor hours, materials and third-party costs) that correspond with efforts incurred to date in relation to total estimated efforts to complete the contract. To a lesser extent, revenue is recognized using output measures, such as impressions or ongoing reporting. For client contracts when the Company has a stand-ready obligation to perform services, the Company recognizes revenue ratably using a time-based measure. In addition, for client contracts where the Company is providing online subscription-based hosted services, it recognizes revenue ratably over the contract term. Point in time recognition primarily relates to certain commission-based contracts, which are recognized upon the placement of advertisements in various media when the Company has no further performance obligation. Revenue is recognized net of sales and other taxes due to be collected and remitted to governmental authorities. The Company’s contracts typically provide for termination by either party within 30 to 90 days. Although payment terms vary by client, they are typically within 30 to 60 days. In addition, the Company generally has the right to payment for all services provided through the end of the contract or termination date. Within each contract, we identify whether the Company is principal or agent at the service level. In arrangements where the Company has substantive control over the service before transferring it to the client, and is primarily responsible for integrating the services into the final deliverables, we act as principal. In these arrangements, revenue is recorded at the gross amount billed. Accordingly, for these contracts the Company has included reimbursed expenses in revenue. In other arrangements where a third-party supplier, rather than the Company, is primarily responsible for the integration of services into the final deliverables, and thus the Company is solely arranging for the third-party supplier to provide these services to our client, we generally act as agent and record revenue equal to the net amount retained, when the fee or commission is earned. The role of Stagwell’s Brands under a typical production services agreement is to facilitate a client’s purchasing of production capabilities from a third-party production company in accordance with the client’s strategy and guidelines. The obligation of Stagwell’s Brands under typical media buying services is to negotiate and purchase advertising media from a third-party media vendor on behalf of a client to execute its media plan. Typically, we do not obtain control prior to transferring these services to our clients; therefore, we primarily act as agent for production and media buying services. In situations where we are primarily responsible for fulfillment or have discretion in pricing, we have concluded that we have obtained control and act as principal. A small portion of the Company’s contractual arrangements with clients include performance incentive provisions, which allow the Company to earn additional revenues as a result of its performance relative to both quantitative and qualitative goals. Incentive compensation is primarily estimated using the most likely amount method and is included in revenue up to the amount that is not expected to result in a reversal of a significant amount of cumulative revenue recognized. We recognize revenue related to performance incentives as we satisfy the performance obligation to which the performance incentives are related. Disaggregated Revenue Data The Company provides a broad range of services to a large base of clients across the full spectrum of verticals globally. The primary source of revenue is from Brand arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses. Certain clients may engage with the Company in various geographic locations, across multiple disciplines, and through multiple Brands. Representation of a client rarely means that Stagwell handles marketing communications for all Brands or product lines of the client in every geographical location. The Company’s Brands often cooperate with one another through referrals and the sharing of both services and expertise, which enables Stagwell to service clients’ varied marketing needs by crafting custom integrated solutions. 90 The following table presents revenue disaggregated by our principal capabilities for the years ended December 31, 2023, 2022, and 2021. We reclassified certain brands into the Stagwell Marketing Cloud Group (software-as-a-service and data-as-a-service tools for the in-house marketers) principal capability in the third quarter of 2023. All prior periods presented have been revised to reflect these changes. Year Ended December 31, Principal Capabilities Reportable Segment 2023 2022 2021 (dollars in thousands) Digital Transformation All segments $ 636,624 $ 773,677 $ 373,657 Creativity and Communications All segments 1,160,178 1,222,289 591,062 Performance Media and Data Brand Performance Network 295,247 279,903 193,476 Consumer Insights and Strategy Integrated Agencies Network 199,260 212,869 162,733 Stagwell Marketing Cloud Group All segments 235,868 199,054 148,435 $ 2,527,177 $ 2,687,792 $ 1,469,363 Stagwell’s Brands are located in the United States and United Kingdom, and more than 28 other countries around the world. The Company continues to expand its global footprint to support clients in international markets. Historically, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which included discretionary components that are easier to reduce in the short term than other operating expenses. The following table presents revenue disaggregated by geography for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, Geographical Location Reportable Segment 2023 2022 2021 (dollars in thousands) United States All $ 2,048,229 $ 2,218,681 $ 1,219,816 United Kingdom All 162,318 181,764 105,961 Other All 316,630 287,347 143,586 $ 2,527,177 $ 2,687,792 $ 1,469,363 Contract Assets and Liabilities Contract assets consist of fees and reimbursable outside vendor costs incurred on behalf of clients when providing advertising, marketing and corporate communications services that have not yet been invoiced to clients. Such amounts are invoiced to clients at various times over the course of providing services. Unbilled service fees were $ 141.9 million and $ 116.4 million at December 31, 2023 and December 31, 2022, respectively, and are included as a component of Accounts receivable, net on the Consolidated Balance Sheets. Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $ 114.1 million and $ 93.1 million at December 31, 2023 and December 31, 2022, respectively, and are included on the Consolidated Balance Sheets as Expenditures billable to clients. Contract liabilities represent advanced billings to customers for fees and reimbursements of third-party costs, whether we act as principal or agent. Such fees and reimbursements of third-party costs are classified as Advance billings on the Company’s Consolidated Balance Sheets. In arrangements in which we are acting as an agent, the recognition related to the contract liability is presented on a net basis within the Consolidated Statements of Operations. Advance billings at December 31, 2023 and December 31, 2022 were $ 301.7 million and $ 337.0 million, respectively. The decrease in Advance billings of $ 35.4 million for the year ended December 31, 2023 was primarily driven by $ 320.0 million of revenue recognized that was included in the Advance billings balances as of December 31, 2022, the incurrence of third-party costs, offset by cash payments received or due in advance of satisfying our performance obligations. Changes in the contract asset and liability balances during the year ended December 31, 2023 were not materially impacted by write offs, impairment losses or any other factors. 91 Unsatisfied Performance Obligations The majority of our contracts are for periods of one year or less. For those contracts with a term of more than one year, we had $ 97.7 million of unsatisfied performance obligations as of December 31, 2023 of which we expect to recognize approximately 86 % in 2024, 11 % in 2025 and 3 % in 2026. 92 6. Earnings (Loss) Per Share The following tables set forth the computations of basic and diluted income per common share for the year ended December 31, 2023 (amounts in thousands, except per share amounts): Year Ended December 31, 2023 Earnings Per Share - Basic Numerator: Net income $ 41,642 Net income attributable to Class C shareholders ( 39,066 ) Net income attributable to other equity interest holders ( 2,442 ) Net income attributable to noncontrolling and redeemable noncontrolling interests ( 41,508 ) Net income attributable to Stagwell Inc. common shareholders $ 134 Denominator: Weighted average number of common shares outstanding 117,259 Earnings Per Share - Basic $ 0.00 Earnings Per Share - Diluted Numerator: Net income attributable to Stagwell Inc. common shareholders $ 134 Denominator: Basic - Weighted Average number of common shares outstanding 117,259 Dilutive shares: Stock appreciation right awards 421 Restricted share and restricted unit awards 4,485 Employee Stock Purchase Plan shares 5 Dilutive - Weighted average number of common shares outstanding 122,170 Earnings Per Share - Diluted $ 0.00 Anti-dilutive: Class C Shares 154,972 Class A Shares to settle deferred acquisition obligations 5,127 93 The following table sets forth the computations of basic and diluted earnings per common share for the year ended December 31, 2022: Year Ended December 31, 2022 Earnings Per Share - Basic (amounts in thousands, except per share amounts) Numerator: Net income $ 50,044 Net income attributable to Class C shareholders ( 16,004 ) Net income attributable to other equity interest holders ( 14,121 ) Net income attributable to noncontrolling and redeemable noncontrolling interests ( 30,125 ) Net income attributable to Stagwell Inc. common shareholders $ 19,919 Denominator: Weighted Average number of common shares outstanding 124,262 Earnings Per Share - Basic $ 0.16 Earnings Per Share - Diluted Numerator: Net income attributable to Stagwell Inc. common shareholders $ 19,919 Net income attributable to Class C shareholders 16,004 $ 35,923 Denominator: Basic - Weighted Average number of common shares outstanding 124,262 Dilutive shares: Stock appreciation right awards 1,896 Restricted share and restricted unit awards 4,467 Class C Shares 165,971 Dilutive - Weighted average number of common shares outstanding 296,596 Earnings Per Share - Diluted $ 0.12 Restricted stock awards of 2.9 million and 2.3 million as of December 31, 2023 and 2022, respectively, were excluded from the computation of diluted earnings (loss) per common share because the performance contingencies necessary for vesting were not met as of the reporting date. 94 The following table sets forth the computations of basic and diluted earnings per common share for the year ended December 31, 2021: Year Ended December 31, 2021 Numerator: Net loss attributable to Stagwell Inc. common shareholders $ ( 3,706 ) Denominator: Weighted average number of common shares outstanding 90,426 Loss Per Share - Basic & Diluted $ ( 0.04 ) Anti-dilutive: Class C shares 179,970 Stock Appreciation Rights and Restricted Awards 9,509 On September 23, 2021, the Company provided notices of conversion to each holder of record of each share of the Company’s Series 6 and Series 8 Preferred Stock. Pursuant to the notices, the 50,000 issued and outstanding shares of Series 6 Preferred Stock were converted into 12,087 shares of Class A Common Stock, in the aggregate, on October 7, 2021, and the 73,849 issued and outstanding shares of Series 8 Preferred Stock were converted into 20,949 shares of Class A Common Stock, in the aggregate, on November 8, 2021. SMG’s equity structure, prior to the combination with MDC, was a non-unitized single member limited liability company, resulting in all components of equity attributable to the member being reported within Members’ Capital. Given that SMG was a non-unitized single member limited liability company, net income (loss) prior to the combination is not applicable for purposes of calculating earnings per share. Therefore, the net income (loss) in the table above includes the income or loss for the period beginning on the acquisition date through the end of the respective reporting period and as such will not reconcile to the respective amounts presented within the Consolidated Statements of Operations. 95 7. Fixed Assets The following is a summary of the Company’s fixed assets as of December 31,: 2023 2022 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value Computers, furniture and fixtures $ 60,131 $ ( 36,535 ) $ 23,596 $ 56,788 $ ( 27,689 ) $ 29,099 Leasehold improvements 99,127 ( 44,898 ) 54,229 101,535 ( 31,756 ) 69,779 $ 159,258 $ ( 81,433 ) $ 77,825 $ 158,323 $ ( 59,445 ) $ 98,878 Depreciation expense for the years ended December 31, 2023, 2022, and 2021 were $ 29.0 million, $ 26.5 million and $ 15.4 million, respectively. 8. Goodwill and Intangible Assets As of December 31, goodwill was as follows: Integrated Agencies Network Brand Performance Network Communications Network All Other Total Balance at December 31, 2020 $ 95,164 $ 180,639 $ 49,533 $ 26,389 $ 351,725 Acquired goodwill 1,058,411 178,994 66,244 — 1,303,649 Disposition — — — ( 935 ) ( 935 ) Foreign currency translation ( 502 ) ( 1,020 ) — ( 194 ) ( 1,716 ) Balance at December 31, 2021 $ 1,153,073 $ 358,613 $ 115,777 $ 25,260 $ 1,652,723 Acquired goodwill 3,330 26,176 6,569 29,387 65,462 Impairment ( 49,840 ) ( 49,314 ) — ( 17,560 ) ( 116,714 ) Transfer of goodwill between segments (1) ( 111,065 ) 111,065 — — — Foreign currency translation ( 11,422 ) ( 13,467 ) ( 753 ) — ( 25,642 ) Other (2) ( 15,682 ) 685 6,124 — ( 8,873 ) Balance at December 31, 2022 $ 968,394 $ 433,758 $ 127,717 $ 37,087 $ 1,566,956 Acquired goodwill 18,451 2,626 — — 21,077 Disposition - ConcentricLife ( 98,779 ) — — — ( 98,779 ) Transfer of goodwill between segments (1) ( 8,517 ) — 8,517 — — Foreign currency translation 1,846 5,056 353 271 7,526 Other (2) — 220 — 1,815 2,035 Balance at December 31, 2023 $ 881,395 $ 441,660 $ 136,587 $ 39,173 $ 1,498,815 (1) Transfer of goodwill resulting from changes to the Company’s reportable segments (Networks) due to changes in the Company’s internal management and reporting structure. See Note 20 of the Notes included herein for additional information related to these changes. (2) Represents adjustments associated with the finalization of purchase price accounting for acquisitions. There was $ 116.7 million of accumulated goodwill impairment charges as of December 31, 2022 and December 31, 2023. 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. The goodwill impairment was to write-down the carrying value in excess of the fair value at eight reporting units, two in the Integrated Agencies Network, five in the Brand Performance Network and one within the All Other category. The charge was recorded within Impairment and other losses on the Consolidated Statements of Operations. 96 The gross and net amounts of intangible assets other than goodwill as of December 31, are as follows: Intangible Assets 2023 2022 Customer relationships, gross $ 870,987 $ 875,160 Accumulated amortization ( 218,808 ) ( 150,655 ) Customer relationships, net $ 652,179 $ 724,505 Trade names, gross $ 188,820 $ 197,037 Accumulated amortization ( 74,141 ) ( 53,150 ) Trade names, net $ 114,679 $ 143,887 Capitalized software, gross $ 70,622 $ 42,234 Accumulated amortization ( 30,928 ) ( 18,591 ) Capitalized software, net $ 39,694 $ 23,643 Developed technology and other, gross $ 21,583 $ 21,331 Accumulated amortization ( 9,915 ) ( 5,837 ) Developed technology and other, net $ 11,668 $ 15,494 Total intangible assets, gross $ 1,152,012 $ 1,135,762 Accumulated amortization ( 333,792 ) ( 228,233 ) Total intangible assets, net $ 818,220 $ 907,529 T he Company recognized an impairment and other losses charge of $ 16.2 million for the year ended December 31, 2021, primarily related to intangible assets. The impairment was to reduce the carrying values of intangible assets within one reporting unit in the Integrated Agencies Network and two in the Media Network reportable segments in connection with the abandonment of certain trade names as part of the rebranding of certain Brands. The charge was recorded within Impairment and other losses on the Consolidated Statements of Operations. The weighted average amortization period for customer relationships is thirteen years , trade names is twelve years , capitalized software is three years , and developed technology and other intangible assets is six years . In total, the weighted average amortization period is twelve years . Amortization expense related to amortizable intangible assets for the years ended December 31, 2023, 2022, and 2021 was $ 112.2 million, $ 103.1 million, and $ 61.1 million, respectively. The estimated amortization expense for the five succeeding years is as follows: Year Amortization 2024 $ 106,514 2025 99,091 2026 89,824 2027 79,256 2028 71,734 Thereafter 371,801 9. Deferred Acquisition Consideration Deferred acquisition consideration on the Consolidated Balance Sheets consists of deferred obligations related to contingent and fixed purchase price payments, and contingent and fixed retention payments tied to continued employment of specific personnel. Arrangements that are not contingent upon future employment are initially measured at the acquisition date fair value and are remeasured at each reporting period within Office and general expenses on the Consolidated Statements of 97 Operations. Arrangements that are contingent upon future employment are expensed as earned over the respective vesting (employment) period within Office and general expenses on the Consolidated Statements of Operations. The following table presents changes in deferred acquisition consideration and a reconciliation to the amounts reported on the Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 (dollars in thousands) Beginning balance $ 161,323 $ 222,369 Payments (1) ( 97,447 ) ( 74,963 ) Adjustments to deferred acquisition consideration (2) 14,303 ( 12,779 ) Additions (3) 22,172 26,594 Currency translation adjustment 680 ( 758 ) Other 27 860 Ending balance (4) $ 101,058 $ 161,323 (1) Includes deferred acquisition consideration payments settled in shares of Class A Common Stock of $ 32.8 million and $ 1.0 million, respectively, for the period ended December 31, 2023 and December 31, 2022. (2) Adjustments to deferred acquisition consideration contains fair value changes from the Company’s initial estimates of deferred acquisition payments and accretion of expense as awards are earned over the vesting period. (3) In 2021, the Company entered into an agreement to purchase the remaining 26.7 % interest in Targeted Victory it did not previously own. The agreement provided for the purchase of 50 % of the interest on October 1, 2021 (paid in October 2023) and 50 % on July 31, 2023 (payable in October 2025 with a seller’s right to defer until October 2027). In connection with the purchase, the estimated amount payable in October 2025, was reclassified from redeemable noncontrolling interest to deferred acquisition consideration. (4) The contingent and fixed deferred acquisition consideration obligation was $ 57.5 million and $ 43.6 million, respectively, as of December 31, 2023 and $ 69.9 million and $ 91.4 million, respectively, as of December 31, 2022. The deferred acquisition consideration as of December 31, 2023 and December 31, 2022, includes $ 29.3 million and $ 51.6 million, respectively, expected to be settled in shares of Class A Common Stock. 10. Leases The Company leases office space in North America, Europe, Asia, South America, Africa, and Australia. This space is primarily used for office and administrative purposes by the Company’s employees in performing professional services. These leases are classified as operating leases and expire between years 2024 through 2034. The Company’s finance leases are immaterial. The Company’s leasing policies are established in accordance with FASB’s Accounting Standards Codification 842 (“ASC 842”), and accordingly, the Company recognizes on the balance sheet at the time of lease commencement a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments. Right-of-use lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. All right-of-use lease assets are reviewed for impairment. As the Company’s implicit rate in its leases is not readily determinable, in determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the commencement date. Lease payments included in the measurement of the lease liability are comprised of non-cancellable lease payments, payments based upon an index or rate, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early. Lease costs are recognized in the Consolidated Statements of Operations over the lease term on a straight-line basis. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset. Some of the Company’s leases contain variable lease payments, including payments based upon an index or rate. Variable lease payments based upon an index or rate are initially measured using the index or rate in effect at the lease commencement date and are included within the lease liabilities. Lease liabilities are not remeasured as a result of changes in the index or rate, rather changes in these types of payments are recognized in the period in which the obligation for those payments is incurred. In 98 addition, some of our leases contain variable payments for utilities, insurance, real estate tax, repairs and maintenance, and other variable operating expenses. Such amounts are not included in the measurement of the lease liability and are recognized in the period when the facts and circumstances which the variable lease payments are based upon occur. Some of the Company’s leases include options to extend or renew the leases through 2044. The renewal and extension options are not included in the lease term as the Company is not reasonably certain that it will exercise its option. From time to time, the Company enters into sublease arrangements with unrelated third parties. These leases are classified as operating leases and expire between years 2024 through 2032. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company subleases office space in North America and Europe. As of December 31, 2023, the Company entered into three operating leases for which the commencement date has not yet occurred primarily because of the premises being prepared for occupancy by the landlord. Accordingly, these three leases represent an obligation of the Company that is not reflected within the Consolidated Balance Sheets as of December 31, 2023. The aggregate future liability related to these leases is $ 5.9 million. The discount rate used for leases accounted for under ASC 842 is the Company’s collateralized credit adjusted borrowing rate. The following table presents lease costs and other quantitative information for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 2022 2021 Lease Cost: (dollars in thousands) Operating lease cost $ 76,750 $ 75,190 $ 46,019 Variable lease cost 20,924 18,575 10,685 Sublease rental income ( 9,659 ) ( 14,446 ) ( 7,367 ) Total lease cost $ 88,015 $ 79,319 $ 49,337 Additional information: Cash paid for amounts included in the measurement of lease liabilities for operating leases Operating cash flows $ 88,955 $ 91,300 $ 53,360 Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments (1) $ 37,259 $ 27,761 $ 373,179 (1) Includes Right-of-use lease assets obtained in exchange for operating lease liabilities related to acquisitions. As of December 31, 2023, the weighted average remaining lease term (in years) and weighted average discount rate were 6.41 years and 5.5 %, respectively. Operating lease expense is included in Office and general expenses in the Consolidated Statements of Operations. The Company’s lease expense for leases with a term of 12 months or less is immaterial. In the year ended December 31, 2023, as a result of subleasing or ceasing use of office spaces, the Company recognized 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 agencies within the Integrated Agencies Network and the Brand Performance Network. In the year ended December 31, 2022, 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. The right-of-use lease assets and related leasehold improvements related to agencies within the Integrated Agencies Network and the Brand Performance Network. The Company evaluated the facts and circumstances related to the use of the assets which indicated that they may not be recoverable. Using estimated and actual sublease income to develop expected future cash flows, it was determined that the fair 99 value of the assets were less than their carrying value. The aforementioned impairment charges are included in Impairment and other losses within the Consolidated Statements of Operations. The following table presents minimum future rental payments under the Company’s leases as of December 31, 2023 and their reconciliation to the corresponding lease liabilities: Maturity Analysis (dollars in thousands) 2024 $ 78,733 2025 68,302 2026 57,312 2027 52,130 2028 48,884 Thereafter 112,102 Total 417,463 Less: Present value discount ( 70,257 ) Lease liability $ 347,206 11. Debt As of December 31, 2023 and December 31, 2022, the Company’s indebtedness was comprised as follows: December 31, 2023 December 31, 2022 (dollars in thousands) Credit Agreement $ 59,000 $ 100,000 5.625 % Notes 1,100,000 1,100,000 Debt issuance costs ( 13,172 ) ( 15,293 ) 5.625% Notes, net of debt issuance costs 1,086,828 1,084,707 Total long-term debt $ 1,145,828 $ 1,184,707 Interest expense related to long-term debt included in Interest expense, net on the Consolidated Statements of Operations for the years ended December 31, 2023, 2022, and 2021, was $ 88.7 million, $ 73.8 million, and $ 29.6 million, respectively. The amortization of debt issuance costs included in Interest expense, net on the Consolidated Statements of Operations for the years ended December 31, 2023, 2022, and 2021 was $ 3.2 million, $ 2.4 million, and $ 2.7 million, respectively. Revolving Credit Agreement The Company is party to a senior secured revolving credit facility with a five-year maturity with a syndicate of banks (the “Credit Agreement”). On May 4, 2023, the Company amended the Credit Agreement to, among other things, increase the revolving commitments under the Credit Agreement by $ 140.0 million from $ 500.0 million to $ 640.0 million and permit restricted payments for share repurchases or redemptions from certain of its stockholders in an aggregate principal amount of up to $ 150.0 million. The Credit Agreement contains sub-limits for revolving loans denominated in pounds and euros not to exceed the U.S. dollar equivalent of $ 50.0 million in pounds and $ 50.0 million in euros and $ 100.0 million in the aggregate. Additionally, the Credit Agreement contains a $ 15.0 million sub-limit for letters of credit denominated in pounds, euros or saudi riyals and any alternative currency that is agreed among the Borrowers, the applicable Issuing Bank and the Administrative Agent. Borrowings pursuant to the Credit Agreement bear interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest in effect on such day, (b) the federal funds effective rate plus 0.50 % and (c) the Secured Overnight Financing Rate (“SOFR”) plus 0.10 %, plus 1 % in each case, plus the applicable margin (calculated based on the Company’s Total Leverage Ratio, as defined in the Credit Agreement) at that time or (ii) the SOFR rate plus 0.10 % plus the applicable margin (calculated based on the borrowers’ total leverage ratio) at that time. Advances under the Credit Agreement may be prepaid in whole or in part from time to time without penalty or premium. The Credit Agreement commitment may be reduced by the Company from time to time. Principal amounts outstanding under the Credit Agreement are due and payable in full at maturity on August 3, 2026. 100 The Credit Agreement contains a number of financial and nonfinancial covenants and is guaranteed by substantially all of our present and future subsidiaries, subject to customary exceptions. The Company was in compliance with all covenants as of December 31, 2023. A portion of the Credit Agreement in an amount not to exceed $ 50.0 million is available for the issuance of standby letters of credit. As of December 31, 2023 and December 31, 2022, the Company had issued undrawn outstanding letters of credit of $ 16.2 million and $ 25.3 million, respectively. Senior Notes The Company had $ 1.1 billion aggregate principal amount of 5.625 % senior notes (“ 5.625 % Notes”) outstanding as of December 31, 2023. The 5.625 % Notes are due August 15, 2029 and bear interest of 5.625 % to be paid on February 15 and August 15 of each year. The 5.625 % Notes are guaranteed on a senior unsecured basis by substantially all of the Company’s subsidiaries. The 5.625 % Notes rank (i) equally in right of payment with all of the Company’s or any guarantor’s existing and future unsubordinated indebtedness, (ii) senior in right of payment to the Company’s or any guarantor’s existing and future subordinated indebtedness, (iii) effectively subordinated to any of the Company’s or any guarantor’s existing and future secured indebtedness to the extent of the collateral securing such indebtedness, including the Credit Agreement, and (iv) structurally subordinated to all existing and future liabilities of the Company’s subsidiaries that are not guarantors. Our obligations under the 5.625 % Notes are unsecured and are effectively junior to our secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. Borrowings under the Credit Agreement are secured by substantially all of the assets of the Company, and any existing and future subsidiary guarantors, including all of the capital stock of each restricted subsidiary. The Company may, at its option, redeem the 5.625 % Notes in whole at any time or in part from time to time, on and after August 15, 2024 at a redemption price of 102.813 % of the principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2024, at a redemption price of 101.406 % of the principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2025 and at a redemption price of 100 % of the principal amount thereof if redeemed on August 15, 2026 and thereafter. Prior to August 15, 2024, the Company may, at its option, redeem some or all of the 5.625 % Notes at a price equal to 100 % of the principal amount of the 5.625 % Notes plus a “make whole” premium and accrued and unpaid interest. The Company may also redeem, at its option, prior to August 15, 2024, up to 40 % of the 5.625 % Notes with the net proceeds from one or more equity offerings at a redemption price of 105.625 % of the principal amount thereof. If the Company experiences certain kinds of changes of control (as defined in the indenture), holders of the 5.625 % Notes may require the Company to repurchase any 5.625 % Notes held by them at a price equal to 101 % of the principal amount of the 5.625 % Notes plus accrued and unpaid interest. In addition, if the Company sells assets under certain circumstances, it may be required to use the net sale proceeds (as defined in the indenture) to offer to repurchase the 5.625 % Notes at a price equal to 100 % of the principal amount of the 5.625 % Notes plus accrued and unpaid interest, up to the net sale proceeds amount. The indenture includes covenants that, among other things, restrict the Company’s ability and the ability of its restricted subsidiaries (as defined in the indenture) to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of the Company; make certain types of investments; create restrictions on the payment of dividends or other amounts from the Company’s restricted subsidiaries; sell assets; enter into transactions with affiliates; create liens; enter into sale and leaseback transactions; and consolidate or merge with or into, or sell substantially all of the Company’s assets to, another person. These covenants are subject to a number of limitations and exceptions. The 5.625 % Notes are also subject to customary events of default, including cross-payment default and cross-acceleration provisions. The Company was in compliance with all covenants as of December 31, 2023. 12. Employee Benefit Plan A subsidiary of the Company, sponsors a defined benefit plan with benefits based on each employee’s years of service and compensation. The benefits under the defined benefit pension plan are frozen. 101 Net Periodic Pension Cost and Pension Benefit Obligation Net periodic pension benefit consists of the following components for the years ended December 31,: Pension Benefits 2023 2022 2021 Interest cost on benefit obligation $ 1,486 $ 1,104 $ 441 Expected return on plan assets ( 1,218 ) ( 1,659 ) ( 697 ) Amortization of actuarial (gain) ( 67 ) — — Net periodic benefit (income) loss $ 201 $ ( 555 ) $ ( 256 ) Settlement (gain) ( 501 ) ( 198 ) — Total periodic benefit income $ ( 300 ) $ ( 753 ) $ ( 256 ) The above components are included within O ther, net on the Consolidated Statements of Operations. The weighted average discount rate and expected return on plan assets that were used to determine net periodic costs were 5.47 % and 6.50 %, respectively, as of December 31, 2023, 2.82 % and 6.50 %, respectively, as of December 31, 2022, and 2.62 % and 6.50 %, respectively, as of December 31, 2021. The expected return on plan assets is a long-term assumption established by considering historical and anticipated returns of the asset classes invested in by the pension plan and the allocation strategy currently in place among those classes. Other changes in plan assets and benefit obligation recognized in Other comprehensive income (loss) consist of the following components for the years ended December 31,: Pension Benefits 2023 2022 2021 Current year actuarial (gain) $ ( 405 ) $ ( 4,088 ) $ ( 722 ) Amortization of actuarial gain 67 — — Total recognized in other comprehensive (income) ( 338 ) ( 4,088 ) ( 722 ) Total recognized in net periodic benefit (income) and other comprehensive (income) $ ( 638 ) $ ( 4,841 ) $ ( 978 ) The following table summarizes the change in benefit obligation and fair values of plan assets for the years ended December 31,: Pension Benefits 2023 2022 2021 (1) Change in benefit obligation: Benefit obligation, beginning balance $ 28,044 $ 40,005 $ 41,206 Interest cost 1,486 1,104 441 Actuarial (gain) loss 535 ( 10,930 ) ( 1,091 ) Benefits paid ( 3,604 ) ( 2,135 ) ( 551 ) Benefit obligation, ending balance 26,461 28,044 40,005 Change in plan assets: Fair value of plan assets, beginning balance 19,235 26,355 26,578 Actual gain (loss) on plan assets 2,659 ( 4,985 ) 328 Employer contributions 4,106 — — Benefits paid ( 3,604 ) ( 2,135 ) ( 551 ) Fair value of plan assets, ending balance 22,396 19,235 26,355 Unfunded status $ 4,065 $ 8,809 $ 13,650 102 (1) Benefit obligation assumed in connection with the acquisition of MDC. Beginning balance is as of July 31, 2021. Amounts recognized in the Consolidated Balance Sheets at December 31, consist of the following: Pension Benefits 2023 2022 Non-current liability $ 4,065 $ 8,809 Net amount recognized $ 4,065 $ 8,809 Amounts recognized in Accumulated other comprehensive loss before income taxes consists of the following components for the years ended December 31,: Pension Benefits 2023 2022 2021 Accumulated net actuarial gains $ 5,148 $ 4,810 $ 722 Amount recognized $ 5,148 $ 4,810 $ 722 As of December 31, 2023 and 2022, the weighted average discount rates used to determine benefit obligations were 5.34 % and 5.47 %, respectively. The discount rate assumptions at December 31, 2023 and 2022 were determined independently. The discount rate was derived from the effective interest rate of a hypothetical portfolio of high-quality bonds, whose cash flows match the expected future benefit payments from the plan as of the measurement date. Fair Value of Plan Assets and Investment Strategy As of December 31, 2023 and 2022, the plan assets consisted of receivables, money market fund - short term investments, and mutual funds, which were all Level 1 assets within the fair value hierarchy. The fair value of the receivables, money market fund - short term investments, and mutual funds were approximately $ 0.1 million, $ 0.8 million, and $ 21.5 million, respectively, as of December 31, 2023 and approximately $ 0.1 million, $ 0.8 million, and $ 18.4 million, respectively, as of December 31, 2022. See Note 18 of the Notes included herein for additional information regarding the fair value hierarchy. The pension plan’s weighted average asset allocation for the years ended December 31, 2023 and 2022 were as follows: Target Allocation Actual Allocation 2023 2023 2022 Asset Category: Equity securities 65.0 % 69.6 % 67.4 % Debt securities 30.0 % 26.6 % 28.4 % Cash/cash equivalents and Short-term investments 5.0 % 3.8 % 4.2 % Total 100.0 % 100.0 % 100.0 % The goals of the pension plan investment program are to fully fund the obligation to pay retirement benefits in accordance with the plan documents and to provide returns that, along with appropriate funding from the Company, maintain an asset/liability ratio that is in compliance with all applicable laws and regulations and assures timely payment of retirement benefits. Equity securities primarily include investments in companies located in the United States with readily available prices and mid to large-cap companies that are traded in foreign markets. Debt securities are diversified across different asset types with bonds issued in the United States as well as outside the United States. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the preceding tables. Cash Flows The pension plan contributions are deposited into a trust, and the pension plan benefit payments are made from trust assets. The Company made contributions to the pension plan totaling $ 4.1 million during 2023 and did not make contributions in 2022 or 2021. The Company estimates that it will make $ 1.1 million in contributions to the pension plan in 2024. Fluctuations in 103 actual market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefit costs and contributions in future periods. The estimated benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the amount of $ 1.9 million in 2024, $ 1.8 million in 2025, $ 1.8 million in 2026, $ 1.8 million in 2027, $ 1.8 million in 2028, and $ 9.5 million thereafter. 13. Noncontrolling and Redeemable Noncontrolling Interests When acquiring less than 100% ownership of an entity, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances. Where the option to purchase the incremental ownership is within the Company’s control, the amounts are recorded as Noncontrolling interests within Shareholders’ Equity in the Consolidated Balance Sheets. Where the incremental purchase may be required of the Company, the amounts are recorded as Redeemable noncontrolling interests in mezzanine equity in the Consolidated Balance Sheets at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through Retained earnings (but not less than their initial redemption value), except for foreign currency translation adjustments. The following table presents Net income attributable to noncontrolling and redeemable noncontrolling interests between holders of Class C Common Stock and other equity interest holders for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 2022 2021 (dollars in thousands) Net income attributable to Class C shareholders $ 39,066 $ 16,004 $ 6,126 Net income attributable to other equity interest holders 3,076 5,986 9,170 Net income attributable to noncontrolling interests $ 42,142 $ 21,990 $ 15,296 Net income (loss) attributable to redeemable noncontrolling interests ( 634 ) 8,135 ( 412 ) Net income attributable to noncontrolling and redeemable noncontrolling interests $ 41,508 $ 30,125 $ 14,884 The following table presents noncontrolling interests between holders of Class C Common Stock and other equity interest holders as of December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 (dollars in thousands) Noncontrolling interest of Class C shareholders $ 436,215 $ 399,316 Noncontrolling interest of other equity interest holders 32,362 30,848 Total noncontrolling interests $ 468,577 $ 430,164 104 The following table presents changes in redeemable noncontrolling interests: December 31, 2023 December 31, 2022 (dollars in thousands) Beginning balance $ 39,111 $ 43,364 Redemptions (1) ( 22,172 ) ( 1,400 ) Distributions ( 5,800 ) ( 2,822 ) Changes in redemption value 442 ( 8,711 ) Net income (loss) attributable to redeemable noncontrolling interests ( 634 ) 8,135 Other ( 155 ) 545 Ending balance $ 10,792 $ 39,111 (1) Redemptions for the year ended December 31, 2023, is associated with redeemable noncontrolling interest of a certain brand we did not previously own. The amount was reclassified as a deferred acquisition contingent obligation (see Note 9). The noncontrolling shareholders’ ability to exercise any such option right is subject to the satisfaction of certain conditions, including conditions requiring notice in advance of exercise and specific employment termination conditions. In addition, these rights cannot be exercised prior to specified staggered exercise dates. The exercise of these rights at their earliest contractual date would result in obligations of the Company to fund the related amounts during 2024 to 2028. It is not determinable, at this time, if or when the owners of these rights will exercise all or a portion of these rights. The redeemable noncontrolling interest of $ 10.8 million as of December 31, 2023, consists of $ 7.3 million, assuming that the subsidiaries meet certain performance metrics, and $ 3.5 million upon termination of such owner’s employment with the applicable subsidiary or death. These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. As such, there is no related impact on the Company’s earnings per share calculations for the year ended December 31, 2023 and 2022. Comprehensive Loss Attributable to Noncontrolling and Redeemable Noncontrolling Interests For the year ended December 31, 2023, comprehensive income attributable to the noncontrolling and redeemable noncontrolling interests was $ 47.4 million, which consists of $ 41.5 million of net income and $ 5.9 million of other comprehensive income. For the year ended December 31, 2022, comprehensive income attributable to the noncontrolling and redeemable noncontrolling interests was $ 6.6 million, which consists of $ 30.1 million of net income and $ 23.5 million of other comprehensive loss. 14. Commitments, Contingencies, and Guarantees Legal Proceedings. The Company’s operating entities are involved in legal proceedings and regulatory inquiries of various types. While any litigation or investigation contains an element of uncertainty, the Company has no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on the financial condition or results of operations of the Company. Guarantees . Generally, the Company has indemnified the purchasers of certain assets in the event that a third party asserts a claim against the purchaser that relates to a liability retained by the Company. These types of indemnification guarantees typically extend for a number of years. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying Audited Consolidated Financial Statements with respect to these indemnification guarantees. The Company continues to monitor the conditions that are subject to guarantees and indemnifications to identify whether it is probable that a loss has occurred and would recognize any such losses under any guarantees or indemnifications in the period when those losses are probable and estimable. Commitments. At December 31, 2023, the Company had $ 16.2 million of undrawn letters of credit outstanding. The Company entered into three operating leases for which the commencement date has not yet occurred as of December 31, 2023. See Note 10 of the Notes included herein for additional information. 105 In the ordinary course of business, the Company may enter into long-term, non-cancellable contracts with partner associations that include revenue or profit-sharing commitments related to the provision of its services. These contracts may also include provisions that require the partner associations to meet certain performance targets prior to any obligation to the Company. As of December 31, 2023, the Company estimates its future minimum commitments under these non-cancellable agreements to be: $ 7.3 million, $ 7.0 million, $ 4.2 million, $ 3.0 million, $ 3.1 million and $ 3.8 million for 2024, 2025, 2026, 2027, 2028, and thereafter, respectively. The Company has also entered into a certain long-term, non-cancellable contract with a certain vendor for cloud services that requires the Company to commit to minimum spending over the contract term. As of December 31, 2023, the Company estimates its future minimum commitments under this agreement to be: $ 5.7 million, $ 6.9 million, $ 8.7 million, $ 10.4 million, $ 12.7 million and $ 15.3 million for 2024, 2025, 2026, 2027, 2028, and thereafter, respectively. 15. Share Capital The authorized and outstanding share capital of the Company is below. Class A Common Stock There are 1.0 billion shares of Class A Common Stock authorized, of which 118.5 million shares were issued and outstanding as of December 31, 2023. Each share of Class A Common Stock carries one vote and represents an economic interest in the Company. Class C Common Stock There are 250.0 million shares of Class C Common Stock authorized, of which 151.6 million shares were issued and outstanding as of December 31, 2023. Each share of Class C Common Stock carries one vote and does not represent an economic interest in the Company. Each share of Class C Common Stock is paired with a corresponding common unit of OpCo (each such paired share of Class C Common Stock and common unit of OpCo, a “Paired Unit”). Each holder of Paired Units may, at its option, exchange such Paired Units for shares of Class A Common Stock on a one-to-one basis (i.e., one Paired Unit for one share of Class A Common Stock). In the year ended December 31, 2023, holders of the Paired Units exchanged 9.3 million Paired Units for the same number of shares of Class A Common Stock. Class A Common Stock Repurchases The Company may purchase shares of Class A Common Stock under its stock repurchase program (the “Repurchase Program”) as well as repurchases outside of the Repurchase Program. On March 1, 2023, the Company’s board of directors (the “Board”) authorized an extension and a $ 125.0 million increase in the size of the Repurchase Program to an aggregate of $ 250.0 million, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program, as amended, will expire on March 1, 2026. Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices, including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice. Our Board will review the Repurchase Program periodically and may authorize adjustments of its terms. 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. In addition to the repurchases under the Repurchase Program, on May 23, 2023, the Company repurchased 23.3 million shares of Class A Common Stock from certain affiliates of AlpInvest Partners B.V. at a price of $ 6.43 per share, for an aggregate total repurchase price of $ 150.0 million. 106 Employee Stock Purchase Plan The Company’s 2023 Employee Stock Purchase Plan (the “ESPP”) was approved by stockholders and adopted by the Board in 2023. A total of 3.0 million shares of Class A Common Stock was reserved for sale under the ESPP to eligible employees as defined in the plan. Under the ESPP, eligible employees can elect to withhold up to 15 % of their earnings, subject to certain maximums, to purchase shares of Class A Common Stock on certain plan-defined dates. The purchase price for each offering period is 92.5% of the fair market value of shares of Class A Common Stock at the end of the offering period. The plan is considered compensatory resulting in the fair value of the discount being expensed over the service period. The total number of shares authorized that remained available to be issued was 2.9 million as of December 31, 2023. During the year ended December 31, 2023, there were no material expenses incurred by the Company related to the ESPP and contributions to the ESPP were nominal. Stock-based Awards The Company ’ s stock-based awards outstanding consist of restricted stock units, restricted stock and stock appreciation rights (“SAR awards”). The total number of shares authorized that remained available to be issued for future awards was 6.5 million as of December 31, 2023 and 12.9 million as of December 31, 2022. For the years ended December 31, 2023, 2022, and 2021, the Company recognized total stock-based compensation expense related to all stock compensation awards of $ 51.2 million, $ 36.7 million, and $ 75.0 million, respectively. The related income tax benefit for the years ended December 31, 2023, 2022, and 2021 was $ 13.0 million, $ 4.1 million, and $ 5.3 million, respectively. The following tables summarize stock-based activity of awards authorized under our employee stock incentive plans and awards (such as inducement awards) and other share-based commitments that have met the requirements to be issued separate from shareholder-approved stock incentive plans. The following table summarizes information about time-based and performance-based restricted stock and restricted stock unit awards: Time-Based Awards Performance-Based Awards Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Balance at December 31, 2022 6,269 $ 7.07 2,386 $ 7.74 Granted 6,595 7.19 1,328 7.24 Vested ( 5,479 ) 7.00 — — Forfeited ( 213 ) 7.25 ( 3 ) 5.01 Balance at December 31, 2023 7,172 $ 7.23 3,711 $ 7.56 The weighted average grant date fair value of time-based awards granted in 2022 and 2021 was $ 7.38 and $ 5.51 , respectively. The weighted average grant date fair value of performance-based awards granted in 2022 and 2021 was $ 8.68 and $ 7.03 , respectively. The vesting of the performance-based awards is contingent primarily upon the Company meeting certain cumulative revenue and earnings targets, primarily three years, and continued employment through the vesting date. The term of the time-based awards is generally three years with vesting generally one to three years. The vesting period of the time-based and performance-based awards is generally commensurate with the requisite service period. The total fair value of restricted stock and restricted stock unit awards, which vested during the years ended December 31, 2023, 2022, and 2021, was $ 38.4 million, $ 77.3 million, and $ 1.5 million respectively. At December 31, 2023, the weighted average remaining contractual life for time-based and performance-based awards was 0.67 and 1.33 years, respectively. At December 31, 2023, the unrecognized compensation expense for time-based awards was $ 21.3 million and will be recognized over a weighted average period of 0.67 years. At December 31, 2023, the unrecognized compensation expense for performance-based awards was $ 12.3 million and will be recognized over a weighted average period of 1.33 years. 107 The following table summarizes information about SAR awards: SAR Awards Shares Weighted Average Grant Date Fair Value Weighted Average Exercise Price Balance at December 31, 2022 4,845 $ 2.78 $ 4.57 Granted 225 2.23 6.79 Forfeited — — — Exercised ( 1,948 ) 3.02 2.93 Balance at December 31, 2023 3,122 $ 2.59 $ 5.74 The weighted average grant date fair value of SAR awards granted in 2021 was $ 2.39 . There were no SAR awards granted in 2022. We use the Black-Scholes option-pricing model to estimate the fair value of SAR awards. The grant date fair value of the SAR awards granted in 2021 ranged from $ 2.20 to $ 3.66 per share. The assumptions used to value the SAR awards granted in 2021 were as follows: expected life ranging from 2.8 to 4 years, risk free interest rate of approximately 1.0 %, expected volatility ranging from 35.5 % to 38.1 %, and dividend yield of 0 %. The grant date fair value of the SAR awards granted in 2023 ranged from $ 2.10 to $ 2.35 per share. The assumptions used to value the SARS granted in 2023 were as follows: expected life ranging from 3 to 4 years, risk free interest rate of approximately 4.6 %, expected volatility ranging from 34.6 % to 36.7 %, and dividend yield of 0 %. These SAR awards vest in 1 to 3 years. The vesting period of these awards is generally commensurate with the requisite service period. The term of these awards is 5 years. Certain of the Company’s SAR awards are settled in cash. These awards are liability classified and remeasured at each reporting period. As of December 31, 2023, the assumptions for the Black-Scholes model for these awards were as follows: expected life ranging from 0 to 3 years, risk free interest rate of approximately 5 %, expected volatility ranging from 26.7 % to 42.1 %, and dividend yield of 0.0 %. The remaining term of these awards as of December 31, 2023, ranges from approximately 0.2 years to 4 years. During the year ended December 31, 2023, certain SAR awards were modified from equity to cash settled. The SAR awards were fair valued on the date of modification, reclassed from equity to liability and resulted in incremental stock-based compensation expense of $ 4.4 million. For the year ended December 31, 2023, 0.5 million SAR awards vested. As of December 31, 2023, 2.4 million SAR awards vested and were exercisable. The total intrinsic value of SAR awards exercised during the years ended December 31, 2023 and 2022 was $ 8.1 million and $ 0.1 million, respectively. There were no SAR awards exercised during the year ended December 31, 2021. As of December 31, 2023, the aggregate intrinsic value of the SAR awards outstanding was $ 5.3 million and the weighted average remaining contractual life for these awards was 1.02 years. As of December 31, 2023, the aggregate intrinsic value of the SAR awards exercisable was $ 5.3 million and the weighted average remaining contractual life for these awards was 0 years. The weighted average exercise price of SAR awards exercisable as of December 31, 2023 was $ 5.12 . At December 31, 2023, the unrecognized compensation expense for these awards was $ 0.4 million, to be recognized over a weighted average period of 1.02 years. Subsidiary Awards Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”). The profits interests awards generally provide the employee the right, but not the obligation, to sell its profits interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are settled in cash and the corresponding liability was $ 20.3 million and $ 21.0 million at December 31, 2023 and 2022, respectively and is included as a component of Accruals and other liabilities and Other liabilities on the Consolidated Balance Sheets. The change in the profits interest liabilities for the years ended December 31, 2023 and 2022 was an increase of $ 3.9 million and a decrease of $ 4.2 million, respectively and was recorded as stock-based compensation in Cost of Services within the Statements of Operations. 108 16. Changes in Accumulated Other Comprehensive Income (Loss) The changes in accumulated other comprehensive income (loss) for the years ended December 31, were: Defined Benefit Pension Foreign Currency Translation Total Balance at December 31, 2021 $ 722 $ ( 6,000 ) $ ( 5,278 ) Other comprehensive income (loss) before reclassifications 4,088 ( 14,288 ) ( 10,200 ) Other comprehensive income (loss) 4,088 ( 14,288 ) ( 10,200 ) Balance at December 31, 2022 4,810 ( 20,288 ) ( 15,478 ) Other comprehensive income before reclassifications 338 2,073 2,411 Other comprehensive income 338 2,073 2,411 Balance at December 31, 2023 $ 5,148 $ ( 18,215 ) $ ( 13,067 ) 17. Income Taxes The components of the Company’s income before income taxes and equity in earnings of non-consolidated affiliates by taxing jurisdiction for the years ended December 31, were: 2023 2022 2021 Income (Loss): U.S. $ 66,432 $ 31,681 $ 38,717 Non-U.S. 24,637 43,904 20,841 $ 91,069 $ 75,585 $ 59,558 The provision (benefit) for income taxes by taxing jurisdiction for the years ended December 31, were: 2023 2022 2021 Current tax provision U.S. federal $ 4,868 $ 13,229 $ 7,259 U.S. state and local 3,103 8,106 7,459 Non-U.S. 13,143 22,368 12,498 21,114 43,703 27,216 Deferred tax provision (benefit): U.S. federal 18,168 ( 16,132 ) ( 143 ) U.S. state and local 7,017 701 ( 2,521 ) Non-U.S. ( 5,742 ) ( 2,810 ) ( 1,154 ) 19,443 ( 18,241 ) ( 3,818 ) Income tax expense $ 40,557 $ 25,462 $ 23,398 109 A reconciliation of income tax expense (benefit) using the U.S. federal income tax rate compared with actual income tax expense for the years ended December 31, is as follows: 2023 2022 2021 Income before income taxes, equity in non-consolidated affiliates and noncontrolling interest $ 91,069 $ 75,585 $ 59,558 Statutory income tax rate 21.0 % 21.0 % 21.0 % Tax expense using U.S. statutory income tax rate $ 19,124 $ 15,873 $ 12,507 Impact of disregarded entity structure ( 8,520 ) ( 3,355 ) ( 6,954 ) Foreign, net ( 3,684 ) 6,930 5,995 State taxes, net 8,422 8,807 4,327 Stock compensation 400 ( 1,342 ) 4,009 Valuation allowance 11,791 4,932 ( 15 ) Revaluation of TRA step up ( 424 ) ( 5,109 ) — Gain on sale of business 8,347 — Prior year adjustments 5,617 ( 17,205 ) — Goodwill impairments — 14,645 — Other, net ( 516 ) 1,286 3,529 Income tax expense $ 40,557 $ 25,462 $ 23,398 Effective income tax rate 44.5 % 33.7 % 39.3 % Prior to merger, the Company was a limited liability company classified as a disregarded entity for U.S. federal income tax purposes, and as such was not subject to taxes from a U.S. federal income tax perspective. After the merger, the Company is a corporation with an investment in a limited liability company classified as a partnership for U.S. federal income tax purposes, and as such a portion of the consolidated income is not subject to taxes from a U.S. federal income tax perspective. The tax rate of 21.0 % has been used to capture the U.S. federal taxes of the Company and the corporations owned by the Company and recorded in the Consolidated Statements of Operations and Comprehensive Income. In August 2022, the United States enacted to the Inflation Reduction Act of 2022 (“IRA”), which creates a new book minimum tax of at least 15% of consolidated GAAP pre-tax income for corporations with average book income in excess of $1 billion. We do not expect an increase in our tax liability from this new book minimum tax in 2023. Income taxes receivable were $ 21.6 million and $ 5.2 million at December 31, 2023 and 2022, respectively, and were included in other current assets on the balance sheet. Long-term income taxes receivable were $ 12.5 million at December 31, 2023 and 2022, and were included in other assets on the balance sheet. Income taxes payable were $ 5.7 million and $ 13.5 million at December 31, 2023 and 2022, respectively, and were included in accrued and other liabilities on the balance sheet. 110 The tax effects of significant temporary differences representing deferred tax assets and liabilities at December 31, were as follows: 2023 2022 2021 Deferred tax assets: Net operating losses $ 29,835 $ 44,001 $ 33,112 Tax credits 6,355 7,104 6,644 Operating lease liability 50,657 52,442 48,173 Interest deductions 36,618 30,681 30,760 Accruals and other liabilities 252 2,794 3,720 TRA and related step-up, net of amortization 29,007 30,556 — Other 13,568 10,584 15,160 Gross deferred tax asset 166,292 178,162 137,569 Less: valuation allowance ( 26,288 ) ( 14,395 ) ( 5,825 ) Net deferred tax assets $ 140,004 $ 163,767 $ 131,744 Deferred tax liabilities: Right-of-use lease asset - operating leases 38,261 40,012 37,001 Property and equipment, net 11,553 9,329 4,212 Goodwill and intangibles 83,335 85,990 83,607 Residual basis differences — — 102,297 Other 205 940 6,854 Total deferred tax liabilities 133,354 136,271 233,971 Net deferred tax asset (liability) $ 6,650 $ 27,496 $ ( 102,227 ) Deferred tax assets $ 47,159 $ 68,375 $ 866 Deferred tax liabilities ( 40,509 ) ( 40,879 ) ( 103,093 ) $ 6,650 $ 27,496 $ ( 102,227 ) The preliminary deferred tax liability for the Company’s residual basis difference in OpCo of $ 102.3 million reflected in the table above as of December 31, 2021 was adjusted to zero as of December 31, 2022 to reflect the finalization of the Company’s book and tax basis in OpCo. This deferred tax liability had a balance of $ 119.5 million as of September 30, 2022 that should have been zero. In addition, a deferred tax liability of $ 16.7 million, and the associated reduction to additional paid-in-capital was not recorded when the exchanges of Paired Units for Class A Common Stock occurred in February 2022. The correction has been reflected as of December 31, 2022. Tax Receivables Agreement In connection with the closing of the Transaction, we entered into the Tax Receivables Agreement (“TRA”) with OpCo and Stagwell Media, pursuant to which we are required to make cash payments to Stagwell Media equal to 85% of certain U.S. federal, state and local income tax or franchise tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (i) increases in the tax basis of OpCo’s assets resulting from exchanges of Paired Units (defined in Note 11) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to us making payments under the TRA. The Company accounts for amounts payable under the TRA in accordance with ASC 450-Contingencies. We will evaluate the likelihood that we will realize the benefit represented by the deferred tax asset and, to the extent that we estimate that it is more likely than not that we will not realize the benefit, we will reduce the carrying amount of the deferred tax asset with a valuation allowance and a corresponding reduction to the TRA liability. The amounts to be recorded for both the deferred tax assets and the liability under the TRA will be estimated at the time of any purchase or exchange as a reduction to shareholders’ equity, and the effects of changes in any of our estimates after this date will be included in net income or loss. Similarly, the effect of subsequent changes in the enacted tax rates will be included in net income or loss. In the first quarter of 2022, the Company had its first exchange of Paired Units for shares of Class A Common Stock and recorded its initial TRA liability. Further exchanges have been made in the subsequent quarters in 2022 and no further exchanges in 2023. As of December 31, 2023, and 2022, the Company has recorded a TRA liability of $ 26.9 million and 111 $ 26.6 million, respectively, and a deferred tax asset, net of amortization of $ 29.0 million and $ 30.6 million, respectively, in connection with the exchanges of the Paired Units and the projected obligations under the TRA. Stagwell Inc. itself has net operating loss carryforwards of $ 58.1 million relating to U.S. states which expire years 2026 through 2042. Stagwell Inc. also had indefinite net operating loss carryforwards less than $ 0.1 million relating to states. Stagwell Inc. also has foreign and state tax credits and general business carryovers of $ 6.4 million which expire between 2024 and 2031. Stagwell Inc.’s consolidated corporate subsidiaries also have net operating loss carryforwards which expire in years 2031 through 2042. These definite lived net operating loss carryforwards consist of $ 13.8 million relating to U.S. federal, $ 8.0 million relating to states and $ 32.9 million relating to non-U.S. The corporate subsidiaries also have indefinite net operating loss carryforwards which consist of $ 17.1 million relating to U.S. federal, and $ 48.6 million relating to states, and $ 46.3 million relating to non-U.S. The majority of the consolidated corporate subsidiaries’ U.S. tax attributes are subject to an annual limitation as a result of historic acquisitions which constituted a change of ownership as defined under Internal Revenue Code 382. The Company records a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Management evaluates all positive and negative evidence and considers factors such as the reversal of taxable temporary differences, taxable income in eligible carryback years, future taxable income, and tax planning strategies. A change to these factors could impact the estimated valuation allowance and income tax expense. The Company maintained a valuation allowance of $ 26.3 million as of December 31, 2023, relating to both U.S. and foreign deferred tax assets, and $ 14.4 million as of December 31, 2022 relating to U.S. and foreign deferred tax assets. The Company is permanently reinvested with respect to its foreign earnings in certain jurisdictions, and no deferred taxes have been recorded related to such earnings as the determination of the amount is not practicable. The Company currently does not intend to distribute previously taxed income. Upon distribution in the future, the Company may incur state and foreign withholding taxes on such income, the amount of which is not practicable to compute. As of December 31, 2023 and 2022, the Company recorded a liability for unrecognized tax benefits as well as applicable penalties and interest in the amount of $ 1.8 million and $ 2.2 million, respectively. It is the Company’s policy to classify interest and penalties arising in connection with unrecognized tax benefits as a component of income tax expense. As of December 31, 2023 and 2022, accrued penalties and interest included in unrecognized tax benefits were $ 1.8 million and less than $ 0.1 million, respectively. If these unrecognized tax benefits were to be recognized, it would affect the Company’s effective tax rate. 2023 2022 A reconciliation of the change in unrecognized tax benefits is as follows: Unrecognized tax benefit - Beginning Balance $ 2,136 $ 1,038 Current year positions 288 — Prior period positions ( 1,840 ) 1,850 Settlements ( 289 ) ( 477 ) Lapse of statute of limitations ( 286 ) ( 275 ) Unrecognized tax benefits - Ending Balance $ 9 $ 2,136 It is reasonably possible that the amount of unrecognized tax benefits could decrease by a range of $ — to less than $ 0.1 million in the next twelve months as a result of expiration of certain statute of limitations. The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. The statute of limitations for tax years prior to 2020 are closed for U.S. federal purposes. The statute of limitations for tax years prior to 2017 have also expired in non-U.S. jurisdictions. 18. Fair Value Measurements A fair value measurement assumes a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. The hierarchy for observable and unobservable inputs used to measure fair value into three broad levels are described below: 112 • Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. • Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. • Level 3 - Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. Financial Instruments that are not Measured at Fair Value on a Recurring Basis The following table presents certain information for our financial liability that is not measured at fair value on a recurring basis as of December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 Carrying Amount Fair Value Carrying Amount Fair Value (dollars in thousands) 5.625% Notes $ 1,100,000 $ 1,010,658 $ 1,100,000 $ 902,000 The fair value of this instrument is based on quoted market prices in markets that are not active. Therefore, this debt is classified as Level 2 within the fair value hierarchy. Financial Instruments Measured at Fair Value on a Recurring Basis Contingent deferred acquisition consideration (Level 3 fair value measurement) is initially recorded at the acquisition date fair value and adjusted at each reporting period. The estimated liability is determined in accordance with models of each business’ future performance, including revenue growth and free cash flows. These models are dependent upon significant assumptions, such as the growth rate of the earnings of the relevant subsidiary during the contractual period and the discount rate. These growth rates are consistent with the Company’s long-term forecasts. As of December 31, 2023, the discount rate used to measure these liabilities was 5.1 %. As these estimates require the use of assumptions about future performance, which are uncertain at the time of estimation, the fair value measurements presented on the Consolidated Balance Sheets are subject to material uncertainty. See Note 9 of the Notes included herein for additional information regarding contingent deferred acquisition consideration. As of December 31, 2023 and December 31, 2022, the carrying amount of the Company’s financial instruments, including cash, cash equivalents, accounts receivable and accounts payable, approximated fair value because of their short-term maturity. Non-financial Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis Certain non-financial assets are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value measurements) and right-of-use lease assets (Level 2 fair value measurement). Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment. See Note 8 of the Notes included herein for additional information on goodwill and intangible assets and Note 10 of the Notes included herein for additional information on right-of-use lease assets. 113 19. Related Party Transactions In the ordinary course of business, the Company enters into transactions with related parties, including its affiliates. The transactions may range in the nature and value of services underlying the arrangements. The following table presents significant related party transactions where a third party receives services from the Company: Total Transaction Value Revenue Due From Related Party Year Ended December 31, December 31, Services 2023 2022 2021 2023 2022 (dollars in thousands) Marketing and advertising services (1) $ 465 and Continuous (7) $ 2,576 $ 2,240 $ — $ 1,518 $ 1,047 Marketing and advertising services (2) $ 3,576 and Continuous (7) 894 7,449 950 4,381 4,831 Marketing and website development services (3) $ 6,496 and Continuous (7) 3,566 7,185 9,440 694 488 Polling services (4) $ 1,903 1,042 379 436 160 280 Polling services (5) $ 830 350 339 — 39 — Polling services (6) $ 4,431 1,046 3,450 — — — Total $ 9,474 $ 21,042 $ 10,826 $ 6,792 $ 6,646 (1) A member of the Company’s Board holds an executive leadership position or is on the Board of the client. (2) Brands’ partners and executives either hold a key leadership position in or are on the Board of the client. (3) Client has a significant interest in the Company. (4) A family member of the Company’s Chief Executive Officer holds a key leadership position in the client. (5) A family member of the Company’s President holds a key leadership position in the client. (6) Founder of the client has significant interest in the Company. (7) Certain of the contractual arrangements within these transactions were entered into for an indefinite term and are invoiced as services are provided, while others have a fixed definitive contract value. In 2019, a Brand entered into a loan agreement with a related party who holds a minority interest in the Brand. The loan receivable of $ 0.8 million and $ 3.6 million due from the third party is included within Other current assets in the Company’s Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022, respectively. The Company recognized $ 0.3 million, $ 0.5 million and $ 0.3 million for the year ended December 31, 2023, 2022, and 2021 respectively, of interest income within Interest expense, net on its Consolidated Statements of Operations. In addition, in 2021, the Brand entered into an arrangement to obtain sales and management services from the same third party. Under the arrangement, the Brand has incurred $ 2.4 million, $ 2.0 million and $ 0.8 million of related party expense for the year ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023 and December 31, 2022, $ 0.6 million and $ 1.4 million, respectively, was due to the third party. In 2018, a Brand entered into an agreement to provide marketing and advertising services to a related party whose partners hold executive leadership positions in the Brand. Under the arrangement, the Brand recognized $ 0.8 million, $ 1.0 million, and $ 0.7 million of revenue for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023 nothing was from the related party, and as of December 31, 2022, $ 0.8 million was due from the related party. In addition, on behalf of the related party, the Brand serves as an agent to transfer funds from one of the related party ’ s customers to the related party. The Brand does not receive revenue from this arrangement. As of December 31, 2023 $ 0.7 million was due to the related party, and nothing was due as of December 31, 2022. 114 In 2022, the Company made loans to three employees of a subsidiary each in the amount of $ 0.9 million, together with interest on the unpaid principal balance at a fixed interest rate equal to 3.5 % per annum, compounding quarterly. The cash from the loan was used by the employees to purchase the noncontrolling interest of 13.3% in TMA Direct. 20. Segment Information The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of operating segments is applicable. This determination is based upon a quantitative analysis of the expected and historic average long-term profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics. The CODM uses Adjusted EBITDA (defined below) as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions. Adjusted EBITDA is defined as Net income excluding non-operating income or expense to achieve operating income, plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items. The Company 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, and includes the elimination of certain intercompany services, as “All Other.” This segment also includes the elimination of intercompany revenue. The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes included herein. • The Integrated Agencies Network includes five operating segments: the Anomaly Alliance, Constellation, the Doner Partner Network, Code and Theory, and National Research Group. The operating segments offer an array of complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications. The Brands included in the operating segments that comprise the Integrated Agencies Network reportable segment are as follows: Anomaly Alliance (Anomaly), Constellation (72andSunny, Colle McVoy, Hunter, Instrument, Redscout, Team Enterprises, Harris Insights, Left Field Labs, and Movers and Shakers), the Doner Partner Network (Doner, KWT Global, Harris X, Veritas, Doner North, and Yamamoto (Brands)), Code and Theory, and National Research Group. ConcentricLife, which was part of Anomaly Alliance was sold on October 31, 2023. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these operating segments may occasionally compete with each other for new business or have business move between them. • The Brand Performance Network (“BPN”) is comprised of a single operating segment. BPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities. Our Brands in this segment aim to provide scaled creative performance through developing and executing sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data. BPN’s Brands provide media solutions such as audience analysis, media planning, and buying across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast, among others) and includes multichannel Brands Assembly, Brand New Galaxy, Crispin Porter Bogusky, Forsman & Bodenfors, Goodstuff, Bruce Mau, digital creative & transformation consultancy Gale, B2B specialist Multiview, CX specialists Kenna, and travel media experts Ink. • The Communications Network reportable segment is comprised of a single operating segment, our specialist network that provides advocacy, strategic corporate communications, investor relations, public relations, online fundraising and other services to both corporations and political and advocacy organizations and consists of our Allison brands, SKDK brands, and Targeted Victory brands. 115 • All Other consists of the Company’s digital innovation group and Stagwell Marketing Cloud Group, including Maru and Epicenter, and products such as ARound, PRophet and SmartAssets. • Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office. Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category. 116 Year Ended December 31, 2023 2022 2021 (dollars in thousands) Revenue: Integrated Agencies Network $ 1,378,109 $ 1,474,970 $ 771,123 Brand Performance Network 768,776 757,208 424,632 Communications Network 333,707 435,652 247,766 All Other 46,585 19,962 25,842 Total Revenue $ 2,527,177 $ 2,687,792 $ 1,469,363 Adjusted EBITDA: Integrated Agencies Network $ 271,322 $ 292,293 $ 165,385 Brand Performance Network 96,015 115,835 65,942 Communications Network 51,819 87,032 43,741 All Other ( 10,607 ) ( 931 ) ( 772 ) Corporate ( 48,410 ) ( 43,111 ) ( 20,644 ) Total Adjusted EBITDA $ 360,139 $ 451,118 $ 253,652 Depreciation and amortization $ ( 142,831 ) $ ( 131,273 ) $ ( 77,503 ) Impairment and other losses ( 11,395 ) ( 122,179 ) ( 16,240 ) Stock-based compensation ( 57,179 ) ( 33,152 ) ( 75,032 ) Deferred acquisition consideration ( 13,060 ) 13,405 ( 18,721 ) Other items, net ( 45,147 ) ( 18,691 ) ( 21,430 ) Total Operating Income $ 90,527 $ 159,228 $ 44,726 Other Income (expenses): Interest expense, net $ ( 90,644 ) $ ( 76,062 ) $ ( 31,894 ) Foreign exchange, net ( 2,960 ) ( 2,606 ) ( 3,332 ) Gain on sale of business 94,505 — 43,038 Other, net ( 359 ) ( 4,975 ) 7,020 Income before income taxes and equity in earnings of non-consolidated affiliates 91,069 75,585 59,558 Income tax expense 40,557 25,462 23,398 Income before equity in earnings of non-consolidated affiliates 50,512 50,123 36,160 Equity in (loss) of non-consolidated affiliates ( 8,870 ) ( 79 ) ( 240 ) Net income 41,642 50,044 35,920 Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests ( 41,508 ) ( 30,125 ) ( 14,884 ) Net income attributable to Stagwell Inc. common shareholders $ 134 $ 19,919 $ 21,036 The Company’s long-lived assets (i.e., Right-of-use-lease assets-operating leases and Fixed asset, net) was $ 332.1 million ($ 268.5 million in the United States and $ 63.6 million in all other countries) as of December 31, 2023, and $ 372.4 million ($ 315.8 million in the United States and $ 56.7 million in all other countries) as of December 31, 2022. The Company’s CODM does not use segment assets to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed. See Note 5 of the Notes included herein for a summary of the Company’s revenue by geographic region for the years ended December 31, 2023, 2022, and 2021. 117 21. Revision of 2022 Issued Consolidated Financial Statements As described in Note 1, in connection with the preparation of the consolidated financial statements for the year ended December 31, 2023, the Company identified errors in the areas of income taxes, noncontrolling interests, and accumulated other comprehensive loss in its previously issued 2022 annual consolidated financial statements. The Company has revised its financial statements as of and for the year ended December 31, 2022, to reflect the corrections in this Form 10-K. There were no changes to previously issued cash flows generated from (used by) operating, investing, or financing activities for any of the impacted periods. Line items impacted in the Consolidated Statements of Shareholders Equity have been reflected below within the Statements of Comprehensive Income (Loss) and Consolidated Balance Sheet below. Presented below are the effects of the errors to the impacted financial statements as of and for the year ended December 31, 2022. Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income (Loss) Year Ended December 31, 2022 As reported Adjustment As revised Other, net $ ( 7,059 ) $ 2,084 $ ( 4,975 ) Other income (expenses) ( 85,727 ) 2,084 ( 83,643 ) Income before income taxes and equity in earnings of non-consolidated affiliates 73,501 2,084 75,585 Income tax expense 7,580 17,882 25,462 Income before equity in earnings of non-consolidated affiliates 65,921 ( 15,798 ) 50,123 Net income 65,842 ( 15,798 ) 50,044 Net (income) attributable to noncontrolling and redeemable noncontrolling interests ( 38,573 ) 8,448 ( 30,125 ) Net income attributable to Stagwell Inc. common shareholders $ 27,269 $ ( 7,350 ) $ 19,919 Earnings Per Common Share: Basic 0.22 ( 0.06 ) 0.16 Diluted 0.17 ( 0.05 ) 0.12 Year Ended December 31, 2022 As reported Adjustment As revised Other comprehensive (loss) - foreign currency translation adjustment $ ( 37,751 ) $ ( 22 ) $ ( 37,773 ) Other comprehensive (loss) ( 33,663 ) ( 22 ) ( 33,685 ) Comprehensive income for the period 32,179 ( 15,820 ) 16,359 Comprehensive (income) attributable to the noncontrolling and redeemable noncontrolling interest ( 38,573 ) 31,933 ( 6,640 ) Comprehensive income (loss) attributable to Stagwell Inc. common shareholders ( 6,394 ) 16,113 9,719 118 Consolidated Balance Sheet December 31, 2022 As reported Adjustment As revised Other current assets 71,443 2,568 74,011 Total current assets $ 1,030,955 $ 2,568 $ 1,033,523 Other assets 115,447 691 116,138 Total assets $ 3,993,332 $ 3,259 $ 3,996,591 Accruals and other liabilities 248,477 20,394 268,871 Total current liabilities 1,349,802 20,394 1,370,196 Deferred tax liabilities, net 40,109 770 40,879 Other liabilities 69,780 ( 2,085 ) 67,695 Total liabilities $ 3,009,587 $ 19,079 $ 3,028,666 Retained earnings 29,445 ( 7,350 ) 22,095 Accumulated other comprehensive loss ( 38,941 ) 23,463 ( 15,478 ) Stagwell Inc. Shareholders' Equity 482,537 16,113 498,650 Noncontrolling interests 462,097 ( 31,933 ) 430,164 Total Shareholders' Equity 944,634 ( 15,820 ) 928,814 Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity $ 3,993,332 $ 3,259 $ 3,996,591 22. Quarterly Financial Information (Unaudited) The following table presents selected unaudited revised financial information for each of the four quarters during the year ended December 31, 2023. See Note 1 of the Notes included herein for additional information on the revision. There were no changes to previously issued cash flows generated from (used by) operating, investing, or financing activities for any of the impacted periods. The quarterly interim consolidated balance sheets were only impacted by the effects of the balance sheet adjustments noted above. For the three months ended March 31, 2023, we have included the line items that will be impacted by the correction of errors originally adjusted as out-of-period in the 2023 interim financial statements for the Consolidated Statements of Shareholders Equity. The impact to the Consolidated Statements of Shareholders Equity for the periods ended June 30, 2023 and September 30, 2023 have been reflected below within the Consolidated Statements of Comprehensive Income (Loss). 119 Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income (Loss) Q1 2023 Q2 2023 Q3 2023 Q4 2023 Revenue $ 622,444 $ 632,265 $ 617,573 $ 654,895 Cost of services 413,898 402,431 384,980 419,865 Income tax expense 236 437 4,324 35,560 Income (loss) before equity in earnings of non-consolidated affiliates ( 2,642 ) ( 4,749 ) 3,121 54,782 Net income (loss) ( 2,869 ) ( 4,965 ) 3,117 46,359 Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests 4,258 1,771 ( 2,464 ) ( 45,073 ) Net income (loss) attributable to Stagwell Inc. common shareholders 1,389 ( 3,194 ) 653 1,286 Earnings (Loss) Per Common Share Basic 0.01 ( 0.03 ) 0.01 0.01 Diluted 0.00 ( 0.03 ) 0.00 0.00 Other comprehensive income (loss) - foreign currency translation adjustment 4,447 2,945 ( 13,516 ) 14,120 Other comprehensive income (loss) 4,447 2,945 ( 13,516 ) 14,458 Comprehensive income (loss) for the period 1,578 ( 2,020 ) ( 10,399 ) 60,817 Comprehensive (income) loss attributable to the noncontrolling and redeemable noncontrolling interests 2,036 ( 1,158 ) 5,483 ( 53,792 ) Comprehensive income (loss) attributable to Stagwell Inc. common shareholders 3,614 ( 3,178 ) ( 4,916 ) 7,025 120 The impact of the revision on the previously issued unaudited quarterly financial information is as follows: Three Months Ended March 31, 2023 As reported Adjustment As revised Income tax expense $ 2,384 $ ( 2,148 ) $ 236 Loss before equity in earnings of non-consolidated affiliates ( 4,790 ) 2,148 ( 2,642 ) Net loss ( 5,017 ) 2,148 ( 2,869 ) Net loss attributable to noncontrolling and redeemable noncontrolling interests 5,460 ( 1,202 ) 4,258 Net income attributable to Stagwell Inc. common shareholders 443 946 1,389 Earnings (Loss) Per Common Share Basic 0.00 0.01 0.01 Diluted ( 0.01 ) 0.01 0.00 Other comprehensive income - foreign currency translation adjustment 4,425 22 4,447 Other comprehensive income 4,425 22 4,447 Comprehensive income (loss) for the period ( 592 ) 2,170 1,578 Comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests 26,723 ( 24,687 ) 2,036 Comprehensive income attributable to Stagwell Inc. common shareholders 26,131 ( 22,517 ) 3,614 Three Months Ended June 30, 2023 As reported Adjustment As revised Income tax expense $ 5,717 $ ( 5,280 ) $ 437 Loss before equity in earnings of non-consolidated affiliates ( 10,029 ) 5,280 ( 4,749 ) Net loss ( 10,245 ) 5,280 ( 4,965 ) Net loss attributable to noncontrolling and redeemable noncontrolling interests 5,552 ( 3,781 ) 1,771 Net loss attributable to Stagwell Inc. common shareholders ( 4,693 ) 1,499 ( 3,194 ) Loss Per Common Share Basic ( 0.04 ) 0.01 ( 0.03 ) Diluted ( 0.04 ) 0.01 ( 0.03 ) Other comprehensive income - foreign currency translation adjustment 2,938 7 2,945 Other comprehensive income 2,938 7 2,945 Comprehensive loss for the period ( 7,307 ) 5,287 ( 2,020 ) Comprehensive (income) loss attributable to the noncontrolling and redeemable noncontrolling interests 2,623 ( 3,781 ) ( 1,158 ) Comprehensive loss attributable to Stagwell Inc. common shareholders ( 4,684 ) 1,506 ( 3,178 ) 121 Six Months Ended June 30, 2023 As reported Adjustment As revised Income tax expense $ 8,101 $ ( 7,428 ) $ 673 Loss before equity in earnings of non-consolidated affiliates ( 14,819 ) 7,428 ( 7,391 ) Net loss ( 15,262 ) 7,428 ( 7,834 ) Net loss attributable to noncontrolling and redeemable noncontrolling interests 11,012 ( 4,983 ) 6,029 Net loss attributable to Stagwell Inc. common shareholders ( 4,250 ) 2,445 ( 1,805 ) Loss Per Common Share Basic ( 0.04 ) 0.03 ( 0.01 ) Diluted ( 0.04 ) 0.03 ( 0.01 ) Other comprehensive income - foreign currency translation adjustment 7,363 29 7,392 Other comprehensive income 7,363 29 7,392 Comprehensive loss for the period ( 7,899 ) 7,457 ( 442 ) Comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests 29,346 ( 28,468 ) 878 Comprehensive income attributable to Stagwell Inc. common shareholders 21,447 ( 21,011 ) 436 Nine Months Ended September 30, 2023 As reported Adjustment As revised Income tax expense $ 12,425 $ ( 7,428 ) $ 4,997 Loss before equity in earnings of non-consolidated affiliates ( 11,698 ) 7,428 ( 4,270 ) Net loss ( 12,145 ) 7,428 ( 4,717 ) Net loss attributable to noncontrolling and redeemable noncontrolling interests 8,548 ( 4,983 ) 3,565 Net loss attributable to Stagwell Inc. common shareholders ( 3,597 ) 2,445 ( 1,152 ) Loss Per Common Share Basic ( 0.03 ) 0.02 ( 0.01 ) Diluted ( 0.03 ) 0.02 ( 0.01 ) Other comprehensive loss - foreign currency translation adjustment ( 6,153 ) 29 ( 6,124 ) Other comprehensive loss ( 6,153 ) 29 ( 6,124 ) Comprehensive loss for the period ( 18,298 ) 7,457 ( 10,841 ) Comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests 34,829 ( 28,468 ) 6,361 Comprehensive income (loss) attributable to Stagwell Inc. common shareholders 16,531 ( 21,011 ) ( 4,480 ) 122 Consolidated Statements of Shareholders' Equity Three Months Ended March 31, 2023 As reported Adjustment As revised Net income attributable to Stagwell Inc. common shareholders $ 443 $ 946 $ 1,389 Net income (loss) attributable to Noncontrolling Interests ( 2,917 ) 1,202 ( 1,715 ) Other comprehensive income 25,688 ( 23,463 ) 2,225 Other comprehensive income (loss) attributable to Noncontrolling Interests ( 21,263 ) 23,485 2,222 Total other comprehensive income $ 4,425 $ 22 $ 4,447 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures Not Applicable.