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Item 7. Management’s Discussion and Analysis

2025-03-11 compared with 2024-03-11 · 222 added, 197 removed, 434 unchanged (49% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis are based on and should be read in conjunction with our Audited Consolidated Financial Statements and the notes thereto included elsewhere in this Form 10-K.

The following discussion and analysis contains forward-looking statements and should be read in conjunction with the disclosures and information contained and referenced under the captions “Forward-Looking Statements” and “Risk Factors” in this Form 10-K.

The following discussion and analysis also includes a discussion of certain non-GAAP financial measures.

Th e following discussion and analysis are based on and should be read in conjunction with our Audited Consolidated Financial Statements and the notes thereto included elsewhere in this Form 10-K.

The following discussion and analysis contain forward-looking statements and should be read in conjunction with the disclosures and information contained and referenced under the captions “Forward-Looking Statements” and “Risk Factors” in this Form 10-K.

The following discussion and analysis also include a discussion of certain non-GAAP financial measures.

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

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

In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” refer to Stagwell Inc.

and its direct and indirect subsidiaries.

References to a “fiscal year” mean the Company’s year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal 2024 means the period beginning January 1, 2024, and ending December 31, 2024).

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

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

Executive Summary

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Stagwell’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.

Stagwell’s differentiation lies in its creative roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients.

We believe Stagwell’s differentiation lies in its creative roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients.

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

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

Revision of Previously Issued Consolidated Financial Statem ents

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

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

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

Recent Developments

On 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.

On January 1, 2025, the Company entered into a stock purchase agreement to acquire ADK Group, an integrated marketing solutions company.

The purchase price is dependent on the closing balance sheet but is estimated to be approximately $24 million.

The acquisition is expected to close in the second quarter of 2025.

On December 23, 2024, the Company entered into a sale purchase agreement to acquire Create Group Holding Limited, a strategic digital communications group in Middle East, for approximately $16 million subject to post-closing adjustments.

Under the agreement, the sellers are entitled to contingent consideration up to a maximum value of approximately $24 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, par value $0.001 per share (the “ Class A Common Stock ” ) at the Company’s discretion.

The acquisition is expected to close in the second quarter of 2025.

Significant Factors Affecting our Business and Results of Operations

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

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

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

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

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

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

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

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

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common shareholders excluding non-operating income or expense to achieve operating income (loss), 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.

Other items primarily includes restructuring, certain system implementation and acquisition-related expenses.

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

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

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

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

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

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

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

All amounts are in dollars unless otherwise stated.

All amounts are in U.S.

dollars unless otherwise stated.

Amounts reported in millions herein are computed based on the amounts in thousands.

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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 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.

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.

All segments follow the same basis of presentation and accounting policies as those described throughout the Notes included herein.

The CODM uses Adjusted EBITDA (as defined above) 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.

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.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Audited Consolidated Financial Statements included herein and in Note 2 of the Notes to the Company’s Audited Consolidated Financial Statements included in this Form 10-K.

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

Corporate provides client and business development support to the networks as well as certain strategic resources, including accounting, administrative, financial, real estate, human resource and legal functions.

“Integrated Agencies Network,” “Brand Performance Network” and the “Communications Network.” The composition of these segments are as follows:

• The Integrated Agencies Network includes five operating segments:

the Anomaly Alliance, Constellation, the Doner Partner Network, Code and Theory Network, 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, Stagwell Marketing Cloud Group and Creativity & Communications.

The Brands included in the operating segments that comprise the Integrated Agencies Network reportable segment includes:

Anomaly Alliance (Anomaly, What’s Next Partners), Constellation (72andSunny, Crispin LLC, Colle McVoy, Hunter, Redscout, Team Enterprises, Harris Insights, Movers and Shakers, and Team Epiphany), the Doner Partner Network (Doner, KWT Global, Harris X, Veritas, Doner North, and Yamamoto), Code and Theory Network (Code and Theory, Instrument, Left Field Labs), and National Research Group.

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

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

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”) comprises 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, CPB International, Stagwell Production, Vitro, 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 comprises 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 includes Allison, SKDK, Targeted Victory, and Consulum.

The Company combines and discloses operating segments that do not meet the aggregation criteria and includes the elimination of certain intercompany services and revenue, within “All Other.” All Other consists of the Company’s “software as a service” (“SaaS”) and “data as a service” (“DaaS”) technology tools.

The Company reports corporate expenses as “Corporate.” 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.

The Company made changes to its internal management and reporting structure in the first quarter of 2024, resulting in a change to its reportable segments (Networks).

Specifically, certain agencies previously within the Brand Performance Network

are now in the Integrated Agencies Network.

Periods presented prior to the first quarter of 2024 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

The following discussion focuses on the operating performance of the Company for the years ended December 31, 2024, and 2023 and the financial condition of the Company as of December 31, 2024.

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

37,723 91,069

Income tax expense 13,182 40,557

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24,541 50,512

Equity in (loss) of non-consolidated affiliates

Equity in income (loss) of non-consolidated affiliates

25,044 41,642

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

Net income attributable to noncontrolling and redeemable noncontrolling interests

(22,785) (41,508)

Net income attributable to Stagwell Inc.

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Depreciation and amortization 151,652 142,831 8,821 6.2 %

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

Deferred acquisition consideration 22,995 13,060 9,935 76.1 %

Impairment and other losses 1,715 11,395 (9,680) (84.9) %

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

Other items, net 49,196 45,147 4,049 9.0 %

Operating Income (1)

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common shareholders.

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

Revenue for the year ended December 31, 2024 was $2,841.2 million, compared to $2,527.2 million for the year ended December 31, 2023, an increase of $314.0 million.

The components of the fluctuations in net revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023, were as follows:

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Communications Network 245,261 (28) 22,177 66,385 88,534 333,795 27.1% 36.1%

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

All Other 46,585 (984) (609) (6,108) (7,701) 38,884 (13.1)% (16.5)%

$2,152,454 $1,434 $31,028 $111,746 $144,208 $2,296,662 5.2% 6.7%

Component % change 0.1% 1.4% 5.2% 6.7%

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

Overall, the macroeconomic uncertainty challenged the industry in 2023.

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

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

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

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

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

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

For the year ended December 31, 2024, organic net revenue increased $111.7 million, or 5.2%.

The increase was primarily attributable to new wins and increased spending by clients in the retail, technology, and consumer products sectors.

This increase was further driven by new wins and increased revenue in the public affairs sector as a result of the current political campaign year.

This increase was partially offset by losses and a decrease in client spending due to budget cuts in the business services sector.

The increase in net acquisitions (divestitures) was impacted by acquisitions and dispositions, including the acquisitions of Team Epiphany, LLC (“Epiphany”), Movers and Shakers LLC (“Movers and Shakers”), Left Field Labs LLC (“Left Field Labs”), What’s Next Partners (“WNP”), Huskies, Ltd.

(“Huskies”), PROS Agency (“PROS”), Sidekick Live Limited (“Sidekick”), Consulum (Cayman) Limited (“Consulum”), and L.D.R.S.

(“Leaders”), partially offset by the sale of ConcentricLife (“Concentric”) in the fourth quarter of 2023 and the derecognition of a certain noncontrolling interest in the first quarter of 2024.

The geographic mix in net revenues for the year ended December 31, 2024 and 2023 was as follows:

Year Ended December 31,

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Total $ 2,296,662 $ 2,152,454

Impairment and Other Losses

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

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

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

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

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

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

Operating Income

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

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

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

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

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

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

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

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

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

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

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

Gain on Sale of Business

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

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

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

Foreign Exchange, Net

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

dollar strengthening against the Euro and British Pound.

Operating Income for the year ended December 31, 2024, was $133.1 million, compared to $90.5 million for the year ended December 31, 2023, representing an increase of $42.5 million.

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

The increase in Cost of services was primarily attributable to higher billable costs and staff costs, commensurate with the increase in revenue as well as the inclusion of costs from acquired entities.

The increase in Office and general expenses was primarily attributable to an increase in staff costs, commensurate with the increase in revenue, the inclusion of costs from acquired entities and an increase in deferred acquisition consideration, partially offset by a decrease in stock-based compensation.

Stock-based compensation decreased $5.0 million, primarily due to a decrease in the fair value and number of awards, partially offset by an increase in the fair value of profits interest awards.

Deferred acquisition consideration increased $9.9 million, primarily attributable to acquisitions, the change in the fair value of certain obligations, as well as the earn out period of certain brands ending during 2024.

Depreciation and amortization increased $8.8 million, primarily attributable to the Company’s acquisitions of businesses and the acceleration of amortization of certain tradenames during the year ended December 31, 2024, as the Company ceased use of these Brand names.

Impairment and other losses for the year ended December 31, 2024 was $1.7 million.

This was attributable to charges to reduce the carrying value of right-of-use lease assets and related leasehold improvements within the Integrated Agencies Network and Corporate.

Impairment and other losses for the year ended December 31, 2023 was $11.4 million, primarily related to the impairment of right-of-use lease assets totaling $6.9 million and the associated leasehold improvements totaling $3.1 million.

Interest Expense, Net

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

Income Tax Expense

Interest expense, net for the year ended December 31, 2024 was $92.3 million, compared to $90.6 million for the year ended December 31, 2023, an increase of $1.7 million, primarily attributable to higher levels of debt outstanding under the Credit Agreement (as defined and discussed in Note 11 of the Notes to the Audited Consolidated Financial Statements included herein), and a higher interest rate on amounts outstanding under the Credit Agreement.

Foreign Exchange, Net

The foreign exchange loss for the year ended December 31, 2024, was $1.7 million, compared to a loss of $3.0 million for the year ended December 31, 2023, primarily attributable to the movement in the British Pound.

Gain on Sale of Business

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

Other, net for the year ended December 31, 2024 was an expense of $1.4 million, compared to an expense of $0.4 million for the year ended December 31, 2023.

I ncome Tax Expense

The Company had an income tax expense for the year ended December 31, 2024 of $13.2 million (on a pre-tax income of $37.7 million resulting in an effective tax rate of 34.9%), compared to income tax expense of $40.6 million (on pre-tax income of $91.1 million resulting in an effective tax rate of 44.5%) for the year ended December 31, 2023.

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

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

The difference in the effective tax rate of 34.9% in the year ended December 31, 2024, compared to 44.5% in the year ended December 31, 2023, is primarily due to a decrease on gain related to sale of business, and a change in prior period adjustments offset by an increase in foreign tax and a reduction in tax benefits for share based compensation

Noncontrolling and Redeemable Noncontrolling Interests

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

$11.4 million.

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

The effect of noncontrolling and redeemable noncontrolling interests for the year ended December 31, 2024 was income of $22.8 million, compared to an income of $41.5 million for the year ended December 31, 2023.

The amounts are driven by the mix of income and loss derived from entities not entirely owned by the Company.

Net Income (Loss) Attributable to Stagwell Inc.

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common shareholders for the year ended December 31, 2024, was $2.3 million, compared to net income of $0.1 million for the year ended December 31, 2023.

Earnings (Loss) Per Share

Earnings Per Share

Diluted EPS and Adjusted Diluted EPS for the year ended December 31, 2024, were as follows:

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$ 0.02 $ 0.77

Adjustments to Net Income (loss) (1)

Adjustments to Net Income

Amortization $ 122,442

Impairment and other losses 1,715

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Deferred acquisition consideration 22,995

Gain on sale of business

Other items, net 49,196

Adjusted tax expense (61,308)

Net loss attributable to Class C shareholders 39,066

Net income attributable to Class C shareholders

Allocation of adjustments to Net income

Net income attributable to Stagwell Inc.

common shareholders $ 52,712

Net income attributable to Class C shareholders 67,087

common shareholders - add-backs $ 80,403

Net income attributable to Class C shareholders - add-backs 106,798

Net income attributable to Class C shareholders 17,144

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common shareholders

$ 134 $ 52,712 $ 52,846

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

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and Class C and adjusted net income

$ 134 $ 158,865 $ 158,999

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

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Diluted EPS and Adjusted Diluted EPS (1)

Adjustments to Net income (loss) (1)

Adjustments to Net income

Impairment and other losses 11,395

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Deferred acquisition consideration 13,060

Gain on sale of business (94,505)

Other items, net 45,147

Adjusted tax expense

Net income attributable to Class C shareholders

Allocation of adjustments to Net income

Net income attributable to Stagwell Inc.

common shareholders - add-backs $ 52,712

Net income to attributable to Class C shareholders - add-backs 67,087

Net income attributable to Class C shareholders

Net income attributable to Stagwell Inc.

common shareholders $ 158,865

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

Adjusted EBITDA

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

Adjusted EBITDA for the year ended December 31, 2024, was $410.8 million, compared to $360.1 million for the year ended December 31, 2023, representing an increase of $50.6 million, primarily driven by an increase in Operating Income, as discussed above.

Integrated Agencies Network

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Adjusted EBITDA 279,002 269,558 9,444 3.5 %

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

Stock-based compensation 27,253 27,485 (232) (0.8) %

Depreciation and amortization 78,076 81,957 (3,881) (4.7) %

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Impairment and other losses 1,500 11,299 (9,799) (86.7) %

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

Other items, net 20,592 20,225 367 1.8 %

Operating Income $ 138,291 $ 116,661 $ 21,630 18.5 %

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

Revenue for the year ended December 31, 2024 was $1,535.4 million, compared to $1,418.7 million for the year ended December 31, 2023, an increase of $116.7 million.

The components of the fluctuations in net revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023, were as follows:

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Component % change —% 0.6% 2.6% 3.2%

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

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

The increase in organic net revenue was primarily attributable to new client wins and higher spending in the technology and retail sectors, partially offset by budget cuts and client losses in the food and beverage and business services sectors.

The increase in net acquisitions (divestitures) was primarily driven by acquisitions and dispositions, including the acquisitions of Epiphany, Movers and Shakers, Left Field Labs, and WNP, partially offset by the sale of Concentric in the fourth quarter of 2023.

Operating Income

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

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

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

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

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

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

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

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

Operating Income for the year ended December 31, 2024, was $138.3 million, compared to $116.7 million for the year ended December 31, 2023, representing an increase of $21.6 million.

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

The increase in Cost of sales was primarily attributable to higher billable costs and staff costs, commensurate with the increase in revenue as well as the inclusion of costs from acquired entities.

The increase in Office and general expenses was primarily attributable to an increase in staff and other business development related costs, commensurate with the increase in revenue, as well as the inclusion of costs from acquired entities.

Deferred acquisition consideration increased $1.4 million, primarily attributable to the Company’s acquisitions.

Impairment and other losses for the year ended December 31, 2024 was $1.5 million.

This was attributable to a charge to reduce the carrying value of a right-of-use lease asset and related leasehold improvements.

Impairment and other losses for the year ended December 31, 2023, was $11.3 million, primarily related to right-of-use lease assets totaling $6.8 million and the associated leasehold improvements totaling $3.1 million.

Depreciation and amortization decreased $3.9 million, primarily attributable to the acceleration of amortization of a tradename in the third quarter of 2023.

As a result, amortization expense of $3.1 million was recorded in the year ended December 31, 2023, representing the remaining amortization expense associated with this tradename.

Adjusted EBITDA increased $9.4 million, primarily driven by an increase in Revenue, partially offset by an increase in expenses, as discussed above.

Brand Performance Network

10 unchanged sentences

$ 710,375 $ 685,002 $ 25,373 3.7 %

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

Operating Income $ 41,509 $ 43,172 $ (1,663) (3.9) %

Year Ended December 31,

11 unchanged sentences

Depreciation and amortization 34,595 33,250 1,345 4.0 %

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

Deferred acquisition consideration (7,744) 2,851 (10,595) NM

Impairment and other losses — 96 (96) (100.0) %

Other items, net 19,536 12,206 7,330 60.1 %

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

Operating Income $ 41,509 $ 43,172 $ (1,663) (3.9) %

Revenue for the year ended December 31, 2024, was $751.9 million, compared to $728.2 million for the year ended December 31, 2023, an increase of $23.7 million.

5 unchanged sentences

Component % change 0.4% 0.4% 3.0% 3.7%

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

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

The increase in organic net revenue was primarily attributable to new clients and increased spending by existing clients in the consumer products and food and beverage sectors.

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

Operating Income

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

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

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

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

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

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

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

Operating Income for the year ended December 31, 2024, was $41.5 million, compared to $43.2 million for the year ended December 31, 2023, representing a decrease of $1.7 million, primarily attributable to an increase in Cost of services and Office and general expenses, partially offset by an increase in Revenue.

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

The increase in Office and general expenses was primarily attributable to an increase in staff costs, commensurate with the increase in revenue, partially offset by a decrease in deferred acquisition consideration.

Deferred acquisition consideration decreased $10.6 million, primarily attributable to a reduction in the fair value of the deferred acquisition consideration liabilities associated with certain Brands.

Adjusted EBITDA decreased $2.9 million, primarily driven by an increase in Revenue, more than offset by an increase in expenses, as discussed above.

Communications Network

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$ 437,786 $ 297,803 $ 139,983 47.0 %

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

Operating Income $ 77,354 $ 35,904 $ 41,450 NM

Year Ended December 31,

2 unchanged sentences

Net Revenue $ 333,795 $ 245,261 $ 88,534 36.1 %

Billable costs 88,446 141,808 (53,362) (37.6) %

Billable costs 181,345 88,446 92,899 NM

Revenue 515,140 333,707 181,433 54.4 %

Billable costs 88,446 141,808 (53,362) (37.6) %

Billable costs 181,345 88,446 92,899 NM

Staff costs 177,629 159,165 18,464 11.6 %

Administrative costs 37,057 33,664 3,393 10.1 %

Unbillable and other costs, net 613 427 186 43.6 %

Adjusted EBITDA 51,819 87,032 (35,213) (40.5) %

Unbillable and other costs, net 2,235 613 1,622 NM

Adjusted EBITDA 116,874 51,819 65,055 NM

Stock-based compensation 3,374 3,334 40 1.2 %

1 unchanged sentence

Deferred acquisition consideration 18,770 30 18,740 NM

Other items, net 1,535 883 652 73.8 %

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

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

Other items, net 3,250 1,535 1,715 NM

Operating Income $ 77,354 $ 35,904 $ 41,450 NM

Revenue for the year ended December 31, 2024 was $515.1 million, compared to $333.7 million for the year ended December 31, 2023, an increase of $181.4 million.

The components of the fluctuations in net revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023, were as follows:

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Component % change —% 9.0% 27.1% 36.1%

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

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

The increase in organic net revenue was primarily attributable to new clients and increased spending in the retail and public affairs sectors.

The public affairs sector gained new clients and increased spending as a result of the current political campaign year.

The increase in net acquisitions (divestitures) was primarily driven by the acquisitions of PROS, Sidekick, and Consulum.

Operating Income

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

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

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

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

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

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

Operating Income for the year ended December 31, 2024, was $77.4 million, compared to $35.9 million for the year ended December 31, 2023, representing an increase of $41.5 million.

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

The increase in Cost of services was primarily attributable to an increase in billable costs and staff cost, commensurate with higher revenue as well as the inclusion of costs from acquired entities.

The increase in Office and general expenses was primarily attributable to an increase in deferred acquisition consideration as well as the inclusion of costs from acquired entities.

Deferred acquisition consideration increased $18.7 million, primarily attributable to an increase in the fair value of a certain obligation.

Adjusted EBITDA increased $65.1 million, primarily driven by an increase in Revenue, partially offset by an increase in expenses, as discussed above.

The components of operating results for the year ended December 31, 2024, compared to the year ended December 31, 2023 were as follows:

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(dollars in thousands)

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

Revenue $ 38,747 $ 46,585 $ (7,838) (16.8) %

Operating Expenses

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

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

Cost of services 25,588 32,484 (6,896) (21.2) %

Office and general expenses 29,453 24,648 4,805 19.5 %

Depreciation and amortization 12,718 8,390 4,328 51.6 %

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

$ 67,759 $ 65,522 $ 2,237 3.4 %

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(dollars in thousands)

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

46,585 19,962 26,623 NM

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

Net Revenue $ 38,884 $ 46,585 $ (7,701) (16.5) %

Billable costs (137) — (137) (100.0) %

38,747 46,585 (7,838) (16.8) %

Billable costs (137) — (137) (100.0) %

Staff costs 34,999 37,416 (2,417) (6.5) %

Administrative costs (1)

6,139 4,689 1,450 30.9 %

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

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

Stock-based compensation 518 41 477 NM

Unbillable and other costs, net 13,570 15,087 (1,517) (10.1) %

Adjusted EBITDA (15,824) (10,607) (5,217) 49.2 %

Stock-based compensation 904 518 386 74.5 %

Depreciation and amortization 12,718 8,390 4,328 51.6 %

Deferred acquisition consideration (1,321) (1,752) 431 (24.6) %

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

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

Other items, net 887 1,174 (287) (24.4) %

Operating Loss $ (29,012) $ (18,937) $ (10,075) 53.2 %

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

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

(1) All Other Revenue and Administrative costs include approximately $8 million and $6 million of eliminations of intercompany services for the years ended December 31, 2024, and 2023, respectively.

Revenue for the year ended December 31, 2024, was $38.7 million, compared to $46.6 million for the year ended December 31, 2023, a decrease of $7.8 million.

The components of the fluctuations in net revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023, were as follows:

2 unchanged sentences

(dollars in thousands)

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

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

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

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

All Other $46,585 $(984) $(609) $(6,108) $(7,701) $38,884 (13.1)% (16.5)%

Component % change (2.1)% (1.3)% (13.1)% (16.5)%

The decrease in organic net revenue was primarily attributable to budget cuts and client losses from clients in the food and beverage, travel and transportation, consumer products, healthcare, and financial services sectors.

The decrease in net acquisitions (divestitures) was primarily driven by the acquisition of Leaders, offset by the derecognition of a certain noncontrolling interest in the first quarter of 2024.

Operating Loss

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

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

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

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

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

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

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

Operating Loss for the year ended December 31, 2024, was $29.0 million, compared to $18.9 million for the year ended December 31, 2023, representing an increase of $10.1 million.

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

The decrease in Cost of Services was primarily attributable to lower unbillable costs and staff costs, commensurate with lower revenue.

The increase in Office and general expenses was primarily attributable to an increase in staff costs as a result of a change in the organization structure of certain Brands.

Depreciation and amortization increased $4.3 million, primarily attributable to the acceleration of amortization of certain tradenames.

As a result, amortization expense of $2.8 million was recorded in the year ended December 31, 2024, representing the remaining amortization expense associated with these tradenames.

Adjusted EBITDA decreased $5.2 million, primarily driven by a decrease in Revenue, offset by a decrease in expenses, as discussed above.

The components of operating results for the year ended December 31, 2024, compared to the year ended December 31, 2023 were as follows:

7 unchanged sentences

Depreciation and amortization 12,137 8,218 3,919 47.7 %

Impairment and other losses 215 — 215 100.0 %

Other items, net 4,931 10,007 (5,076) (50.7) %

1 unchanged sentence

Operating Loss for the year ended December 31, 2024, was $95.1 million, compared to $86.3 million for the year ended December 31, 2023, representing an increase of $8.8 million.

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

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

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

The increase in Operating Loss was primarily attributable to an increase in Staff costs, partially offset by a decrease in Stock-based compensation.

Staff costs increased $10.8 million, primarily as a result of an increase in headcount, higher health insurance costs and a reduction in bonus expense in 2023 related to cost savings initiatives.

Stock-based compensation expense decreased $6.0 million, primarily attributable to a decrease in the fair value and number of awards.

Liquidity and Capital Resources:

3 unchanged sentences

Net cash provided by operating activities $ 142,859 $ 81,007

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

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

Net cash (used in) provided by investing activities (162,472) 155,951

Net cash provided by (used in) financing activities 36,938 (339,864)

The Company had cash and cash equivalents of $131.3 million and $119.7 million as of December 31, 2024, and December 31, 2023, respectively.

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

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

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

The Credit Agreement provides revolving commitments of up to $640.0 million and permits restricted payments for share repurchases or redemptions from certain of its stockholders in an aggregate principal amount of up to $150.0 million.

As of December 31, 2024, the Company had $264.0 million of borrowings outstanding and $15.3 million of issued and undrawn letters of credit resulting in $360.7 million unused amount under the Credit Agreement.

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

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

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

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

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

The trade receivables transferred to the third parties were $435.6 million, $393.9 million, and $176.5 million, during the years ended December 31, 2024, 2023, and 2022, respectively.

The amount collected and due to the third parties under these arrangements was $19.5 million as of December 31, 2024, $1.8 million as of December 31, 2023, and $5.7 million as of December 31, 2022.

Fees for these arrangements were recorded in Office and general expenses in the Consolidated Statements of Operations and totaled $5.8 million, $5.4 million, and $1.8 million for the years ended December 31, 2024, 2023, and 2022, respectively.

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

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

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

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

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

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

On November 6, 2024, the Board authorized an extension and a $125.0 million increase in the size of our Repurchase Program.

Under the Repurchase Program, as amended, we may repurchase up to an aggregate of $375.0 million of shares of our outstanding Class A Common Stock, with any previous purchases under the Repurchase Program continuing to count against that limit.

The Repurchase Program will expire on November 6, 2027.

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.

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

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

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

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

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

During the year ended December 31, 2024, 14.8 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an average price of $6.31 per share, for an aggregate value, excluding fees, of $93.5 million.

The repurchased shares included 4 million shares of Class A Common Stock repurchased from certain affiliates of The Goldman Sachs Group, Inc.

at a price of $6.34 per share, for an aggregate purchase price of $25.4 million.

The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $169.9 million as of December 31, 2024.

The Company expects to make estimated cash payments in the future to satisfy obligations under our

Tax Receivables Agreement with Stagwell Media LP and OpCo (“TRA”) (see Note 17 of the Notes included herein for additional details).

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

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

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

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

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

1 unchanged sentence

Cash flows provided by operating activities for the year ended December 31, 2024 were $142.9 million, primarily driven by earnings, partially offset by unfavorable working capital requirements, including the timing of media supplier payments.

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

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

Investing Activities

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

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

Cash flows used in investing activities were $162.5 million for the year ended December 31, 2024, primarily driven by $35.1 million in capitalized software spend, $18.9 million in capital expenditures, and $103.3 million for acquisitions, net of cash acquired.

Financing Activities

During the year ended December 31, 2024, cash flows provided by financing activities were $36.9 million, primarily driven by $205.0 million in net proceeds under the Credit Agreement, partially offset by shares repurchased and cancelled of $108.2 million, payments of deferred consideration of $29.8 million, and distributions to noncontrolling interests of $26.7 million.

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

During the year ended December 31, 2022, cash flows used in financing activities were $186.7 million, primarily driven by $63.2 million of deferred acquisition consideration payments, $39.2 million of distributions to noncontrolling interests, $70.3 million in shares repurchased and cancelled.

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

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

Debt, net of debt issuance costs, as of December 31, 2024, was $1,353.6 million, compared to $1,145.8 million outstanding as of December 31, 2023.

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

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

2 unchanged sentences

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

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

For the period ended December 31, 2024, the Company’s calculation of this ratio,

and the maximum permitted under the Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:

December 31, 2024

3 unchanged sentences

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

They are presented here to demonstrate compliance with the

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

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

Material Cash Requirements

The Company’s Brands enter into contractual commitments with media providers and agreements with production companies on behalf of its clients at levels that exceed the revenue from services.

Some of our Brands purchase media for clients and act as an agent for a disclosed principal.

The Company’s Brands enter into contractual commitments with media providers and agreements with production companies on behalf of their clients at levels that exceed the revenue from services.

Some of our Brands purchase media for clients and act as an agent for a disclosed principle.

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

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The risk of a material loss could significantly increase in periods of severe economic downturn.

The following table summarizes current and long-term requirements as of December 31, 2023.

Management anticipates that the obligations outstanding at December 31, 2023 will be repaid with new financing, equity offerings, asset sales and/or cash flow from operations:

The following table and discussion below summarize current and long-term material cash requirements of the Company.

Certain of these requirements vary in the ultimate future amount payable because they are dependent on the future results of operations of the subject subsidiaries and/or the timing of when certain rights are exercised.

Management anticipates it will finance these requirements using available cash from operations, borrowings under the Credit Agreement (or any refinancings thereof), and, if necessary, through the incurrence of additional debt and/or issuance of additional equity.

Payments Due by Period

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Operating lease obligations (2)

360,906 75,646 118,862 94,246 72,152

Interest on debt 309,375 61,875 123,750 123,750 —

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

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

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

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

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

(2) As of December 31, 2024, the Company had entered into one operating lease for which the commencement date had not yet occurred because the premises is being prepared for occupancy by the landlord.

Accordingly, this one lease represents an obligation of the Company that is not reflected within the Consolidated Balance Sheets as of December 31, 2024.

The aggregate future liability related to this lease was $0.1 million.

(3) Deferred acquisition consideration on the Consolidated Balance Sheets consists of deferred obligations related to contingent purchase price payments.

The 63.7 million reflected in the above table is included in the Consolidated Balance Sheet as of December 31, 2024, and does not include $38.4 million expected to be paid in shares of Class A Common Stock.

In addition, certain of the Company’s deferred acquisition consideration is tied to continued employment of certain personnel of the acquired subsidiaries.

These arrangements are expensed over the respective vesting period (employment) period and therefore the expected, entire amount of payment is not reflected in the Consolidated Balance Sheet as of December 31, 2024 The Company estimates that the total amount to be paid related to such obligations was $52.1 million as of December 31, 2024, of which $27.7 million is expected to be paid in cash and the remaining in Company’s Class A Common Stock.

The total amount of cash expected to be paid in the next twelve months related to these arrangements was $0.4 million.

See Note 9 of the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information regarding contingent deferred acquisition consideration.

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 incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity.

See Note 13 of the Notes included herein for additional information regarding noncontrolling interests and redeemable noncontrolling interests.

See Note 13 of the Notes included in Item 8 of this Form 10-K for additional information regarding noncontrolling interests and redeemable noncontrolling interests.

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

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

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

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

The awards generally provide the employee with 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.

The Company enters into certain long-term non-cancellable contracts for services such as revenue or profit share arrangements, cloud-based services, or software licensing.

See Note 14 of the Notes included in Item 8 of this Form 10-K for additional information regarding these material commitments.

Critical Accounting Estimates

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

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

At each reporting date, the Company models each business’ future performance, including revenue, 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.

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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 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 exercise of significant judgement about 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.

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

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

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

Income Taxes.

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New Accounting Pronouncements

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

See Note 3 of the Notes included in Item 8 of this Form 10-K.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis