What changed in this filing

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Item 9A. Controls and Procedures

2025-03-11 compared with 2024-03-11 · 42 added, 65 removed, 210 unchanged (34% of the section changed)

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Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”), who is our principal executive officer, and Chief Financial Officer (“CFO”), who is our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”), who is our principal executive officer, and Chief Financial Officer (“CFO”), who is our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

We conducted an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rules 13a-15(b) and 15d-15(b) of the Exchange Act.

Based on that evaluation, and in light of the unremediated material weaknesses identified in our internal control over financial reporting described below, our CEO and CFO concluded that, as of December 31, 2 023, our disclosure controls and procedures were not effective.

Notwithstanding the conclusion by our CEO and CFO that our disclosure controls and procedures were not effective as of December 31, 2023, management has concluded that the consolidated financial statements and related financial information included in this Form 10-K fairly present in all material respects our financial condition, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with GAAP.

Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2024.

Management’s Report on Internal Control Over Financial Reporting

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Our management, under the supervision of and with the participation of the CEO and CFO, assessed the effectiveness of our internal control over financial reporting as of December 31, 2024 using the criteria set forth in Internal Control-Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment, our management concluded that our internal control over financial reporting was not effective as of December 31, 2023, because of the existing material weaknesses described below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management identified material weaknesses in our internal control over financial reporting as follows:

• We lacked a sufficient complement of resources with an appropriate level of accounting knowledge, experience and training to (i) appropriately analyze, record and disclose accounting matters timely and accurately, and (ii) perform effective processes and controls.

• We did not design and maintain an effective risk assessment process at a precise enough level to (i) identify, assess, and communicate appropriate control objectives, (ii) identify and analyze risks to achieve these control objectives, and (iii) identify and assess changes in the business that could result in new and evolving risks of material misstatement in the consolidated financial statements.

• We did not design and maintain effective controls over information and communication relating to communicating accurate information internally and externally, including providing information pursuant to objectives, responsibilities, and functions of internal control.

• We did not design and maintain effective monitoring controls to ascertain whether the components of internal control are present and functioning.

These material weaknesses contributed to the following additional material weaknesses:

• We did not design and maintain effective control activities that address relevant risks at the appropriate level of precision to identify all potential material misstatements and retain sufficient evidence of the performance 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.

These existing material weaknesses failed to prevent or detect misstatements requiring adjustments to our income tax expense and related accounts, accumulated other comprehensive loss, noncontrolling interest and related disclosures for each of the interim periods of 2023 and resulted in the revision of the Company ’ s consolidated financial statements for the annual period of 2022.

These material weaknesses also resulted in immaterial adjustments to multiple accounts and related disclosures for the annual and each of the interim periods of 2023.

Additionally, these material weaknesses could result in material misstatements to the annual or interim consolidated financial statements that would not be prevented or detected.

Based on this assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2024.

We excluded Unicepta and Consulum from our assessment of internal control over financial reporting as of December 31, 2024 because they were acquired in business combinations during 2024.

The combined total assets and total revenues of these acquired businesses represent less than 2% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2024.

The effectiveness of our internal control over financial reporting as of December 31, 2024, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 8 of this Form 10-K.

Remediation Plan for Unremediated Material Weaknesses

While management, under the leadership of our CFO, has improved our internal control over financial reporting throughout the fiscal year ended December 31, 2023, additional time and effort is required to fully complete the remediation activities.

We continue to believe these actions will be effective in the remediation of the material weaknesses, but these activities currently remain ongoing.

• We continued our enhanced communications with the Audit Committee of the Board of Directors for increased oversight.

The Company also formally reports quarterly to the Audit Committee regarding progress against the remediation plan.

We intend to further enhance our risk assessment process to identify potential risks related to the ongoing performance of controls.

The risk assessment is regularly updated for new entities and changes in risk profile.

• Based on our assessment of the current state of the system of internal control at the consolidated and brand levels, we enhanced existing business processes and control activities and assessed the adequacy of resources.

Additional time is needed to make the required changes to our resourcing to facilitate effective operation of the controls.

• We implemented new controls and enhanced existing controls 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 function.

• We redesigned and strengthened control activities over account reconciliations including enhanced review and approval controls.

• We designed and enhanced management review controls to improve monitoring of internal control over financial reporting.

• We also formalized internal control policies and procedures and conducted multiple in-depth training sessions with control owners throughout the Company.

During the twelve months ended December 31, 2023, management evaluated its processes and internal control over financial reporting, remediated gaps in the design of internal controls and performed operating effectiveness testing.

However, additional time and effort is required to fully achieve operating effectiveness of the internal controls as well as ensure the related sufficiency of resources to maintain the operating effectiveness.

We will consider the above material weaknesses to be fully remediated once the applicable controls operate for a sufficient period and our management has concluded, through testing, that these controls are operating effectively.

In addition, as we continue to monitor the effectiveness of our internal control over financial reporting, we may perform additional internal control changes as necessary.

Remediation of Previously Disclosed Material Weaknesses

As previously reported in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, management identified the following material weaknesses in our internal control over financial reporting, which were remediated as of December 31, 2023:

• We did not effectively select and develop certain information technology (“IT”) general controls related to access and change management controls.

In 2022, our management developed a comprehensive remediation plan and began to execute this plan to remediate the material weaknesses described above.

During the year ended December 31, 2023, we implemented several measures, which included the following:

• Designed and implemented new controls and enhanced existing controls across our information technology environment including general controls related to access and change management, and centralized numerous IT controls.

We also retired IT systems by continuing to deploy the new enterprise resource planning and human resource information systems.

As of December 31, 2023, management determined the enhancements to controls noted above have been in place for a sufficient period of time and concluded, through testing, that the material weaknesses identified above had been remediated.

As previously disclosed in Part II, “Item 9A – Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2023, management had identified material weaknesses in our internal control over financial reporting as of December 31, 2023.

Management, with the oversight of our Audit Committee, implemented several enhancements to internal control over financial reporting throughout 2024 in order to remediate the material weaknesses, including those noted below:

• We increased the number of and realigned personnel with the requisite levels of accounting knowledge, experience, and training in finance and accounting functions.

• We designed and implemented controls over our risk assessment process that include detailed qualitative and quantitative factors to identify and assess risks and implement or modify controls in response to those risks, including potential risks related to the ongoing performance of controls at both the agency and consolidated Company-level.

• We improved existing controls across business processes covering significant accounts, including controls over the review of journal entries and account reconciliations and income tax controls.

• We enhanced agency and Company-level management review controls to improve monitoring of internal control over financial reporting.

• We created and operationalized a new compliance function, whose objective is to provide continuous monitoring and improvement of internal controls at our agencies.

• We formalized internal control policies and procedures and conducted multiple in-depth training and coaching sessions with control owners throughout the Company.

As of December 31, 2024, management determined that the enhancements to controls, including those noted above, have been in place and operating for a sufficient period of time and concluded, through testing, that the material weaknesses have been remediated.

Changes in Internal Control Over Financial Reporting

Other than as described above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a15(f) and 15d15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

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Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected.

These inherent limitations include the realities that judgments in decision

making can be faulty, and that breakdowns can occur because of a simple error or mistake.

These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

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There is no family relationship among any of the executive officers or directors.

Penn joined MDC in March 2019 and currently serves as Chairman of the Board and Chief Executive Officer.

Penn joined MDC in March 2019, prior to the business combination that formed the Company, and currently serves as Chairman of the Board and Chief Executive Officer.

Penn has also been the Managing Partner and President of The Stagwell Group, a private equity fund that invests in digital marketing services companies, since its formation in 2015.

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Penn served as Microsoft’s Executive Vice President and Chief Strategy Officer and held Chief Executive Officer position in multiple strategic public relation firms.

Leveton joined the Company in August 2021 as President.

Prior to joining Stagwell Inc., Mr.

Leveton joined the Company in August 2021, prior to the business combination that formed the Company, as President.

Prior to joining MDC, Mr.

Leveton served as a Partner of The Stagwell Group, where he was responsible for sourcing, integrating and scaling Stagwell’s portfolio of companies, since July 2015.

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Leveton has more than 20 years of leadership experience in marketing communications services and extensive experience in high-level political and corporate market research.

Lanuto joined MDC in June 2019 as Chief Financial Officer.

Prior to joining Stagwell Inc., Mr.

Lanuto joined MDC in June 2019, prior to the business combination that formed the Company, as Chief Financial Officer.

Prior to joining MDC, Mr.

Lanuto served as Vice President, Corporate Controller at Movado Group, Inc.

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Previously, Mr.

Greene served as a Financial Management Consultant at MorganFranklin Consulting from October 2013 to September 2015, where he serviced clients across

a variety of industries, including advertising technology, healthcare, financial services, and defense contractors, in connection with initial public offerings, mergers and acquisitions and business process reengineering.

Greene served as a Financial Management Consultant at MorganFranklin Consulting from October 2013 to September 2015, where he serviced clients across a variety of industries, including advertising technology, healthcare, financial services, and defense contractors, in connection with initial public offerings, mergers and acquisitions and business process reengineering.

Prior to MorganFranklin, Mr.

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Greene held corporate finance and operations roles with Ernst & Young LLP, B|Com3 (acquired by Publicis Groupe), and Arthur Andersen, where he was employed in the Technology, Media and Telecom group.

McElligott joined MDC in March 2021 and became our General Counsel in February 2022.

Prior to joining Stagwell Inc., Mr.

McElligott joined MDC in March 2021, prior to the business combination that formed the Company, and became our General Counsel in February 2022.

Prior to joining MDC., Mr.

McElligott served as General Counsel of RapidSOS, Inc.

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McElligott started his legal career as a clerk for Judge James Loken on the 8th Circuit Court of Appeals.

DiMaggio joined MDC in 2018 as Chief Accounting Officer.

Prior to joining Stagwell Inc., he served as the Senior Vice President, Global Controller & Chief Accounting Officer at Endeavor, from 2017 to 2018.

DiMaggio joined MDC in 2018, prior to the business combination that formed the Company, as Chief Accounting Officer.

Prior to joining MDC, he served as the Senior Vice President, Global Controller & Chief Accounting Officer at Endeavor, from 2017 to 2018.

Prior thereto, he worked at Viacom Inc.

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The Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, certain provisions of the Code of Conduct that apply to its principal executive officer, principal financial officer and principal accounting officer by posting such information on its website, at the address and location specified above.

Insider Trading Policy

The Company has adopted an Insider Trading Policy governing the purchase, sale and other dispositions of Company securities that applies to our directors, officers, all other employees, consultants to and contractors.

We also follow certain procedures for the repurchase of our securities.

We believe that our Insider Trading Policy and repurchase procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to us.

A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Form 10-K.

Executive Compensation

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(dollars in thousands)

Column A Column B Column C Column D Column E Column F

Description Balance at Beginning of Period Charged to Costs and Expenses Removal of Uncollectible Receivables Translation Adjustments Increase (Decrease) Balance at End of Period

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(dollars in thousands)

Column A Column B Column C Column D Column E Column F

Description Balance at Beginning of Period Charged to Costs and Expenses Other Translation Adjustments Increase (Decrease) Balance at End of Period

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2 to the Transaction Agreement, dated as of July 8, 2021 (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on July 9, 2021).

Second Amended and Restated Certificate of Incorporation of Stagwell Inc., as amended (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q filed May 9, 2023).

Second Amended and Restated Certificate of Incorporation of Stagwell Inc., as amended (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q filed on May 9, 2023).

Amended and Restated Bylaws of Stagwell Inc.

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Form of 5.625% Senior Note due 2029 (included in Exhibit 4.1).

Description of Securities.*

Description of Securities (incorporated by reference to Exhibit 4.3 to the Company's Form 10-K filed on March 11, 2024).

Second Amended and Restated Limited Liability Company Agreement of Stagwell Global LLC dated as of March 23, 2022.

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Second Amended and Restated 2016 Stock Incentive Plan (incorporated by reference to Exhibit 4.3 to the Company’s Form S-8 filed on June 14, 2022).

Form of Financial Performance-Based Restricted Stock Unit Grant Agreement.*

Form of Time-Based Restricted Stock Unit Grant Agreement.*

Form of Financial Performance-Based Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.15.1 to the Company’s Form 10-K filed on March 11, 2024).

Form of Time-Based Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.15.2 to the Company's Form 10-K filed on March 11, 2024).

Form of Financial Performance-Based Restricted Stock Grant Agreement (incorporated by reference to Exhibit 10.14 to the Company's Form 10-Q filed on November 9, 2021).

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2023 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.3 to the Company's Form S-8 filed on March 7, 2023).

Form of Indemnification Agreement with Directors and Officers (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed November 7, 2022).

Form of Indemnification Agreement with Directors and Officers (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q filed on November 7, 2022).

Stagwell Inc.

Non-Employee Director Compensation Policy.

(incorporated by reference to Exhibit 10.20 to the Company’s Form 10-K filed March 17, 2022).

Non-Employee Director Compensation Policy, as amended (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on August 1, 2024).

Stagwell Inc.

Insider Trading Policy*

Subsidiaries of Registrant*

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Stagwell Inc.

Executive Compensation Clawback Policy.*

Executive Compensation Clawback Policy (incorporated by reference to Exhibit 97 to the Company's Form 10-K filed on March 11, 2024).

101 Interactive Data File, for the period ended December 31, 2024.

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The cover page XBRL tags are embedded within the inline XBRL document and are included in Exhibit 101.*

* Filed electronically herewith.

* Filed herewith.

** Furnished herewith

† Indicates management contract or compensatory plan.

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

What changed 10-K

Item 9A. Controls and Procedures