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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20212022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 001-13718
stgw-20220930_g1.jpg
Stagwell Inc.
(Exact name of registrant as specified in its charter)
Delaware 86-1390679
(State or other jurisdiction of
incorporation or organization)
 (IRS Employer Identification No.)
   
One World Trade Center, Floor 65
 
New York,New York10007
(Address of principal executive offices) (Zip Code)
(646) 429-1800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001 per shareSTGWNASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No  
The number of common shares outstanding as of November 8, 2021October 28, 2022 was 113,198,517130,785,623 shares of Class A Common Stock, 3,946 shares of Class B Common Stock, and 179,970,051164,375,682 shares of Class C Common Stock.


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STAGWELL INC.
 
QUARTERLY REPORT ON FORM 10-Q
 
TABLE OF CONTENTS
 
  Page
 PART I. FINANCIAL INFORMATION 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
   
 PART II. OTHER INFORMATION 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

                    EXPLANATORY NOTE
On December 21, 2020, MDC Partners Inc. (“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into the Transaction Agreement,an agreement, providing for the combination of MDC with the operating businesses and subsidiaries of Stagwell Media (the “Stagwell Subject Entities”) (the “Transaction Agreement”). The Stagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell MarketingMarketing” or SMG”“SMG”) and its direct and indirect subsidiaries.

On August 2, 2021 (the “Closing Date”), we completed the combination of MDC and the Stagwell Subject Entities and a series of steps and related transactions (such combination and transactions, the “Transactions”). In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of Stagwell Inc. (“the Company,Company” or “Stagwell”), converted into a Delaware limited liability company and changed its name to Midas OpCo Holdings LLC and subsequently to Stagwell Global LLC (“OpCo”); (ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo; and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc.

The Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing treated as the accounting acquirer. As a result of the Transactions and the change in our business and operations, under applicable accounting principles, the historical financial results of Stagwell Marketing prior to August 2, 2021 are considered our historical financial results. Accordingly, historical information presented in this Form 10-QQuarterly
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Report on Form 10-Q (this “Form 10-Q”) for events occurring or periods ending before August 2, 2021 does not reflect the impact of the Transactions or the financial results of MDC and may not be comparable with historical information for events occurring or periods ending on or after August 2, 2021.

References in this Quarterly Report on Form 10-Q to Stagwell,“Stagwell,” “we,” “us,” “our” and the “Company” refer (i) with respect to events occurring or periods ending before August 2, 2021, to Stagwell Marketing Group LLC and its direct and indirect subsidiaries and (ii) with respect to events occurring or periods ending on or after August 2, 2021, to Stagwell Inc. and its direct and indirect subsidiaries.

All dollar amounts are stated in U.S. dollars unless otherwise stated.
             ��  Note About Forward-Looking Statements
This document contains forward-looking statements. within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s representatives may also make forward-looking statements orally or in writing from time to time. Statements in this document that are not historical facts, including, but not limited to, statements about the Company’s beliefs and expectations, recentfuture financial performance and future prospects, business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Forward-looking statements, which are generally denoted by words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “create,” “estimate,” “expect,” “focus,” “forecast,” “foresee,” “future,” “guidance,” “intend,” “look,” “may,” “opportunity,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” or the negative of such terms or other variations thereof and terms of similar substance used in connection with any discussion of current plans, estimates and projections are subject to change based on a number of factors, including those outlined in this section.
Forward-looking statements in this document are based on certain key expectations and assumptions made by the Company. Although the management of the Company believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. The material assumptions upon which such forward-looking statements are based include, among others, assumptions with respect to general business, economic and market conditions, the competitive environment, anticipated and unanticipated tax consequences and anticipated and unanticipated costs. These forward-looking statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:
risks associated with international, national and regional unfavorable economic conditions that could affect the Company or its clients, including as a result of the novel coronavirus pandemic (“COVID-19”);clients;
the effectscontinued impact of the outbreakcoronavirus pandemic (“COVID-19”), and evolving strains of COVID-19 including the measures to reduce its spread, and the impact on the economy and demand for ourthe Company’s services, which may precipitate or exacerbate other risks and uncertainties;
an inability to realize expected benefits of the combination of the Company’s business with MDC (the “Business Combination” and, together with the related transactions, the “Transactions”);business of MDC;
adverse tax consequences in connection with the Transactions for the Company, its operations and its shareholders, that may differ from the expectations of the Company, including that future changes in tax law, potential increases to corporate tax rates in the United States and disagreements with the tax authorities on the Company’s determination of value and computations of its attributes may result in increased tax costs;
the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Transactions;
the impact of uncertainty associated with the Transactions on the Company’s businesses;
direct or indirect costs associated with the Transactions, which could be greater than expected;
risks associated with severe effects of international, national and regional economic conditions;
the Company’s ability to attract new clients and retain existing clients;
the impact of a reduction in client spending and changes in client advertising, marketing and corporate communications requirements;
financial failure of the Company’s clients;
the Company’s ability to retain and attract key employees;
the Company’s ability to compete in the markets in which it operates;
the Company’s ability to achieve the full amount of its stated cost saving initiatives;
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the Company’s implementation of strategic initiatives;
the Company’s ability to remain in compliance with its debt agreements and the Company’s ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to redeemable noncontrolling interests and deferred acquisition consideration;
the Company’s ability to manage its growth effectively, including the successful completion and integration of acquisitions which complement and expand the Company’s business capabilities;
the Company’s material weaknesses in internal control over financial reporting and its ability to establish and maintain an effective system of internal control over financial reporting;
the Company’s ability to protect client data from security incidents or cyberattacks;
economic disruptions resulting from war and other geopolitical tensions (such as the ongoing military conflict between Russia and Ukraine), terrorist activities and natural disasters;
stock price volatility; and
foreign currency fluctuations.

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Investors should carefully consider these risk factors, other risk factors described herein, and the additional risk factors outlined in more detail in Exhibit 99.2 to our CurrentAnnual Report on Form 8-K,10-K for the year ended December 31, 2021 (our “2021 Form 10-K”), filed with the Securities and Exchange Commission (the “SEC”) on August 10, 2021,March 17, 2022, and accessible on the SEC’s website at www.sec.gov, under the caption “Risk Factors,” andan in the Company’s other SEC filings.
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PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(thousands of United States dollars, except per share amounts)amounts in thousands)
Three Months Ended September 30,Nine Months Ended September 30, Three Months
Ended September 30,
Nine Months
Ended September 30,
2021202020212020 2022202120222021
RevenueRevenue$466,634 $228,097 $857,436 $574,970 Revenue$663,791 $466,634 $1,979,607 $857,436 
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services324,782 149,011 558,856 373,064 Cost of services417,134 324,782 1,253,765 558,856 
Office and general expensesOffice and general expenses121,770 42,666 226,720 127,181 Office and general expenses119,186 121,770 429,121 226,720 
Depreciation and amortizationDepreciation and amortization24,790 9,974 46,122 29,838 Depreciation and amortization32,207 24,790 95,642 46,122 
Impairment and other lossesImpairment and other losses14,926 — 14,926 — Impairment and other losses25,211 14,926 28,034 14,926 
486,268 201,651 846,624 530,083 593,738 486,268 1,806,562 846,624 
Operating income (loss)(19,634)26,446 10,812 44,887 
Other Income (expenses):
Operating Income (Loss)Operating Income (Loss)70,053 (19,634)173,045 10,812 
Other income (expenses):Other income (expenses):
Interest expense, netInterest expense, net(11,912)(1,778)(15,197)(4,665)Interest expense, net(19,672)(11,912)(56,552)(15,197)
Foreign exchange, netForeign exchange, net(893)(856)(1,955)794 Foreign exchange, net(3,927)(893)(4,163)(1,955)
Gain on sale of business and other, net45,621 263 46,806 948 
Other, netOther, net147 45,621 182 46,806 
32,816 (2,371)29,654 (2,923)(23,452)32,816 (60,533)29,654 
Income before income taxes and equity in earnings of non-consolidated affiliatesIncome before income taxes and equity in earnings of non-consolidated affiliates13,182 24,075 40,466 41,964 Income before income taxes and equity in earnings of non-consolidated affiliates46,601 13,182 112,512 40,466 
Income tax expenseIncome tax expense5,183 2,618 9,205 3,211 Income tax expense11,540 5,183 20,150 9,205 
Income before equity in earnings of non-consolidated affiliatesIncome before equity in earnings of non-consolidated affiliates7,999 21,457 31,261 38,753 Income before equity in earnings of non-consolidated affiliates35,061 7,999 92,362 31,261 
Equity in losses (income) of non-consolidated affiliates(76)(35)(75)
Equity in income (loss) of non-consolidated affiliatesEquity in income (loss) of non-consolidated affiliates213 (76)1,053 (75)
Net incomeNet income7,923 21,422 31,186 38,760 Net income35,274 7,923 93,415 31,186 
Net income attributable to noncontrolling and redeemable noncontrolling interestsNet income attributable to noncontrolling and redeemable noncontrolling interests(9,994)(3,614)(10,987)(4,636)Net income attributable to noncontrolling and redeemable noncontrolling interests(24,665)(9,994)(59,668)(10,987)
Net income (loss) attributable to Stagwell Inc. common shareholdersNet income (loss) attributable to Stagwell Inc. common shareholders$(2,071)$17,808 $20,199 $34,124 Net income (loss) attributable to Stagwell Inc. common shareholders$10,609 $(2,071)$33,747 $20,199 
Income (loss) Per Common Share:
Income Per Common Share:Income Per Common Share:
BasicBasic  Basic  
Net loss attributable to Stagwell Inc. common shareholders$(0.06)N/A$(0.06)N/A
Net income (loss) attributable to Stagwell Inc. common shareholdersNet income (loss) attributable to Stagwell Inc. common shareholders$0.08 $(0.06)$0.27 $(0.06)
DilutedDilutedDiluted
Net income attributable to Stagwell Inc. common shareholders$(0.06)N/A$(0.06)N/A
Net income (loss) attributable to Stagwell Inc. common shareholdersNet income (loss) attributable to Stagwell Inc. common shareholders$0.08 $(0.06)$0.26 $(0.06)
Weighted Average Number of Common Shares Outstanding:Weighted Average Number of Common Shares Outstanding:  Weighted Average Number of Common Shares Outstanding:  
BasicBasic76,105,807 N/A76,105,807 N/ABasic125,384 76,106 124,710 76,106 
DilutedDiluted76,105,807 N/A76,105,807 N/ADiluted130,498 76,106 131,550 76,106 
See notes to the Unaudited Condensed Consolidated Financial Statements.
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STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(thousands of United States dollars)amounts in thousands)
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
COMPREHENSIVE INCOME 
Net income$7,923 $21,422 $31,186 $38,760 
Other comprehensive income (loss), net of applicable tax: 
Foreign currency translation adjustment12,537 3,231 12,537 (1,749)
Net unrealized loss on available for sale investment— (28)— (5,024)
Other comprehensive income (loss)12,537 3,203 12,537 (6,773)
Comprehensive income for the period20,460 24,625 43,723 31,987 
Comprehensive income attributable to the noncontrolling interests(9,994)(3,614)(10,987)(4,636)
Comprehensive income attributable to Stagwell Inc.$10,466 $21,011 $32,736 $27,351 
 Three Months
Ended September 30,
Nine Months
Ended September 30,
 2022202120222021
COMPREHENSIVE INCOME (LOSS) 
Net income$35,274 $7,923 $93,415 $31,186 
Other comprehensive income (loss) 
Foreign currency translation adjustment(30,505)12,537 (59,678)12,537 
Other comprehensive income (loss)(30,505)12,537 (59,678)12,537 
Comprehensive income for the period4,769 20,460 33,737 43,723 
Comprehensive income attributable to the noncontrolling and redeemable noncontrolling interests(24,665)(9,994)(59,668)(10,987)
Comprehensive income (loss) attributable to Stagwell Inc. common shareholders$(19,896)$10,466 $(25,931)$32,736 
See notes to the Unaudited Condensed Consolidated Financial Statements.
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STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of United States dollars)amounts in thousands)
September 30, 2021December 31, 2020 September 30,
2022
December 31, 2021
(Unaudited)
ASSETSASSETS  ASSETS  
Current AssetsCurrent Assets  Current Assets  
Cash and cash equivalentsCash and cash equivalents$115,489 $92,457 Cash and cash equivalents$165,251 $184,009 
Accounts receivable, netAccounts receivable, net669,612 225,733 Accounts receivable, net725,346 696,937 
Expenditures billable to clientsExpenditures billable to clients37,101 11,063 Expenditures billable to clients57,873 63,065 
Other current assetsOther current assets78,884 36,433 Other current assets71,249 61,830 
Total Current AssetsTotal Current Assets901,086 365,686 Total Current Assets1,019,719 1,005,841 
Fixed assets, netFixed assets, net118,526 35,614 Fixed assets, net123,128 118,603 
Right-of-use lease assets - operating leasesRight-of-use lease assets - operating leases334,867 57,752 Right-of-use lease assets - operating leases283,974 311,654 
GoodwillGoodwill1,619,272 351,725 Goodwill1,615,694 1,652,723 
Other intangible assets, netOther intangible assets, net945,081 186,035 Other intangible assets, net879,049 937,695 
Other assetsOther assets24,789 17,043 Other assets47,784 29,064 
Total AssetsTotal Assets$3,943,621 $1,013,855 Total Assets$3,969,348 $4,055,580 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ EQUITY
LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITYLIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Current LiabilitiesCurrent LiabilitiesCurrent Liabilities
Accounts payableAccounts payable$277,385 $147,826 Accounts payable$294,402 $271,769 
Accrued mediaAccrued media188,344 237,794 
Accruals and other liabilitiesAccruals and other liabilities371,289 90,557 Accruals and other liabilities211,263 272,533 
Advance billingsAdvance billings286,790 66,418 Advance billings340,675 361,885 
Current portion of lease liabilities - operating leasesCurrent portion of lease liabilities - operating leases74,162 19,579 Current portion of lease liabilities - operating leases73,659 72,255 
Current portion of deferred acquisition considerationCurrent portion of deferred acquisition consideration60,951 12,579 Current portion of deferred acquisition consideration74,426 77,946 
Total Current LiabilitiesTotal Current Liabilities1,070,577 336,959 Total Current Liabilities1,182,769 1,294,182 
Long-term debtLong-term debt1,265,747 198,024 Long-term debt1,329,134 1,191,601 
Long-term portion of deferred acquisition considerationLong-term portion of deferred acquisition consideration14,754 5,268 Long-term portion of deferred acquisition consideration85,163 144,423 
Long-term lease liabilities - operating leasesLong-term lease liabilities - operating leases328,048 52,606 Long-term lease liabilities - operating leases308,162 342,730 
Deferred tax liabilities, netDeferred tax liabilities, net134,288 16,050 Deferred tax liabilities, net103,243 103,093 
Other liabilitiesOther liabilities59,190 5,801 Other liabilities70,167 57,147 
Total LiabilitiesTotal Liabilities2,872,604 614,708 Total Liabilities3,078,638 3,133,176 
Redeemable Noncontrolling InterestsRedeemable Noncontrolling Interests29,787 604 Redeemable Noncontrolling Interests65,817 43,364 
Commitments, Contingencies and Guarantees (Note 11)00
Commitments, Contingencies and Guarantees (Note 10)Commitments, Contingencies and Guarantees (Note 10)
Shareholders' Equity:Shareholders' Equity:Shareholders' Equity:
Convertible preferred shares, 123,849,000 and 0 authorized, issued and outstanding at September 30, 2021 and December 31, 2020, respectively209,980 — 
Members' capital— 358,756 
Common shares - Class A & BCommon shares - Class A & B77 — Common shares - Class A & B135 118 
Common shares - Class CCommon shares - Class C— Common shares - Class C
Paid-in capitalPaid-in capital169,537 — Paid-in capital348,663 382,893 
Accumulated deficit(6,153)— 
Accumulated other comprehensive income12,537 — 
Retained earnings (loss)Retained earnings (loss)6,573 (6,982)
Accumulated other comprehensive lossAccumulated other comprehensive loss(64,956)(5,278)
Stagwell Inc. Shareholders' EquityStagwell Inc. Shareholders' Equity385,980 358,756 Stagwell Inc. Shareholders' Equity290,417 370,753 
Noncontrolling interestsNoncontrolling interests655,250 39,787 Noncontrolling interests534,476 508,287 
Total Shareholders' EquityTotal Shareholders' Equity1,041,230 398,543 Total Shareholders' Equity824,893 879,040 
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' EquityTotal Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity$3,943,621 $1,013,855 Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity$3,969,348 $4,055,580 
See notes to the Unaudited Condensed Consolidated Financial Statements.
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STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of United States dollars)amounts in thousands)


Nine Months Ended September 30, Nine Months Ended September 30,
2021202020222021
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net incomeNet income$31,186 $38,760 Net income$93,415 $31,186 
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Adjustments to reconcile net income to cash provided by operating activities:Adjustments to reconcile net income to cash provided by operating activities:
Stock-based compensationStock-based compensation53,465 — Stock-based compensation33,410 53,465 
Depreciation and amortizationDepreciation and amortization46,122 29,838 Depreciation and amortization95,642 46,122 
Impairment and other lossesImpairment and other losses14,926 — Impairment and other losses28,034 14,926 
Provision for bad debt1,893 3,241 
Provision for bad debt expenseProvision for bad debt expense2,681 1,893 
Deferred income taxesDeferred income taxes2,710 (2,631)Deferred income taxes(1,557)2,710 
Adjustment to deferred acquisition considerationAdjustment to deferred acquisition consideration9,456 2,270 Adjustment to deferred acquisition consideration(14,420)9,456 
Gain on sale of assetGain on sale of asset— (43,440)
OtherOther6,998 (882)Other(1,002)6,998 
Gain on sale of an asset(43,440)— 
Changes in working capital:Changes in working capital:Changes in working capital:
Accounts receivableAccounts receivable(26,095)6,951 Accounts receivable(34,637)(26,095)
Expenditures billable to clientsExpenditures billable to clients(9,230)(12,225)Expenditures billable to clients5,525 (9,230)
Other assetsOther assets(14,568)(6,637)Other assets4,100 (14,568)
Accounts payableAccounts payable(37,435)4,539 Accounts payable34,630 (37,435)
Accruals and other liabilities(26,668)11,128 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities(138,947)(26,668)
Advance billingsAdvance billings16,598 18,832 Advance billings(23,017)16,598 
Acquisition related payments(5,772)— 
Deferred acquisition related paymentsDeferred acquisition related payments(10,776)(5,772)
Net cash provided by operating activitiesNet cash provided by operating activities20,146 93,184 Net cash provided by operating activities73,081 20,146 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Capital expendituresCapital expenditures(13,666)(8,977)Capital expenditures(25,495)(13,666)
Proceeds from sale of assets37,232 — 
Acquisitions, net of cash acquired130,155 (5,549)
Current period acquisitions, net of cash acquiredCurrent period acquisitions, net of cash acquired(37,461)130,155 
Proceeds from sale of business, netProceeds from sale of business, net— 37,232 
OtherOther— (1,895)Other(1,328)— 
Net cash provided by (used in) investing activities153,721 (16,421)
Net cash (used in) provided by investing activitiesNet cash (used in) provided by investing activities(64,284)153,721 
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Repayment of borrowings under revolving credit facilityRepayment of borrowings under revolving credit facility(535,472)(108,744)Repayment of borrowings under revolving credit facility(855,000)(535,472)
Proceeds from borrowings under revolving credit facilityProceeds from borrowings under revolving credit facility408,369 167,000 Proceeds from borrowings under revolving credit facility989,500 408,369 
Shares acquired and cancelledShares acquired and cancelled(820)— Shares acquired and cancelled(14,970)(820)
Distributions to noncontrolling interests and otherDistributions to noncontrolling interests and other(19,245)(3,075)Distributions to noncontrolling interests and other(38,486)(19,245)
Payment of deferred consideration and other— (1,500)
Contributions— 1,576 
Payment of deferred considerationPayment of deferred consideration(61,089)— 
Purchase of noncontrolling interestPurchase of noncontrolling interest(3,600)— 
Proceeds from issuance of the 5.625% NotesProceeds from issuance of the 5.625% Notes1,100,000 — Proceeds from issuance of the 5.625% Notes— 1,100,000 
Debt issuance costsDebt issuance costs(15,365)(319)Debt issuance costs— (15,365)
DistributionsDistributions(204,929)(98,638)Distributions— (204,929)
Repurchase of 7.50% Senior NotesRepurchase of 7.50% Senior Notes(884,398)— Repurchase of 7.50% Senior Notes(884,398)
Repurchase of Common StockRepurchase of Common Stock(28,667)— 
Net cash used in financing activitiesNet cash used in financing activities(151,860)(43,700)Net cash used in financing activities(12,312)(151,860)
Effect of exchange rate changes on cash and cash equivalentsEffect of exchange rate changes on cash and cash equivalents1,025 555 Effect of exchange rate changes on cash and cash equivalents(15,243)1,025 
Net increase in cash and cash equivalents23,032 33,618 
Cash and cash equivalents at beginning of period92,457 63,860 
Cash and cash equivalents at end of period$115,489 $97,478 
Supplemental disclosures:
Cash income taxes paid$42,346 $3,618 
Net decrease in cash and cash equivalentsNet decrease in cash and cash equivalents(18,758)23,032 
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STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
(thousands of United States dollars)amounts in thousands)

Nine Months Ended September 30, Nine Months Ended September 30,
2021202020222021
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period184,009 92,457 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$165,251 $115,489 
Supplemental disclosures:Supplemental disclosures:
Cash income taxes paidCash income taxes paid$23,315 $42,346 
Cash interest paidCash interest paid$22,493 $7,288 Cash interest paid61,016 22,493 
Non-cash investing and financing activities:Non-cash investing and financing activities:Non-cash investing and financing activities:
Acquisitions of businessAcquisitions of business$426,396 $23,720 Acquisitions of business— 426,396 
Acquisitions of noncontrolling interestAcquisitions of noncontrolling interest37,559 — Acquisitions of noncontrolling interest— 37,559 
Net unrealized (loss) gain on available for sale investment— 5,024 
Non-cash contributions included in Member’s equity12,372 83,242 
Reduction of deferred tax liability related to the exchange of Paired UnitsReduction of deferred tax liability related to the exchange of Paired Units20,763 — 
Establishment of Tax Receivables Agreement liabilityEstablishment of Tax Receivables Agreement liability17,649 — 
Non-cash contributionsNon-cash contributions— 12,372 
Non-cash distributions to Stagwell Media LPNon-cash distributions to Stagwell Media LP13,000 — Non-cash distributions to Stagwell Media LP— 13,000 
Non-cash payment of deferred acquisition considerationNon-cash payment of deferred acquisition consideration$7,080 $64,322 Non-cash payment of deferred acquisition consideration— 7,080 

See notes to the Unaudited Condensed Consolidated Financial Statements.
9

Table of Contents

STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(thousands of United States dollars, except share amounts)amounts in thousands)




Three Months Ended
September 30, 2021
 Members' capitalConvertible Preference SharesCommon Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalAccumulated DeficitOther Comprehensive IncomeStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
SharesAmountSharesAmountSharesAmount
Balance at June 30, 2021$350,395  $  $  $ $ $ $ $350,395 $30,947 $381,342 
Net income prior to reorganization3,032 — — — — — — — — — 3,032 70 3,102 
Other comprehensive income (loss)(63)— — — — — — — — — (63)— (63)
Contributions(11,834)— — — — — — — — — (11,834)— (11,834)
Distributions(165,717)— — — — — — — — — (165,717)— (165,717)
Distributions to noncontrolling interests— — — — — — — — — — — (934)(934)
Changes in redemption value of RNCI2,559 — — — — — — — — — 2,559 — 2,559 
Other— — — — — — — — — — — 161 161 
Effect of reorganization(178,372)123,849,000 209,980 78,793,502 77 179,970,051 110,555 — — 142,242 636,416 778,658 
Net income (loss) attributable to Stagwell Inc.— — — — — — — — (4,545)— (4,545)6,774 2,229 
Other comprehensive income— — — — — — — — — 12,537 12,537 — 12,537 
Distributions to noncontrolling interests— — — — — — — — — — — (7,561)(7,561)
Changes in redemption value of RNCI— — — — — — — — (1,608)— (1,608)— (1,608)
Vesting of restricted awards— — — 202,488 — — — — — — — — — 
Shares acquired and cancelled— — — (12,084)— — — (820)— — (820)— (820)
Stock-based compensation— — — — — — — 49,895 — — 49,895 — 49,895 
Purchases of NCI— — — — — — — 9,679 — — 9,679 (10,450)(771)
Other— — — — — — — 228 — — 228 (173)55 
Balance at September 30, 2021$ 123,849,000 $209,980 78,983,906 $77 179,970,051 $2 $169,537 $(6,153)$12,537 $385,980 $655,250 $1,041,230 
Three Months Ended September 30, 2022
 Common Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
SharesAmountSharesAmount
Balance at June 30, 2022131,838 $135 164,427 $2 $368,345 $10,268 $(34,451)$344,299 $513,085 $857,384 
Net income— — — — — 10,609 — 10,609 21,573 32,182 
Other comprehensive loss— — — — — — (30,505)(30,505)— (30,505)
Changes in redemption value of RNCI— — — — — (14,658)— (14,658)— (14,658)
Granting of restricted awards1,689 — — (2)— — — — — 
Shares repurchased and cancelled (withheld for payroll taxes)(7)(2)— — (44)— — (46)— (46)
Shares forfeited(3)— — — — — — — — — 
Shares repurchased and cancelled (Approved plan)(2,025)(2)— — (13,828)— — (13,830)— (13,830)
Stock-based compensation— — — — 9,583 — — 9,583 — 9,583 
Conversion of shares51 (51)— (1)— — — — — 
Finalization of MDC acquisition accounting— — — — (16,294)— — (16,294)2,301 (13,993)
Other— — 904 354 — 1,259 (2,483)(1,224)
Balance at September 30, 2022131,544 $135 164,376 $2 $348,663 $6,573 $(64,956)$290,417 $534,476 $824,893 

See notes to the Unaudited Condensed Consolidated Financial Statements.

10

Table of Contents

STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)
(thousands of United States dollars, except share amounts)amounts in thousands)

Nine Months Ended
September 30, 2021
 Members' capitalConvertible Preference SharesCommon Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalAccumulated DeficitOther Comprehensive IncomeStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
 
SharesAmountSharesAmountSharesAmount
Balance at December 31, 2020$358,756  $  $  $ $ $ $ $358,756 $39,787 $398,543 
Net income prior to reorganization24,742 — — — — — — — — — 24,742 2,693 27,435 
Other comprehensive loss(375)— — — — — — — — — (375)— (375)
Contributions250 — — — — — — — — — 250 — 250 
Distributions(204,929)— — — — — — — — — (204,929)— (204,929)
Distributions to noncontrolling interests— — — — — — — — — — — (11,936)(11,936)
Changes in redemption value of RNCI(72)— — — — — — — — — (72)— (72)
Other— — — — — — — — — — — (300)(300)
Effect of reorganization(178,372)123,849,000 209,980 78,793,502 77 179,970,051 110,555 — — 142,242 636,416 778,658 
Net loss attributable to Stagwell Inc.— — — — — — — — (4,545)— (4,545)6,774 2,229 
Other comprehensive income— — — — — — — — — 12,537 12,537 — 12,537 
Distributions to noncontrolling interests— — — — — — — — — — — (7,561)(7,561)
Changes in redemption value of RNCI— — — — — — — — (1,608)— (1,608)— (1,608)
Vesting of restricted awards— — — 202,488 — — — — — — — — — 
Shares acquired and cancelled— — — (12,084)— — — (820)— — (820)— (820)
Stock-based compensation— — — — — — — 49,895 — — 49,895 — 49,895 
Purchases of NCI— — — — — — — 9,679 — — 9,679 (10,450)(771)
Other— — — — — — — 228 — — 228 (173)55 
Balance at September 30, 2021$ 123,849,000 $209,980 78,983,906 $77 179,970,051 $2 $169,537 $(6,153)$12,537 $385,980 $655,250 $1,041,230 









Nine Months Ended September 30, 2022
 Common Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
SharesAmountSharesAmount
Balance at December 31, 2021118,252 $118 179,970 $2 $382,893 $(6,982)$(5,278)$370,753 $508,287 $879,040 
Net income— — — — — 33,747 — 33,747 55,110 88,857 
Other comprehensive loss— — — — — — (59,678)(59,678)— (59,678)
Distributions to noncontrolling interests— — — — — — — — (29,957)(29,957)
Purchases of noncontrolling interests— — — — (1,000)— — (1,000)(3,600)(4,600)
Acquisition of noncontrolling interest— — — — — — — — 2,667 2,667 
Changes in redemption value of RNCI— — — — (20,546)— (20,546)— (20,546)
Granting of restricted awards3,678 — — (4)— — — — — 
Shares repurchased and cancelled (withheld for payroll taxes)(2,005)(2)— — (14,970)— — (14,972)— (14,972)
Shares forfeited(111)— — — — — — — — — 
Shares repurchased and cancelled (Approved plan)(4,006)(4)— — (28,667)— — (28,671)— (28,671)
Stock-based compensation— — — — 25,475 — — 25,475 — 25,475 
Conversion of shares15,594 16 (15,594)— (16)— — — — — 
Finalization of MDC acquisition accounting— — — — (16,294)— — (16,294)2,301 (13,993)
Other142 — — 1,246 354 — 1,603 (332)1,271 
Balance at September 30, 2022131,544 $135 164,376 $2 $348,663 $6,573 $(64,956)$290,417 $534,476 $824,893 

See notes to the Unaudited Condensed Consolidated Financial Statements.





11

Table of Contents

STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)
(thousands of United States dollars, except share amounts)amounts in thousands)

Three Months Ended
September 30, 2020
 Members' capitalConvertible Preference SharesCommon Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
 
SharesAmountSharesAmountSharesAmount
Balance at June 30,, 2020$314,598  $  $  $ $ $ $ $314,598 $34,386 $348,984 
Net income attributable to Stagwell Inc.17,808 — — — — — — — — — 17,808 4,522 22,330 
Other comprehensive loss3,203 — — — — — — — — — 3,203 — 3,203 
Distributions(4,724)— — — — — — — — — (4,724)— (4,724)
Distributions to noncontrolling interests— — — — — — — — — — — (3,075)(3,075)
Changes in redemption value of RNCI(199)(199)(199)
Other— — — — — — — — — — — — — 
Balance at September 30, 2020$330,686  $  $  $ $ $ $ $330,686 $35,833 $366,519 
Three Months Ended September 30, 2021
 Members' capitalConvertible Preference SharesCommon Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
SharesAmountSharesAmountSharesAmount
Balance at June 30, 2021$350,395  $  $  $ $ $ $ $350,395 $30,947 $381,342 
Net income prior to reorganization3,032 — — — — — — — — — 3,032 70 3,102 
Other comprehensive loss(63)— — — — — — — — — (63)— (63)
Contributions(11,834)— — — — — — — — — (11,834)— (11,834)
Distributions(165,717)— — — — — — — — — (165,717)— (165,717)
Distributions to noncontrolling interests— — — — — — — — — — — (934)(934)
Changes in redemption value of RNCI2,559 — — — — — — — 2,559 — 2,559 
Other— — — — — — — — — — — 161 161 
Effect of reorganization(178,372)123,849 209,980 78,794 77 179,970 110,555 — — 142,242 636,416 778,658 
Net income (loss) attributable to Stagwell Inc.— — — — — — — — (4,545)— (4,545)6,774 2,229 
Other comprehensive income— — — — — — — — — 12,537 12,537 — 12,537 
Distributions to noncontrolling interests— — — — — — — — — — — (7,561)(7,561)
Changes in redemption value of RNCI— — — — — — — — (1,608)— (1,608)— (1,608)
Vesting of restricted awards— — — 202 — — — — — — — — — 
Shares acquired and cancelled— — — (12)— — — (820)— — (820)— (820)
Stock-based compensation— — — — — — — 49,895 — — 49,895 — 49,895 
Purchases of NCI— — — — — — — 9,679 — — 9,679 (10,450)(771)
Other— — — — — — — 228 — — 228 (173)55 
Balance at September 30, 2021$ 123,849 $209,980 78,984 $77 179,970 $2 $169,537 $(6,153)$12,537 $385,980 $655,250 $1,041,230 

12

Nine Months Ended
September 30, 2020
 Members' capitalConvertible Preference SharesCommon Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalAccumulated DeficitOther Comprehensive IncomeStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
 
SharesAmountSharesAmountSharesAmount
Balance at December 31, 2019$316,960  $  $  $ $ $ $ $316,960 $31,577 $348,537 
Net income attributable to Stagwell Inc.34,124 — — — — — — — 0— 34,124 7,331 41,455 
Other comprehensive loss(6,773)— — — — — — — — — (6,773)— (6,773)
Contributions84,818 — — — — — — — — — 84,818 — 84,818 
Distributions(98,638)— — — — — — — — — (98,638)— (98,638)
Distributions to noncontrolling interests— — — — — — — — — — — (3,075)(3,075)
Changes in redemption value of RNCI193 — — — — — — — — — 193 — 193 
Other— — — — — — — — — — 
Balance at September 30, 2020$330,686  $  $  $ $ $ $ $330,686 $35,833 $366,519 

Table of Contents


STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)
(amounts in thousands)






Nine Months Ended September 30, 2021
 Members' capitalConvertible Preference SharesCommon Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
SharesAmountSharesAmountSharesAmount
Balance at December 31, 2020$358,756  $  $  $ $ $ $ $358,756 $39,787 $398,543 
Net income prior to reorganization24,742 — — — — — — — — 24,742 2,693 27,435 
Other comprehensive loss(375)— — — — — — — — — (375)— (375)
Contributions250 — — — — — — — — — 250 — 250 
Distributions(204,929)— — — — — — — — — (204,929)— (204,929)
Distributions to noncontrolling interests— — — — — — — — — — — (11,936)(11,936)
Changes in redemption value of RNCI(72)— — — — — — — — — (72)— (72)
Other— — — — — — — — — — — (300)(300)
Effect of reorganization(178,372)123,849 209,980 78,794 77 179,970 110,555 — — 142,242 636,416 778,658 
Net loss attributable to Stagwell Inc.— — — — — — — — (4,545)— (4,545)6,774 2,229 
Other comprehensive income— — — — — — — — — 12,537 12,537 — 12,537 
Distributions to noncontrolling interests— — — — — — — — — — — (7,561)(7,561)
Changes in redemption value of RNCI— — — — — — — — (1,608)— (1,608)— (1,608)
Vesting of restricted awards— — — 202 — — — — — — — — — 
Shares acquired and cancelled— — — (12)— — — (820)— — (820)— (820)
Stock-based compensation— — — — — — — 49,895 — — 49,895 — 49,895 
Purchases of NCI— — — — — — — 9,679 — — 9,679 (10,450)(771)
Other— — — — — — — 228 — — 228 (173)55 
Balance at September 30, 2021$ 123,849 $209,980 78,984 $77 179,970 $2 $169,537 $(6,153)$12,537 $385,980 $655,250 $1,041,230 

See notes to the Unaudited Condensed Consolidated Financial Statements.
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Table of Contents
STAGWELL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, of United States dollars, except per share amounts, unless otherwise stated)
1. Business and Basis of Presentation
Stagwell Inc. (the “Company” or “Stagwell”), incorporated under the laws of Delaware, conducts its business through its networks and their Brands ("Brands"(“Brands”), which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment.

The accompanying condensed consolidated financial statements include the accounts of Stagwell and its subsidiaries. Stagwell has prepared the unaudited condensed consolidated interim financial statements included herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting interim financial information on Form 10-Q. Accordingly, the financial statements have been condensed and do not include certain information and disclosures pursuant to these rules. The preparation of financial statements in conformity with GAAP requires us to make judgments, assumptions and estimates about current and future results of operations and cash flows that affect the amounts reported and disclosed. Actual results could differ from these estimates and assumptions. The consolidated results for interim periods are not necessarily indicative of results for the full year and should be read in conjunction with the Company’s other SEC filings.

Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”).
On December 21, 2020, MDC Partners Inc. (“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of Stagwell Media (the “Stagwell Subject Entities”). The Stagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell Marketing” or “SMG”) and its direct and indirect subsidiaries.

On August 2, 2021, we completed the previously announced combination of MDC Partners Inc. (“MDC”) and the operating businesses and subsidiaries of Stagwell Media LP. (“Stagwell Media”) and a series related transactions (such combination and transactions, the “Transactions”). The Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing Group LLC (“Stagwell Marketing or SMG”) treated as the accounting acquirer. The results of MDC are included within the Unaudited Condensed Consolidated Statements of Operations for the period beginning on the date of the acquisition through the end of the respective period presented and the results of SMG are included for the entire period presented. See Note 43 of the Notes included herein for information in connection with the acquisition of MDC.

While a recovery from the COVID-19 pandemic is underway, economic conditions will be volatile as long as COVID-19 remains a public health threat. The Company continues to monitor developments. We will continue to monitor the impact on our operations from worldwide public health threat, government actions to combatevents such as the COVID-19 and the impact such developments may have on the overall economy, our clients and operations. The impact of the pandemic and evolving strains of COVID-19, as well as the corresponding actions are reflected inmilitary conflict between Russia and Ukraine, which we do not expect to have a material adverse effect on our operations. Our judgments, assumptions and estimates inabout the preparationpotential effects of such events are reflected in the financial statements. The judgments,use of different judgements, assumptions andor estimates will be updated and could result in different results in the future dependinghave a material impact on the continued impact of the COVID-19 pandemic.

our condensed consolidated financial statements.
The accompanying financial statements reflect all adjustments, consisting of normally recurring accruals, which in the opinion of management are necessary for a fair presentation, in all material respects, of the information contained therein. Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior year financial information to conform to the current year presentation.

We have revised the presentation of Current Liabilities to separately present Accrued media, which was previously included in Accruals and other liabilities, of $237,794 as of December 31, 2021. As a result, the accompanying Condensed Consolidated Balance Sheet has been revised to correct this immaterial classification error by decreasing the previously reported amount for Accruals and other liabilities as of December 31, 2021 by the $237,794 of Accrued media. This revision had no effect on our previously reported Total Current Liabilities, or on any other previously reported amounts in our consolidated financial statements for the year ended December 31, 2021.
14

Recent Developments

On October 3, 2022, the Company acquired all of the equity interest of Maru Group Limited Ltd, a software experience & insights data platform, for approximately £23,000 in cash, subject to post-closing adjustments.
On September 23, 2021,October 3, 2022, the Company provided noticesacquired the remaining 80% interest that it did not already own in Wolfgang, LLC, a creative agency combining consultancy, strategy and technology experience, for approximately $3,750 in cash and $5,250 in shares of conversionStagwell Inc. Class A Common Stock, subject to each holderpost-closing adjustments. The stock payment is subject to the seller’s continued employment throughout the period, with total shares vesting on July 1, 2025.
On October 3, 2022, the Company acquired the assets of recordEpicenter Experience LLC, an enterprise software company that leverages mobile and location data to map and sequence complex consumer behavior patterns, for approximately $9,729, subject to post-closing adjustments, as well as contingent consideration up to a maximum value of each of the Company’s Series 6$5,000. The contingent consideration is based on meeting certain future earnings targets through 2024 and Series 8 Preferred Stock. See Note 12 for additional informationcan be paid up to 25% in connection with the conversion of the Preferred Stock toStagwell Class A Common Stock.

On October 1, 2021 (the "closing date"), the Company entered into an agreement to purchase the remaining 26.7% interest in Targeted Victory it did not previously own for a combination of cash and Class A Common Stock, up to 50% with certain exceptions, determined at the option of the Company. The agreement provides for the purchase of half of the remaining interest on the closing date and the other half on July 31, 2023 ("second purchase"). The total purchase price which is capped at $135,000 with certain exceptions, is based on a formula taking a multiple of the two-year average of earnings that includes the year of and the year subsequent to the year of the purchase. The seller has the option to extend the measurement period for two years in connection with the second purchase.
13

Table of Contents



2. Significant Accounting Policies

The Company’s significant accounting policies are summarized as follows:

Principles of Consolidation.  The accompanying consolidated financial statements include the accounts of Stagwell Inc. and its domestic and international controlled subsidiaries that are not considered variable interest entities, and variable interest entities for which the Company is the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates.  The preparation of the consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities including goodwill, intangible assets, contingent deferred acquisition consideration, redeemable noncontrolling interests, deferred tax assets, right-of-use assets and the amounts of revenue and expenses reported during the period. These estimates are evaluated on an ongoing basis and are based on historical experience, current conditions and various other assumptions believed to be reasonable under the circumstances. These estimates require the use of assumptions about future performance, which are uncertain at the time of estimation. To the extent actual results differ from the assumptions used, results of operations and cash flows could be materially affected.
Fair Value.  The Company applies the fair value measurement guidance for financial assets and liabilities that are required to be measured at fair value and for non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis, including goodwill, right-of-use assets and other identifiable intangible assets. See Note 13 included herein for additional information regarding fair value measurements.
Concentration of Credit Risk.  The Company provides marketing communications services to clients who operate in most industry sectors. Credit is granted to qualified clients in the ordinary course of business. Due to the diversified nature of the Company’s client base, the Company does not believe that it is exposed to a concentration of credit risk. No client accounted for more than 10% of the Company’s consolidated accounts receivable as of September 30, 2021 or December 31, 2020. No sales to an individual client accounted for more than 10% of revenue for the three and nine months ended September 30, 2021 and 2020.
Cash and Cash Equivalents.  The Company’s cash equivalents are primarily comprised of investments in overnight interest-bearing deposits, money market instruments and other short-term investments with original maturity dates of three months or less at the time of purchase. The Company has a concentration of credit risk in that there are cash deposits in excess of federally insured amounts and international cash balances may not qualify for foreign government insurance programs. To date, the Company has not experienced any losses on cash and cash equivalents.

Allowance for Doubtful Accounts.  Trade receivables are stated at invoiced amounts less allowances for doubtful accounts. The allowances represent estimated uncollectible receivables associated with potential customer defaults usually due to customers’ potential insolvency. The allowances include amounts for certain customers where a risk of default has been specifically identified. The assessment of the likelihood of customer defaults is based on various factors, including the length of time the receivables are past due, historical experience and existing economic conditions. Allowance for doubtful accounts was $5,294 and $5,109  at September 30, 2021 and December 31, 2020, respectively.
Expenditures Billable to Clients.  Expenditures billable to clients consist principally of outside vendor costs incurred on behalf of clients when providing services thatallocations have not yet been invoiced to clients. Such amounts are invoiced to clients at various times over the course of the period.
Fixed Assets.  Fixed assets are stated at cost, net of accumulated depreciation. Computers, furniture and fixtures, and capitalized software are depreciated on a straight-line basis over periods of three to ten years. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset. Repairs and maintenance costs are expensed as incurred. Accumulated depreciation was $39,357 and $28,365 at September 30, 2021 and December 31, 2020, respectively.
Leases. Effective January 1, 2019, the Company adopted Accounting Standards Codification, Leases (“ASC 842”).completed. The Company recognizes on the balance sheet at the time of lease commencement a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments. All right-of-use lease assets are reviewed for impairment. With the adoption of ASC 842, the Company elected to apply the package of practical expedients: (i) whether a contract is or contains a lease, (ii) the classification of existing leases, and (iii) whether previously capitalized costs continue to qualify as initial indirect costs. Additionally, the Company elected the practical expedient to not separate non-lease components from lease components for all operating leases. See Note 8 included herein for further information on leases.
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Impairment of Long-lived Assets.  A long-lived asset or asset group is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such events occur, the Company compares the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of such asset or asset group. If this comparison indicates that there is an impairment, the amount of the impairment is typically calculated using discounted expected future cash flows where observable fair values are not readily determinable. The discount rate applied to these cash flows is based on the Company’s weighted average cost of capital (“WACC”), risk adjusted where appropriate, or other appropriate discount rate.
Goodwill.  Goodwill (the excess of the acquisition cost over the fair value of the net assets acquired) acquired as a result of a business combination which is not subject to amortization is tested for impairment, at the reporting unit level, annually as of October 1st of each year, or more frequently if indicators of potential impairment exist.

For the annual impairment test, the Company has the option of assessing qualitative factors to determine whether it is more likely than not that the carrying amount of a reporting unit exceeds its fair value or performing a quantitative goodwill impairment test. Qualitative factors considered in the assessment include industry and market considerations, the competitive environment, overall financial performance, changing cost factors such as labor costs, and other factors specific to each reporting unit such as change in management or key personnel.
If the Company elects to perform the qualitative assessment and concludes that it is more likely than not that the fair value of the reporting unit is more than its carrying amount, then goodwill is not considered impaired and the quantitative impairment test is not necessary. For reporting units for which the qualitative assessment concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount and for reporting units for which the qualitative assessment is not performed, the Company will perform the quantitative impairment test, which compares the fair value of the reporting unit to its carrying amount. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not considered impaired. However, if the fair value of the reporting unit is lower than the carrying amount of the net assets assigned to the reporting unit, an impairment charge is recognized equal to the excess of the carrying amount over the fair value.
Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. The Company uses a combination of the income approach, which incorporates the use of the discounted cash flow (“DCF”) method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. The Company generally applies an equal weighting to the income and market approaches for the impairment test. The income approach and the market approach both require the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates.
The DCF estimates incorporate expected cash flows that represent a spectrum of the amount and timing of possible cash flows of each reporting unit from a market participant perspective. The expected cash flows are developed from the Company’s long-range planning process using projections of operating results and related cash flows based on assumed long-term growth rates, demand trends and appropriate discount rates based on a reporting unit’s WACC as determined by considering the observable WACC of comparable companies and factors specific to the reporting unit. The terminal value is estimated using a constant growth method which requires an assumption about the expected long-term growth rate. The estimates are based on historical data and experience, industry projections, economic conditions, and the Company’s expectations.
Definite Lived Intangible Assets.  Definite lived intangible assets are subject to amortization over their useful lives. A straight-line amortization method is used over the estimated useful life which is representative of the pattern of how the economic benefits of the specific intangible asset is consumed. Intangible assets that are subject to amortization are reviewed for potential impairment at least annually or whenever events or circumstances indicate that carrying amounts may not be recoverable. The Company uses an income approach, which incorporates the use of the discounted cash flow (“DCF”) method.
BusinessCombinations. Business combinationsare accounted for using the acquisition method and accordingly, the assets acquired (including identified intangible assets), the liabilities assumed and any noncontrolling interest in the acquired business are recorded at their acquisition date fair values.
For each acquisition, the Company undertakes a detailed review to identify other intangible assets and a valuation is performed for all such identified assets. The Company uses several market participant measurements to determine the estimated value. This approach includes consideration of similar and recent transactions, as well as utilizing discounted expected cash flow methodologies. A substantial portion of the intangible assets value that the Company acquires is the specialized know-how of the workforce, which is treated as part of goodwill and is not required to be valued separately. The majority of the value of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, as well as tradenames and trademarks.
Deferred Acquisition Consideration. Certain acquisitions include an initial payment at the time of closing and provide for future additional contingent purchase price payments. Contingent purchase price obligations for these transactions are recorded
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as deferred acquisition consideration liabilities on the balance sheet, at the acquisition date fair value and are remeasured at each reporting period. These liabilities are derived from the projected performance of the acquired entity. These arrangements may be dependent on future events, such as the growth rate of the earnings of the relevant subsidiary during the contractual period. At each reporting date, the Company models each business’ future performance, including revenue growth and free cash flows, to estimate the value of each deferred acquisition consideration liability. The liability is adjusted quarterly based on changes in current information affecting each subsidiary’s current operating results and the impact this information will have on future results included in the calculation of the estimated liability. These adjustments are recorded in the results of operations. In instances where such contingent payments require the sellers’ continuous employment with the Company after the transaction, they are recorded as compensation expense in the Unaudited Condensed Consolidated Statements of Operations.

Redeemable Noncontrolling Interests. Many of the Company’s acquisitions include contractual arrangements where the noncontrolling shareholders have an option to purchase, or may require the Company to purchase, such noncontrolling shareholders’ incremental ownership interests under certain circumstances. The Company typically has similar call options under the same contractual terms. The amount of consideration under these contractual arrangements is not a fixed amount, but rather is dependent upon various valuation formulas, such as the average earnings of the relevant subsidiary through the date of exercise or the growth rate of the earnings of the relevant subsidiary during that period. In the event that an incremental purchase may be required by the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity on the Unaudited Condensed Consolidated Balance Sheets at their acquisition date fair value and adjusted for changes to their estimated redemption value through Retained earnings or Paid-in capital (when at an accumulated deficit) in the Unaudited Condensed Consolidated Balance Sheets (but not less than their initial redemption value), except for foreign currency translation adjustments. These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values.
Subsidiary and Equity Investment Stock Transactions. Transactions involving the purchase, sale or issuance of interests of a subsidiary where control is maintained are recorded as a reduction in the redeemable noncontrolling interests or noncontrolling interests, as applicable. Any difference between the purchase price allocations and noncontrolling interest is recorded to Common stock and other paid-in capital in the Unaudited Condensed Consolidated Balance Sheets. In circumstances where the purchase of shares of an equity investmentpro forma operating results in obtaining control, the existing carrying value of the investment is remeasured to the acquisition date fair value and any gain or loss is recognizedcombined company in the results of operations.
Revenue Recognition.  The Company’s revenue is recognized when control of the promised services are transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchangeits Form 10-K for those goods or services. See Note 5 included herein for additional information.
Cost of Services.  Cost of services sold primarily consists of staff costs that are directly attributable to the Company’s client engagements, as well as third-party direct costs of production and delivery of services to its clients. Cost of services sold does not include depreciation, amortization, and other office and general expenses that are not directly attributable to the Company’s client engagements.
Deferred Financing Costs.  The Company uses the effective interest method to amortize deferred financing costs and any original issue premium or discount, if applicable. The Company also uses the straight-line method, which approximates the effective interest method, to amortize the deferred financing costs on the Credit Agreement.
Income Taxes. We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates and laws expected to be in effect when the differences are expected to reverse. The Company records associated interest and penalties as a component of income tax expense. The Company records a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Management evaluates on a quarterly basis all available positive and negative evidence considering factors such as the reversal of deferred income tax liabilities, taxable income in eligible carryback years, projected future taxable income, the character of the income tax asset, tax planning strategies, changes in tax laws and other factors. The periodic assessment of the net carrying value of the Company’s deferred tax assets under the applicable accounting rules requires significant management judgment. A change to any of these factors could impact the estimated valuation allowance and income tax expense.
Stock-Based Compensation.  Under the fair value method, compensation cost is measured at fair value at the date of grant and is expensed over the service period, generally the award’s vesting period. The Company uses its historical volatility derived over the expected term of the award to determine the volatility factor used in determining the fair value of the award. The Company recognizes forfeitures as they occur.
Stock-based awards that are settled in cash or equity at the option of the Company are recorded at fair value on the date of grant. The fair value measurement of the compensation cost for these awards is based on using the Black-Scholes option
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pricing-model or other acceptable method and is recorded in Operating income over the service period, in this case the award’s vesting period.
The Company has adopted the straight-line attribution method for determining the compensation cost to be recorded during each accounting period. The Company commences recording compensation expense related to awards that are based on performance conditions under the straight-line attribution method when it is probable that such performance conditions will be met.
Income (Loss) per Common Share.  Basic income (loss) per common share is based upon the weighted average number of common shares outstanding during each period. Diluted income (loss) per common share is based on the above, in addition, if dilutive, common share equivalents, which include outstanding options, stock appreciation rights, and unvested restricted stock units. In periods of net loss, all potentially issuable common shares are excluded from diluted net loss per common share because they are anti-dilutive.
Foreign Currency Translation.  The functional and reporting currency of the Company is the US dollar. Generally, the Company’s subsidiaries use their local currency as their functional currency. Accordingly, the currency impacts of the translation of the Unaudited Condensed Consolidated Balance Sheets of the Company and its non-U.S. dollar based subsidiaries to U.S. dollar statements are included as cumulative translation adjustments in Accumulated other comprehensive income (loss). Translation of intercompany debt, which is not intended to be repaid, is included in cumulative translation adjustments. Cumulative translation adjustments are not included in net income (loss) unless they are actually realized through a sale or upon complete, or substantially complete, liquidation of the Company’s net investment in the foreign operation. Translation of current intercompany balances are included in net income (loss). The balance sheets of non-U.S. dollar based subsidiaries are translated at the period end rate. The Unaudited Condensed Consolidated Statements of Operations of the Company and its non-U.S. dollar based subsidiaries are translated at average exchange rates for the period.
Gains and losses arising from the Company’s foreign currency transactions are reflected in Foreign exchange, net on the Consolidated Statements of Operations.

December 31, 2022.
3.2. New Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and other items. ASU 2021-08 is effective January 1, 2023; however, the Company has early adopted the standard and retrospectively applied it to the financial statements herein.

In March 2020, the FASBFinancial Accounting Standards Board, (“FASB”) issued ASUAccounting Standards Update (“ASU”) 2020-04, and in January 2021 subsequently issued ASU 2021-01, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective upon issuance, through December 31, 2022. The Company is evaluating the impactCombined Credit Agreement (as defined in Note 8 of the adoption ofNotes included herein) is the Company’s only contractual arrangement that referenced LIBOR and is impacted by ASU 2020-04. On April 28, 2022, the Company amended the Combined Credit Agreement. Among other things, this guidanceamendment replaced any references to LIBOR with references to the Secured Overnight Financing Rate (“SOFR”). Based on the Company'sCompany’s assessment, the Company has elected to apply the optional expedient and treat the contract modifications as a continuation of an existing contract. This election does not have a material effect on our results of operations or financial statementsposition. See Note 8 of the Notes included herein for information.
3. Acquisitions
2022 Acquisitions
Acquisition of Brand New Galaxy
On April 19, 2022, the Company acquired Brand New Galaxy (“BNG”), for approximately $20,695 of cash consideration, as well as contingent consideration up to a maximum value of $50,000. The contingent consideration is due upon meeting certain future earnings targets through 2024, with approximately 67% payable in cash and disclosures.33% payable in Class A Common Stock.
The consideration has been allocated to the assets acquired and assumed liabilities of BNG based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The preliminary purchase price allocation is as follows:
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Amount
Cash and cash equivalents$2,771 
Accounts receivable7,638 
Other current assets1,634 
Fixed assets2,338 
Intangible assets12,410 
Other assets1,416 
Accounts payable(6,855)
Accruals and other liabilities(4,896)
Advance billings(1,095)
Other liabilities(3,448)
Net assets assumed11,913 
Goodwill25,552 
Purchase price consideration$37,465

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of BNG. Goodwill of $25,552 was assigned to the Brand Performance Network reportable segment. The majority of the goodwill is non-deductible for income tax purposes.
4.Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is ten years. The following table presents the details of identifiable intangible assets acquired:

Estimated Fair ValueEstimated Useful Life in Years
Trade Names$5,930 10
Customer Relationships5,390 11
Other1,090 7
Total Acquired Intangible Assets$12,410 

Pro Forma Financial Information (unaudited)
The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.

Three Months Ended September 30,Nine Months Ended September 30,
202120222021
Revenue$473,539 $1,989,833 $878,610 
Net Income7,031 92,670 30,495 
Revenue attributable to BNG, included within the three and nine months ended September 30, 2022 unaudited condensed consolidated statement of operations is $5,580 and $11,215, respectively and operating loss was $2,500 and $2,620, respectively.
Acquisition of TMA Direct, Inc.
On May 31, 2022, the Company acquired approximately 87% of TMA Direct, Inc. (“TMA Direct”) for approximately $17,247 of cash consideration and approximately $457 of deferred acquisition payments. The Company was also granted an option to purchase the remaining 13% minority interest in TMA Direct for up to approximately $13,330.
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The consideration has been allocated to the assets acquired and assumed liabilities of TMA Direct based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The preliminary purchase price allocation is as follows:
Amount
Accounts receivable$582 
Other current assets669 
Intangible assets13,200 
Accounts payable(379)
Other liabilities(270)
Noncontrolling interests(2,667)
Net assets assumed11,135 
Goodwill6,569 
Purchase price consideration$17,704
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of TMA Direct. Goodwill of $6,569 was assigned to the Communications Network reportable segment. The majority of the goodwill is deductible for income tax purposes.
Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is ten years. The following table presents the details of identifiable intangible assets acquired:

Estimated Fair ValueEstimated Useful Life in Years
Customer Relationships$11,400 10
Trade names1,800 10
Total Acquired Intangible Assets$13,200 

Pro Forma Financial Information (unaudited)
The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.

Three Months Ended September 30,Nine Months Ended September 30,
202120222021
Revenue$468,862 $1,983,437 $867,533 
Net Income8,462 94,768 34,491 
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Revenue attributable to TMA Direct, included within the three and nine months ended September 30, 2022 unaudited condensed consolidated statement of operations is $3,774 and $5,026, respectively, and operating income was $1,369 and $1,626, respectively.
Other Acquisitions
On July 12, 2022, the Company acquired PEP Group Holdings B.V. (“PEP Group”), an omnichannel content creation and Dispositionsadaption production company for approximately $521, subject to post-closing adjustments, as well as contingent consideration up to a maximum value of $2,679. The contingent consideration is based on meeting certain future earnings targets through 2025.
On July 15, 2022, the Company acquired Apollo Program II Inc. (“Apollo”), a real-time artificial intelligence-powered software-as-a-service platform, for approximately $2,300, subject to post-closing adjustments, as well as fixed deferred payments of $1,000 and $1,500 on or prior to July 1, 2023 and July 1, 2024, respectively.
The estimates of fair value for the aforementioned acquisitions are subject to change and could be significant. The Company expects to complete the allocation of purchase price as soon as practicable, but no later than one year after the acquisition date.
2021 Acquisitions
Acquisition of MDC
On December 21, 2020, MDC Partners Inc. (“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of the Stagwell Media (the “Stagwell Subject Entities”).Entities. The Stagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell Marketing or SMG”) and its direct and indirect subsidiaries.

On August 2, 2021 (the “Closing Date”), we completed the combination of MDC and the Stagwell Subject Entities and a series of steps and related transactions (such combination and transactions, the “Transactions”). In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of the Company, converted into a Delaware limited liability company and changed its name to Midas OpCo Holdings LLC, and subsequently to Stagwell Global LLC (“OpCo”); (ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo; and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc.

In respect of the Transactions, the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in the Financial Accounting Standards Board’s (“FASB”)FASB’s Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). The Transactions waswere accounted for as a reverse acquisition using the acquisition method of accounting, pursuant to FASBASC Topic 805-10, Business Combinations, with MDC treated as the legal
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acquirer and SMG treated as the accounting acquirer. In identifying SMG as the acquiring entity for accounting purposes, MDC and SMG took into account a number of factors, including the relative voting rights and the corporate governance structure of the Company. SMG is considered the accounting acquirer since Stagwell Media controls the board of directors of the Company following the Transactions and received an indirect ownership interest in the Company’s only operating subsidiary, OpCo, of 69.55% ownership of OpCo’s common units. However, no single factor was the sole determinant in the overall conclusion that Stagwell is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion. Under the acquisition method of accounting, the assets and liabilities of MDC, as the accounting acquiree, were recorded at their respective fair value as of the date the Transactions were completed.

On August 2, 2021, an aggregate of 179,970,051179,970 shares of the Company’s Class C common stockCommon Stock were issued to Stagwell Media in exchange for $1,800$1.80 (the “Stagwell New MDC Contribution”). The Class C common stockCommon Stock does not participate in the earnings of the Company. Additionally, an aggregate of 179,970,051179,970 OpCo common units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities (the “Stagwell OpCo Contribution”).

The fair value of the purchase consideration is $426,396,$429,062, consisting of approximately 80,000,00080,000 shares of the Company’s Class A and B common stockCommon Stock and common stockCommon Stock equivalents based on a per share price of approximately $5.42, the closing stock price on the date of the combination.

ASC 805 requires the allocation of the purchase price consideration to the fair value of the identified assets acquired and liabilities assumed upon consummation of a business combination. For this purpose, fair value shall be determined in accordance with the fair value concepts defined in ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”). Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements can be highly subjective and can involve a high degree of estimation.

The total purchase price to acquire MDC has been allocated tovaluation was completed during the assets acquired and assumed liabilities based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The fair valuethird quarter of the acquired assets and assumed liabilities as of the date of acquisition are based on preliminary estimates assisted, in part, by a third-party valuation expert. The estimates are subject to change upon the finalization of appraisals and other valuation analyses, which are expected to be completed no later than one year from the date of acquisition. Although the completion of the valuation activities may result in asset and liability fair values that are different from the preliminary estimates included herein, it is not expected that those differences would alter the understanding of the impact of this transaction on the consolidated financial position and results of operations of the Company.2022.

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The preliminary purchase price allocation is as follows:

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Amount
Cash and cash equivalents$130,155130,197 
Accounts receivable419,742398,736 
Other current assets44,50841,291 
Fixed Assetsassets80,04781,343 
Right-of-use lease assets - operating leases293,034252,739 
Intangible assets809,900810,900 
Other assets16,92818,282 
Accounts payable(165,443)(139,590)
Accruals and other liabilities(308,757)(307,439)
Advance billings(211,687)(211,212)
Current portion of lease liabilities(55,878)(54,009)
Current portion of deferred acquisition consideration(53,054)
Long-term debt(1,011,690)(901,736)
Revolving credit facility(109,954)
Long-term portion of deferred acquisition consideration(8,056)
Long-term portion of lease liabilities(292,497)(283,637)
Other liabilities(131,897)(139,026)
Redeemable noncontrolling interests(30,830)(25,990)
Preferred shares(209,980)
Noncontrolling interests(158,230)(151,090)
Net liabilities assumed(843,685)(861,285)
Goodwill1,270,0811,290,347 
Purchase price consideration$426,396429,062 

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of MDC. Goodwill of $1,041,277, $166,658$932,582, $285,396 and $62,146$72,369 was assigned to the Integrated Agencies Network, the MediaBrand Performance Network and the Communications Network reportable segments, respectively. The majority of the goodwill is non-deductible for income tax purposes.

Goodwill has been reduced from the reported amount as of June 30, 2022 of $1,298,370 primarily to reflect the finalization of the assessment of certain tax positions and the related deferred taxes, as well as the finalization of the valuation of certain assets and liabilities in the Brand Performance Network. There has been no change that impacts the Consolidated Statement of Operations.
Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is 13thirteen years. The following table presents the details of identifiable intangible assets acquired.acquired:

Estimated Fair ValueEstimated Useful Life in Years
Trade Names$98,000 10
Customer Relationships712,900 6-15
Total Acquired Intangible Assets$810,900 
Estimated Fair ValueEstimated Useful Life in Years
Trade Names$98,000 10
Customer Relationships711,900 6-15
Total Acquired Intangible Assets$809,900 
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MDC operating results are included in the Condensed Consolidated Statements of Operations from the date of the acquisition through September 30, 2021 with revenue of $241,257 and a nominal net loss.

Transaction expenses were approximately $15,000 for the nine months ended September 30, 2021.






Pro Forma Financial Information (unaudited)
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The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2020.2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.
Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
Revenue$568,424 $1,612,399 

The pro forma net loss was nominal for the three and nine months ended September 30, 2021.
Revenue attributable to MDC, included within the three and nine months ended September 30, 2021 unaudited condensed consolidated statement of operations is $342,539 and $995,729, respectively and operating income was $17,506 and $77,817, respectively.
Acquisition of GoodStuff Holdings Limited
On December 31, 2021, the Company acquired GoodStuff Holdings Limited (“Goodstuff”) for approximately £21,000 (approximately $28,188) of cash consideration as well as contingent consideration up to a maximum of £22,000. The cash consideration included an initial payment of £8,000, an excess working capital payment of approximately £9,000 and approximately £4,000 of deferred payments. The contingent consideration is tied to employees’ service and will be recognized as deferred acquisition consideration expense through 2026. Therefore, only the cash consideration has been allocated to the assets acquired and assumed liabilities of Goodstuff based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The preliminary purchase price allocation is as follows:
Amount
Cash and cash equivalents$30,985 
Accounts receivable28,685 
Other current assets3,207 
Fixed assets237 
Right-of-use lease assets - operating leases2,060 
Intangible assets14,974 
Other assets55 
Accounts payable(6,344)
Accruals and other liabilities(27,353)
Advance billings(15,956)
Current portion of lease liabilities(857)
Income taxes payable(967)
Long-term portion of lease liabilities(3,744)
Other liabilities(1,204)
Net assets assumed23,778 
Goodwill4,410 
Purchase price consideration$28,188
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of Goodstuff. Goodwill of $4,410 was assigned to the Brand Performance Network reportable segment. The majority of the goodwill is non-deductible for income tax purposes.
Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is ten years. The following table presents the details of identifiable intangible assets acquired:

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Estimated Fair ValueEstimated Useful Life in Years
Trade Names$1,349 15
Customer Relationships13,625 10
Total Acquired Intangible Assets$14,974 
Pro Forma Financial Information (unaudited)
The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2021. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.

Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
Revenue$471,406 $872,192 
Net Income8,357 33,894 

Nine Months Ended September 30, 2021Nine Months Ended September 30, 2020
Revenue$1,612,399 $1,445,813 
The proforma net loss was nominal for the nine months ended September 30, 2021 and 2020.
2020 Acquisitions2022 Purchases of Noncontrolling Interests
On February 14, 2020,April 1, 2022, the Company acquired Sloane & Companythe remaining interest in Hello Design, LLC (“Sloane”Hello Design”) fromthat it did not already own for an affiliateaggregate purchase price of MDC for approximately $24,400$4,600, comprised of total consideration. Total consideration included a closing cash payment of $18,900 made by Stagwell Media (Non-consolidated related party) which was accounted for as$3,600 and a non-cash contributioncontingent deferred acquisition payment of $1,000. The contingent deferred payment will be based on the financial results of the underlying business through the end of 2022 with the payment due in 2023.
2021 Purchases of Noncontrolling Interests
On October 1, 2021, the Company entered into an agreement to purchase the approximate 27% remaining interest of Targeted Victory it did not already own, stipulating the purchase of 13.3% on October 1, 2021 and the remaining 13.3% on July 31, 2023, with the option for the purposesseller to delay the second purchase until July 31, 2025. The purchase price of the Company’s Consolidated Statement$73,898 was comprised of Cash Flowsa contingent deferred acquisition payment and Statement of Changes in Equity,redeemable noncontrolling interest with estimated present values at the acquisition date fair valueof $46,618 and $27,280, respectively. The contingent deferred payment and redeemable noncontrolling interest were based on the financial results of the underlying business through 2025. In addition, at the option of the Company, up to 50% of the total purchase price can be paid in shares of Class A Common Stock and in no event may the purchase price exceed $135,000.
On December 1, 2021, the Company acquired the approximate 27% remaining interest of Concentric it did not already own for an aggregate purchase price of $8,058, comprised of a closing cash payment of $1,581 and contingent deferred acquisition considerationpayments with an estimated present value at the acquisition date of $4,800, and $700$6,477. The contingent deferred payments were based on the financial results of cash paid by the Company. Sloane is an industry-leading strategic communications firm, based out of New York. Sloane will extend SKDK’s current suite of services and allow for the expansion into the capital markets and special situations verticals.underlying business through 2022 with final payment due in 2023.
On August 14, 2020,December 31, 2021, the Company acquired Kettle Solutions, LLC (“Kettle”)the approximate 49% remaining interest of Instrument it did not already own for approximately $5,400an aggregate purchase price of total consideration. Total consideration included$157,072, comprised of a cashclosing payment of $4,900, plus$37,500 in cash and $37,500 in shares of Class A Common Stock and deferred acquisition payments with an additional $500 due upon the finalization of Kettle’s working capital accounts, as outlined in the purchase agreement. The purchase agreement also offers the previous owners of Kettle an additional $11,900 in deferred consideration, and is dependent on Kettle reaching contractually defined operating goals in 2020, 2021, 2022 and 2023. Kettle is an industry recognized web design and content creation firm that assists its customers in developing and executing marketing campaigns, based out of New York.
On October 30, 2020, the Company acquired Truelogic Software, LLC, Ramenu S.A., and Polar Bear Development S.R.L. (collectively referred to as “Truelogic”), for approximately $17,300 of total consideration. Total consideration included a cash payment of $8,900,estimated present value at the acquisition date fair value of the$82,072. The deferred payments are not contingent deferred acquisition consideration of $7,900, and an additional $500 due upon the finalization of Truelogic’s working capital accounts, as outlinedwill be paid in the purchase agreement. Truelogic is a software development firm based in Buenos Aires that assists customers in sourcing top South American engineering talent2023 and developing small-scale software projects. Truelogic is included in the Company’s Code and Theory Brand, which is part of its Digital - Marketing reportable segment.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of each acquisition (in thousands):

2020
SloaneKettleTruelogicTotal
Cash, cash equivalents and restricted cash$— $49 $90 $139 
Accounts receivable and other current assets2,768 2,732 2,958 8,458 
Other noncurrent assets— 172 10 182 
Intangible assets5,900 1,930 9,500 17,330 
Property and equipment72 58 50 180 
Right-of-use assets – operating leases— 533 201 734 
Accounts payable and other current liabilities(469)(552)(1,063)(2,084)
Advanced billings(130)(310)(429)(869)
Operating lease liabilities— (533)(201)(734)
Goodwill16,275 1,323 6,184 23,782 
Total net assets acquired$24,416 $5,402 $17,300 $47,118 

Goodwill recognized on the Sloane, Kettle and Truelogic acquisitions is fully-deductible for income tax purposes.
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The following table reports the fair value of intangible assets acquired, including the corresponding weighted average amortization periods, as of the date of each acquisition (in thousands, except years):

2020
Weighted Average Amortization PeriodSloaneKettleTruelogicTotal
Customer relationships10 years$4,600 $1,600 $9,100 $15,300 
Tradenames and trademarks11 years1,300 330 400 2,030 
Total$5,900 $1,930 $9,500 $17,330 

The following table summarizes the total revenue and net income included in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) from the date of each acquisition (in thousands):

Nine Months Ended September 30, 2020
Revenue$10,794 
Net Income$1,199 

Pro Forma Financial Information (unaudited)

The unaudited pro forma information for the periods set forth below gives effect to the 2020 acquisitions as if they had occurred as of January 1, 2020. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time (in thousands):

Nine Months Ended September 30, 2020
Revenue$587,343 
Net Income$39,801 

2021 Disposition

On September 15, 2021, the Company sold Reputation Defender to a strategic buyer for approximately $40,000 resulting in a gain of approximately $43,000. The gain is recognized within the All Other category in Gain on sale of business and other, net within the Unaudited Condensed Consolidated Statements of Operations.


2024.
5.4. Revenue
The Company’s revenue recognition policies are established in accordance with ASC 606, and accordingly, revenue is recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The Stagwell network provides an extensive range of services to our clients, offering a variety of marketing and communication capabilities including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast), public relations services including strategy, editorial, crisis support or issues management, media training, influencer engagement and events management. We also provide media buying and planning across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast), experiential marketing and application/website design and development.
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The primary source of the Company’s revenue is from agency arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses, depending on the terms of the client contract. In all circumstances, revenue is only recognized when collection is reasonably assured. Certain of the Company’s contractual arrangements have more than one performance obligation. For such arrangements, revenue is allocated to each performance obligation based on its
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relative stand-alone selling price. Stand-alone selling prices are determined based on the prices charged to clients or using expected cost plus margin.
The determination of our performance obligations is specific to the services included within each contract. Based on a client’s requirements within the contract, and how these services are provided, multiple services could represent separate performance obligations or be combined and considered one performance obligation. Contracts that contain services that are not significantly integrated or interdependent, and that do not significantly modify or customize each other, are considered separate performance obligations. Typically, we consider media planning, media buying, creative (or strategy), production and experiential marketing services to be separate performance obligations if included in the same contract as each of these services can be provided on a stand-alone basis, and do not significantly modify or customize each other. Public relations services and application/website design and development are typically each considered one performance obligation as there is a significant integration of these services into a combined output.
Certain of the Company’s contracts consist of a single performance obligation. In these instances, the Company does not consider the underlying activities as separate or distinct performance obligations because its services are highly interrelated, and the integration of the various components is essential to the overall promise to the Company’s customer. In certain of the Company’s client contracts, the performance obligation is a stand-ready obligation because the Company provides a constant level of similar services over the term of the contract.
We typically satisfy our performance obligations over time, as services are performed. Fees for services are typically recognized using input methods (direct labor hours, materials and third-party costs) that correspond with efforts incurred to date in relation to total estimated efforts to complete the contract. To a lesser extent, revenue is recognized using output measures, such as impressions or ongoing reporting. For client contracts when the Company has a stand-ready obligation to perform services on an ongoing basis over the life of the contract, where the scope of these arrangements includes an undefined number of broad activities and there are no significant gaps in performing the services, the Company recognizes revenue ratably using a time-based measure. In addition, for client contracts where the Company is providing online subscription-based hosted services, it recognizes revenue ratably over the contract term. Point in time recognition primarily relates to certain commission-based contracts, which are recognized upon the placement of advertisements in various media when the Company has no further performance obligation.
Revenue is recognized net of sales and other taxes due to be collected and remitted to governmental authorities. The Company’s contracts typically provide for termination by either party within 30 to 90 days. Although payment terms vary by client, they are typically within 30 to 60 days. In addition, the Company generally has the right to payment for all services provided through the end of the contract or termination date.
Within each contract, we identify whether the Company is principal or agent at the performance obligation level. In arrangements where the Company has substantive control over the service before transferring it to the client, and is primarily responsible for integrating the services into the final deliverables, we act as principal. In these arrangements, revenue is recorded at the gross amount billed. Accordingly, for these contracts the Company has included reimbursed expenses in revenue. In other arrangements where a third-party supplier, rather than the Company, is primarily responsible for the integration of services into the final deliverables, and thus the Company is solely arranging for the third-party supplier to provide these services to our client, we generally act as agent and record revenue equal to the net amount retained, when the fee or commission is earned. The role of Stagwell’s agencies under a production services agreement is to facilitate a client’s purchasing of production capabilities from a third-party production company in accordance with the client’s strategy and guidelines. The obligation of Stagwell’s agencies under media buying services is to negotiate and purchase advertising media from a third-party media vendor on behalf of a client to execute its media plan. WeTypically, we do not obtain control prior to transferring these services to our clients; therefore, we primarily act as agent for production and media buying services.                                    
A small portion of the Company’s contractual arrangements with clients include performance incentive provisions, which allow the Company to earn additional revenues as a result of its performance relative to both quantitative and qualitative goals. Incentive compensation is primarily estimated using the most likely amount method and is included in revenue up to the amount that is not expected to result in a reversal of a significant amount of cumulative revenue recognized. We recognize revenue related to performance incentives as we satisfy the performance obligation to which the performance incentives are related.
Disaggregated Revenue Data
The Company provides a broad range of services to a large base of clients across the full spectrum of verticals globally. The primary source of revenue is from agency arrangements in the form of fees for services performed, commissions, and from
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performance incentives or bonuses. Certain clients may engage with the Company in various geographic locations, across multiple disciplines, and through multiple Brands. Representation of a client rarely means that Stagwell handles marketing communications for all brandsBrands or product lines of the client in every geographical location. The Company’s Brands often cooperate with one another through referrals and the sharing of both services and expertise, which enables Stagwell to service
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clients’ varied marketing needs by crafting custom integrated solutions. Additionally, the Company maintains separate, independent operating companies to enable it to effectively manage potential conflicts of interest by representing competing clients across the Stagwell network.
The following table presents revenue disaggregated by lines of businessour principal capabilities for the three and nine months ended September 30, 20212022 and 2020:2021:
Three Months Ended September 30,Nine Months Ended September 30,
Lines of BusinessReportable Segment2021202020212020
Public RelationsIntegrated Agencies Network, Communications Network, Other$67,497 $43,497 $118,380 $97,217 
CreativeIntegrated Agencies Network125,637 1,927 127,791 6,792 
DigitalAll Segments191,643 153,284 445,485 370,711 
ExperientialIntegrated Agencies Network14,413 — 14,413 — 
MediaMedia Network10,819 — 10,819 — 
ResearchIntegrated Agencies Network46,363 24,863 117,467 78,242 
OtherMedia Network, Integrated Agencies Network, Other10,262 4,526 23,081 22,008 
$466,634 $228,097 $857,436 $574,970 

Three Months Ended September 30,Nine Months Ended September 30,
Principal CapabilitiesReportable Segment2022202120222021
Digital TransformationAll Segments$197,337 $124,268 $606,061 $256,966 
Creativity and CommunicationsIntegrated Agencies Network, Brand Performance Network, Communications Network304,048 208,424 890,692 261,080 
Performance Media and DataBrand Performance Network111,548 88,139 325,584 222,186 
Consumer Insights and StrategyIntegrated Agencies Network50,858 45,803 157,270 117,204 
$663,791 $466,634 $1,979,607 $857,436 
Stagwell has historically largely focused where the Company was founded in North America, the largest market for its services in the world. The Company has expanded its global footprint to support clients looking for help to grow their businesses in new markets. Stagwell’s Brands are located in the United States and United Kingdom, and an additional 18more than thirty other countries around the world. In the past, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which included discretionary components that are easier to reduce in the short term than other operating expenses.
The following table presents revenue disaggregated by geography for the three and nine months ended September 30, 20212022 and 2020:2021:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
Geographical LocationGeographical LocationReportable Segment2021202020212020Geographical LocationReportable Segment2022202120222021
United StatesUnited StatesAll$387,662 $208,045 $733,038 $515,403 United StatesAll$553,744 $387,662 $1,650,610 $733,038 
United KingdomUnited KingdomAll32,218 4,904 62,416 18,658 United KingdomAll42,774 32,218 125,950 62,416 
OtherOtherAll46,754 15,148 61,982 40,909 OtherAll67,273 46,754 203,047 61,982 
$466,634 $228,097 $857,436 $574,970 $663,791 $466,634 $1,979,607 $857,436 

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Contract Assets and Liabilities
Contract assets consist of fees and reimbursable outside vendor costs incurred on behalf of clients when providing advertising, marketing and corporate communications services that have not yet been invoiced to clients. Unbilled service fees were $137,938$179,878 and $30,570$116,558 at September 30, 20212022 and December 31, 2020,2021, respectively, and are included as a component of Accounts receivable on the Unaudited Condensed Consolidated Balance Sheets. Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $37,101$57,873 and $11,063$63,065 at September 30, 20212022 and December 31, 2020,2021, respectively, and are included on the Unaudited Condensed Consolidated Balance Sheets as Expenditures billable to clients. Such amounts are invoiced to clients at various times over the course of providing services. Additions to contract assets of $99,853 were added during the period as a result of the acquisition of MDC.
Contract liabilities consist of fees received from or billed to clients in excess of fees recognized as revenue andrecognized. Such fees are classified as Advance billings and also are included within Accruals and other liabilitiespresented on the Company’s Unaudited Condensed Consolidated Balance Sheets. In arrangements in which we are acting as an agent, the revenue recognition related to the contract liability is presented on a net basis within the Unaudited Condensed Consolidated Statements of Operations. Advance billings at September 30, 20212022 and December 31, 20202021 were $286,790$340,675 and $66,418,$361,885, respectively. The increasedecrease in the Advance billings balance of $220,372$21,210 for the nine months ended September 30, 20212022 was primarily driven by the acquisition of MDC, representing a $211,687 increase, and by cash payments received or due in advance of satisfying our performance obligations, offset by $45,432$323,734 of revenues recognized that were included in the Advance billings balances as of December 31, 2020 and reductions due to the incurrence of third-party costs. Contract liabilities classified within Accruals and other liabilities at September 30, 2021 and December 31, 2020 were $168,882 and $9,311, respectively. The increase in the balance of $159,571 for the nine months ended September 30, 2021 was primarily driven by was primarily driven by the acquisition of MDC, representing a $108,488 increase, and by cash payments received or due in advance of satisfying our performance obligations, offset by $9,311 of revenues recognized that were included in the balance as of December 31, 2020 and reductions due to the incurrence of third-party costs.
Changes in the contract asset and liability balances during the nine months ended September 30, 20212022 were not materially impacted by write offs, impairment losses or any other factors.
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Unsatisfied Performance Obligations
The majority of our contracts are for periods of one year or less. For those contracts with a term of more than one year, we had approximately $8,498$42,438 of unsatisfied performance obligations as of September 30, 2021,2022 of which we expect to recognize approximately 35%32% in 2021, 60%the remaining quarters of 2022, 56% in 20222023 and 4%12% in 2023.2024.
6. Income (Loss)5. Earnings Per Common Share
The following table sets forth the computations of basic and diluted income (loss) per common share:share for the three and nine months ended September 2022:
 Three Months Ended September 30,Nine Months Ended September 30,
 20212021
Numerator: 
Net loss attributable to Stagwell Inc. common shareholders$ (4,545)$ (4,545)
Denominator:
Weighted average number of common shares outstanding76,105,80776,105,807
Earnings Per Share - Basic & Diluted$ (0.06)$ (0.06)
Anti-dilutive:
Class C shares179,970,051179,970,051
Stock Appreciation Rights and Restricted Awards6,596,0236,596,023
 Three Months Ended September 30,Nine Months Ended September 30,
20222022
Earnings Per Share - Basic
Numerator: 
Net income$35,274 $93,415 
Net income attributable to Class C shareholders(19,286)(51,027)
Net loss attributable to other equity interest holders(5,379)(8,641)
Net income attributable to noncontrolling and redeemable noncontrolling interests(24,665)(59,668)
Net income attributable to Stagwell Inc. common shareholders$       10,609 $       33,747 
Denominator:
Weighted Average number of common shares outstanding125,384 124,710 
Earnings Per Share - Basic$       0.08 $       0.27 
Earnings Per Share - Diluted
Numerator:
Net income attributable to Stagwell Inc. common shareholders$       10,609 $       33,747 
Denominator:
Basic - Weighted Average number of common shares outstanding125,384 124,710 
Dilutive shares:
Stock appreciation rights1,837 1,885 
Restricted share and restricted unit awards3,277 4,955 
Diluted - Weighted average number of common shares outstanding130,498 131,550 
Earnings Per Share - Diluted$       0.08 $       0.26 
Restricted stock awards of 2,340 as of September 30, 2022 are excluded from the computation of diluted income per common share because the performance contingency necessary for vesting had not been met as of the reporting date.
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Table
The following table sets forth the computations of Contents
basic and diluted income per common share for the three and nine months ended September 2021:
There were 123,849,000 Preferred Shares outstanding which were convertible into 33,035,446 of Class A common shares at September 30, 2021. These Preferred Shares were anti-dilutive for each period presented in the table above and are therefore excluded from the diluted earnings per share calculation.
 Three Months Ended September 30,Nine Months Ended September 30,
 20212021
Numerator:
Net loss attributable to Stagwell Inc. common shareholders$       (4,545)$     (4,545)
Denominator:
Weighted average number of common shares outstanding76,106 76,106 
Loss Per Share - Basic & Diluted$ (0.06)$ (0.06)
Anti-dilutive:
Class C shares179,970 179,970 
Stock Appreciation Rights and Restricted Awards6,596 6,596 

The combination of MDC and SMG, was completed on August 2, 2021, which was treated as a reverse acquisition for financial reporting purposes. SMG was treated as the accounting acquirer and MDC wasas the accounting acquiree. Therefore, under applicable accounting principles, the historical financial results of SMG prior to August 2, 2021 are considered our historical financial results. Accordingly, historical information presented in this Form 10-Q for events occurring or periods ending before August 2, 2021 does not reflect the impact of the Transactions or the financial results of MDC and may not be comparable with historical information for events occurring or periods ending on or after August 2, 2021.
SMG’s equity structure, prior to the combination with MDC, was a non-unitized single member limited liability company, resulting in all components of equity attributable to the member being reported within Members'Members’ Capital. Given that SMG was a non-unitized single member limited liability company, net income (loss) prior to the combination is not applicable for purposes of calculating earnings per share. Therefore, the net income (loss) in the table above includes the income or loss for the period beginning on the acquisition date through the end of the respective reporting period and as such will not reconcile to the respective amounts presented within the Unaudited Condensed Consolidated Statements of Operations.


7.6. Deferred Acquisition Consideration
Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments, and to a lesser extent, contingent and fixed retention payments tied to continued employment of specific personnel. Contingent deferred acquisition consideration is recorded at the acquisition date fair value and adjusted at each reporting period through operating income. The Company accounts for certain retention payments through operating income as compensation expense over the required retention period.
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The following table presents changes in contingent deferred acquisition consideration, which is measured at fair value on a recurring basis using significant unobservable inputs, and a reconciliation to the amounts reported on the balance sheets as of September 30, 20212022 and December 31, 2020:2021:
September 30,December 31,September 30,
2022
December 31, 2021
20212020
Beginning Balance of Contingent Payments$17,847 $65,792 
Beginning balance of contingent paymentsBeginning balance of contingent payments$222,369 $17,847 
PaymentsPayments(12,286)(66,235)Payments(71,865)(12,431)
Redemption value adjustments (1)
9,535 2,520 
Adjustment to deferred acquisition consideration (1)
Adjustment to deferred acquisition consideration (1)
(13,793)18,721 
Additions (2)
Additions (2)
61,110 15,717 
Additions (2)
24,594 198,937 
Currency Translation AdjustmentCurrency Translation Adjustment(1,576)— 
OtherOther(501)53 Other(140)(705)
Ending balance of contingent payments(3)Ending balance of contingent payments(3)$75,705 $17,847 Ending balance of contingent payments(3)$159,589 $222,369 
(1) Redemption value adjustments areAdjustment to deferred acquisition consideration contains fair value changes from the Company’s initial estimates of deferred acquisition payments. Redemption value adjustments areAdjustment to deferred acquisition consideration is recorded within Office and general expenses on the Unaudited Condensed Consolidated Statements of Operations.
(2) Additions inIn 2021, approximately $61,000 of additions represent deferred acquisition consideration acquired in connection with the acquisition of MDC. Approximately $136,000 of additions represent deferred acquisition consideration acquired in connection with the purchases of noncontrolling interests. See Note 3 of the Notes included herein for additional information related to the purchases of Concentric, Targeted Victory, and Instrument. In 2022, approximately 22,014 of additions represent deferred acquisition consideration acquired in connection with the acquisitions of BNG, Apollo, and PEP Group. See Note 3 of the Notes included herein for additional information related to these purchases.
(3) As of September 30, 2022, approximately, $42,356 of the deferred acquisition consideration is expected to be settled in the Company’s in Class A Common Stock.
8.7. Leases
The Company leases office space in North America, Europe, Asia, South America, Africa and Australia. This space is primarily used for office and administrative purposes by the Company’s employees in performing professional services. These leases are classified as operating leases and expire between years 20212022 through 2034. The Company’s finance leases are immaterial.
The Company’s leasing policies are established in accordance with ASC 842, and accordingly, the Company recognizes on the balance sheet at the time of lease commencement a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments. Right-of-use lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. All right-of-use lease assets are reviewed for impairment. As the Company’s implicit rate in its leases is not readily determinable, in
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determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the commencement date. Lease payments included in the measurement of the lease liability are comprised of noncancelablenon-cancellable lease payments, payments based upon an index or rate, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.
Lease costs are recognized in the Unaudited Condensed Consolidated Statements of Operations over the lease term on a straight-line basis. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset. 
Some of the Company’s leases contain variable lease payments, including payments based upon an index or rate. Variable lease payments based upon an index or rate are initially measured using the index or rate in effect at the lease commencement date and are included within the lease liabilities. Lease liabilities are not remeasured as a result of changes in the index or rate, rather changes in these types of payments are recognized in the period in which the obligation for those payments is incurred. In addition, some of our leases contain variable payments for utilities, insurance, real estate tax, repairs and maintenance, and other variable operating expenses. Such amounts are not included in the measurement of the lease liability and are recognized in the period when the facts and circumstances which the variable lease payments are based upon occur.
Some of the Company’s leases include options to extend or renew the leases through 2044. The renewal and extension options are not included in the lease term as the Company is not reasonably certain that it will exercise its option.
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From time to time, the Company enters into sublease arrangements both with unrelated third-parties and with our partner agencies.third parties. These leases are classified as operating leases and expire between years 20212022 through 2031.2032. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company subleases office space in North America Asia, Europe and Australia.Europe.
As of September 30, 2021,2022, the Company has entered into 3one operating leaseslease for which the commencement date has not yet occurred asprimarily because the premises areis in the process of being prepared for occupancy by the landlord. Accordingly, these 3 leases representthis one lease represents an obligation of the Company that is not reflected within the Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021.2022. The aggregate future liability related to these leasesthis lease is approximately $31,310.$1,167.
The discount rate used for leases accounted for under ASC 842 is the Company’s collateralized credit adjusted borrowing rate.
The following table presents lease costs and other quantitative information for the three and nine months ended September 30, 20212022 and 2020:2021:
Three Months Ended September 30,Nine Months Ended September 30, Three Months
Ended September 30,
Nine Months
Ended September 30,
2021202020212020 2022202120222021
Lease Cost:Lease Cost:Lease Cost:
Operating lease costOperating lease cost$13,502$5,900$27,779$19,279Operating lease cost$19,966$13,502$54,929$27,779
Variable lease costVariable lease cost3,2309285,1672,959Variable lease cost4,7593,23013,9635,167
Sublease rental incomeSublease rental income(2,359)(938)(4,290)(2,818)Sublease rental income(3,636)(2,359)(11,128)(4,290)
Total lease costTotal lease cost$14,373$5,890$28,656$19,420Total lease cost$21,089$14,373$57,764$28,656
Additional information:Additional information:Additional information:
Cash paid for amounts included in the measurement of lease liabilities for operating leasesCash paid for amounts included in the measurement of lease liabilities for operating leasesCash paid for amounts included in the measurement of lease liabilities for operating leases
Operating cash flowsOperating cash flows$16,490$5,260$29,854$15,580Operating cash flows$22,694$16,490$69,827$29,854
Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustmentsRight-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments$353,984$128$353,984$1,961Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments$5,189$353,984$27,878$353,984
Weighted average remaining lease term (in years) - Operating leases6.84.66.84.6
Weighted average discount rate - Operating leases4.0 %4.1 %4.0 %4.1 %

As of September 30, 2022, the weighted average remaining lease term (in years) and weighted average discount rate were 6.4 and 4.3%, respectively.
Operating lease expense is included in office and general expenses in the Unaudited Condensed Consolidated Statements of Operations. The Company’s lease expense for leases with a term of 12 months or less is immaterial.
In the three and nine months ended September 30, 2022, the Company recorded a charge of $1,734 and $2,014, respectively, primarily to reduce the carrying value of one of its right-of-use lease assets and related leasehold improvements. This right-of-use lease asset related to an agency within the Integrated Agencies Network. As a result of subleasing the space, the Company evaluated the facts and circumstances related to the use of the assets which indicated that they may not be recoverable. Using the sublease income to develop expected future cash flows, it was determined that the fair value of the asset was less than its carrying value. This impairment charge is included in Impairment and other losses within the Unaudited Condensed Consolidated Statements of Operations.
The following table presents minimum future rental payments under the Company’s leases at September 30, 20212022 and their reconciliation to the corresponding lease liabilities:
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 Maturity Analysis
Remaining 2021$23,452 
202284,730 
202380,281 
202465,242 
202550,076 
2026 and thereafter161,462 
Total465,243 
Less: Present value discount(63,033)
Lease liability$402,210 

 Maturity Analysis
Remaining 2022$20,551 
202388,697 
202475,684 
202559,203 
202644,170 
2027 and thereafter158,858 
Total447,163 
Less: Present value discount(65,342)
Lease liability$381,821 
9.8. Debt
As of September 30, 20212022 and December 31, 2020,2021, the Company’s indebtedness was comprised as follows:
September 30, 2021December 31, 2020
Revolving credit facility$181,112 $201,636 
Term debt— 994 
5.625% Notes1,100,000 — 
Debt issuance costs(15,365)(3,612)
Total debt$1,265,747 $199,018 
Less: Current maturities of long-term debt$— $(994)
Long-term debt$1,265,747 $198,024 

September 30,
2022
December 31, 2021
Revolving credit facility$245,000 $110,165 
5.625% Notes1,100,000 1,100,000 
Debt issuance costs(15,866)(18,564)
Total long-term debt$1,329,134 $1,191,601 
Interest expense related to long-term debt included in Interest expense, net on the Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 was $19,022 and $54,918, respectively, and for the three and nine months ended September 30, 2021 was $9,913 and 2020 was $15,560, and $4,317, respectively.

The amortization of debt issuance costs included in Interest expense, net on the Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 was $573 and $1,784, respectively, and for the three and nine months ended September 30, 2021 was $1,623 and 2020 was $2,092, and $396, respectively.

Revolving Credit Agreement

On November 18, 2019, the Company entered into a debt agreement (“JPM Syndicated Facility”) with a syndicate of banks led by JPMorgan Chase Bank, N.A (“JPM”). The JPM Syndicated Facility consisted of a five-year revolving credit facility of $265,000 (“JPM Revolver”) with the right to be increased by an additional $150,000. On March 18, 2020, the Company increased the commitments on the JPM Revolver by $60,000 to $325,000.

On August 2, 2021, in connection with the closing of the acquisition of MDC, the Company entered into an amended and restated credit agreement (the “Combined Credit Agreement”) with a syndicate of banks led by JPM to increase commitments on the existing JPM Revolver. The Combined Credit Agreement consists of a $500,000 senior secured revolving credit facility with a five-year maturity.

The Combined Credit Agreement contains sub-limits for revolving loans and letters of credit of $50,000 for loans denominated in pounds sterling or euros. It also includes an accordion feature under which the Company may request, subject to lender approval and certain conditions, to increase the amount of the commitments to an aggregate amount not to exceed $650,000.

On April 28, 2022, the Company amended the Combined Credit Agreement. Among other things, this amendment replaced any references to LIBOR with references to SOFR. Borrowings pursuant to the Combined Credit Agreement, as amended, bear interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest in effect on such day, (b) the federal funds effective rate plus 0.50% and (c) SOFR plus 1% in each case, plus the applicable margin (calculated based on the Company’s Total Leverage Ratio, as defined in the Combined Credit Agreement) at that time. Additionally, the Combined Credit Agreement was amended to remove certain pre-commencement notice provisions for certain acquisitions under $50,000 in the aggregate, increased the amount permitted for certain investments allowed under the Combined Credit Agreement, bearand, subject to certain conditions, to allow for the repurchase of Stagwell Inc. stock in an amount not to exceed $100,000 in any fiscal year. All other substantive terms of the Combined Credit Agreement remain unchanged.
Prior to April 28, 2022, borrowings under the Combined Credit Agreement bore interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest announced from time to time by JPM, (b) the federal funds
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effective rate from time to time plus 0.50% and (c) the LIBOR rate plus 1%, in each case, plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time or (ii) the LIBOR rate plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time. The Company is also required to pay an unused revolver fee to the lenders under the Combined Credit Agreement in respect of the unused commitments thereunder ranging from 0.15% to 0.30% of unused commitments depending on the total leverage ratio, as well as customary letter of credit fees.
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Advances under the Combined Credit Agreement may be prepaid in whole or in part from time to time without penalty or premium. The Combined Credit Agreement commitment may be reduced by the Company from time to time. Principal amounts outstanding under the Combined Credit Agreement are due and payable in full at maturity within five years of the date of the Combined Credit Agreement.

If an event of default occurs under the Combined Credit Agreement or any future secured indebtedness, the holders of such secured indebtedness will have a prior right to our assets securing such indebtedness, to the exclusion of the holders of the 5.625% Notes (as defined below), even if we are in default with respect to the 5.625% Notes. In that event, our assets securing such indebtedness would first be used to repay in full all indebtedness and other obligations secured by them (including all amounts outstanding under the Combined Credit Agreement), resulting in all or a portion of our assets being unavailable to satisfy the claims of the holders of the 5.625% Notes and other unsecured indebtedness.

The Combined Credit Agreement contains a number of financial and nonfinancial covenants and is guaranteed by substantially all of our present and future subsidiaries, subject to customary exceptions.

The Company was in compliance with all covenants at September 30, 2021.

2022.
A portion of the Combined Credit Agreement in an amount not to exceed $50,000 is available for the issuance of standby letters of credit. At September 30, 20212022 and December 31, 2020,2021, the Company had issued undrawn outstanding letters of credit of $25,628$24,973 and $5,500,$24,332, respectively.

Term Loan

On November 13, 2020, the Company, JPM as administrative agent, and a group of lenders entered into a term loan agreement that provided the Company with a delayed draw term loan in an aggregate principal amount of $90,000 (“DD Term Loan A”) with a maturity date of November 13, 2023.

In connection with the acquisition of MDC, the Company drew down on the full amount of the DD Term Loan A, repaid the amount with the Combined Credit Agreement, and terminated the agreement.

Line of Credit

On August 2, 2021, the Company entered into an unsecured uncommitted line of credit in the aggregate amount of $30,000 with JPM (the “Line of Credit”) to meet certain short-term working capital needs. The Line of Credit expired on August 20, 2021.

Senior Notes

In August 2021, the Company issued $1,100,000 aggregate principal amount of 5.625% senior notes ("(“5.625% Notes"Notes”). A portion of the proceeds from the issuance of the 5.625% Notes was used to redeem $870,300 aggregate principal amount of the outstanding 7.50% Senior Notes due 2024 (the “Existing Notes”) for a price of $904,200. This price is equal to 101.625% of the outstanding principal amount of the Existing Notes being redeemed, plus, accrued, and unpaid interest on the principal amount of such Existing Notes. The Company did not recognize a gain or loss on redemption.

The 5.625% Notes are due August 15, 2029 and bear interest of 5.625% to be paid on February 15 and August 15 of each year, commencing on February 15, 2022.

The 5.625% Notes are guaranteed on a senior unsecured basis by substantially all of the Company’s subsidiaries. The 5.625% Notes rank (i) equally in right of payment with all of the Company’s or any guarantor’s existing and future unsubordinated indebtedness, (ii) senior in right of payment to the Company’s or any guarantor’s existing and future subordinated indebtedness, (iii) effectively subordinated to any of the Company’s or any guarantor’s existing and future secured indebtedness to the extent of the collateral securing such indebtedness, including the Combined Credit Agreement, and (iv) structurally subordinated to all existing and future liabilities of the Company’s subsidiaries that are not guarantors.

Our obligations under the 5.625% Notes are unsecured and are effectively junior to our secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. Borrowings under the Combined Credit Agreement are secured by substantially all of the assets of the Company, and any existing and future subsidiary guarantors, including all of the capital stock of each restricted subsidiary.

The Company may, at its option, redeem the 5.625% Notes in whole at any time or in part from time to time, on and after August 15, 2024 at a redemption price of 102.813% of the principal amount thereof if redeemed during the twelve-month
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period beginning on August 15, 2024, at a redemption price of 101.406% of the principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2025 and at a redemption price of 100% of the principal amount thereof if redeemed on August 15, 2026 and thereafter. Prior to August 15, 2024, the Company may, at its option, redeem some or all of the 5.625% Notes at a price equal to 100% of the principal amount of the 5.625% Notes plus a “make whole” premium and accrued and unpaid interest. The Company may also redeem, at its option, prior to August 15, 2024, up to 40% of the 5.625% Notes with the net proceeds from one or more equity offerings at a redemption price of 105.625% of the principal amount thereof.

If the Company experiences certain kinds of changes of control (as defined in the indenture), holders of the 5.625% Notes may require the Company to repurchase any 5.625% Notes held by them at a price equal to 101% of the principal amount of the 5.625% Notes plus accrued and unpaid interest. In addition, if the Company sells assets under certain circumstances, it must offer to repurchase the 5.625% Notes at a price equal to 100% of the principal amount of the 5.625% Notes plus accrued and unpaid interest.

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The indenture includes covenants that, among other things, restrict the Company’s ability and the ability of its restricted subsidiaries (as defined in the indenture) to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of the Company; make certain types of investments; create restrictions on the payment of dividends or other amounts from the Company’s restricted subsidiaries; sell assets; enter into transactions with affiliates; create liens; enter into sale and leaseback transactions; and consolidate or merge with or into, or sell substantially all of the Company’s assets to, another person. These covenants are subject to a number of important limitations and exceptions. The 5.625% Notes are also subject to customary events of default, including cross-payment default and cross-acceleration provisions. The Company was in compliance with all covenants at September 30, 2021.2022.

Interest Rate Swap

The Company also ownshad an interest rate swap maturingthat matured in April 2022 with Bank of America to convert $11,563 of its variable rate debt as of September 30, 2021 to a fixed rate of 2.7%.2022. The fair value of the swap was $155 and $416 and is included in Accruals and other liabilities on the Unaudited Condensed Consolidated Balance Sheets$77 as of September 30, 2021 and December 31, 2020, respectively.


2021.
10.9. Noncontrolling and Redeemable Noncontrolling Interests
Noncontrolling Interests
When acquiring less than 100% ownership of an entity, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances. Where the option to purchase the incremental ownership is within the Company’s control, the amounts are recorded as noncontrolling interests in the equity section of the Company’s Unaudited Condensed Consolidated Balance Sheets. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through Retained earnings (but not less than their initial redemption value), except for foreign currency translation adjustments.
Changes in the Company’s ownership interests in ourits less than 100% owned subsidiaries during the three and nine months ended September 30, 20212022 and 20202021 were as follows:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
Net income (loss) attributable to Stagwell Inc. common shareholdersNet income (loss) attributable to Stagwell Inc. common shareholders$(2,071)$17,808 $20,199 $34,124 Net income (loss) attributable to Stagwell Inc. common shareholders$10,609 $(2,071)$33,747 $20,199 
Transfers from the noncontrolling interest:Transfers from the noncontrolling interest:Transfers from the noncontrolling interest:
Increase in Stagwell Inc. paid-in capital for purchase of redeemable noncontrolling interests and noncontrolling interests9,679 — 9,679 — 
Change in Stagwell Inc. Paid-in capital for purchase of redeemable noncontrolling interests and noncontrolling interestsChange in Stagwell Inc. Paid-in capital for purchase of redeemable noncontrolling interests and noncontrolling interests— 9,679 (1,000)9,679 
Net transfers from noncontrolling interestsNet transfers from noncontrolling interests9,679 — 9,679 — Net transfers from noncontrolling interests— 9,679 (1,000)9,679 
Change from net income (loss) attributable to Stagwell Inc. and transfers to noncontrolling interests$7,608 $17,808 $29,878 $34,124 
Change from net income attributable to Stagwell Inc. and transfers to noncontrolling interestsChange from net income attributable to Stagwell Inc. and transfers to noncontrolling interests$10,609 $7,608 $32,747 $29,878 

The following table presents net income attributable to noncontrolling interests between holders of Class C shares and other equity interest holders for the three and nine months ended September 30, 2022 and 2021:
Three Months
Ended September 30,
Nine Months
Ended September 30,
2022202120222021
Net income attributable to Class C shareholders$19,286 $2,110 $51,027 $2,110 
Net income attributable to other equity interest holders2,287 7,210 4,083 9,833 
Net income attributable to noncontrolling interests$21,573 $9,320 $55,110 $11,943 
The following table presents noncontrolling interests between holders of Class C shares and other equity interest holders as of September 30, 2022 and December 31, 2021:
September 30,
2022
December 31, 2021
Noncontrolling interest of Class C shareholders$502,912 $475,373 
Noncontrolling interest of other equity interest holders31,564 32,914 
NCI attributable to noncontrolling interests$534,476 $508,287 
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Redeemable Noncontrolling Interests
The following table presents changes in redeemable noncontrolling interests:
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September 30,December 31,
20212020September 30,
2022
December 31, 2021
Beginning BalanceBeginning Balance$604 $3,603 Beginning Balance$43,364 $604 
RedemptionsRedemptions(2,831)— Redemptions(3,511)(15,231)
Acquisitions(1)
Acquisitions(1)
30,830 — 
Acquisitions (1)
— 53,270 
Changes in redemption valueChanges in redemption value1,680 127 Changes in redemption value20,546 3,834 
Net loss attributable to redeemable noncontrolling interests(956)(3,126)
Net income (loss) attributable to redeemable noncontrolling interestsNet income (loss) attributable to redeemable noncontrolling interests4,558 (412)
OtherOther460 — Other860 1,299 
Ending BalanceEnding Balance$29,787 $604 Ending Balance$65,817 $43,364 
(1) RepresentsAs of December 31, 2021, approximately $26,000 represents redeemable noncontrolling interests acquired in connection with the acquisition of MDC. Approximately $27,000 represents redeemable noncontrolling interests acquired in connection with the purchase of the noncontrolling interest of Targeted Victory. See Note 3 of the Notes included herein for additional information related to the purchase of Targeted Victory.
The noncontrolling shareholders’ ability to exercise any such option right is subject to the satisfaction of certain conditions, including conditions requiring notice in advance of exercise and specific employment termination conditions. In addition, these rights cannot be exercised prior to specified staggered exercise dates. The exercise of these rights at their earliest contractual date would result in obligations of the Company to fund the related amounts during 20212022 to 2025. It is not determinable, at this time, if or when the owners of these rights will exercise all or a portion of these rights.
The redeemable noncontrolling interest of $29,787$65,817 as of September 30, 2021,2022, consists of $14,847,$62,197, assuming that the subsidiaries perform over the relevant periods at their current profit levels, $14,940and $3,620 upon termination of such owner’s employment with the applicable subsidiary or death, and $0 representing the initial redemption value (required floor) recorded for certain acquisitions in excess of the amount the Company would have to pay should the Company acquire the remaining ownership interests for such subsidiaries.death.
These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. There is no related impact on the Company’s income per share calculations.
11.10. Commitments, Contingencies, and Guarantees
Legal Proceedings. The Company’s operating entities are involved in legal proceedings of various types. While any litigation contains an element of uncertainty, the Company has no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on the financial condition or results of operations of the Company.
Deferred Acquisition Consideration and Options to Purchase. See Notes 76 and 109 of the Notes included herein for information regarding potential payments associated with deferred acquisition consideration and the acquisition of noncontrolling shareholders’ ownership interest in subsidiaries.
Guarantees. Generally, the Company has indemnified the purchasers of certain assets in the event that a third party asserts a claim against the purchaser that relates to a liability retained by the Company. These types of indemnification guarantees typically extend for a number of years. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification guarantees. The Company continues to monitor the conditions that are subject to guarantees and indemnifications to identify whether it is probable that a loss has occurred and would recognize any such losses under any guarantees or indemnifications in the period when those losses are probable and estimable.
Commitments. At September 30, 2021,2022, the Company had $25,628$24,973 of undrawn letters of credit.
The Company entered into 3one operating leaseslease for which the commencement date has not yet occurred as of September 30, 2021.2022. See Note 87 of the Notes included herein for additional information.
In the ordinary course of business, the Company may enter into long-term, non-cancellable contracts with partner associations that include revenue or profit-sharing commitments related to the provision of its services. These contracts may also include provisions that require the partner associations to meet certain performance targets prior to any obligation to the Company. As of September 30, 2021,2022, the Company estimates its future minimum commitments under these non-cancellable agreements to be: $2,435, $10,636, $5,990, $2,098$1,948, $6,558, $2,093, $1,226, $1,008, and $82 for the remainder of 2021, 2022, 2023, 2024, 2025, 2026, and 2024,2027, respectively.
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12.

11. Share Capital
On March 23, 2022, the board of directors authorized a stock repurchase program (the “Repurchase Program”) under which we may repurchase up to $125,000 of shares of our outstanding Class A common stock. The Repurchase Program will expire on March 23, 2025.
Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices (including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Exchange Act), in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice. Our board of directors will review the Repurchase Program periodically and may authorize adjustments of its terms.
When repurchasing shares, we reduce the value of our Class A Common Stock for the par value of the shares repurchased and account for the difference between the price paid for the Class A Common Stock, excluding fees, and the par value of such stock recorded to Paid-in capital.
As of September 30, 2022, there were 4,006 shares of Class A Common Stock repurchased under the Repurchase Program at an aggregate value, excluding fees, of $28,671. These were purchased at an average share price of $7.16 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $96,249 as of September 30, 2022.
The authorized and outstanding share capital of the Company is below. See Note 1 for information regarding the Transactions.
Class A Common Stock (“Class A Shares”)
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There are 1,000,000,0001,000,000 shares of Class A common stockShares authorized. There were 78,979,960131,540 Class A Shares issued and outstanding as of September 30, 2021.2022. The Class A Shares are an unlimited number of subordinate voting shares, carrying 1carry one vote each, with a par value of $0.001, entitled to dividends equal to or greater than Class B Shares, and convertible at the option of the holder into one Class B Share for each Class A Share after the occurrence of certain events related to an offer to purchase all Class B shares.
Class B Common Stock (“Class B Shares”)
There are 5,0005 shares of Class B common stockShares authorized. There were 3,9464 of Class B Shares issued and outstanding as of September 30, 2021. These are an unlimited number of voting shares, carrying 202022. The Class B Shares carry twenty votes each, with a par value of $0,$0.001, convertible at any time at the option of the holder into one Class A shareShare for each Class B share.Share.
Class C Common Stock (“Class C Shares”)
There are 250,000,000250,000 shares of Class C common stockShares authorized. There were 179,970,051164,376 Class C Shares issued and outstanding as of September 30, 2021.2022. The Class C sharesShares do not participate in the earnings of the Company.Company and have a par value of $.00001. In addition,2021, an aggregate of 179,970,051179,970 OpCo common units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities. Each Class C Share, together with the related Class COpCo common unit, in OpCo, is convertible at any time, at the option of the holder, into one Class A Share.

Convertible Preferred Stock ("Preferred Shares")
There are 50,000,000 Series 6 Preferred Shares (par value $0.001 per share) outstanding held by Stagwell Agency Holdings LLC (a third party with an ownership interest in In the Company) and 73,849,000 Series 8 Preferred Shares (par value $0.001 per share) held by affiliates of The Goldman Sachs Group, Inc. ("Goldman") as ofnine months ended September 30, 2021. The Company entered into an agreement with Goldman2022, holders of Class C Shares and on August 4, 2021, redeemed $30,000 of liquidation value ofOpCo Units (the “Paired Units”) exchanged 15,594 Paired Units for the Series 8 Preferred Shares for $25,000, resulting in the redemption of 21,151,000 shares.

The terms of the Preferred Shares provided the Company the option to convert the Preferred Shares to Class A Common Shares if Class A Common Shares traded above 125% of the $5.00 per share conversion price for 30 consecutive trading days. On September 23, 2021, the Company provided notices of conversion to each holder of record of each of the Company’s Series 6 and Series 8 Preferred Shares. Pursuant to the notices, the 50,000,000 issued and outstanding Series 6 Preferred Shares were converted into 12,086,700 Class A Common Shares, in the aggregate, on October 7, 2021 and the 73,849,000 issued and outstanding Series 8 Preferred Shares were converted into 20,948,746 Class A Common Shares, in the aggregate, on November 8, 2021. Subsequent to the conversion of the Series 6 and Series 8 preferred shares, thesame number of Class A CommonShares. Approximately 5,000 Paired Units exchanged into an equal number of Class A Shares outstanding was 113,198,517 astriggered an employee tax withholding obligation of November 8, 2021.

$14,900. The Company repurchased approximately 2,000 of the 5,000 Class A Shares issued to the employees to satisfy their employee tax withholding obligation.
13.12. Fair Value Measurements
A fair value measurement assumes a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. The hierarchy for observable and unobservable inputs used to measure fair value into three broad levels are described below: 
Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3 - Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
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Financial Instruments that are not Measured at Fair Value on a Recurring Basis
The following table presents certain information for our financial liability that is not measured at fair value on a recurring basis at September 30, 20212022 and December 31, 2020:2021:
 September 30, 2021December 31, 2020
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
5.625% Notes1,100,000 1,133,891 — — 
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 September 30, 2022December 31, 2021
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
5.625% Notes1,100,000 896,500 1,100,000 1,120,900 
Our long-term debt includes fixed rate debt. The fair value of this instrument is based on quoted market prices in markets that are not active. Therefore, this debt is classified as Level 2 within the fair value hierarchy.
Financial Instruments Measured at Fair Value on a Recurring Basis
The following table presents certain information for our financial instruments that are measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020:

 September 30, 2021December 31, 2020
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
Interest Rate Swap$155 $155 $416 $416 
Call Options— — 360 360 
Preferred Shares— — 12,033 12,033 
The interest rate swap and call options are classified as Level 3 within the fair value hierarchy.
As of December 31, 2020, the Company owned preferred shares in a company called Finn Partners. The preferred shares had a cost basis of $10,000, accrued non-cash dividends, on a cost basis, at a rate of 6% annually. The shares were redeemable to cash in the amount of the cost-plus accrued interest at any time after February 28, 2021 or upon a liquidation event and were also were convertible to common shares of Finn Partners at any time until February 28, 2021 using a conversion ratio of 1% per $1,000 of preferred shares held including accrued dividends. The conversion feature was not bifurcated and was clearly and closely related to the host instrument, preferred shares. Management determined that the preferred shares were a debt-like financial instrument and should be accounted for as available-for-sale securities at their fair value at each reporting period. These preferred shares are considered to be a Level 3 fair value measurement since they utilize unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions.

On March 11, 2021, the Company transferred all of its ownership in the preferred shares. The Company recognized a gain of $1,200 within Gain on sale of business and other, net on the Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 31, 2021 related to this transaction.
Contingent deferred acquisition consideration (Level 3 fair value measurement) is recorded at the acquisition date fair value and adjusted at each reporting period. The estimated liability is determined in accordance with models of each business'business’ future performance, including revenue growth and free cash flows. These models are dependent upon significant assumptions, such as the growth rate of the earnings of the relevant subsidiary during the contractual period and the discount rate. These growth rates are consistent with the Company’s long-term forecasts. As of September 30, 2021,2022, the discount rate used to measure these liabilities ranged from 3.5%4.2% to 5.1%6.0%.
As these estimates require the use of assumptions about future performance, which are uncertain at the time of estimation, the fair value measurements presented on the Unaudited Condensed Consolidated Balance Sheets are subject to material uncertainty.
See Note 76 of the Notes included herein for additional information regarding contingent deferred acquisition consideration.
At September 30, 20212022 and December 31, 2020,2021, the carrying amount of the Company’s financial instruments, including cash, cash equivalents, accounts receivable and accounts payable, approximated fair value because of their short-term maturity.
Non-financial Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
Certain non-financial assets are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value measurement) and right-of-use lease assets (Level 2 fair value measurement). Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment.
The Company recognized an impairment of goodwill and an impairment of right-of-use lease assets for the three and nine months ended September 30, 2022. The Company did not recognize an impairment of goodwill in the three and nine months ended September 30, 2021 and 2020. The Company did recognize an impairment for intangibleor right-of-use lease assets in the three and nine months ended September 30, 2021 . Refer to2021. See Note 147 of the Notes included herein for further detail.additional information regarding right-of-use assets and Note 13 of the Notes included herein for additional information regarding goodwill.
14.13. Supplemental Information
Stock-Based Compensation & Purchase of Noncontrolling InterestsSubsidiary Awards
The Company recognized stock-based compensation expense of $53,465 for the three and nine months ended September 30, 2021, of which $45,986 was for SMG unit awards (consisting of one shareCertain of the Company’s Class C Common stock and one Opco Common Unit)issuedsubsidiaries grant awards to their employees providing them with an equity interest in the third quarter of 2021. Immediately followingrespective subsidiary (the “profits interests awards”). The awards generally provide the acquisition of MDC,employee the right, but not the obligation, to sell its profits interest in the subsidiary to the Company issued 12,131 SMG unitbased on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are settled in cash and the corresponding liability at fair value was $32,198 at September 30, 2022 (Level 3 fair value model), and included as a component of which 6,661 were fully vestedAccruals and 5,470 vest over a 6-month service period. Each SMG unit award is exchangeable into one share of the Company’s Class A Common Stock. The unit awards were issued from
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Stagwell Media's total 179,970,051 Class C common shares and Stagwell OpCo common units issued to it in the business combination. Class C common shares and Stagwell OpCo common units.

Immediately following the acquisition of MDC, the Company also purchased the remaining interest it did not already own in Code and Theory (8.5%) and Observatory (8.1%) and an incremental interest in Targeted Victory (13.3%). The acquired interests were also funded from Stagwell Media’s total 179,970,051 Class C common shares and Stagwell OpCo common units issued to it in the business. A total of 6,930 units with a value of $37,560 were exchanged for the above interests in accordance with the business combination transaction agreement. See Note 1 for information related to the purchase of the remaining noncontrolling interest in Targeted Victory.
Impairmentother liabilities and Other Lossesliabilities on the Unaudited Condensed Consolidated Balance Sheets.
The CompanyStock-based Compensation    
Total stock-based compensation recognized a charge of $14,926 for the nine months ended September 30, 20212022 was $33,410, primarily attributable to reduce$26,288 recognized for stock-based compensation associated with grants of Class A Common Stock and $5,550 recognized for profits interest awards. In the nine months ended September 30, 2022, the Company granted approximately 5,728 share based awards.
Impairment and Other Losses
The Company recognized an impairment and other losses charge of $28,034 for the nine months ended September 30, 2022, primarily related to the impairment of goodwill totaling $23,139. The goodwill impairment was to write-down the carrying value in excess of intangible assetsthe fair value at three reporting units, one in the Integrated Agencies Network, one in the Brand Performance Network and one within the Media Network reportable segmentAll Other category. The expense was recorded within Impairment and other losses on the Unaudited Condensed Consolidated Statements of Operations.
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As of September 30, 2022, the Company assessed whether it was more likely than not that the carrying amount of its reporting units exceeded their fair value. As a result of this assessment, the Company completed a quantitative impairment test for certain reporting units that resulted in connection with the abandonmentimpairment charge due to a combination of certain trade nameschanges in fair value measures such as partan increase in interest rates and decrease in market multiples of comparable public companies, as well as actual performance below previous financial forecasts. The Company uses a combination of the rebrandingincome approach, which incorporates the use of the Media Network.

discounted cash flow method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. The Company generally applies an equal weighting to the income and market approaches for the impairment test. The income approach and the market approach both require the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates.

15.14. Income Taxes
Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in interim periods.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act includes provisions relating to delaying certain payroll tax payments, refundable payroll tax credits, net operating loss carryback periods, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property. The tax law changes in the CARES Act did not have a material impact on the Company’s income tax provision.
The Company had an income tax expense for the three months ended September 30, 20212022 of $11,540 (on a pre-tax income of $46,601 resulting in an effective tax rate of 24.8%) compared to income tax expense of $5,183 (on a pre-tax income of $13,182 resulting in an effective tax rate of 39.3%) compared to an income tax expense of $2,618 (on pre-tax income of $24,075 resulting in an effective tax rate of 10.9%) for the three months ended September 30, 2020.2021.
The difference in the effective tax rate of 24.8% in the three months ended September 30, 2022 as compared to 39.3% in the three months ended September 30, 2021 as comparedwas primarily attributable to 10.9% in the same period in 2020 primarily results from the expansion of the group to include more tax-paying entities and proportionally less pre-tax income not subject to tax within the group, as well ashigher non-deductible share based compensation expenses incurred duringin September 30, 2021, and favorable return to provision adjustments at September 30, 2022, offset in part by the third quarter related to the merger.impact of non-deductible goodwill impairments in September 30, 2022.
The Company had an income tax expense for the nine months ended September 30, 20212022 of $20,150 (on a pre-tax income of $112,512 resulting in an effective tax rate of 17.9%) compared to income tax expense of $9,205 (on a pre-tax income of $40,466 resulting in an effective tax rate of 22.7%) compared to income tax expense of $3,211 (on pre-tax income of $41,964 resulting in an effective tax rate of 7.7%) for the nine months ended September 30, 2020.2021.
The difference in the effective tax rate of 17.9% in the nine months ended September 30, 2022 as compared to 22.7% in the nine months ended September 30, 2021 as comparedwas primarily related to 7.7%favorable adjustments for share-based compensation vesting and return to provision adjustments at September 30, 2022, offset in part by the same periodimpact of non-deductible goodwill impairments in 2020 primarily results fromSeptember 30, 2022.
In connection with the expansionfinalization of the group to include more tax-paying entitiesMDC purchase accounting, the Company finalized its tax basis calculations and proportionally less pre-tax income not subject toadjusted deferred taxes and goodwill.The change in goodwill also impacted the deferred tax within the group,liability on Company’s ownership interest in OpCo.This change has been accounted for as well as non-deductible share based compensation expenses incurred during the third quarter related to the merger.an equity transaction resulting in a reduction in paid in capital of $17,303.

Tax Receivables Agreement
In connection with the closing of the Transactions, we entered into the Tax Receivables Agreement (“TRA”) with OpCo and Stagwell Media, pursuant to which we are required to make cash payments to Stagwell Media equal to 85% of certain U.S. federal, state and local income tax or franchise tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (i) increases in the tax basis of OpCo’s assets resulting from exchanges of Paired Units (defined in Note 11) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to us making payments under the TRA.
The significant changeCompany accounts for amounts payable under the TRA in accordance with ASC 450—Contingencies. We will evaluate the likelihood that we will realize the benefit represented by the deferred tax asset and, to the extent that we estimate that it is more likely than not that we will not realize the benefit, we will reduce the carrying amount of the deferred tax asset with a valuation allowance and a corresponding reduction to the TRA liability. The amounts to be recorded for both the deferred tax assets and the liability under the TRA will be estimated at the time of any purchase or exchange as a reduction to shareholders’ equity, and the effects of changes in any of our estimates after this date will be included in net income or loss. Similarly, the effect of subsequent changes in the enacted tax rates will be included in net income or loss.
In the first quarter of 2022, the Company had its first exchange of Paired Units for shares of Class A Common Stock and recorded its initial TRA liability. Further exchanges have been made in the subsequent quarters. As of September 30, 2022, the Company had a TRA liability of $17,649 and has recognized deferred tax benefits of $20,763 as a reduction to the net deferred tax liability on its unaudited condensed consolidated balance sheets in connection with the exchanges of $16,050 to $134,288 from December 31, 2020 to September 30, 2021, respectively, was primarily due to adjustments related to the reverse merger.Paired Units and the projected obligations under the TRA.

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16.
15. Related Party Transactions
In the ordinary course of business, the Company enters into transactions with related parties, including its affiliates. The transactions may range in the nature and value of services underlying the arrangements. Below are theThe following table presents significant related party transactions that are significant in nature:where a third party receives services from the Company:
In August 2016, a Brand
Total Transaction ValueRevenuesDue From
Related Party
Three Months
Ended September 30,
Nine Months
Ended September 30,
September 30,
2022
December 31, 2021
Services2022202120222021
Technological (1)
Ongoing arrangement (7)
$10 $15 $29 $45 $36 $137 
Marketing Services (2)
Ongoing arrangement (7)
905 63 1,388 155 1,178 88 
Polling Services (3)
$1,271201 224 779 343 140 70 
Marketing and Website Development Services (4)
$5,689589 441 3,512 441 333 502 
Marketing and Advertising Services (5)
Ongoing arrangement (7)
866 203 2,038 272 1,800 4,577 
Marketing and Advertising Services (8)
Ongoing arrangement (7)
2,064 — 3,315 — 2,041 — 
Polling Services (6)
$3,8001,295 — 2,248 — — — 
(1) Client was founded by the Company’s Chief Executive Officer.
(2) Family member of one of the Company entered intoBrands’ partners holds an arrangement to provide technology development services to a clientexecutive leadership position in which severalthe client.
(3) Family members of Brand's partners hold key leadership positions. Under the arrangement, the Brand is expected to receive from the client approximately $1,800, which is expected to be fully recognized as of October 31, 2022. During the three and nine months ended September 30, 2021, the Company recognized $200 and $300, respectively, in revenue related to this transaction. As of September 30, 2021, $200 was due from the client.

In December 2018, a Brand entered into a continuous arrangement with a third-party in which the third-party was to perform marketing services. Severalcertain of the Company’s Brand partnersexecutives hold key leadership positions in this entity. Under the client.
(4) Client has significant interest in the Company.
(5) Brands’ partners and executives either hold a key leadership position in or are on the board of directors of the client.
(6) Founder of the client has significant interest in the Company.
(7) This arrangement was entered into for an indefinite term and is invoiced as services are provided.
(8) A member of the Company’s board of directors holds an executive leadership position in the client.
The following table presents significant related party transactions in which the Company receives services from a third party:
Total Transaction ValueExpensesDue to Related Party
Three Months
Ended September 30,
Nine Months
Ended September 30,
September 30,
2022
December 31, 2021
Services2022202120222021
Data Management Services (1)
Ongoing arrangement (4)
$890 $422 $1,705 $1,178 $1,249 $623 
Sales and Management Services (2)
Ongoing arrangement (4)
703 88 1,442 266 1,685 442 
Marketing Services (3)
$40— — 40 — 40 — 
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arrangement, the Brand is expected to pay the affiliate based upon the success of their services with no minimum or maximum spend. During the three and nine months ended September 30, 2021, the Company incurred $400 and $1,200, respectively, in expenses related to this transaction. As of September 30, 2021, $700 was due to the vendor.

(1)
In October 2020, a Brand entered into a continuous arrangement to provide marketing services to a client in which one of the Brands's partners holds a key leadership position. During the three and nine months ended September 30, 2021, the Company recognized $500 and $5,100, respectively, in revenue related to this transaction. As of September 30, 2021, no receivables remained outstanding related to this arrangement.

In June 2021, a Brand entered into a continuous arrangement to provide marketing services to a client in which one of Brand's partners has an ownership interest. During the three and nine months ended September 30, 2021, the Company recognized $1,300 and $2,700, respectively, in revenue related to this transaction. As of September 30, 2021, $2,200 was due from the client.

In December 2018, a Brand entered into a continuous arrangement to provide marketing services to a client in which a family Family member of one of the Brand'sBrand’s partners holds an executive leadership position. Duringposition in the threethird party.
(2) Chief Executive Officer of the Brand is a shareholder of the affiliate providing the services.
(3 ) A family member of the Company’s President holds a key leadership position in the client.
(4) This arrangement was entered into for an indefinite term and nine months ended September 30, 2021, the Company recognized $100 and $200, respectively, in revenue related to this transaction. As of September 30, 2021, $200 was due from the client.

is invoiced as services are provided.
In March 2019, a Brand of the Company, entered into a loan agreement with a third-partythird party who holds a minority interest in the Brand. The loan receivable of $3,800$4,029 and $3,400$3,784 due from the third-partythird party is included within Other current assets in the Company'sCompany’s Unaudited Condensed Consolidated Balance Sheets as of September 30, 20212022 and December 31, 2020,2021, respectively. The Company recognized $200$80 and $300$234 for the three and nine months ended September 30, 2022, respectively, and $76 and $227 for the three and nine months ended September 30, 2021, respectively, of interest income within interest expense, net on its Unaudited Condensed Consolidated Statements of Operations forOperations.
During the three and nine months ended September 30, 2021, respectively.

The Stagwell Group LLC, the registered investment advisor of Stagwell Media, engaged certain of its Brands to provide services for the Stagwell Group for interagency customers. The Company recorded $100 and $1,200 of related party revenue for the three and nine months ended September 30, 2020, respectively, and nil and $200 of cost of service paid to the Stagwell Group for the three and nine months ended September 30, 2020, respectively, in connection with such services. The Company did not recognize any related party revenue or cost of services paid to the Stagwell Group for the three and nine months ended September 30, 2021.

Stagwell Media made noncashadditional non-cash investments in the Company of $300 and nil, during the three months ended September 30, 2021 and 2020, respectively, and $12,400, and $83,200, during the nine months ended September 30, 2021 and 2020, respectively. Additionally, during the three and nine months ended September 30, 2021, the Company made cash investments of $1,600

On$1,600. In March 11, 2021, the Company made a non-cash distribution to Stagwell Media received a Noncash distribution of $13,000 for the transfer of the Company’s ownership in the Finn Partners Preferred shares.

$13,000. Additionally, the Company made cash distributions to Stagwell Media of $165,700 and $4,700$191,900 for the three months ended September 30, 2021 and 2020, respectively, and $191,900 and $98,600 for the nine months ended September 30, 2021, and 2020, respectively.


17.16. Segment Information
The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of operating segments is applicable. This determination is based upon a quantitative analysis of the expected and historic average long-term profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics.
The CODM uses Adjusted EBITDA (defined below) as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions. Adjusted EBITDA is defined as Net income excluding non-operating income or expense to achieve operating income, plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items.
Due to changes in the Company’s internal management and reporting structure in the second quarter of 2022, reportable segment results for periods presented prior to the second quarter of 2022 have been recast to reflect the reclassification of certain reporting units (brands) between operating segments. The changes in reportable segments were that the Forsman & Bodenfors, Observatory, Crispin Porter Bogusky, Bruce Mau and Vitro brands, previously within the Integrated Agencies Network, are now within the Brand Performance Network.
The Company has 3three reportable segments as follows: “Integrated Agencies Network,” “Media“Brand Performance Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the
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aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Unaudited Condensed Consolidated Financial Statements included herein.
The Integrated Agencies Network includes five operating segments: the Anomaly Alliance, Constellation, the Doner Partner Network, Code and Theory, and National Research Group. The operating segments offer an array of complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications. The brands included in the operating segments that comprise the Integrated Agencies Network reportable segment is comprised of Constellation (72andSunny, Crispin Porter Bogusky, Instrument, Team Enterprises, Harris, and Redscout brands), theare as follows: Anomaly Alliance (Anomaly, Concentric, Hunter, Mono, YML and Scout brands)(brands), Constellation (72andSunny, Colle McVoy, Instrument, Redscout, Hello Design, Team Enterprises, and Harris Insights), the Doner Partner Network (Doner, 6 Degrees, KWT Global, Union, Bruce Mau Design, Vitro, Harris X, Veritas, Doner North, Northstar, Veritaswhich is currently sunsetting, and Yamamoto brands)(brands)), Code and the Code & Theory Network (Code & Theory, Forsman & Bodenfors,and National Research Group, Observatory, Hello Design, and Colle McVoy brands) operating segments.Group.
The Integrated Agencies Networks provide a range of services for their clients, primarily including strategy, creative         and production for advertising campaigns across a variety of platforms (digital, social media, television broadcast and print) as well as public relations and communications services, experiential, social media and influencer marketing. 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 and from time to timeor have business move between them.
TheMedia Brand Performance Network (“BPN”), previously referred to as the “Media Network” reportable segment, is comprised of a single operating segment. BPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities.
36

Our Brands in this segment that combinesaim to provide scaled creative performance through developing and executing sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data. BPN’s Brands combine media buying and planning across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast) with technology and data capabilitiesbroadcast, among others) and includes themultichannel brands Assembly, GALE,Brand New Galaxy, Crispin Porter Bogusky, Forsman & Bodenfors, Bruce Mau Design, Goodstuff, MMI Agency, Ink,digital creative & transformation consultancy Gale, B2B specialist Multiview, Observatory, Vitro, CX specialists Kenna, and Kenna brands.

travel media experts Ink.
The Communications Network reportable segment is comprised of a single operating segment, our specialist network that provides advocacy, strategic corporate communications, investor relations, public relations, online fundraising and other services to both corporations and includes SKDK,political and advocacy organizations and consists of our Allison & Partners SKDK (including Sloane & Company), and Targeted Victory brands.
All Other consists of the Company’s our central innovationsdigital innovation group Reputation Defender (sold in September 2021) and infancy stage digitalStagwell Marketing Cloud products such as Prophet.PRophet and Reputation Defender (which was sold in September 2021).
Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office. Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category.

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Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenue:(Dollars in Thousands)
Integrated Agencies Network$288,479 $55,293 $441,229 $163,540 
Media Network103,418 60,777 235,539 185,714 
Communications Network67,348 106,909 157,794 210,100 
All Other$7,389 $5,118 $22,874 $15,616 
Total Revenue$466,634 $228,097 $857,436 $574,970 
Adjusted EBITDA:
Integrated Agencies Network$68,356 $11,270 $100,960 $28,913 
Media Network15,371 8,131 29,789 14,993 
Communications Network10,312 20,231 28,302 39,139 
All Other419 (193)(1,316)(749)
Corporate(6,940)(2,316)(7,656)(3,325)
Total Adjusted EBITDA$87,518 $37,123 $150,079 $78,971 
Depreciation and amortization$(24,790)$(9,974)$(46,122)$(29,838)
Impairment and other losses(14,926)— (14,926)— 
Stock-based compensation(53,465)— (53,465)— 
Deferred acquisition consideration(3,422)(149)(9,456)(1,270)
Other items, net(10,549)(554)(15,298)(2,976)
Total Operating Income (Loss)$(19,634)$26,446 $10,812 $44,887 



3637

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(Dollars in Thousands)
Other Income (expenses):
Interest expense, net$(11,912)$(1,778)$(15,197)$(4,665)
Foreign exchange, net(893)(856)(1,955)794 
Gain on sale of business and other, net45,621 263 46,806 948 
Income before income taxes and equity in earnings of non-consolidated affiliates13,182 24,075 40,466 41,964 
Income tax expense5,183 2,618 9,205 3,211 
Income before equity in earnings of non-consolidated affiliates7,999 21,457 31,261 38,753 
Equity in losses (income) of non-consolidated affiliates(76)(35)(75)
Net income7,923 21,422 31,186 38,760 
Net income attributable to noncontrolling and redeemable noncontrolling interests(9,994)(3,614)(10,987)(4,636)
Net income (loss) attributable to Stagwell Inc. common shareholders$(2,071)$17,808 $20,199 $34,124 
Depreciation and amortization:
Integrated Agencies Network$14,396 $2,292 $19,816 $6,715 
Media Network6,597 4,903 17,041 14,751 
Communications Network2,110 1,455 5,087 4,210 
All Other493 815 2,013 2,696 
Corporate1,194 509 2,165 1,466 
Total$24,790 $9,974 $46,122 $29,838 
Stock-based compensation:
Integrated Agencies Network$32,443 $— $32,443 $— 
Media Network2,608 — 2,608 — 
Communications Network15,384 — 15,384 — 
All Other16 — 16 — 
Corporate3,014 — 3,014 — 
Total$53,465 $— $53,465 $— 
Three Months
Ended September 30,
Nine Months
Ended September 30,
2022202120222021
Revenue:(Dollars in Thousands)
Integrated Agencies Network$367,122 $269,071 $1,095,761 $419,659 
Brand Performance Network171,463 122,826 563,546 257,109 
Communications Network121,770 67,348 311,075 157,794 
All Other3,436 7,389 9,225 22,874 
Total Revenue$663,791 $466,634 $1,979,607 $857,436 
Adjusted EBITDA:
Integrated Agencies Network$76,224 $66,063 $215,920 $100,264 
Brand Performance Network24,312 17,664 89,259 30,485 
Communications Network25,462 10,312 58,630 28,302 
All Other(363)419 (972)(1,316)
Corporate(10,543)(6,940)(35,014)(7,656)
Total Adjusted EBITDA$115,092 $87,518 $327,823 $150,079 
Depreciation and amortization$(32,207)$(24,790)$(95,642)$(46,122)
Impairment and other losses(25,211)(14,926)(28,034)(14,926)
Stock-based compensation(12,258)(53,465)(33,410)(53,465)
Deferred acquisition consideration29,789 (3,422)14,420 (9,456)
Other items, net(5,152)(10,549)(12,112)(15,298)
Total Operating Income (Loss)$70,053 $(19,634)$173,045 $10,812 
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Three Months
Ended September 30,
Nine Months
Ended September 30,
2022202120222021
(Dollars in Thousands)
Other Income (expenses):
Interest expense, net$(19,672)$(11,912)$(56,552)$(15,197)
Foreign exchange, net(3,927)(893)(4,163)(1,955)
Other, net147 45,621 182 46,806 
Income before income taxes and equity in earnings of non-consolidated affiliates46,601 13,182 112,512 40,466 
Income tax expense11,540 5,183 20,150 9,205 
Income before equity in earnings of non-consolidated affiliates35,061 7,999 92,362 31,261 
Equity in income (loss) of non-consolidated affiliates213 (76)1,053 (75)
Net income35,274 7,923 93,415 31,186 
Net income attributable to noncontrolling and redeemable noncontrolling interests(24,665)(9,994)(59,668)(10,987)
Net income (loss) attributable to Stagwell Inc. common shareholders$10,609 $(2,071)$33,747 $20,199 
Depreciation and amortization:
Integrated Agencies Network$18,316 $13,494 $55,206 $18,787 
Brand Performance Network8,205 7,499 25,044 18,070 
Communications Network2,654 2,110 7,718 5,087 
All Other1,206 493 2,457 2,013 
Corporate1,826 1,194 5,217 2,165 
Total$32,207 $24,790 $95,642 $46,122 
Stock-based compensation
Integrated Agencies Network$5,308 $32,431 $15,044 $32,431 
Brand Performance Network2,923 2,620 9,152 2,620 
Communications Network671 15,384 1,077 15,384 
All Other16 15 16 
Corporate3,349 3,014 8,122 3,014 
Total$12,258 $53,465 $33,410 $53,465 
The Company’s CODM does not use segment assets to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed.
See Note 54 of the Notes included herein for a summary of the Company’s revenue by geographic region for the three and nine months ended September 30, 20212022 and 2020.2021.
Item 2.    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 unaudited condensed consolidated financial statements and the notes related thereto included elsewhere in Part 1, Item 1 of this Current Report on Form 10-Q. 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 “Cautionary Statement Concerning“Note about Forward-Looking Statements” and “Risk Factors” in this Quarterly Report on Form 10-Q (this “Form 10-Q”).and “Forward-Looking Statements” and “Risk Factors” in our 2021 Form 10-K. The following discussion and analysis also includes 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 financial measures are below.

In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” refer (i) with respect to events occurring or periods ending before August 2, 2021, to Stagwell Marketing Group LLC and its direct and indirect subsidiaries and (ii) with respect to events occurring or periods ending on or after August 2, 2021, to Stagwell Inc. and its direct and indirect subsidiaries.
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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 20212022 means the period beginning January 1, 2021,2022, and ending December 31, 2021)2022).

Executive Summary

Business Combination
On December 21, 2020, MDC Partners Inc. (“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of Stagwell Media (the “Stagwell Subject Entities”). The Stagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell Marketing or SMG”) and its direct and indirect subsidiaries.

On August 2, 2021 (the “Closing Date”), we completed the previously announced combination of MDC and the Stagwell Subject Entities and a series of steps and related transactions (such combination transactions, the “Transactions”). In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of the Company, converted into a Delaware limited liability company and changed its name to Midas OpCo Holdings LLC (“OpCo”); (ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo; and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc.

The Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing treated as the accounting acquirer. As a result of the Transactions and the change in our business and operations, under applicable accounting principles, the historical financial results of Stagwell Marketing prior to August 2, 2021 are considered our historical financial results. Accordingly, historical information presented in this Form 10-Q for events occurring or periods ending before August 2, 2021 does not reflect the impact of the Transactions and may not be comparable with historical information for events occurring or periods ending on or after August 2, 2021, which do not include the financial results of MDC. See Note 4 of the Unaudited Condensed Consolidated Financial Statements for additional information in connection with the Transaction.

Overview
Stagwell conducts its business through its networks, which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment. 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. The Company’s work is designed to challenge the industry status quo, realize outsized returns on investment, and drive transformative growth and business performance for its clients and stakeholders.

Stagwell manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenue, operating expenses, capital expenditures and the non-GAAP measures described below. Revenue growth is analyzed by reviewing a mix of measurements, including (i) growth by major geographic location, (ii) growth by client industry vertical, (iii) growth from existing clients and the addition of new clients, (iv)(iii) growth by primary discipline, (v)principal capability, (iv) growth from currency changes, and (vi)(v) growth from acquisitions. In addition to monitoring the foregoing financial indicators, the Company assesses and monitors several non-financial performance indicators relating to the business performance of our networks. These indicators may include a networksnetwork’s recent new client win/loss record; the depth and scope of a pipeline of potential new client account activity; the overall quality of the services provided to clients; and the relative strength of the Network'snetwork’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.

While a recovery from the COVID-19 pandemic is underway, economic conditions will be volatile as long as COVID-19 remains a public health threat. The Company continues to monitor developments, We will continue to monitor the impact on our operations from worldwide public health threat, government actionsevents such as the COVID-19 pandemic and evolving strains of COVID-19, as well as the military conflict between Russia and Ukraine, which we do not expect to combat COVID-19have a material adverse effect on our operations. If the impacts of either of the aforementioned events are beyond our expectations, we believe we are well positioned to successfully work through such impacts for the foreseeable future.
Business Combination
On December 21, 2020, MDC and Stagwell Media LP announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the “Stagwell Subject Entities.” The Stagwell Subject Entities comprised Stagwell Marketing and its direct and indirect subsidiaries.
On August 2, 2021 (the “Closing Date”), we completed the Transactions. In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of the Company, converted into OpCo; (ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo; and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc.
The Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing treated as the accounting acquirer. As a result of the Transactions and the impact such developments may have onchange in our business and operations, under applicable accounting principles, the overall economy,historical financial results of Stagwell Marketing prior to August 2, 2021 are considered our clients and operations. Ifhistorical financial results. Accordingly, historical information presented in this Form 10-Q for events occurring or periods ending before August 2, 2021 does not reflect the impact of the pandemic continues to go beyond expectations, the Company believes it is well positioned through the actions implemented at the onset of the pandemic to successfully work through the effects of COVID-19Transactions and may not be comparable with historical information for events occurring or periods ending on our business. The impact of the pandemic and the corresponding actions are reflected in our judgments, assumptions and estimates in the preparation ofor after August 2, 2021, which do not include the financial statements. The judgments, assumptions and estimates will be updated and could result in different results in the future depending on the continued impact of the COVID-19 pandemic.

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Recent Developments
On October 1, 2021 (the "closing date"), the Company entered into an agreement to purchase the remaining 26.7% interest in Targeted Victory it did not previously own for a combination of cash and Class A Common shares, up to 50% with certain exceptions, determined at the option of the Company. The agreement provides for the purchase of half of the remaining interest on the closing date and the other half on July 31, 2023 ("second purchase"). The total purchase price, which is capped at $135 million with certain exceptions, is based on a formula taking a multiple of the two-year average of earnings that includes the year of and the year subsequent to the year of the purchase. The seller has the option to extend the measurement period for two years in connection with the second purchase.

On September 23, 2021, the Company provided notices of conversion to each holder of record of each of the Company’s Series 6 and Series 8 Preferred Stock.MDC. See Note 123 of the Unaudited Condensed Consolidated Financial Statements included herein for additional information in connection withregarding the conversionTransactions.
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Recent Developments
On October 3, 2022, the Company acquired all of the Preferred Stockequity interest of Maru Group Limited Ltd, a software experience & insights data platform, for approximately £23,000 in cash, subject to post-closing adjustments.
On October 3, 2022, the Company acquired the remaining 80% interest that it did not already own in Wolfgang, LLC, a creative agency combining consultancy, strategy and technology experience, for approximately $3,750 in cash and $5,250 in shares of Stagwell Inc. Class A Common Shares.Stock, subject to post-closing adjustments. The stock payment is subject to the seller’s continued employment throughout the period, with total shares vesting on July 1, 2025.

On October 3, 2022, the Company acquired the assets of Epicenter Experience LLC, an enterprise software company that leverages mobile and location data to map and sequence complex consumer behavior patterns, for approximately $9,729, subject to post-closing adjustments, as well as contingent consideration up to a maximum value of $5,000. The contingent consideration is based on meeting certain future earnings targets through 2024 and can be paid up to 25% in Stagwell Class A Common Stock.
Significant Factors Affecting our Business and Results of Operations
The most significant factors affecting our business and results of operations include national, regional, and local economic conditions, our clients’ profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees. 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 Brandsbrands 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 an agency that it may have previously worked with. In addition, if the client is merged or acquired by another company, the marketing communication firm is often changed. Clients also change firms as a result of the firm’s failure to meet marketing performance targets or other expectations in client service delivery.

Seasonality

Historically, we typically generate the highest quarterly revenue during the fourth quarter in each year with a significant increaseyear. In addition, client concentration increases during election years due to the even years.cyclical nature of our advocacy Brands. The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season. The even years benefit from the U.S. election cycles.

Non-GAAP Measures
The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In addition, the Company has included non-GAAP financial measures and ratios, which management uses to operate the business, which it believes provide useful supplemental information to both management and readers of this report in making period-to-period comparisons in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP. The non-GAAP measures included are “organic revenue growth or decline”decline,” “Adjusted EBITDA,” and “Adjusted EBITDA.diluted EPS.
Organic Revenue: “Organic revenue growth” and “organic revenue decline” refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the partner firmsbrands that the Company has held throughout each of the comparable periods presented, and (b) “non-GAAP“Net acquisitions (dispositions), net”(divestitures). Non-GAAP” Net acquisitions (dispositions), net(divestitures) consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or the same prior year period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year.
Adjusted EBITDA is defined as Net income (loss) attributable to Stagwell Inc. 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.
Adjusted EPS is defined as Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income attributable to Class C shareholders, excluding amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, per diluted weighted average shares outstanding (if dilutive). Other items includes restructuring costs, acquisition-related expenses, and non-recurring items.
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This analysis should be read in conjunction with the interim Unaudited Condensed Consolidated Financial Statements presented in this interim report and the annual Audited Consolidated Financial Statements and Management’s Discussion and Analysis presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”).
All amounts are in dollars unless otherwise stated. Amounts reported in millions herein are computed based on the amounts in thousands. As a result, the sum of the components, and related calculations, reported in millions may not equal the total amounts due to rounding.
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The percentage changes included in the tables herein Item 2 that are not considered meaningful are presented as “NM.”
Segments
The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of operating segments is applicable. This determination is based upon a quantitative analysis of the expected and historic average long-term profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics.

The CODM uses Adjusted EBITDA as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions.
Due to changes in the Company’s internal management and reporting structure in the second quarter of 2022, reportable segment results for periods presented prior to the second quarter of 2022 have been recast to reflect the reclassification of certain reporting units (brands) between operating segments. The changes in reportable segments were that the Forsman & Bodenfors, Observatory, Crispin Porter Bogusky, Bruce Mau and Vitro brands, previously within the Integrated Agencies Network, are now within the Stagwell Brand Performance Network.
The Company has three reportable segments as follows: “Integrated Agencies Network,” “Media“Brand Performance Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies. See Note 2 ofpolicies as those described throughout the Notes to the Unaudited Condensed Consolidated Financial Statements forincluded herein and Note 2 of the Company's significant accounting policies.Company’s audited consolidated financial statements included in the 2021 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.
The following discussion focuses on the operating performance of the Company for the three and nine months ended September 30, 20212022 and 20202021 and the financial condition of the Company as of September 30, 2021.
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Results of Operations:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(Dollars in Thousands)
Revenue:
Integrated Agencies Network$288,479 $55,293 $441,229 $163,540 
Media Network103,418 60,777 235,539 185,714 
Communications Network67,348 106,909 157,794 210,100 
All Other7,389 5,118 22,874 15,616 
Total Revenue$466,634 $228,097 $857,436 $574,970 
Operating Income (Loss):
Integrated Agencies Network$17,173 $7,909 $37,838 $20,403 
Media Network(9,088)2,957 (5,580)(1,748)
Communications Network(6,871)19,414 7,886 34,420 
All Other(90)(1,010)(3,345)(3,446)
Corporate(20,758)(2,824)(25,987)(4,742)
Operating Income (loss)$(19,634)$26,446 $10,812 $44,887 
Other Income (Expenses):
Interest expense, net$(11,912)$(1,778)$(15,197)$(4,665)
Foreign exchange, net(893)(856)(1,955)794 
Gain on sale of business and other, net45,621 263 46,806 948 
Income before income taxes and equity in earnings of non-consolidated affiliates13,182 24,075 40,466 41,964 
Income tax expense5,183 2,618 9,205 3,211 
Income before equity in earnings of non-consolidated affiliates7,999 21,457 31,261 38,753 
Equity in losses (income) of non-consolidated affiliates(76)(35)(75)
Net income7,923 21,422 31,186 38,760 
Net income attributable to noncontrolling and redeemable noncontrolling interests(9,994)(3,614)(10,987)(4,636)
Net income (loss) attributable to Stagwell Inc. common shareholders(2,071)17,808 20,199 34,124 
Net income allocated to convertible preference shares— — — — 
Net income (loss) attributable to Stagwell Inc. common shareholders$(2,071)$17,808 $20,199 $34,124 
Reconciliation to Adjusted EBITDA
Net income (loss) attributable to Stagwell Inc. common shareholders$(2,071)$17,808 $20,199 $34,124 
Non-operating items(17,563)8,638 (9,387)10,763 
Operating Income (loss)$(19,634)$26,446 $10,812 $44,887 
Depreciation and amortization24,790 9,974 46,122 29,838 
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Impairment and other losses14,926 — 14,926 — 
Stock-based compensation53,465 — 9,456 1,270 
Deferred acquisition consideration3,422 149 53,465 — 
Total other items, net10,549 554 15,298 2,976 
Adjusted EBITDA$87,518 $37,123 $150,079 $78,971 






2022.
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Results of ContentsOperations:
Three Months
Ended September 30,
Nine Months
Ended September 30,
2022202120222021
(Dollars in Thousands)
Revenue
Integrated Agencies Network$367,122 $269,071 $1,095,761 $419,659 
Brand Performance Network171,463 122,826 563,546 257,109 
Communications Network121,770 67,348 311,075 157,794 
All Other3,436 7,389 9,225 22,874 
Total Revenue$663,791 $466,634 $1,979,607 $857,436 
Operating Income (Loss)$70,053 $(19,634)$173,045 $10,812 
Other Income (Expenses)
Interest expense, net$(19,672)$(11,912)$(56,552)$(15,197)
Foreign exchange, net(3,927)(893)(4,163)(1,955)
Other, net147 45,621 182 46,806 
Income before income taxes and equity in earnings of non-consolidated affiliates46,601 13,182 112,512 40,466 
Income tax expense11,540 5,183 20,150 9,205 
Income before equity in earnings of non-consolidated affiliates35,061 7,999 92,362 31,261 
Equity in income (loss) of non-consolidated affiliates213 (76)1,053 (75)
Net income35,274 7,923 93,415 31,186 
Net income attributable to noncontrolling and redeemable noncontrolling interests(24,665)(9,994)(59,668)(10,987)
Net income (loss) attributable to Stagwell Inc. common shareholders$10,609 $(2,071)$33,747 $20,199 
Reconciliation to Adjusted EBITDA
Net income (loss) attributable to Stagwell Inc. common shareholders$10,609 $(2,071)$33,747 $20,199 
Non-operating items (1)
59,444 (17,563)139,298 (9,387)
Operating income (loss)70,053 (19,634)173,045 10,812 
Depreciation and amortization32,207 24,790 95,642 46,122 
Impairment and other losses25,211 14,926 28,034 14,926 
Stock-based compensation12,258 53,465 33,410 53,465 
Deferred acquisition consideration(29,789)3,422 (14,420)9,456 
Other items, net (1)
5,152 10,549 12,112 15,298 
Adjusted EBITDA$115,092 $87,518 $327,823 $150,079 
(1) Non-operating items includes items within the Statements of Operations, below Operating Income, and above Net income attributable to Stagwell Inc. common shareholders.
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THREE MONTHS ENDED SEPTEMBER 30, 20212022 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 20202021
Consolidated Results of Operations
The components of operating results for the three months ended September 30, 20212022 compared to the three months ended September 30, 20202021 were as follows:
Three Months Ended September 30,
20212020Change
$$$%
(Dollars in Thousands)
Revenue:$466,634 $228,097 $238,537 NM
Operating Expenses:
Cost of services sold324,782 149,011 175,771 NM
Office and general expenses121,770 42,666 79,104 NM
Depreciation and amortization24,790 9,974 14,816 NM
Impairment and other losses$14,926 $— $14,926 $— 
$486,268 $201,651 $284,617 NM
Operating Income (loss)$(19,634)$26,446 $(46,080)NM
Three Months Ended September 30,
20222021Change
(Dollars in Thousands)
$%
Revenue$663,791 $466,634 $197,157 42.3 %
Operating Expenses
Cost of services417,134 324,782 92,352 28.4 %
Office and general expenses119,186 121,770 (2,584)(2.1)%
Depreciation and amortization32,207 24,790 7,417 29.9 %
Impairment and other losses25,211 14,926 10,285 68.9 %
$593,738 $486,268 $107,470 22.1 %
Operating income (loss)$70,053 $(19,634)$89,687 NM

Three Months Ended September 30,
Three Months Ended September 30,20222021Change
20212020Change(Dollars in Thousands)
$%$%
Net RevenueNet Revenue$409,328 $152,860 $256,468 NMNet Revenue$555,754 $409,328 $146,426 35.8 %
Billable costsBillable costs57,306 75,237 (17,931)(23.8)%Billable costs108,037 57,306 50,731 88.5 %
RevenueRevenue466,634228,097238,537104.6 %Revenue663,791466,634$197,157 42.3 %
Billable costs Billable costs57,306 75,237 (17,931)(23.8)%Billable costs108,037 57,306 50,731 88.5 %
Staff costsStaff costs270,067 97,744 172,323 NMStaff costs351,764 249,791 101,973 40.8 %
Administrative costsAdministrative costs42,799 21,846 20,953 95.9 %Administrative costs58,963 44,635 14,328 32.1 %
Other, net8,944 (3,853)12,797 NM
Unbillable and other costs, netUnbillable and other costs, net29,935 27,384 2,551 9.3 %
Adjusted EBITDAAdjusted EBITDA87,518 37,123 50,395 NMAdjusted EBITDA115,092 87,518 27,574 31.5 %
Stock-based compensationStock-based compensation53,465 — 53,465 — %Stock-based compensation12,258 53,465 (41,207)(77.1)%
Depreciation and amortizationDepreciation and amortization24,790 9,974 14,816 NMDepreciation and amortization32,207 24,790 7,417 29.9 %
Deferred acquisition considerationDeferred acquisition consideration3,422 149 3,273 NMDeferred acquisition consideration(29,789)3,422 (33,211)NM
Impairment and other lossesImpairment and other losses14,926 — 14,926 — %Impairment and other losses25,211 14,926 10,285 68.9 %
Other items, netOther items, net10,549 554 9,995 NMOther items, net5,152 10,549 (5,397)(51.2)%
Operating Income(1)
$(19,634)$26,446 $(46,080)NM
Operating Income (Loss) (1)
Operating Income (Loss) (1)
$70,053 $(19,634)$89,687 NM
(1) See the Results of Operations section above for a reconciliation of Operating Income to Net Income attributable to Stagwell Inc. common shareholders.
(1) See the Results of Operations section above for a reconciliation of Operating Income to Net Income attributable to Stagwell Inc. common shareholders.
(1) See the Results of Operations section above for a reconciliation of Operating Income to Net Income attributable to Stagwell Inc. common shareholders.
Revenue
Revenue for the three months ended September 30, 2022 was $663.8 million compared to $466.6 million for the three months ended September 30, 2021, and $228.1 million for three months ended September 30, 2020, an increase of $238.5$197.2 million.

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Net Revenue
The components of the fluctuations in net revenue for the three months ended September 30, 20212022 compared to the three months ended September 30, 20202021 were as follows:
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Net Revenue - Components of ChangeChangeNet Revenue - Components of ChangeChange
Three Months Ended September 30, 2020Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended September 30, 2021OrganicTotalThree Months Ended September 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended September 30, 2022OrganicTotal
(Dollars in Thousands)(Dollars in Thousands)
Integrated Agencies NetworkIntegrated Agencies Network$53,044 $2,129 $138,896 $62,163 $203,188 $256,232 117.2 %NMIntegrated Agencies Network$237,750 $(1,496)$69,871 $7,157 $75,532 $313,282 3.0 %31.8 %
Media Network55,602 (1,558)19,969 25,072 43,483 99,085 45.1 %78.2 %
Brand Performance NetworkBrand Performance Network117,568 (3,221)29,216 16,909 42,904 160,472 14.4 %36.5 %
Communications NetworkCommunications Network39,096 235 12,202 (4,917)7,520 46,616 (12.6)%19.2 %Communications Network46,615 (211)8,652 23,509 31,950 78,565 50.4 %68.5 %
All OtherAll Other5,118 131 1,558 588 2,277 7,395 11.5 %44.5 %All Other7,395 (54)(4,030)124 (3,960)3,435 1.7 %(53.5)%
Total$152,860 $937 $172,625 $82,906 $256,468 $409,328 54.2 %NM
$409,328 $(4,982)$103,709 $47,699 $146,426 $555,754 11.7 %35.8 %
Component % changeComponent % change0.6%N/M54.2%N/MComponent % change(1.2)%25.3%
For the three months ended September 30, 2021,2022, organic net revenue increased $82.9$47.7 million, or 54.2%,11.7%. Organic revenue grew across all segments. Such growth was primarily attributable to increased spending by existing clients and business with new clients. The increase in connection withnet acquisition (divestitures) was primarily driven by the recovery from the COVID-19 pandemicacquisitions of MDC, Brand New Galaxy (“BNG”), GoodStuff Holdings Limited (“Goodstuff”), and the impact from the acquisition of MDC.
TMA Direct, Inc. (“TMA Direct”).
The geographic mix in net revenues for the three months ended September 30, 2022 and 2021 and 2020 wasis as follows:
Three Months Ended September 30,
20222021
20212020(Dollars in Thousands)
United StatesUnited States$337,814 $134,831 United States$453,160 $337,814 
United KingdomUnited Kingdom30,194 13,589 United Kingdom42,443 30,194 
OtherOther41,320 4,440 Other60,151 41,320 
$409,328 $152,860 
TotalTotal$555,754 $409,328 
Impairment and Other Losses
The Company recognized an impairment and other losses charge of $25,211 for the three months ended September 30, 2022, primarily related to the impairment of goodwill totaling $23,139. The goodwill impairment was to write-down the carrying value in excess of the fair value at three reporting units, one within the Integrated Agencies Network, one within the Brand Performance Network and one within the All Other category. The expense was recorded within Impairment and other losses on the Unaudited Condensed Consolidated Statements of Operations.
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As of September 30, 2022, the Company assessed whether it was more likely than not that the carrying amount of its reporting units exceeded their fair value. As a result of this assessment, the Company completed a quantitative impairment test for certain reporting units that resulted in the impairment charge due to a combination of changes in fair value measures such as an increase in interest rates and decrease in market multiples of comparable public companies, as well as actual performance below previous financial forecasts. The Company uses a combination of the income approach, which incorporates the use of the discounted cash flow method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. The Company generally applies an equal weighting to the income and market approaches for the impairment test. The income approach and the market approach both require the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates. These estimates and assumptions may vary between each reporting unit depending on the facts and circumstances specific to that reporting unit. The discount rate for each reporting unit is influenced by general market conditions as well as factors specific to the reporting unit. For the tests performed as of September 30, 2022, the discount rate we used for our reporting units tested ranged between 14.0% and 15.5%, and the terminal value growth rate ranged between 1.0% and 3.0%. The terminal value growth rate represents the expected long-term growth rate for our industry, which incorporates the type of services each reporting unit provides as well as the global economy. For the tests performed as of September 30, 2022, the revenue growth rates for our reporting units used in our analysis were between 1.0% and 10.0%. Factors influencing the revenue growth rates include the nature of the services the reporting unit provides for its clients, the geographic locations in which the reporting unit conducts business and the maturity of the reporting unit.

To the extent that (i) there is underperformance in one or more reporting units (ii) a potential recession further disrupts the economic environment impacting the performance or (iii) interest rates continue to rise in response to persistent inflation, the fair value of one or more of the reporting units could fall below their carrying value, resulting in a goodwill impairment charge.
The Company's annual goodwill test as of October 1, 2022 is in process. Based on our initial assessment, the fair value of seven reporting units, with goodwill of approximately $590 million, exceed their carrying value by less than 20%. As we finalize the annual goodwill impairment test, there could be reductions to the fair value of those reporting units, resulting in a goodwill impairment charge.
Operating Income (Loss)
Operating income for the three months ended September 30, 2022 was $70.1 million compared to operating loss of $19.6 million for the three months ended September 30, 2021, was $19.6 million, compared to operating incomerepresenting an increase of $26.4 million for the$89.7 million.
The three months ended September 30, 2020, representing an increase of $46.1 million,2022 was impacted primarily driven by the increase in revenue, more than offset by an increase in operating expenses. The operating loss forrevenue and expenses due to the three months ended September 30, 2021 was impacted by the impairmentacquisition of MDC, BNG, Goodstuff and other losses of $14.9 million in connectionTMA Direct, and costs associated with a write-down of trade names no longer in use and stock-based compensation expense of $53.5 million in connection with the merger.
Adjusted EBITDA
Adjusted EBITDA for the three months ended September 30, 2021 was $87.5 million, compared to $37.1 million for the three months ended September 30, 2020, representing an increase of $50.4 million, principally resulting from an increase in revenue, partially offsetservices provided. Stock-based compensation expense decreased primarily driven by higher operating expenses. The acquisition of MDC contributedawards issued to higher revenue and expenses.
Gain on Sale of Business and Other, net
Gain on sale of business and other, net, for the three months ended September 30, 2021 was income of $45.6 million compared to income of $0.3 million for the three months ended September 30, 2020, primarily due to the a gain of approximately $43 million in connection with sale of Reputation Defenderemployees in the third quarter of 2021.
Foreign Exchange, Net
The foreign exchange loss for the three months ended September 30, 2021, was $0.9 million compared to a loss of $0.9 million for the three months ended September 30, 2020.
Interest Expense, Net
Interest expense, net for the three months ended September 30, 2021 was $11.9 million compared to $1.8 million for the three months ended September 30, 2020, representing an increase of $10.1 million, primarily driven by an increase in debt in connection with the acquisition of MDC.

Income Tax Expense
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Table of Contents
The Company had an income tax expense for the three months ended September 30, 2021 of $5.2 million (on a pre-tax income of $13.2 million resulting in an effective tax rate of 39.3%) compared to an income tax expense of $2.6 million (on pre-tax loss of $24.1 million resulting in an effective tax rate of 10.9%) for the three months ended September 30, 2020.
The difference in the effective tax rate of 39.3% in the three months ended September 30, 2021 as compared to 10.9% in the same period in 2020 primarily results from the expansion of the group to include more tax-paying entities and proportionally less pre-tax income not subject to tax within the group, as well as non-deductible share based compensation expenses incurred during the third quarter related to the merger.

Noncontrolling Interests
The effect of noncontrolling interests for the three months ended September 30, 2021 was $10.0 million compared to $3.6 million for the three months ended September 30, 2020.
Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders
As a result of the foregoing, net loss attributable to Stagwell Inc. common shareholders for the three months ended September 30, 2021 was $2.1 million compared to income of $17.8 million for the three months ended September 30, 2020.
Integrated Agencies Network
The components of operating results for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:
Three Months Ended September 30,
20212020Change
Integrated Agencies Network$$$%
(Dollars in Thousands)
Revenue:$288,479 $55,293 $233,186 NM
Operating Expenses:
Cost of services sold203,377 32,034 171,343 NM
Office and general expenses53,452 13,058 40,394 NM
Depreciation and amortization14,396 2,292 12,104 NM
Impairment and other losses$81 $— $81 — %
$271,306 $47,384 $223,922 NM
Operating income$17,173 $7,909 $9,264 NM

Three Months Ended September 30,

20212020Change
$%
Net Revenue$256,232 $53,044 $203,188 NM
Billable costs32,247 2,249 29,998 NM
GAAP Revenue288,479 55,293 233,186 NM
   Billable costs32,247 2,249 29,998 NM
Staff costs162,685 37,481 125,204 NM
Administrative costs21,448 5,533 15,915 NM
Other, net3,743 (1,240)4,983 NM
Adjusted EBITDA68,356 11,270 57,086 NM
Stock-based compensation32,443 — 32,443 — %
Depreciation and amortization14,396 2,292 12,104 NM
Deferred acquisition consideration3,422 787 2,635 NM
Impairment and other losses81 — 81 — %
Other items, net841 282 559 NM
Operating Income$17,173 $7,909 $9,264 NM
Revenue
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Revenue was $288.5 millionthree months ended September 30, 2021 and $55.3 million for three months ended September 30, 2020, an increase of $233.2 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:
Net Revenue - Components of ChangeChange
Three Months Ended September 30, 2020Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended September 30, 2021OrganicTotal
Integrated Agencies Network$53,044 $2,129 $138,896 $62,163 $203,188 $256,232 117.2 %NM
Component % change4.0%NMNMNM
The increase in organic net revenue was primarily attributable to increased spending by clients in connection with the recovery from the COVID-19 pandemic and the impact from the acquisition of MDC in the third quarter of 2021.
The increase in expenses was driven by the impact from the acquisition of MDC. Stock-based compensation expense increased in the third quarter of 2021, driven by awards issued in connection with the acquisition of MDC, that fully vested in the third quarter of 2021 and depreciationthe first quarter of 2022. Deferred acquisition costs decreased primarily as the result of a decrease in the fair value of future earn out payments as a result of lower forecasted financial results. Impairment and other losses primarily increased due to the impairment of goodwill and a right-of-use lease asset in the third quarter of 2022. Depreciation and amortization grewwas higher primarily due to the recognition of amortizable intangible assets in connection with the acquisitionacquisitions of MDC.
Operating income increased $9.3 million asMDC, BNG, Goodstuff and TMA Direct. Other items, net decreased due to the increase in revenue, more than offset higher operatingreduction of merger-related expenses.
The increase in Adjusted EBITDAOther, net
Other, net, for the three months ended September 30, 2022 was driven by higher revenue, partially offset by higher expenses.
Media Network
The componentsincome of operating results$0.1 million, compared to income of $45.6 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020 were as follows:
Three Months Ended September 30,
20212020Change
Media Network$$$%
(Dollars in Thousands)
Revenue:$103,418 $60,777 $42,641 70.2 %
Operating Expenses:
Cost of services sold56,994 33,966 23,028 67.8 %
Office and general expenses34,069 18,951 15,118 79.8 %
Depreciation and amortization6,597 4,903 1,694 34.6 %
Impairment and other losses14,846 — 14,846 — %
$112,506 $57,820 $54,686 94.6 %
Operating income (loss)$(9,088)$2,957 $(12,045)NM

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Three Months Ended September 30,
20212020Change
$%
Net Revenue$99,085 $55,602 $43,483 78.2 %
Billable costs4,333 5,175 (842)(16.3)%
GAAP Revenue103,418 60,777 42,641 70.2 %
   Billable costs4,333 5,175 (842)(16.3)%
Staff costs66,608 37,196 29,412 79.1 %
Administrative costs12,589 9,544 3,045 31.9 %
Other, net4,517 731 3,786 517.9 %
Adjusted EBITDA15,371 8,131 7,240 89.0 %
Stock-based compensation2,608 — 2,608 — %
Depreciation and amortization6,597 4,903 1,694 34.6 %
Impairment and other losses14,846 — 14,846 — %
Other items, net408 271 137 50.5 %
Operating Income$(9,088)$2,957 $(12,045)NM
Revenue
Revenue was $103.4 millionthree months ended September 30, 2021 and $60.8 million for three months ended September 30, 2020,representing an increase of $42.6 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:
Net Revenue - Components of ChangeChange
Three Months Ended September 30, 2020Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended September 30, 2021OrganicTotal
(Dollars in Thousands)
Media Network$55,602 $(1,558)$19,969 $25,072 $43,483 $99,085 45.1 %78.2 %
Component % change(2.8)%35.9%45.1%78.2%
The increase in organic net revenue was primarily attributable to increased spending by clients in connection with the recovery from the COVID-19 pandemic and the impact from the acquisition of MDC in the third quarter of 2021.
The increase in expenses was driven by the impact from the acquisition of MDC and an impairment loss of $14.9 million in connection with a write-down of trade names no longer in use.
The operating loss in the third quarter of 2021 was driven by the impairment of the trade names.
The increase in Adjusted EBITDA was driven by higher revenue, partially offset by higher expenses.
Communications Network
The components of operating results for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:
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Three Months Ended September 30,
20212020Change
Communications Network$$$%
(Dollars in Thousands)
Revenue:$67,348 $106,909 $(39,561)(37.0)%
Operating Expenses:
Cost of services sold59,550 81,536 (21,986)(27.0)%
Office and general expenses12,559 4,504 8,055 NM
Depreciation and amortization2,110 1,455 655 45.0 %
Impairment and other losses— $— $— — %
$74,219 $87,495 $(13,276)(15.2)%
Operating income(6,871)19,414 (26,285)NM

Three Months Ended September 30,
20212020Change
$%
Net Revenue$46,616 $39,096 $7,520 19.2 %
Billable costs20,732 67,813 (47,081)(69.4)%
GAAP Revenue67,348 106,909 (39,561)(37.0)%
   Billable costs20,732 67,813 (47,081)(69.4)%
Staff costs30,071 17,258 12,813 74.2 %
Administrative costs5,445 1,926 3,519 182.7 %
Other, net788 (319)1,107 NM
Adjusted EBITDA10,312 20,231 (9,919)(49.0)%
Stock-based compensation15,384 — 15,384 — %
Depreciation and amortization2,110 1,455 655 45.0 %
Deferred acquisition consideration— (638)638 (100.0)%
Other items, net(311)— (311)— %
Operating Income$(6,871)$19,414 $(26,285)NM
Revenue
Revenue was $67.3 millionthree months ended September 30, 2021 and $106.9 million for three months ended September 30, 2020, a decrease of $39.6 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:
Net Revenue - Components of ChangeChange
Three Months Ended September 30, 2020Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended September 30, 2021OrganicTotal
(Dollars in Thousands)
Communications Network$39,096 $235 $12,202 $(4,917)$7,520 $46,616 (12.6)%19.2 %
Component % change0.6%31.2%(12.6)%19.2%
The decline in organic net revenue was attributable to lower advocacy business compared to the prior year period that included higher levels of business in connection with the 2020 elections.
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The increase in expenses was driven by higher staff costs from the impact of the acquisition of MDC and stock-based compensation expense in the third quarter of 2021, driven by awards issued in connection with the acquisition of MDC.
The operating loss in the third quarter of 2021 was driven by stock-based compensation expense.
Adjusted EBITDA was lower in the third quarter of 2021 driven by higher net revenue, more than offset by higher expenses.
All Other
The components of operating results for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:
Three Months Ended September 30,
20212020Change
All Other$$$%
(Dollars in Thousands)
Revenue:$7,389 $5,118 $2,271 44.4 %
Operating Expenses:
Cost of services sold3,286 1,388 1,898 NM
Office and general expenses3,701 3,925 (224)(5.7)%
Depreciation and amortization493 815 (322)(39.5)%
Impairment and other losses$(1)$— $(1)— %
$7,479 $6,128 $1,351 22.0 %
Operating income$(90)$(1,010)$920 (91.1)%

Three Months Ended September 30,
20212020Change
$%
Net Revenue$7,395 $5,118 $2,277 44.5 %
Billable costs(6)— (6)— %
GAAP Revenue7,389 5,118 2,271 44.5 %
Billable costs(6)— (6)— %
Staff costs5,211 5,282 (71)(1.3)%
Administrative costs2,101 3,054 (953)(31.2)%
Other, net(336)(3,025)2,689 88.9 %
Adjusted EBITDA419 (193)612 NM
Stock-based compensation16 — 16 — %
Depreciation and amortization493 815 (322)(39.5)%
Impairment(1)— (1)— %
Other items, net(1)(100.0)%
Operating Income$(90)$(1,010)$920 91.1 %


Revenue
Revenue was $7.4 millionthree months ended September 30, 2021 and $5.1 million for three months ended September 30, 2020, an increase of $2.3 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:
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Net Revenue - Components of ChangeChange
Three Months Ended September 30, 2020Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended September 30, 2021OrganicTotal
(Dollars in Thousands)
All Other$5,118 $131 $1,558 $588 $2,277 $7,395 11.5 %44.5 %
Component % change2.6 %30.4 %11.5 %44.5 %
The increase in organic net revenue was attributable to higher levels of business at the central innovations group.
The increase in revenue was more than offset by higher expenses resulting in an operating loss in both periods.
Corporate
The components of operating results for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:
Three Months Ended September 30,
20212020Change
$%
Total Direct Costs$— $— $— — %
Staff costs$5,492 $527 $4,965 NM
Administrative costs1,216 1,789 (573)(32.0)%
Other costs232 — 232 — 
Adjusted EBITDA(6,940)(2,316)(4,624)NM
Stock-based compensation3,014 — 3,014 NM
Depreciation and amortization1,194 509 685 NM
Deferred acquisition consideration— — — — 
Impairment and other losses— — — — 
Other items, net9,610 (1)9,611 NM
Operating Loss$(20,758)$(2,824)$(17,934)NM
Operating expenses increased primarily in connection with the acquisition of MDC, including professional fees associated with the transaction.

NINE MONTHS ENDED SEPTEMBER 30, 2021 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2020
Consolidated Results of Operations
The components of operating results for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:
Nine Months Ended September 30,
20212020Change
$$$%
(Dollars in Thousands)
Revenue:$857,436 $574,970 $282,466 49.1 %
Operating Expenses:
Cost of services sold558,856 373,064 185,792 49.8 %
Office and general expenses226,720 127,181 99,539 78.3 %
Depreciation and amortization46,122 29,838 16,284 54.6 %
Impairment and other losses$14,926 $— $14,926 — %
$846,624 $530,083 $316,541 59.7 %
Operating income$10,812 $44,887 $(34,075)(75.9)%
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Nine Months Ended September 30,
20212020Change
$%
Net Revenue$749,246 $434,052 $315,194 72.6 %
Billable costs108,190 140,918 (32,728)(23.2)%
GAAP Revenue857,436574,970282,46649.1 %
Billable costs108,190 140,918 (32,728)(23.2)%
Staff costs512,511 305,737 206,774 67.6 %
Administrative costs84,612 60,771 23,841 39.2 %
Other, net2,044 (11,427)13,471 NM
Adjusted EBITDA150,079 78,971 71,108 90.0 %
Stock-based compensation53,465 — 53,465 — %
Depreciation and amortization46,122 29,838 16,284 54.6 %
Deferred acquisition consideration9,456 1,270 8,186 NM
Impairment and other losses14,926 — 14,926 — %
Other items, net15,298 2,976 12,322 NM
Operating Income$10,812 $44,887 $(34,075)(75.9)%
Revenue
Revenue for the nine months ended September 30, 2021 was $857.4 million compared to $575.0 million for the nine months ended September 30, 2020, an increase of $282.5 million.
Net Revenue
Net Revenue - Components of ChangeChange
Nine Months Ended September 30, 2020Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeNine Months Ended September 30, 2021OrganicTotal
(Dollars in Thousands)
Integrated Agencies Network$156,757 $1,057 $138,896 $108,198 $248,151 $404,908 69.0 %158.3 %
Media Network171,286 3,659 19,969 21,278 44,906 216,192 12.4 %26.2 %
Communications Network90,393 72 12,202 2,605 14,879 105,272 2.9 %16.5 %
All Other15,616 476 1,558 5,224 7,258 22,874 33.5 %46.5 %
$434,052 $5,264 $172,625 $137,305 $315,194 $749,246 31.6 %72.6 %
Component % change1.2%39.8%31.6%72.6%
For the nine months ended September 30, 2021, organic net revenue increased $137.3 million, or 31.6%, primarily attributable to higher spending by clients in connection with the recovery from the COVID-19 pandemic and the impact from the acquisition of MDC.
The geographic mix in net revenues for the nine months ended September 30, 2021 and 2020 is as follows:
 20212020
United States$632,307 $376,737 
United Kingdom60,392 41,550 
Other56,547 15,765 
Total$749,246 $434,052 
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Operating Income
Operating income for the nine months ended September 30, 2021 was $10.8 million compared to $44.9 million for the nine months ended September 30, 2020, representing an increase of $34.1$45.5 million primarily driven by the increase in revenue, more than offset by an increase in operating expenses. The nine months ended September 30, 2021 was impacted by the impairment and other losses of $14.9 million in connection with a write-down of trade names no longer in use and stock-based compensation expense of $53.5 million in connection with the merger.
Adjusted EBITDA
Adjusted EBITDA for the nine months ended September 30, 2021 was $150.1 million, compared to $79.0 million for the nine months ended September 30, 2020, representing an increase of $71.1 million, principally resulting from an increase in revenue, partially offset by higher operating expenses. The acquisition of MDC contributed to higher revenue and expenses.
Gain on Sale of Business and Other, net
Gain on sale of business and other, net, for the nine months ended September 30, 2021 was income of $46.8 million, compared to income of $0.9 million for the nine months ended September 30, 2020, primarily due to the a gain of approximately $43 million in connection with sale of Reputation Defender in the third quarter of 2021.
Foreign Exchange Transaction Gain (Loss)
The foreign exchange gainloss for the three months ended September 30, 2022 was $3.9 million compared to a loss of $0.9 million for the three months ended September 30, 2021.
Interest Expense, Net
Interest expense, net, for the three months ended September 30, 2022 was $19.7 million compared to $11.9 million for the three months ended September 30, 2021, representing an increase of $7.8 million, primarily driven by a higher level of debt, principally due to amounts outstanding under the Combined Credit Agreement.
Income Tax Expense
The Company had an income tax expense for the three months ended September 30, 2022 of $11.5 million (on a pre-tax income of $46.6 million resulting in an effective tax rate of 24.8%) compared to income tax expense of $5.2 million (on pre-tax income of $13.2 million resulting in an effective tax rate of 39.3%) for the three months ended September 30, 2021.
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The difference in the effective tax rate of 24.8% in the three months ended September 30, 2022 as compared to 39.3% in the three months ended September 30, 2021 was primarily attributable to higher non-deductible share based compensation in September 30, 2021, and favorable return to provision adjustments at September 30, 2022, offset in part by the impact of non-deductible goodwill impairments in September 30, 2022.
Noncontrolling and Redeemable Noncontrolling Interests
The effect of noncontrolling and redeemable noncontrolling interests for the three months ended September 30, 2022 was $24.7 million compared to $10.0 million for the three months ended September 30, 2021.
Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders
As a result of the foregoing, net income attributable to Stagwell Inc. common shareholders for the three months ended September 30, 2022 was $10.6 million compared to net loss attributable to Stagwell Inc. common shareholders of $2.1 million for the three months ended September 30, 2021.
Earnings Per Share
Diluted EPS and adjusted diluted EPS for the three months ended September 30, 2022 was as follows:
Reported (GAAP)AdjustmentsReported
(Non-GAAP)
(Dollars in Thousands)
Net income attributable to Stagwell Inc. common shareholders$10,609 $16,159 $26,768 
Weighted average number of common shares outstanding130,498 130,498 130,498 
Adjusted Diluted EPS$0.08 $0.12 $0.21 
Adjustments to Net Income (loss) attributable to Stagwell Inc. Common shareholders
Pre-TaxTaxNet
(Dollars in Thousands)
Amortization$23,814 $(4,763)$19,051 
Impairment and other losses25,211 (414)24,797 
Stock-based compensation12,258 (2,452)9,806 
Deferred acquisition consideration(29,789)5,958 (23,831)
Other items, net5,152 (1,030)4,122 
Discrete tax items— 2,680 2,680 
$36,646 $(21)$36,625 
Less: Net income attributable to Class C shareholders(20,466)
Net income attributable to Stagwell Inc. common shareholders$16,159 
Adjusted EBITDA
Adjusted EBITDA for the three months ended September 30, 2022 was $115.1 million, compared to $87.5 million for the three months ended September 30, 2021, representing an increase of $27.6 million, driven by the increase in revenue, partially offset by higher operating expenses.
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Integrated Agencies Network
The components of operating results for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 were as follows:
Three Months Ended September 30,
20222021Change
(Dollars in Thousands)
$%
Revenue$367,122 $269,071 $98,051 36.4 %
Operating Expenses
Cost of services235,110 191,812 43,298 22.6 %
Office and general expenses63,123 47,901 15,222 31.8 %
Depreciation and amortization18,316 13,494 4,822 35.7 %
Impairment and other losses1,735 81 1,654 NM
$318,284 $253,288 $64,996 25.7 %
Operating income$48,838 $15,783 $33,055 NM

Three Months Ended September 30,

20222021Change
(Dollars in Thousands)
$%
Net Revenue$313,282 $237,750 $75,532 31.8 %
Billable costs53,840 31,321 22,519 71.9 %
Revenue367,122 269,071 98,051 36.4 %
Billable costs53,840 31,322 22,518 71.9 %
Staff costs194,057 134,428 59,629 44.4 %
Administrative costs25,592 19,594 5,998 30.6 %
Unbillable and other costs, net17,409 17,664 (255)(1.4)%
Adjusted EBITDA76,224 66,063 10,161 15.4 %
Stock-based compensation5,308 32,431 (27,123)(83.6)%
Depreciation and amortization18,316 13,494 4,822 35.7 %
Deferred acquisition consideration841 3,422 (2,581)(75.4)%
Impairment and other losses1,735 81 1,654 NM
Other items, net1,186 852 334 39.2 %
Operating Income$48,838 $15,783 $33,055 NM
`
Revenue
Revenue for the three months ended September 30, 2022 was $367.1 million compared to $269.1 million for the three months ended September 30, 2021, an increase of $98.1 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 were as follows:
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Net Revenue - Components of ChangeChange
Three Months Ended September 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended September 30, 2022OrganicTotal
(Dollars in Thousands)
Integrated Agencies Network$237,750 $(1,496)$69,871 $7,157 $75,532 $313,282 3.0 %31.8 %
Component % change(0.6)%29.4%
The increase in organic net revenue was primarily attributable to increased spending by existing and new clients, primarily driven by creative, digital transformation and consumer insights services. The increase in net acquisitions (divestitures) was primarily driven by the acquisition of MDC.
The increase in expenses was primarily driven by the impact of the acquisition of MDC and costs associated with an increase in services provided. Deferred acquisition consideration decreased as a result of payments made during 2022. Depreciation and amortization increased primarily due to the recognition of amortizable intangible assets following the acquisition of MDC. Stock-based compensation expense decreased primarily driven by awards issued to employees in the third quarter of 2021 in connection with the acquisition of MDC that fully vested in the third quarter of 2021 and the first quarter of 2022. Impairment and other losses resulted from the impairment of one right-of-use lease asset and associated leasehold improvements.
Operating income and Adjusted EBITDA were higher, driven by an increase in revenues, partially offset by higher expenses as detailed above.
Brand Performance Network
The components of operating results for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 were as follows:
Three Months Ended September 30,
20222021Change
(Dollars in Thousands)
$%
Revenue$171,463 $122,826 $48,637 39.6 %
Operating Expenses
Cost of services105,298 68,559 36,739 53.6 %
Office and general expenses47,386 39,620 7,766 19.6 %
Depreciation and amortization8,205 7,499 706 9.4 %
Impairment and other losses7,494 14,846 (7,352)(49.5)%
$168,383 $130,524 $37,859 29.0 %
Operating income (loss)$3,080 $(7,698)$10,778 NM
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Three Months Ended September 30,

20222021Change
(Dollars in Thousands)
$%
Net Revenue$160,472 $117,568 $42,904 36.5 %
Billable costs10,991 5,258 5,733 NM
Revenue171,463 122,826 48,637 39.6 %
Billable costs10,991 5,258 5,733 NM
Staff costs102,925 73,020 29,905 41.0 %
Administrative costs20,798 18,007 2,791 15.5 %
Unbillable and other costs, net12,437 8,877 3,560 40.1 %
Adjusted EBITDA24,312 17,664 6,648 37.6 %
Stock-based compensation2,923 2,620 303 11.6 %
Depreciation and amortization8,205 7,499 706 9.4 %
Deferred acquisition consideration1,444 — 1,444 100.0 %
Impairment and other losses7,494 14,846 (7,352)(49.5)%
Other items, net1,166 397 769 NM
Operating Income (Loss)$3,080 $(7,698)$10,778 NM
Revenue
Revenue for the three months ended September 30, 2022 was $171.5 million compared to $122.8 million for the three months ended September 30, 2021, an increase of $48.6 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 were as follows:
Net Revenue - Components of ChangeChange
Three Months Ended September 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended September 30, 2022OrganicTotal
(Dollars in Thousands)
Brand Performance Network$117,568 $(3,221)$29,216 $16,909 $42,904 $160,472 14.4 %36.5 %
Component % change(2.7)%24.9%
The increase in organic net revenue was primarily attributable to new clients and increased spending by existing clients. The increase in net acquisitions (divestitures) was primarily driven by the acquisitions of MDC, GoodStuff, and BNG.
The increase in expenses was primarily driven by the impact of the acquisitions of MDC, BNG and Goodstuff and costs associated with an increase in services provided. Deferred acquisition consideration increased primarily due to the assumption of additional liabilities in connection with the acquisitions of BNG and Goodstuff. Impairment and other losses decreased as a result of the write-down of certain trade names that were no longer in use in the third quarter of 2021, partially offset by the impairment of goodwill in the third quarter of 2022.
Operating income (loss) and Adjusted EBITDA increased due to an increase in revenues, partially offset by higher expenses as detailed above.
50

Communications Network
The components of operating results for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 were as follows:
Three Months Ended September 30,
20222021Change
(Dollars in Thousands)
$%
Revenue$121,770 $67,348 $54,422 80.8 %
Operating Expenses
Cost of services75,573 59,550 16,023 26.9 %
Office and general expenses(10,355)12,559 (22,914)NM
Depreciation and amortization2,654 2,110 544 25.8 %
$67,872 $74,219 $(6,347)(8.6)%
Operating income (loss)$53,898 $(6,871)$60,769 NM

Three Months Ended September 30,

20222021Change
(Dollars in Thousands)
$%
Net Revenue$78,565 $46,615 $31,950 68.5 %
Billable costs43,205 20,733 22,472 NM
Revenue121,770 67,348 54,422 80.8 %
Billable costs43,205 20,732 22,473 NM
Staff costs44,197 30,171 14,026 46.5 %
Administrative costs8,836 5,331 3,505 65.7 %
Unbillable and other costs, net70 802 (732)(91.3)%
Adjusted EBITDA25,462 10,312 15,150 NM
Stock-based compensation671 15,384 (14,713)(95.6)%
Depreciation and amortization2,654 2,110 544 25.8 %
Deferred acquisition consideration(32,074)— (32,074)(100.0)%
Other items, net313 (311)624 NM
Operating Income (Loss)$53,898 $(6,871)$60,769 NM
Revenue
Revenue for the three months ended September 30, 2022 was $121.8 million compared to $67.3 million for the three months ended September 30, 2021, an increase of $54.4 million.
51

Net Revenue
The components of the fluctuations in net revenue for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 were as follows:
Net Revenue - Components of ChangeChange
Three Months Ended September 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended September 30, 2022OrganicTotal
(Dollars in Thousands)
Communications Network$46,615 $(211)$8,652 $23,509 $31,950 $78,565 50.4 %68.5 %
Component % change(0.5)%18.6%
The increase in organic net revenue was attributable to increased spending by existing and new clients, primarily driven by higher public relations as well as advocacy services, as these are typically higher during election years. The increase in net acquisitions (divestitures) was driven by the acquisition of MDC and TMA Direct.
The increase in expenses was driven by the impact from the acquisitions of MDC and TMA Direct and costs associated with an increase in services provided. Deferred acquisition consideration decreased due to the purchase of the remaining interest we did not already own in one of our Brands on October 1, 2021. In the third quarter of 2022, the fair value of the deferred acquisition consideration liability associated with this Brand was reduced as a result of a decrease in the fair value. Stock-based compensation expense decreased primarily driven by awards issued to employees in the third quarter of 2021 in connection with the acquisition of MDC that fully vested in the third quarter of 2021 and the first quarter of 2022.
Operating income (loss) and Adjusted EBITDA were driven by an increase in revenues, partially offset by higher expenses as detailed above.
All Other
The components of operating results for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 were as follows:
Three Months Ended September 30,
20222021Change
(Dollars in Thousands)
$%
Revenue$3,436 $7,389 $(3,953)(53.5)%
Operating Expenses
Cost of services1,153 3,286 (2,133)(64.9)%
Office and general expenses2,653 3,701 (1,048)(28.3)%
Depreciation and amortization1,206 493 713 NM
Impairment and other losses15,982 (1)15,983 NM
$20,994 $7,479 $13,515 NM
Operating loss$(17,558)$(90)$(17,468)NM
52


Three Months Ended September 30,
20222021Change
(Dollars in Thousands)
$%
Net Revenue$3,435 $7,395 $(3,960)(53.5)%
Billable costs(6)NM
Revenue3,436 7,389 (3,953)(53.5)%
Billable costs(6)NM
Staff costs2,750 4,994 (2,244)(44.9)%
Administrative costs1,029 1,950 (921)(47.2)%
Unbillable and other costs, net19 32 (13)(40.6)%
Adjusted EBITDA(363)419 (782)NM
Stock-based compensation16 (9)(56.3)%
Depreciation and amortization1,206 493 713 NM
Impairment and other losses15,982 (1)15,983 NM
Other items, net— (1)(100.0)%
Operating Loss$(17,558)$(90)$(17,468)NM
Revenue
Revenue for the three months ended September 30, 2022 was $3.4 million compared to $7.4 million for the three months ended September 30, 2021, a decrease of $4.0 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 were as follows:
Net Revenue - Components of ChangeChange
Three Months Ended September 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended September 30, 2022OrganicTotal
(Dollars in Thousands)
All Other$7,395 $(54)$(4,030)$124 $(3,960)$3,435 1.7 %(53.5)%
Component % change(0.7)%(54.5)%
The decrease related to net acquisitions (divestitures) was primarily attributable to the sale of Reputation Defender in the third quarter of 2021.
The increase in impairment and other losses was driven by the impairment of goodwill.
Increases in operating loss and decreases in Adjusted EBITDA were driven by a decrease in revenues and an increase in expenses, primarily driven by the sale of Reputation Defender and the impairment of goodwill.
53

Corporate
The components of operating results for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 were as follows:
Three Months Ended September 30,

20222021Change
(Dollars in Thousands)
$%
Staff costs$7,835 $7,178 $657 9.2 %
Administrative costs2,708 (247)2,955 NM
Unbillable and other costs, net— (9)100.0 %
Adjusted EBITDA(10,543)(6,940)(3,603)51.9 %
Stock-based compensation3,349 3,014 335 11.1 %
Depreciation and amortization1,826 1,194 632 52.9 %
Other items, net2,487 9,610 (7,123)(74.1)%
Operating Loss$(18,205)$(20,758)$2,553 (12.3)%
Operating expenses increased primarily in connection with an increase in stock-based compensation expense as a result of awards issued in the first quarter of 2022, partially offset by the reduction of professional fees and other merger-related expenses associated with the acquisition of MDC.
NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2021
Consolidated Results of Operations
The components of operating results for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 were as follows:
Nine Months Ended September 30,
20222021Change
(Dollars in Thousands)
$%
Revenue$1,979,607 $857,436 $1,122,171 NM
Operating Expenses
Cost of services1,253,765 558,856 694,909 NM
Office and general expenses429,121 226,720 202,401 89.3 %
Depreciation and amortization95,642 46,122 49,520 NM
Impairment and other losses28,034 14,926 13,108 87.8 %
$1,806,562 $846,624 $959,938 NM
Operating income$173,045 $10,812 $162,233 NM
54

Nine Months Ended September 30,
20222021Change
(Dollars in Thousands)
$%
Net Revenue$1,638,707 $749,246 $889,461 NM
Billable costs340,900 108,190 232,710 NM
Revenue1,979,607857,436$1,122,171 NM
Billable costs340,900 108,190 232,710 NM
Staff costs1,041,870 459,482 582,388 NM
Administrative costs181,606 83,950 97,656 NM
Unbillable and other costs, net87,408 55,735 31,673 56.8 %
Adjusted EBITDA327,823 150,079 177,744 NM
Stock-based compensation33,410 53,465 (20,055)(37.5)%
Depreciation and amortization95,642 46,122 49,520 NM
Deferred acquisition consideration(14,420)9,456 (23,876)NM
Impairment and other losses28,034 14,926 13,108 87.8 %
Other items, net12,112 15,298 (3,186)(20.8)%
Operating Income (1)
$173,045 $10,812 $162,233 NM
(1) See the Results of Operations section above for a reconciliation of Operating Income to Net Income attributable to Stagwell Inc. common shareholders.
Revenue
Revenue for the nine months ended September 30, 2022 was $1,979.6 million compared to $857.4 million for the nine months ended September 30, 2021, an increase of $1,122.2 million.
Net Revenue
The components of the fluctuations in net revenue for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 were as follows:
Net Revenue - Components of ChangeChange
Nine Months Ended September 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeNine Months Ended September 30, 2022OrganicTotal
(Dollars in Thousands)
Integrated Agencies Network$384,263 $636 $459,820 $88,999 $549,455 $933,718 23.2 %NM
Brand Performance Network236,837 (5,527)174,707 81,811 250,991 487,828 34.5 %NM
Communications Network105,272 (211)50,529 52,347 102,665 207,937 49.7 %97.5 %
All Other22,874 (164)(14,971)1,485 (13,650)9,224 6.5 %(59.7)%
$749,246 $(5,266)$670,085 $224,642 $889,461 $1,638,707 30.0 %NM
Component % change(0.7)%89.4%
For the nine months ended September 30, 2022, organic net revenue increased $224.6 million, or 30.0%. There was $2.0organic revenue growth across all segments, primarily attributable to increased spending by existing clients and business with new clients. The increase in net acquisitions (divestitures) was primarily driven by the acquisitions of MDC, BNG, TMA Direct and Goodstuff.
55

The geographic mix in net revenues for the nine months ended September 30, 2022 and 2021 is as follows:
Nine Months Ended September 30,
 20222021
(Dollars in Thousands)
United States$1,333,571 $632,307 
United Kingdom122,798 60,392 
Other182,338 56,547 
Total$1,638,707 $749,246 
Impairment and Other Losses
The Company recognized an impairment and other losses charge of $28,034 for the nine months ended September 30, 2022, primarily related to the impairment of goodwill totaling $23,139. The goodwill impairment was to write-down the carrying value in excess of the fair value at three reporting units, one within the Integrated Agencies Network, one within the Brand Performance Network and one within the All Other category. The expense was recorded within Impairment and other losses on the Unaudited Condensed Consolidated Statements of Operations. See the Consolidated Results of Operations for the three months ended September 30, 2022, above, for additional information regarding our goodwill impairment assessment.
In addition, in the three and nine months ended September 30, 2022, the Company recorded a charge of $2,014 primarily to reduce the carrying value of one of its right-of-use lease assets and related leasehold improvements. This right-of-use lease asset related to an agency within the Integrated Agencies Network. As a result of subleasing the space, the Company evaluated the facts and circumstances related to the use of the assets which indicated that they may not be recoverable. Using the sublease income to develop expected future cash flows, it was determined that the fair value of the asset was less than its carrying value. This impairment charge is included in Impairment and other losses within the Unaudited Condensed Consolidated Statements of Operations.
Operating Income
Operating income for the nine months ended September 30, 2022 was $173.0 million compared to a loss of $0.8$10.8 million for the nine months ended September 30, 2020.2021, representing an increase of $162.2 million.
Operating income for the nine months ended September 30, 2022 was impacted primarily by an increase in revenue and expenses due to the acquisitions of MDC, BNG, TMA Direct and Goodstuff and costs associated with an increase in services provided. Stock-based compensation expense decreased, primarily driven by awards issued to employees in the third quarter of 2021, in connection with the acquisition of MDC, that fully vested in the third quarter of 2021 and the first quarter of 2022, partially offset by awards issued in the first quarter of 2022. Deferred acquisition consideration decreased primarily due to the assumption of additional liabilities in connection with the acquisitions of MDC, BNG, TMA Direct and Goodstuff, more than offset by the negative change in fair value associated with a Brand in which the deferred acquisition consideration liability originated from the purchase of the remaining interest we did not already own in the fourth quarter of 2021. Depreciation and amortization was higher primarily due to the recognition of amortizable intangible assets in connection with the acquisitions of MDC, BNG, TMA Direct and Goodstuff. Impairment and other losses primarily increased due to the impairment of goodwill and a right-of-use lease asset in the third quarter of 2022.
Other, net
Other, net, for the nine months ended September 30, 2022 was income of $0.18 million, compared to income of $46.8 million for the nine months ended September 30, 2021.
Foreign Exchange Transaction Gain (Loss)
The foreign exchange loss for the nine months ended September 30, 2022 was $4.2 million compared to a loss of $2.0 million for the nine months ended September 30, 2021.
Interest Expense, Net
Interest expense, net, for the nine months ended September 30, 20212022 was $15.2$56.6 million compared to $4.7$15.2 million for the nine months ended September 30, 2020,2021, representing an increase of $10.5$41.4 million, primarily driven by an increase ina higher level of debt in connection with the acquisition of MDC.
56

Income Tax Expense (Benefit)
The Company had an income tax expense for the nine months ended September 30, 20212022 of $20.2 million (on a pre-tax income of $112.5 million resulting in an effective tax rate of 17.9%) compared to income tax expense of $9.2 million (on a pre-tax income of $40.5 million resulting in an effective tax rate of 22.7%) compared to income tax expense of $3.2 million (on pre-tax income of $42.0 million resulting in an effective tax rate of 7.7%) for the nine months ended September 30, 2020.2021.
The difference in the effective tax rate of 17.9% in the nine months ended September 30, 2022 as compared to 22.7% in the nine months ended September 30, 2021 as comparedwas primarily related to 7.7% in the same period in 2020 primarily results from the expansion of the group to include more tax-paying entities and proportionally less pre-tax income not subject to tax within the group, as well as non-deductiblefavorable adjustments for share based compensation expenses incurred duringvesting and return to provision adjustments at September 30, 2022, offset in part by the third quarter related to the merger.impact of non-deductible goodwill impairments in September 30, 2022.

Noncontrolling and Redeemable Noncontrolling Interests
The effect of noncontrolling and redeemable noncontrolling interests for the nine months ended September 30, 20212022 was $11.0$59.7 million compared to $4.6$11.0 million for the nine months ended September 30, 2020.2021.
Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders
As a result of the foregoing, net income attributable to Stagwell Inc. common shareholders for the nine months ended September 30, 20212022 was $20.2$33.7 million compared to net lossincome attributable to Stagwell Inc. common shareholders of $34.1$20.2 million for the nine months ended September 30, 2020.2021.
Earnings Per Share
Diluted EPS and adjusted diluted EPS for the nine months ended September 30, 2022 was as follows:
Reported (GAAP)AdjustmentsReported
(Non-GAAP)
(Dollars in Thousands)
Net income attributable to Stagwell Inc. common shareholders$33,747 $50,815 $84,562 
Weighted average number of common shares outstanding131,550 131,550 131,550 
Adjusted Diluted EPS$0.26 $0.39 $0.64 
Adjustments to Net Income (loss) attributable to Stagwell Inc. Common shareholders
Pre-TaxTaxNet
(Dollars in Thousands)
Amortization$70,541 $(14,108)$56,433 
Impairment and other losses28,034 (979)27,055 
Stock-based compensation33,410 (6,682)26,728 
Deferred acquisition consideration(14,420)2,884 (11,536)
Other items, net12,112 (2,422)9,690 
Discrete tax items— 6,805 6,805 
$129,677 $(14,502)$115,175 
Less: Net income attributable to Class C shareholders(64,360)
Net income attributable to Stagwell Inc. common shareholders$50,815 
Adjusted EBITDA
Adjusted EBITDA for the nine months ended September 30, 2022 was $327.8 million, compared to $150.1 million for the nine months ended September 30, 2021, representing an increase of $177.7 million, driven by the increase in revenue, partially offset by higher operating expenses and the impact of the acquisitions of MDC, GoodStuff, TMA Direct and BNG.
57

Integrated Agencies Network
The components of operating results for the nine months ended September 30, 20212022 compared to the nine months ended September 30,202030, 2021 were as follows:
52

Table of Contents
Nine Months Ended September 30,Nine Months Ended September 30,
20212020Change20222021Change
Integrated Agencies Network$$$%
(Dollars in Thousands)
(Dollars in Thousands)$%
RevenueRevenue$441,229 $163,540 $277,689 NMRevenue$1,095,761 $419,659 $676,102 NM
Operating expenses
Cost of services sold292,523 96,951 195,572 NM
Operating ExpensesOperating Expenses
Cost of servicesCost of services708,921 278,971 429,950 NM
Office and general expensesOffice and general expenses90,971 39,471 51,500 NMOffice and general expenses194,362 83,588 110,774 NM
Depreciation and amortizationDepreciation and amortization19,816 6,715 13,101 NMDepreciation and amortization55,206 18,787 36,419 NM
Impairment and other lossesImpairment and other losses81 — 81 — %Impairment and other losses2,519 81 2,438 NM
$403,391 $143,137 $260,254 NM$961,008 $381,427 $579,581 NM
Operating incomeOperating income$37,838 $20,403 $17,435 85.5 %Operating income$134,753 $38,232 $96,521 NM

Nine Months Ended September 30,
Integrated Agencies Network20212020Change
$%
Net Revenue$404,908 $156,757 $248,151 NM
Billable costs36,321 6,783 29,538 NM
GAAP Revenue441,229 163,540 277,689 NM
Billable costs36,321 6,783 29,538 NM
Staff costs269,191 112,321 156,870 NM
Administrative costs34,150 17,086 17,064 99.9 %
Other, net607 (1,563)2,170 NM
Adjusted EBITDA100,960 28,913 72,047 NM
Stock-based compensation32,443 — 32,443 — %
Depreciation and amortization19,816 6,715 13,101 NM
Deferred acquisition consideration9,456 787 8,669 NM
Impairment81 — 81 — %
Other items, net1,326 1,008 318 31.6 %
Operating Income$37,838 $20,403 $17,435 85.5 %

Nine Months Ended September 30,

20222021Change
(Dollars in Thousands)
$%
Net Revenue$933,718 $384,263 $549,455 NM
Billable costs162,043 35,396 126,647 NM
Revenue1,095,761 419,659 676,102 NM
Billable costs162,043 35,396 126,647 NM
Staff costs583,299 213,617 369,682 NM
Administrative costs82,889 31,434 51,455 NM
Unbillable and other costs, net51,610 38,948 12,662 32.5 %
Adjusted EBITDA215,920 100,264 115,656 NM
Stock-based compensation15,044 32,431 (17,387)(53.6)%
Depreciation and amortization55,206 18,787 36,419 NM
Deferred acquisition consideration5,697 9,456 (3,759)(39.8)%
Impairment and other losses2,519 81 2,438 NM
Other items, net2,701 1,277 1,424 NM
Operating Income$134,753 $38,232 $96,521 NM
Revenue
Revenue for the nine months ended September 30, 20212022 was $441.2$1,095.8 million compared to $163.5$419.7 million for the nine months ended September 30, 2020,2021, an increase of $277.7$676.1 million.
Net Revenue
The components of the fluctuations in net revenue for the nine months ended September 30, 20212022 compared to the nine months ended September 30,202030, 2021 were as follows:
Net Revenue - Components of ChangeChange
Nine Months Ended September 30, 2020Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeNine Months Ended September 30, 2021OrganicTotal
(Dollars in Thousands)
Integrated Agencies Network$156,757 $1,057 $138,896 $108,198 $248,151 $404,908 69.0 %158.3 %
Component % change0.7%88.6%69.0%NM
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Table of Contents
Net Revenue - Components of ChangeChange
Nine Months Ended September 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeNine Months Ended September 30, 2022OrganicTotal
(Dollars in Thousands)
Integrated Agencies Network$384,263 $636 $459,820 $88,999 $549,455 $933,718 23.2 %NM
Component % change0.2%NM
The increasegrowth in organic net revenue was primarily attributable to increased spending by existing and new clients, primarily driven by creative, digital transformation and consumer insights services. The increase in connection with the recovery from the COVID-19 pandemic and the impact fromnet acquisitions (divestitures) was primarily driven by the acquisition of MDC.
The increase in expenses was primarily driven by the impact fromof the acquisition of MDC.MDC and costs associated with an increase in services provided. Stock-based compensation expense increased,decreased primarily driven by awards issued to employees in the third quarter of 2021 in connection with the acquisition of MDC that fully vested in the third quarter of 2021 and depreciationthe first quarter of 2022. Depreciation and amortization grew due to the recognition of amortizable intangible assets primarily in connection with the acquisition of MDC. Impairment and other losses increased primarily due to the impairment of a right-of-use lease asset in the third quarter of 2022.
Operating income increased as theand Adjusted EBITDA were higher driven by an increase in revenue, more than offset higher operating expenses.
The increase in Adjusted EBITDA was driven by higher revenue,revenues, partially offset by higher expenses.

expenses as detailed above.
MediaBrand Performance Network
The components of operating results for the nine months ended September 30, 20212022 compared to the nine months ended September 30,202030, 2021 were as follows:
Nine Months Ended September 30,Nine Months Ended September 30,
20212020Change20222021Change
Media Network$$$%
(Dollars in Thousands)
(Dollars in Thousands)$%
RevenueRevenue$235,539 $185,714 $49,825 26.8 %Revenue$563,546 $257,109 $306,437 NM
Operating expenses
Cost of services sold134,183 114,686 19,497 17.0 %
Operating ExpensesOperating Expenses
Cost of servicesCost of services341,796 147,735 194,061 NM
Office and general expensesOffice and general expenses75,049 58,025 17,024 29.3 %Office and general expenses152,668 82,432 70,236 85.2 %
Depreciation and amortizationDepreciation and amortization17,041 14,751 2,290 15.5 %Depreciation and amortization25,044 18,070 6,974 38.6 %
Impairment and other lossesImpairment and other losses14,846 — 14,846 — %Impairment and other losses8,051 14,846 (6,795)(45.8)%
$241,119 $187,462 $53,647 28.6 %$527,559 $263,083 $264,476 NM
Operating income$(5,580)$(1,748)$(3,822)NM
Operating income (loss)Operating income (loss)$35,987 $(5,974)$41,961 NM
59


Nine Months Ended September 30,
Nine Months Ended September 30,

20222021Change


20212020Change(Dollars in Thousands)
$%$%
Net RevenueNet Revenue$216,192 $171,286 $44,906 26.2 %Net Revenue$487,828 $236,837 $250,991 NM
Billable costsBillable costs19,347 14,428 4,919 34.1 %Billable costs75,718 20,272 55,446 NM
GAAP Revenue235,539 185,714 49,825 26.8 %
RevenueRevenue563,546 257,109 306,437 NM
Billable costsBillable costs19,347 14,428 4,919 34.1 %Billable costs75,718 20,272 55,446 NM
Staff costsStaff costs154,422 129,782 24,640 19.0 %Staff costs301,233 153,389 147,844 96.4 %
Administrative costsAdministrative costs30,445 27,265 3,180 11.7 %Administrative costs61,840 36,762 25,078 68.2 %
Other, net1,536 (754)2,290 NM
Unbillable and other costs, netUnbillable and other costs, net35,496 16,201 19,295 NM
Adjusted EBITDAAdjusted EBITDA29,789 14,993 14,796 98.7 %Adjusted EBITDA89,259 30,485 58,774 NM
Stock-based compensationStock-based compensation2,608 — 2,608 — %Stock-based compensation9,152 2,620 6,532 NM
Depreciation and amortizationDepreciation and amortization17,041 14,751 2,290 15.5 %Depreciation and amortization25,044 18,070 6,974 38.6 %
Impairment14,846 — 14,846 — %
Deferred acquisition considerationDeferred acquisition consideration7,349 — 7,349 100.0 %
Impairment and other lossesImpairment and other losses8,051 14,846 (6,795)(45.8)%
Other items, netOther items, net874 1,990 (1,116)(56.1)%Other items, net3,676 923 2,753 NM
Operating Income$(5,580)$(1,748)$(3,832)NM
Operating Income (Loss)Operating Income (Loss)$35,987 $(5,974)$41,961 NM
Revenue
Revenue for the nine months ended September 30, 20212022 was $235.5$563.5 million compared to $185.7$257.1 million for the nine months ended September 30, 2020,2021, an increase of $49.8$306.4 million.
Net Revenue
The components of the fluctuations in net revenue for the nine months ended September 30, 20212022 compared to the nine months ended September 30,202030, 2021 were as follows:
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Net Revenue - Components of ChangeChange
Nine Months Ended September 30, 2020Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeNine Months Ended September 30, 2021OrganicTotal
(Dollars in Thousands)
Media Network$171,286 $3,659 $19,969 $21,278 $44,906 $216,192 12.4 %26.2 %
Component % change2.1%11.7%12.4%26.2%

Net Revenue - Components of ChangeChange
Nine Months Ended September 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeNine Months Ended September 30, 2022OrganicTotal
(Dollars in Thousands)
Brand Performance Network$236,837 $(5,527)$174,707 $81,811 $250,991 $487,828 34.5 %NM
Component % change(2.3)%73.8%
The increase in organic net revenue was primarily attributable to new clients and increased spending by clientsexisting clients. The increase in connection withnet acquisitions (divestitures) was primarily driven by the recovery from the COVID-19 pandemicacquisitions of MDC, Goodstuff and the impact from the acquisition of MDC.BNG.
The increase in expenses was primarily driven by the impact fromof the acquisitionacquisitions of MDC, BNG and Goodstuff and costs associated with an impairment lossincrease in services provided. Deferred acquisition consideration increased primarily due to the assumption of $14.9 millionadditional liabilities in connection with athe acquisitions of MDC, Goodstuff and BNG. Stock-based compensation expense increased, primarily driven by share based awards issued to employees in the first quarter of 2022 as well as increases in the fair value of profits interest awards in 2022. Depreciation and amortization expense increased primarily due to the recognition of amortizable intangible assets in connection with the acquisitions of MDC, Goodstuff and BNG. Impairment and other losses of $14.8 million for the nine months ended September 30, 2021 relates to the write-down of certain trade names no longer in use.
The operating loss inuse, compared to impairment and other losses for the third quarternine months ended September 30, 2022 of 2021 was driven by$8.1 million which relates to the impairment of the trade names.goodwill.
TheOperating income (loss) and Adjusted EBITDA were driven by an increase in Adjusted EBITDA was driven by higher revenue,revenues, partially offset by higher expenses.
expenses as detailed above.
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Communications Network
The components of operating results for the nine months ended September 30, 20212022 compared to the nine months ended September 30,202030, 2021 were as follows:
Nine Months Ended September 30,Nine Months Ended September 30,
20212020Change20222021Change
Communications Network$$$%
(Dollars in Thousands)
(Dollars in Thousands)$%
RevenueRevenue$157,794 $210,100 $(52,306)(24.9)%Revenue$311,075 $157,794 $153,281 97.1 %
Operating expenses
Cost of services sold119,147 156,272 (37,125)(23.8)%
Operating ExpensesOperating Expenses
Cost of servicesCost of services198,843 119,147 79,696 66.9 %
Office and general expensesOffice and general expenses25,674 15,198 10,476 68.9 %Office and general expenses27,642 25,674 1,968 7.7 %
Depreciation and amortizationDepreciation and amortization5,087 4,210 877 20.8 %Depreciation and amortization7,718 5,087 2,631 51.7 %
Impairment and other losses— — — — %
$149,908 $175,680 $(25,772)(14.7)%$234,203 $149,908 $84,295 56.2 %
Operating incomeOperating income$7,886 $34,420 $(26,534)(77.1)Operating income$76,872 $7,886 $68,986 NM

Nine Months Ended September 30,
Nine Months Ended September 30,

20222021Change


20212020Change(Dollars in Thousands)
$%$%
Net RevenueNet Revenue$105,272 $90,393 $14,879 16.5 %Net Revenue$207,937 $105,272 $102,665 97.5 %
Billable costsBillable costs52,522 119,707 (67,185)(56.1)%Billable costs103,138 52,522 50,616 96.4 %
GAAP Revenue157,794 210,100 (52,306)(24.9)%
RevenueRevenue311,075 157,794 153,281 97.1 %
Billable costsBillable costs52,522 119,707 (67,185)(56.1)%Billable costs103,138 52,522 50,616 96.4 %
Staff costsStaff costs67,332 46,174 21,158 45.8 %Staff costs125,834 67,296 58,538 87.0 %
Administrative costsAdministrative costs9,637 5,768 3,869 67.1 %Administrative costs23,200 9,523 13,677 NM
Other, net(688)689 (100.1)%
Unbillable and other costs, netUnbillable and other costs, net273 151 122 80.8 %
Adjusted EBITDAAdjusted EBITDA28,302 39,139 (10,837)(27.7)%Adjusted EBITDA58,630 28,302 30,328 NM
Stock-based compensationStock-based compensation15,384 — 15,384 NMStock-based compensation1,077 15,384 (14,307)(93.0)%
Depreciation and amortizationDepreciation and amortization5,087 4,210 877 20.8 %Depreciation and amortization7,718 5,087 2,631 51.7 %
Deferred acquisition considerationDeferred acquisition consideration— 483 (483)(100.0)%Deferred acquisition consideration(27,466)— (27,466)(100.0)%
Other items, netOther items, net(55)26 (81)NMOther items, net429 (55)484 NM
Operating IncomeOperating Income$7,886 $34,420 $(26,534)(77.1)%Operating Income$76,872 $7,886 $68,986 NM
Revenue
Revenue for the nine months ended September 30, 20212022 was $157.8$311.1 million compared to $210.1$157.8 million for the nine months ended September 30, 2020,2021, an increase of $153.3 million.
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Net Revenue
The components of the fluctuations in net revenue for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 were as follows:
Net Revenue - Components of ChangeChange
Nine Months Ended September 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeNine Months Ended September 30, 2022OrganicTotal
(Dollars in Thousands)
Communications Network$105,272 $(211)$50,529 $52,347 $102,665 207,937 49.7 %97.5 %
Component % change(0.2)%48.0%
The increase in organic net revenue was primarily attributable to increased spending by existing and new clients, primarily driven by higher public relations as well as advocacy services, as these are typically higher during election years. The increase in net acquisitions (divestitures) was driven by the acquisitions of MDC and TMA Direct.
The increase in expenses was primarily driven by the impact from the acquisitions of MDC and TMA Direct and costs associated with an increase in services provided. Deferred acquisition consideration decreased primarily due to the reduction in fair value associated with the deferred acquisition consideration assumed in connection with the purchase of the remaining interest in one of our Brands on October 1, 2021. Stock-based compensation expense decreased primarily driven by awards issued to employees in the third quarter of 2021 in connection with the acquisition of MDC that fully vested in the third quarter of 2021 and the first quarter of 2022. Depreciation and amortization increased primarily due to the recognition of amortizable intangible assets in connection with the acquisitions of MDC and TMA Direct.
Operating income and Adjusted EBITDA were driven by an increase in revenues and lower expenses as detailed above.
All Other
The components of operating results for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 were as follows:
Nine Months Ended September 30,
20222021Change
(Dollars in Thousands)
$%
Revenue$9,225 $22,874 $(13,649)(59.7)%
Operating Expenses
Cost of services4,205 11,850 (7,645)(64.5)%
Office and general expenses6,029 12,357 (6,328)(51.2)%
Depreciation and amortization2,457 2,013 444 22.1 %
Impairment and other losses17,464 (1)17,465 NM
$30,155 $26,219 $3,936 15.0 %
Operating loss$(20,930)$(3,345)$(17,585)NM
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Nine Months Ended September 30,
20222021Change
(Dollars in Thousands)
$%
Net Revenue$9,224 $22,874 $(13,650)(59.7)%
Billable costs— 100.0 %
Revenue9,225 22,874 (13,649)(59.7)%
Billable costs— 100.0 %
Staff costs7,950 14,855 (6,905)(46.5)%
Administrative costs2,217 8,918 (6,701)(75.1)%
Unbillable and other costs, net29 417 (388)(93.0)%
Adjusted EBITDA(972)(1,316)344 (26.1)%
Stock-based compensation15 16 (1)(6.3)%
Depreciation and amortization2,457 2,013 444 22.1 %
Impairment and other losses17,464 (1)17,465 NM
Other items, net22 21 NM
Operating Loss$(20,930)$(3,345)$(17,585)NM
Revenue
Revenue for the nine months ended September 30, 2022 was $9.2 million compared to $22.9 million for the nine months ended September 30, 2021, a decrease of $52.3$13.6 million.
Net Revenue
The components of the fluctuations in net revenue for the nine months ended September 30, 20212022 compared to the nine months ended September 30,202030, 2021 were as follows:
Net Revenue - Components of ChangeChange
Nine Months Ended September 30, 2020Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeNine Months Ended September 30, 2021OrganicTotal
(Dollars in Thousands)
Communications Network$90,393 $72 $12,202 $2,605 $14,879 $105,272 2.9 %16.5 %
Component % change0.1%13.5%2.9%16.5%
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Net Revenue - Components of ChangeChange
Nine Months Ended September 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeNine Months Ended September 30, 2022OrganicTotal
(Dollars in Thousands)
All Other$22,874 $(164)$(14,971)$1,485 $(13,650)$9,224 6.5 %(59.7)%
Component % change(0.7)%(65.4)%
The increase in organic net revenue was attributable to services at the impact from the acquisition of MDC and higher levels of communications services in connection with the recovery from the COVID-19 pandemic.central innovations group.
The increasedecrease related to net acquisitions (divestitures) was primarily attributable to the sale of Reputation Defender in expenses was driven by higher staff costs from the impactthird quarter of the acquisition of MDC and stock-based compensation expense driven by awards issued in connection with the acquisition of MDC.
Operating income declined due to higher net revenue, more than offset by the increase in expenses.2021.
The increases in operating loss and decrease in Adjusted EBITDA waswere primarily driven by a decrease in revenues and expenses due to higher net revenue, more than offset by the sale of Reputation Defender, and an increase in expenses.impairment and other losses due to the impairment of goodwill in the third quarter of 2022.
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All OtherCorporate
The components of operating results for the nine months ended September 30, 20212022 compared to the nine months ended September 30,202030, 2021 were as follows:
Nine Months Ended September 30,
20212020Change
All Other$$$%
(Dollars in Thousands)
Revenue$22,874 $15,616 $7,258 46.5 %
Operating expenses
Cost of services sold11,850 4,971 6,879 NM
Office and general expenses12,357 11,395 962 8.4 %
Depreciation and amortization2,013 2,696 (683)(25.3)%
Impairment and other losses(1)— (1)— %
$26,219 $19,062 $7,157 37.5 %
Operating income$(3,345)$(3,446)$101 (2.9)%

Nine Months Ended September 30,
20212020Change
$%
Net Revenue$22,874 $15,616 $7,258 46.5 %
Billable costs— — — — %
GAAP Revenue22,874 15,616 7,258 46.5 %
Billable costs— — — — %
Staff costs15,643 16,116 (473)(2.9)%
Administrative costs8,647 8,671 (24)(0.3)%
Other, net(100)(8,422)8,322 (98.8)%
Adjusted EBITDA(1,316)(749)(567)(75.7)%
Stock-based compensation16 — 16 — %
Depreciation and amortization2,013 2,696 (683)(25.3)%
Operating Income$(3,345)$(3,446)$101 (2.9)%
Revenue
Revenue for the nine months ended September 30, 2021 was $22.9 million compared to $15.6 million for the nine months ended September 30, 2020, an increase of $7.3 million.
Net Revenue
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The components of the fluctuations in net revenue for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:
Net Revenue - Components of ChangeChange
Nine Months Ended September 30, 2020Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeNine Months Ended September 30, 2021OrganicTotal
(Dollars in Thousands)
All Other$15,616 $476 $1,558 $5,224 $7,258 $22,874 33.5 %46.5 %
Component % change3.0%10.0%33.5%46.5%

The increase in organic net revenue was attributable to higher levels of business at the central innovations group.
The increase in revenue was more than offset by higher expenses resulting in an operating loss in both periods.
Corporate
The components of operating results for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:
Nine Months Ended September 30,
Corporate20212020Change
$%
Staff costs$5,923 $1,344 $4,579 NM
Administrative costs1,733 1,981 (248)(12.5)%
Other, net— — — — %
Adjusted EBITDA(7,656)(3,325)(4,331)NM
Stock-based compensation3,014 — 3,014 NM
Depreciation and amortization2,165 1,466 699 NM
Impairment— — — — %
Other items, net13,152 (49)13,201 (100.2)%
Operating Income$(25,987)$(4,742)$(21,245)NM
Nine Months Ended September 30,

20222021Change
(Dollars in Thousands)
$%
Staff costs$23,554 $10,325 $13,229 NM
Administrative costs11,460 (2,687)14,147 NM
Unbillable and other costs, net— 18 (18)(100.0)%
Adjusted EBITDA(35,014)(7,656)(27,358)NM
Stock-based compensation8,122 3,014 5,108 NM
Depreciation and amortization5,217 2,165 3,052 NM
Other items, net5,284 13,152 (7,868)(59.8)%
Operating Loss$(53,637)$(25,987)$(27,650)NM
Operating expenses increased primarily in connection with the acquisition of MDC, including professional fees associated withMDC. In addition, stock-based compensation expense increased, primarily driven by awards issued to employees in the transaction.

first quarter of 2022.
Liquidity and Capital Resources:
Liquidity
The following table provides summary information about the Company’s liquidity position:
September 30, 2021September 30, 2020September 30, 2022September 30, 2021
(Dollars in Thousands)(Dollars in Thousands)
Net cash provided by operating activitiesNet cash provided by operating activities$20,146 $93,184 Net cash provided by operating activities$73,081 $20,146 
Net cash provided by (used in) investing activities$153,721 $(16,421)
Net cash (used in) provided by investing activitiesNet cash (used in) provided by investing activities(64,284)153,721 
Net cash used in financing activitiesNet cash used in financing activities$(151,860)$(43,700)Net cash used in financing activities(12,312)(151,860)
We continue to monitor the impact on our liquidity from worldwide public health threat, government actionsevents such as the COVID-19 pandemic and evolving strains of COVID-19, as well as the military conflict between Russia and Ukraine, which we do not expect to combat COVID-19 and the impact such developments may have a material adverse effect on our liquidity. If the impactimpacts of either of the pandemic isaforementioned events are beyond our expectation, the Company believes it isexpectations, we believe we are well positioned through the actions implemented at the beginning of the pandemic to successfully work through the effects of COVID-19such impacts for the foreseeable future.
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The Company had cash and cash equivalents of $115.5$165.3 million and $92.5$184.0 million as of September 30, 20212022 and December 31, 2020,2021, respectively. The Company intendsexpects to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months. The Company has historically been able to maintainmaintained and expandexpanded its business using cash generated from operating activities, funds available under its revolving credit agreement, and other initiatives, such as obtaining additional debt and equity financing. AtOn September 30, 2021,2022, the Company had $181.1$245.0 million of borrowings outstanding, $25.0 million of outstanding and $292.8undrawn letters of credit resulting in $230.0 million available under its $500.0 million Combined Credit Agreement (as defined and discussed in Note 8 of the revolving credit agreement.Notes to the Unaudited Condensed Consolidated Financial Statements included herein).
The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition consideration payments, purchases of noncontrolling interests, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company’s 5.625% Notes.Notes (as defined in Note 8 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein) and Combined Credit Agreement. The Company expects to make estimated cash payments in the future to satisfy obligations under the Tax Receivables Agreement (“TRA”) (see Note 14 of the Notes to the Unaudited Condensed Consolidated Financial Statements 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 11 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein) for shares of the Company’s 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 Company’s revolving credit agreement, Combined Credit Agreement,
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will be sufficient to meet the Company’s anticipated cash needs for the next twelve months. The Company’s ability to make scheduled deferred acquisition consideration payments, principal and interest payments, to refinance indebtedness or to fund planned capital expenditures or other obligations will depend on future performance, which is subject to general economic conditions, the competitive environment and other factors, including those described in this formForm 10-Q and in the Company’s other SEC filings.
On March 23, 2022, the board of directors authorized a stock repurchase program (the “Repurchase Program”) under which we may repurchase up to $125 million of shares of our outstanding Class A Common Stock. The Repurchase Program will expire on March 23, 2025.
Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices (including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Exchange Act), in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice. Our board of directors will review the Repurchase Program periodically and may authorize adjustments of its terms.
As of September 30, 2022, there were 4.0 million shares of Class A Common Stock repurchased under the Repurchase Program at an aggregate value, excluding fees, of $28.7 million. These were purchased at an average share price of $7.16 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $96.2 million as of September 30, 2022.
Cash Flows
Operating Activities
Cash flows provided by operating activities for the nine months ended September 30, 2022 were $73.1 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 nine months ended September 30, 2021 were $20.1 million, primarily reflectingdriven by earnings, partially offset by unfavorable working capital requirements.
Investing Activities
Cash flows provided by operatingused in investing activities were $64.3 million for the nine months ended September 30, 2020 were $93.22022, primarily driven by $37.5 million primarily reflecting earningsin acquisitions and favorable working$25.5 million in capital requirements.expenditures.
Investing Activities
During the nine months ended September 30, 2021, cashCash flows provided by investing activities were $153.7 million which wasfor the nine months ended September 30, 2021, primarily driven by the addition of $130.2 million of cash from MDC cash in connection with the combination,acquisition of MDC, and $37.2 million from the sale of Reputation Defender, partially offset by capital expenditures of $13.7 million.
Financing Activities
During the nine months ended September 30, 2020,2022, cash flows used in investingfinancing activities were $16.4$12.3 million, which primarily consisted of $9.0driven by $134.5 million in net borrowings under the Combined Credit Agreement, more than offset primarily by $61.1 million of capital expendituresdeferred acquisition consideration payments, $38.5 million of distributions to noncontrolling interests, $28.7 million in stock repurchases under the Repurchase Program, and $5.5$15.0 million for acquisitions.
Financing Activitiesrelated to shares acquired and cancelled in connection with the vesting of stock awards.
During the nine months ended September 30, 2021, cash flows used in financing activities were $151.9 million, which primarily consisted of $884.4 million for the in repurchase of the Company’s 7.50% Senior Notes due 2024, $127.1 million in net repaymentspayments under the Company’s previous revolving credit agreement, $19.2 million in distributions to minority interest holders, as well asand distributions of $204.9 million to Stagwell Media, offset by receipt of $1.1 billion from the issuance of the 5.625% Notes.
During the nine months ended September 30, 2020, cash flows used in financing activities was $43.7 million, primarily driven by $58.3 million in net borrowings under the revolving credit agreement, more than offset by distributions of $98.6 million to Stagwell Media.
Total Debt
Debt, net of debt issuance costs, as of September 30, 20212022 was $1,265.7$1,329.1 million as compared to $198.0$1,191.6 million outstanding at December 31, 2020. The increase of $1,067.7 million in debt was primarily a result of the Company’s issuance of the 5.625% Notes.2021. See Note 98 to the Unaudited Condensed Consolidated Financial Statements included herein for information regarding the Company’s 5.625% Notes, and the Combined Credit Agreement, which provides for a $500.0 million senior secured revolving credit agreement.facility with a five-year maturity.
The Company is currently in compliance with all of the terms and conditions of the Combined Credit Agreement, and management believes, based on its current financial projections, that the Company will be in compliance with its covenants over the next twelve months.
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If the Company loses all or a substantial portion of its lines of credit under its revolving credit agreement,the Combined Credit Agreement, or if the Company uses the maximum available amount under the agreement, it will be required to seek other sources of liquidity. If the Company were unable to find these sources of liquidity, for example through an equity offering or access to the capital markets, the Company’s ability to fund its working capital needs and any contingent obligations with respect to acquisitions and redeemable noncontrolling interests would be adversely affected.
On April 28, 2022, the Company amended the Combined Credit Agreement. Among other things, this amendment replaced any references to LIBOR with references to SOFR. Borrowings pursuant to the Combined Credit Agreement, as amended, bear interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest in effect on such day, (b) the federal funds effective rate plus 0.50% and (c) SOFR plus 1% in each case, plus the applicable margin (calculated based on the Company’s Total Leverage Ratio, as defined in the Combined Credit Agreement) at that time. Additionally, the Combined Credit Agreement was amended to remove certain pre-commencement notice provisions for certain acquisitions under $50 million in the aggregate, to increase the amount permitted for certain investments allowed under the Combined Credit Agreement, and, subject to certain conditions, to allow for the repurchase of Stagwell Inc. stock in an amount not to exceed $100 million in any fiscal year. All other substantive terms of the Combined Credit Agreement remain unchanged.
Pursuant to the revolving credit agreement,Combined Credit Agreement, the Company must comply with its total leverage ratio covenant, as such term is specificallymaintain a Total Leverage Ratio (as defined in the agreement.Combined Credit Agreement) below a threshold established in the Combined Credit Agreement. For the period ended September 30, 2021,2022, the Company’s calculation of each of these covenants,this ratio, and the specific requirementsmaximum permitted under the revolving credit agreement,Combined Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:
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September 30, 20212022
Total Leverage Ratio3.08 2.83
Maximum per covenant4.75 4.50
These ratios and measures are not based on GAAP and are not presented as alternative measures of operating performance or liquidity. Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one-time charges, and other items, as defined in the Combined Credit Agreement. They are presented here to demonstrate compliance with the covenants in the Combined Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.
Contractual Obligations and Other Commercial CommitmentsMaterial Cash Requirements
The Company’s agenciesAgencies 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 agencies purchase media for clients and act as an agent for a disclosed principal. These commitments are included in Accounts payable and Accruals and other liabilities when the media services are delivered by the media providers. Stagwell takes precautions against default on payment for these services and has historically had a very low incidence of default. Stagwell is still exposed to the risk of significant uncollectible receivables from our clients. The risk of a material loss could significantly increase in periods of severe economic downturn.
Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments. See Note 76 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein 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 109 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for additional information regarding noncontrolling interests and redeemable noncontrolling interests.
The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the revolving credit agreement (andCombined 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.

Critical Accounting Policies
See Note 2the Company’s 2021 Form 10-K for information regarding the Company’s critical accounting policies.
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Website Access to Company Reports and Information
Stagwell Inc. is the successor SEC registrant to MDC Partners Inc. Stagwell Inc.’s Internet website address is www.stagwellglobal.com. The Company’s Annual Reports on Form 10-K, quarterly reportsQuarterly Reports on Form 10-Q and current reportsCurrent Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act, of 1934, as amended (the “Exchange Act” ), will be made available free of charge through the Company’s website as soon as reasonably practical after those reports are electronically filed with, or furnished to, the SEC. The Company announces material information foundto the public through a variety of means, including filings with the SEC, press releases, public conference calls, and its website. The Company uses these channels, as well as social media, including its Twitter account (@stagwell) and its LinkedIn page (https://www.linkedin.com/company/stagwell/), to communicate with investors and the public about the Company, its products and services, and other matters. Therefore, investors, the media, and others interested in the Company are encouraged to review the information the Company makes public in these locations, as such information could be deemed to be material information. Information on or otherwise accessiblethat can be accessed through the Company’s websitewebsites or these social media channels is not incorporated into, and does not form a part of this quarterly report on Form 10-Q. From time to time,10-Q, and the Company may use itsinclusion of the Company’s website as a channel of distribution of material company information.

addresses and social media channels are inactive textual references only.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
TheIn the normal course of business, the Company is exposed to market risk related to interest rates, foreign currencies and impairment risk.
Debt Instruments: At September 30, 2021,2022, the Company’s debt obligations consisted of amounts outstanding under its revolving credit agreementCombined Credit Agreement and the 5.625% Notes. The 5.625% Notes bear a fixed 5.625% interest rate. The revolving credit agreement bears interest at variable rates based upon the U.S. bank prime rate, U.S. base rate, LIBOR or its replacement SOFR,Secured Overnight Financing Rate (“SOFR”), EURIBOR, and SONIA depending on the duration of the borrowing product. The Company’s ability to obtain the required bank syndication commitments depends in part on conditions in the bank market at the time of syndication. Given that there were $181.1 million in borrowings under
On April 28, 2022, the revolving credit agreement, as of September 30, 2021,Company amended the Combined Credit Agreement. This amendment replaced references to LIBOR with references to SOFR. With regard to our variable rate debt, a 1.0%10% increase or decrease in the weighted average interest rate, which was 2.45% at September 30, 2021,rates would have annot be material to our interest impact of approximately $0.4 million.
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expense or cash flows.
Foreign Exchange: While the Company primarily conducts business in markets that use the U.S. dollar, the Canadian dollar, the Euro and the British Pound, its non-U.S. operations transact business in numerous different currencies. The Company’s results of operations are subject to risk from the translation to the U.S. dollar of the revenue and expenses of its non-U.S. operations. The effects of currency exchange rate fluctuations on the translation of the Company’s results of operations are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 2.2 of the Company’s audited consolidated financial statements included in the 2021 Form 10-K. For the most part, revenues and expenses incurred related to the non-U.S. operations are denominated in their functional currency. This minimizesreduces the impact that fluctuations in exchange rates will have on profit margins. Translation of intercompany debt, which is not intended to be repaid, is included in cumulative translation adjustments. Translation of current intercompany balances are included in net income (loss). The Company generally does not enter into foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.
Impairment Risk: AtFor the nine months ended September 30, 2021,2022, the Company did not have anyrecognized an impairment charge of goodwill.$23,139 to write-down the carrying value of goodwill in excess of the fair value. The Company reviews goodwill for impairment annually as of October 1st of each year or more frequently if indicators of potential impairment exist.
The Company’s annual goodwill test as of October 1, 2022 is in process. To the extent that (i) there is underperformance in one or more reporting units (ii) a potential recession further disrupts the economic environment impacting the performance or (iii) interest rates continue to rise in response to persistent inflation, the fair value of one or more of the reporting units could fall below their carrying value, resulting in a goodwill impairment charge.
In addition, in the nine months ended September 30, 2022, the Company recorded an impairment charge of $2,014 primarily to reduce the carrying value of one of its right-of-use lease assets and related leasehold improvements.
See the SignificantCritical Accounting PoliciesEstimates section in Note 2“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s 2021 Form 10-K for information related to impairment testing and the risk of potential impairment charges in future periods.
Item 4.    Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be included in our SEC reports is recorded, processed, summarized and reported within the applicable time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer
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(“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 disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. However, our disclosure controls and procedures are designed to provide reasonable assurances of achieving our control objectives.

We conducted an evaluation, under the supervision and with the participation of our management, including our CEO, CFO and management Disclosure Committee, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to RuleRules 13a-15(e) and 15(d)-15(e)15d-15(e) of the Exchange Act. Based on that evaluation, and in light of the material weaknesses identified in theour internal controlscontrol over financial reporting of Stagwell Marketing Group LLC (“SMG”),as disclosed in our Form 10-K for the fiscal year ended December 31, 2021, our CEO and CFO concluded that, as of September 30, 2021,2022, our disclosure controls and procedures are ineffective to ensure that decisions can be made timely with respect to required disclosures, as well as ensuring that the recording, processing, summarization and reporting of information required to be included in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 is appropriate.were not effective at a reasonable assurance level.

Material WeaknessesChanges in Internal Control Over Financial Reporting
In connection with the preparation of SMG's consolidated financial statements as of December 31, 2020, 2019 and 2018 and for the years then ended, SMGThe Company identified material weaknesses in its internal controls over financial reporting including not designing or maintaining an effective control environment that meets SMG’s accountingas of December 31, 2021 as described in its 2021 Form 10-K. The Company has finalized its remediation plan and has executed the following remediation activities through September 30, 2022:
Hired a Senior Vice President of Sarbanes-Oxley Act (“SOX”)reporting requirements. Specifically, SMG did not maintain a sufficient complement of personnel with an appropriate degree of internal controls and accounting knowledge, experience and training commensurate with its accounting and reporting requirements. This material weakness contributeddirectly to the following additional material weaknesses:

Chief Financial Officer with the appropriate level of knowledge and experience to lead the development and execution of the remediation plan.
SMG did not establish effective controls in responseEstablished a SOX Steering Committee, that monitors and advises with respect to the risks of material misstatement, including designing and maintaining formal accounting policies, procedures and controls over journal entries, significant accounts and disclosures, in order to achieve complete and accurate financial accounting, reporting and disclosures;remediation plan.
SMG did not design and maintain effective controls over information technology (“IT”) general controlsEnhanced communications with the Audit Committee for information systems that are relevantincreased oversight. The Company also formally reports quarterly to the preparation of its financial statements. Specifically, SMG did not design and maintain: (i) program change management controls forAudit Committee regarding progress against the financial systems to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) appropriate user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs and data to appropriate SMG personnel; (iii) computer operations controls to ensure critical data interfaces between systems are appropriately identified and monitored, and data backups are authorized and restorations monitored; and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements; andremediation plan.
SMG has not established a sufficient riskAssessed the state of the entire system of internal control, including information technology systems and controls, at the consolidated and entity levels. The results of this assessment processhave allowed management to identify risksthe necessary remediation activities to address the outstanding material weaknesses.
Appointed third-party consultants and additional staff to assist in the design and implementation of material misstatement duebusiness process and information technology control activities, enhancement of existing business process and information technology control activities, and assessment of the size and structure of its staff.
Conducted a detailed qualitative, quantitative, and fraud risk assessment.
Conducted multiple SOX trainings to fraud and/or errorcontrol owners throughout the Company.
The Company is also undergoing a finance transformation, which involves a phased deployment of new enterprise resource planning and implement controls against such risks.
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Remediation Efforts to Address Material Weakness
We are evaluating the weaknesseshuman resource information systems and intend to evaluate what remedial actions are necessary to enhance and improve our internal controls over financial reporting (“ICFR”) and therefore have not yet remediated the material weakness described above. Our remediation effortsa shared service platform. The Company will continue to be evaluatedexecuting the above remediation activities through 2022. We believe the controls that will be putend of the first quarter of 2023 with the goal of having the system of internal control designed and in place will eliminateoperation from March 31, 2023. However, the material weaknesses and solidifywill not be considered remediated until the effectivenesssystem of our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting
has operated for a sufficient period of time and results of testing by management conclude the internal controls are operating effectively. The business combination of MDC with SMG, which was completed on August 2, 2021, had a material impactCompany will provide an update on the financial position, resultsprogress of operations and cash flows ofits remediation plan throughout the combined company from the completion date through September 30, 2021. The business combination also resulted in material changes in the combined company’s internal controls over financial reporting. In addition to the remediation efforts described above, the Company is in the process of designing and integrating policies, processes, operations, technology and other components of internal controls over financial reporting of the combined company. Management will monitor the implementation of new controls and test the operating effectiveness when instances are available in future periods.

We have given consideration to the impact of COVID-19 and have concluded that there have been no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

fiscal year.
PART II. OTHER INFORMATION
 
Item 1.    Legal Proceedings
In the ordinary course of business, we are involved in various legal proceedings. We do not currently expect that these proceedings will have a material adverse effect on our results of operations, cash flows or financial position.

Item 1A.    Risk Factors
There have been no material changes that we are aware of fromto the risk factors set forth underin Part I, Item 1A “Risk Factors” in Exhibit 99.2 toof our Current Report on2021 Form 8-K filed with the Securities and Exchange Commission on August 10, 2021.10-K. These risks could materially and adversely affect our business, results of operations, financial condition, cash flows, projected results and future prospects. These risks are not exclusive and additional risks to which we are subject include the factors listed under “Note About Forward-Looking Statements” and the risks described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.
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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
In the three months ended September 30, 2021,2022, the Company issued nogranted 327,974 shares of Class A sharesCommon Stock in transactions exempt from registration under Section 4(a)(2) of the Securities ActAct. Of these, 27,974 shares of 1933,Class A Common Stock were granted to employees as amended.

inducement for employment, and 300,000 were issued as payments in lieu of cash for the Company’s obligation to make deferred payments as part of the purchase price for a prior acquisition and therefore did not result in any proceeds to the Company. The Company received no cash proceeds and no commissions were paid to any person in connection with the issuance of the shares.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
ForOn March 23, 2022, the three months ended September 30, 2021,board of directors authorized a stock repurchase program (the “Repurchase Program”) under which we may repurchase up to $125,000,000 of shares of our outstanding Class A Common Stock. The Repurchase Program will expire on March 23, 2025. Under the CompanyRepurchase Program, share repurchases may be made noat our discretion from time to time in open market purchasestransactions at prevailing market prices (including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Exchange Act), in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice. Our board of directors will review the Repurchase Program periodically and may authorize adjustments of its Class A, B, or C shares.terms. Pursuant to its Combined Credit Agreement and the indenture governing the 5.625% Notes, the Company is currently limited as to the dollar amountvalue of shares it may repurchase in the open market.
For the three months ended September 30, 2021, the Company’s employees surrendered Class A shares in connection with the required tax withholding resulting from the vesting of restricted stock. The Company paid these withholding taxes on behalf of the related employees. These Class A shares were subsequently retired and no longer remain outstanding as of September 30, 2021. The following table details thoseour monthly shares withheldrepurchased during the third quarter of 2021:2022:
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramMaximum Number of Shares That May Yet Be Purchased Under the Program
7/1/2021 - 7/31/2021— $— — — 
8/1/2021 - 8/31/2021— — — — 
9/1/2021 - 9/30/2021(12,084)8.39 — — 
Total(12,084)$8.39   
Period
Total Number of Shares Purchased (1)
Average Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramApproximate Dollar Value of Shares That May Yet Be Purchased Under the Program
7/1/2022 - 7/31/20226,525 $6.93 $— $110,119,330 
8/1/2022 - 8/31/20221,160,025 6.78 1,160,025 102,260,248 
9/1/2022 - 9/30/2022864,741 6.97 864,536 96,249,317 
Total2,031,291 $6.89 $2,024,561 $96,249,317 

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(1) Includes 6,730 shares repurchased to settle employee tax withholding obligations related to the vesting of restricted stock awards.

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Item 3.    Defaults Upon Senior Securities
None.

Item 4.    Mine Safety Disclosures
Not applicable.
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Item 5.    Other Information
NoneOn November 2, 2022, our board of directors approved a new form of indemnification agreement (the “Indemnification Agreement”) to be entered into by the Company with its directors, executive officers and certain other key employees (each, an “Indemnitee”). The Indemnification Agreement replaces the Company’s existing form of indemnification agreement and was primarily adopted to update the governing law from the laws of the Province of Ontario and the federal laws of Canada applicable therein to the laws of the State of Delaware. As is the case with the Company’s previous form of indemnification agreement, the Indemnification Agreement requires the Company to indemnify the Indemnitee to the fullest extent permitted by law.
The foregoing summary of the Indemnification Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Indemnification Agreement, the form of which is filed as Exhibit 10.2 hereto and is incorporated herein by reference.

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Item 6.    Exhibits
The exhibits required by this item are listed on the Exhibit Index.
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EXHIBIT INDEX
 
Exhibit No.Description
Transaction Agreement, dated as of December 21, 2020, by and among Stagwell Media LP and the Company (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on December 22, 2020).
Amendment No. 1 to the Transaction Agreement, dated as of June 4, 2021 (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on June 7, 2021).
Amendment No. 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. (incorporated, as amended(incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K10-K filed on August 2, 2021)March 17, 2022).
Certificate of Amendment to the Amended and Restated Certificate of Designation of Series 6 Convertible Preferred Stock of Stagwell Inc., dated September 23, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on September 23, 2021).
Certificate of Amendment to the Certificate of Designation of Series 8 Convertible Preferred Stock of Stagwell Inc., dated September 23, 2021 (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on September 23, 2021).
Amended and Restated Bylaws of Stagwell Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on August 2, 2021).
Indenture, dated as of August 20, 2021, among Midas OpCo Holdings LLC, the Note Guarantors party thereto,Stagwell Inc. Second Amended and The Bank of New York Mellon Trust Company, N.A., as TrusteeRestated 2016 Stock Incentive Plan (incorporated by reference to Exhibit 4.14.3 to the Company’s Form 8-KS-8 filed on August 20, 2021)June 14, 2022).
Form of 5.625% Senior Note due 2029 (included in Exhibit 4.1).
Goldman Letter Agreement, dated as of July 8, 2021, by and among MDC Partners Inc., Broad Street Principal Investments, L.L.C., Stonebridge 2017, L.P. and Stonebridge 2017 Offshore, L.P. (incorporated by reference to Exhibit 2.2 to the Company’s Form 8-K filed on July 9, 2021).
Stagwell Letter Agreement, dated as of July 8, 2021, by and between MDC Partners Inc. and Stagwell Agency Holdings LLC (incorporated by reference to Exhibit 2.3 to the Company’s Form 8-K filed on July 9, 2021).
Registration Rights Agreement, dated August 2, 2021, by and among the Company and the Stagwell Parties (as defined therein) (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 2, 2021).
Tax Receivable Agreement, dated August 2, 2021, by and among the Company, Midas OpCo Holdings LLC and Stagwell Media LP (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on August 2, 2021).
Information Rights Letter Agreement, dated August 2, 2021, by and among the Company, Stagwell Media LP, Stagwell Group LLC and Stagwell Agency Holdings LLC (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on August 2, 2021).
Amended and Restated Credit Agreement, dated August 2, 2021, by and among Midas OpCo Holdings LLC, Maxxcom LLC, Stagwell Marketing Group LLC, and the other Borrowers party thereto, and JP Morgan Chase Bank, as Administrative Agent, and the other Agents and Lenders party thereto (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on August 2, 2021).
Amendment to Securities Purchase Agreement, dated August 4, 2021, by and between Stagwell Inc. and Broad Street Principal Investments, L.L.C. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 4, 2021).
OpCo Letter Agreement, dated August 4, 2021, by and among Stagwell Inc., Broad Street Principal Investments, L.L.C., Stonebridge 2017, L.P. and Stonebridge 2017 Offshore, L.P. (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on August 4, 2021).
Amendment to Securities Purchase Agreement, dated August 4, 2021, by and between Stagwell Inc. and Stagwell Agency Holdings LLC (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on August 4, 2021).
Employment Agreement Amendment, dated as of September 8, 2021, by and between the Company and Mark Penn (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on September 8, 2021).
Employment Agreement Amendment, dated as of September 8, 2021, by and between the Company and Frank Lanuto (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on September 8, 2021).
Employment Agreement, dated as of September 12, 2021, by and between the Company and Jay Leveton (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on September 16, 2021).
Employment Agreement, dated as of September 12, 2021, by and between the Company and Ryan Greene (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on September 16, 2021).
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Form of Financial Performance-Based Restricted Stock GrantIndemnification Agreement (2021). *
Separation Agreementwith Directors and Mutual General Release, made and entered into as of July 30, 2021, by and between David Ross and Midas OpCo Holdings LLC (as successor-in-interest to MDC Partners Inc.). Officers.*
Certification by Chief Executive Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification by Chief Financial Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification by Chief Executive Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
Certification by Chief Financial Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101Interactive Data File, for the period ended September 30, 2021.2022. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.*
104Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document and are included in Exhibit 101.*
* Filed electronically herewith.
** Furnished herewith
† Indicates management contract or compensatory plan.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
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STAGWELL INC.
 
/s/ Mark Penn
Mark Penn
Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
November 9, 20217, 2022
/s/ Frank Lanuto
Frank Lanuto
Chief Financial Officer (Principal Financial Officer)
November 9, 20217, 2022
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