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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 June 30, 20222023
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
Logo.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
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 August 4, 20222023, was 132,132,146116,451,088 shares of Class A Common Stock 3,946 shares of Class B Common Stock, and 164,426,878151,648,740 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 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 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 Stagwell Inc. (“the 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 presentedReferences in this Quarterly
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Report on Form 10-Q (this “Form 10-Q”10Q”) 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 Form 10-Q to “Stagwell,” the “Company,” “we,” “us,” and “our” and the “Company” refer (i) with respect to events occurring or periods ending before August 2, 2021, to Stagwell Marketing 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, unless the context otherwise requires or otherwise is expressly stated, 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.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 statements about the Company’s beliefs and expectations, future 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.
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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;
the continued impact of the coronavirus pandemic (“COVID-19”), and evolving strains of COVID-19 on the economy and demand for the Company’s services, which may precipitate or exacerbate other risks and uncertainties;
inflation and actions taken by central banks to counter inflation;
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 its cost saving initiatives;
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 that complement and expand the Company’s business capabilities;
the Company’s ability to develop products incorporating new technologies, including augmented reality, artificial intelligence, and virtual reality, and realize benefits from such products;
an inability to realize expected benefits of the combination of the Company’s business with the business of MDC;MDC Partners Inc. (the “Transactions”) and other completed, pending or contemplated acquisitions;
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 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 its 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’sunremediated 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.
Investors should carefully consider these risk factors, other risk factors described herein,risks and the additional risk factors outlineddescribed in more detail in our Annual Report on Form 10-K for the year ended December 31, 20212022 (our “2021“2022 Form 10-K”), filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2022,6, 2023, and accessible on the SEC’s website at www.sec.gov, under the caption “Risk Factors,” and 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
(amounts in thousands)thousands, except per share amounts)
Three Months
Ended June 30,
Six Months
Ended June 30,
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021 2023202220232022
RevenueRevenue$672,913 $209,560 $1,315,816 $390,802 Revenue$632,265 $672,913 $1,254,709 $1,315,816 
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services424,661 122,074 836,631 234,073 Cost of services402,431 424,661 816,329 836,631 
Office and general expensesOffice and general expenses165,423 52,674 309,935 104,952 Office and general expenses162,522 165,423 321,358 309,935 
Depreciation and amortizationDepreciation and amortization32,231 10,381 63,435 21,331 Depreciation and amortization35,488 32,231 68,965 63,435 
Impairment and other lossesImpairment and other losses2,266 — 2,823 — Impairment and other losses10,562 2,266 10,562 2,823 
624,581 185,129 1,212,824 360,356 611,003 624,581 1,217,214 1,212,824 
Operating IncomeOperating Income48,332 24,431 102,992 30,446 Operating Income21,262 48,332 37,495 102,992 
Other income (expenses):Other income (expenses):Other income (expenses):
Interest expense, netInterest expense, net(18,151)(1,935)(36,880)(3,286)Interest expense, net(23,680)(18,151)(41,869)(36,880)
Foreign exchange, netForeign exchange, net70 (385)(236)(1,062)Foreign exchange, net(1,478)70 (2,148)(236)
Other, netOther, net(121)(101)35 1,184 Other, net(416)(121)(196)35 
(18,202)(2,421)(37,081)(3,164)(25,574)(18,202)(44,213)(37,081)
Income before income taxes and equity in earnings of non-consolidated affiliates30,130 22,010 65,911 27,282 
Income (loss) before income taxes and equity in earnings of non-consolidated affiliatesIncome (loss) before income taxes and equity in earnings of non-consolidated affiliates(4,312)30,130 (6,718)65,911 
Income tax expenseIncome tax expense5,421 3,348 8,610 4,021 Income tax expense5,717 5,421 8,101 8,610 
Income before equity in earnings of non-consolidated affiliates24,709 18,662 57,301 23,261 
Income (loss) before equity in earnings of non-consolidated affiliatesIncome (loss) before equity in earnings of non-consolidated affiliates(10,029)24,709 (14,819)57,301 
Equity in income (loss) of non-consolidated affiliatesEquity in income (loss) of non-consolidated affiliates(190)(3)840 Equity in income (loss) of non-consolidated affiliates(216)(190)(443)840 
Net income24,519 18,659 58,141 23,262 
Net income attributable to noncontrolling and redeemable noncontrolling interests(14,056)(1,314)(35,003)(1,552)
Net income attributable to Stagwell Inc. common shareholders$10,463 $17,345 $23,138 $21,710 
Income Per Common Share:
Net income (loss)Net income (loss)(10,245)24,519 (15,262)58,141 
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interestsNet (income) loss attributable to noncontrolling and redeemable noncontrolling interests5,552 (14,056)11,012 (35,003)
Net income (loss) attributable to Stagwell Inc. common shareholdersNet income (loss) attributable to Stagwell Inc. common shareholders$(4,693)$10,463 $(4,250)$23,138 
Earnings (Loss) Per Common Share:Earnings (Loss) Per Common Share:
BasicBasic   Basic$(0.04)$0.08 $(0.04)$0.19 
Net income attributable to Stagwell Inc. common shareholders$0.08 N/A$0.19 N/A
DilutedDiluted Diluted$(0.04)$0.08 $(0.04)$0.18 
Net income attributable to Stagwell Inc. common shareholders$0.08 N/A$0.18 N/A
Weighted Average Number of Common Shares Outstanding:Weighted Average Number of Common Shares Outstanding:  Weighted Average Number of Common Shares Outstanding:  
BasicBasic126,425 N/A124,367 N/A Basic115,400 126,425 120,272 124,367 
DilutedDiluted296,414 N/A298,843 N/A Diluted115,400 296,414 120,272 298,843 
See notesNotes to the Unaudited CondensedConsolidated Financial Statements.
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STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands)
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
COMPREHENSIVE INCOME (LOSS) 
Net income (loss)$(10,245)$24,519 $(15,262)$58,141 
Other comprehensive income (loss) - Foreign currency translation adjustment2,938 (23,826)7,363 (29,173)
Comprehensive income (loss) for the period(7,307)693 (7,899)28,968 
Comprehensive (income) loss attributable to the noncontrolling and redeemable noncontrolling interests2,623 (14,056)29,346 (35,003)
Comprehensive income (loss) attributable to Stagwell Inc. common shareholders$(4,684)$(13,363)$21,447 $(6,035)
See Notes to the Unaudited Consolidated Financial Statements.
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STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)BALANCE SHEETS
(amounts in thousands)
 Three Months
Ended June 30,
Six Months
Ended June 30,
 2022202120222021
COMPREHENSIVE INCOME (LOSS) 
Net income$24,519 $18,659 $58,141 $23,262 
Other comprehensive loss 
Foreign currency translation adjustment(23,826)(487)(29,173)(350)
Other comprehensive loss(23,826)(487)(29,173)(350)
Comprehensive income for the period693 18,172 28,968 22,912 
Comprehensive income attributable to the noncontrolling and redeemable noncontrolling interests(14,056)(1,314)(35,003)(1,552)
Comprehensive income (loss) attributable to Stagwell Inc. common shareholders$(13,363)$16,858 $(6,035)$21,360 
 June 30,
2023
December 31,
2022
 
ASSETS  
Current Assets  
Cash and cash equivalents$105,284 $220,589 
Accounts receivable, net646,310 645,846 
Expenditures billable to clients106,871 93,077 
Other current assets97,083 71,443 
Total Current Assets955,548 1,030,955 
Fixed assets, net86,929 98,878 
Right-of-use lease assets - operating leases242,733 273,567 
Goodwill1,578,832 1,566,956 
Other intangible assets, net868,928 907,529 
Other assets120,064 115,447 
Total Assets$3,853,034 $3,993,332 
LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable$338,613 $357,253 
Accrued media162,219 240,506 
Accruals and other liabilities205,751 248,477 
Advance billings306,470 337,034 
Current portion of lease liabilities - operating leases76,494 76,349 
Current portion of deferred acquisition consideration96,781 90,183 
Total Current Liabilities1,186,328 1,349,802 
Long-term debt1,487,430 1,184,707 
Long-term portion of deferred acquisition consideration17,688 71,140 
Long-term lease liabilities - operating leases263,888 294,049 
Deferred tax liabilities, net46,783 40,109 
Other liabilities60,598 69,780 
Total Liabilities3,062,715 3,009,587 
Redeemable Noncontrolling Interests28,129 39,111 
Commitments, Contingencies and Guarantees (Note 9)
Shareholders' Equity
Common shares - Class A & B116 132 
Common shares - Class C
Paid-in capital309,521 491,899 
Retained earnings27,496 29,445 
Accumulated other comprehensive loss(13,244)(38,941)
Stagwell Inc. Shareholders' Equity323,891 482,537 
Noncontrolling interests438,299 462,097 
Total Shareholders' Equity762,190 944,634 
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity$3,853,034 $3,993,332 
See notesNotes to the Unaudited Condensed Consolidated Financial Statements.
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STAGWELL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
 June 30,
2022
December 31, 2021
 (Unaudited)
ASSETS  
Current Assets  
Cash and cash equivalents$93,402 $184,009 
Accounts receivable, net782,927 696,937 
Expenditures billable to clients43,583 63,065 
Other current assets73,251 61,830 
Total Current Assets993,163 1,005,841 
Fixed assets, net123,662 118,603 
Right-of-use lease assets - operating leases299,553 311,654 
Goodwill1,668,892 1,652,723 
Other intangible assets, net904,812 937,695 
Other assets34,936 29,064 
Total Assets$4,025,018 $4,055,580 
LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable$254,650 $271,769 
Accrued media195,939 237,794 
Accruals and other liabilities222,699 272,533 
Advance billings316,654 361,885 
Current portion of lease liabilities - operating leases68,785 72,255 
Current portion of deferred acquisition consideration76,661 77,946 
Total Current Liabilities1,135,388 1,294,182 
Long-term debt1,381,560 1,191,601 
Long-term portion of deferred acquisition consideration119,853 144,423 
Long-term lease liabilities - operating leases327,677 342,730 
Deferred tax liabilities, net80,311 103,093 
Other liabilities73,148 57,147 
Total Liabilities3,117,937 3,133,176 
Redeemable Noncontrolling Interests49,697 43,364 
Commitments, Contingencies and Guarantees (Note 10)00
Shareholders' Equity:
Common shares - Class A & B135 118 
Common shares - Class C
Paid-in capital368,345 382,893 
Retained earnings (loss)10,268 (6,982)
Accumulated other comprehensive loss(34,451)(5,278)
Stagwell Inc. Shareholders' Equity344,299 370,753 
Noncontrolling interests513,085 508,287 
Total Shareholders' Equity857,384 879,040 
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity$4,025,018 $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
(amounts in thousands)


Six Months Ended June 30, Six Months Ended June 30,
2022202120232022
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net income$58,141 $23,261 
Adjustments to reconcile net income to cash (used in) provided by operating activities:
Net income (loss)Net income (loss)$(15,262)$58,141 
Adjustments to reconcile net income to cash used in operating activities:Adjustments to reconcile net income to cash used in operating activities:
Stock-based compensationStock-based compensation21,152 — Stock-based compensation22,550 21,152 
Depreciation and amortizationDepreciation and amortization63,435 21,331 Depreciation and amortization68,965 63,435 
Impairment and other lossesImpairment and other losses2,823 — Impairment and other losses10,562 2,823 
Provision for bad debt expense1,641 381 
Deferred income taxesDeferred income taxes(1,325)138 Deferred income taxes3,884 (1,325)
Adjustment to deferred acquisition considerationAdjustment to deferred acquisition consideration15,390 2,359 Adjustment to deferred acquisition consideration4,480 15,390 
Transaction costs contributed by Stagwell Media LP— 5,042 
Other(6,059)952 
Other, netOther, net(3,328)(4,418)
Changes in working capital:Changes in working capital:Changes in working capital:
Accounts receivableAccounts receivable(78,342)28,960 Accounts receivable4,255 (78,342)
Expenditures billable to clientsExpenditures billable to clients20,386 (4,752)Expenditures billable to clients(13,180)20,386 
Other assetsOther assets(8,555)(676)Other assets4,117 (8,555)
Accounts payableAccounts payable(33,228)(40,344)Accounts payable(25,972)(33,228)
Accrued expenses and other liabilitiesAccrued expenses and other liabilities(109,232)(1,037)Accrued expenses and other liabilities(169,210)(109,232)
Advance billingsAdvance billings(46,391)3,603 Advance billings(32,795)(46,391)
Deferred acquisition related paymentsDeferred acquisition related payments(7,107)— Deferred acquisition related payments(3,212)(7,107)
Net cash (used in) provided by operating activities(107,271)39,218 
Net cash used in operating activitiesNet cash used in operating activities(144,146)(107,271)
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Capital expendituresCapital expenditures(14,467)(7,288)Capital expenditures(7,953)(12,539)
Current period acquisitions, net of cash acquired(38,326)— 
Acquisitions, net of cash acquiredAcquisitions, net of cash acquired(4,965)(38,326)
Capitalized softwareCapitalized software(10,356)(1,928)
OtherOther(2,144)— Other(6,844)(2,144)
Net cash used in investing activitiesNet cash used in investing activities(54,937)(7,288)Net cash used in investing activities(30,118)(54,937)
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(473,000)(25,496)Repayment of borrowings under revolving credit facility(800,500)(473,000)
Proceeds from borrowings under revolving credit facilityProceeds from borrowings under revolving credit facility660,500 10,000 Proceeds from borrowings under revolving credit facility1,102,500 660,500 
Shares acquired and cancelled(14,926)— 
Distributions to noncontrolling interests and other(36,498)— 
Shares repurchased and cancelledShares repurchased and cancelled(199,363)(29,765)
Distributions to noncontrolling interestsDistributions to noncontrolling interests(15,408)(36,498)
Payment of deferred considerationPayment of deferred consideration(52,431)— Payment of deferred consideration(28,558)(52,431)
Purchase of noncontrolling interestPurchase of noncontrolling interest— (3,600)
Debt issuance costsDebt issuance costs(150)— 
Purchase of noncontrolling interest(3,600)— 
Distributions— (37,214)
Repurchase of Common Stock(14,839)— 
Net cash provided by (used in) financing activities65,206 (52,710)
Net cash provided by financing activitiesNet cash provided by financing activities58,521 65,206 
Effect of exchange rate changes on cash and cash equivalentsEffect of exchange rate changes on cash and cash equivalents6,395 1,773 Effect of exchange rate changes on cash and cash equivalents438 6,395 
Net decrease in cash and cash equivalentsNet decrease in cash and cash equivalents(90,607)(19,007)Net decrease in cash and cash equivalents(115,305)(90,607)
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period184,009 92,457 Cash and cash equivalents at beginning of period220,589 184,009 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$93,402 $73,450 Cash and cash equivalents at end of period$105,284 $93,402 
Supplemental Cash Flow Information:Supplemental Cash Flow Information:
Cash income taxes paidCash income taxes paid$23,154 $15,871 
Cash interest paidCash interest paid36,475 30,798 
Non-cash investing and financing activities:Non-cash investing and financing activities:
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STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
(amounts in thousands)

 Six Months Ended June 30,
20222021
Supplemental disclosures:
Cash income taxes paid$15,871 $4,649 
Cash interest paid30,798 3,047 
Non-cash investing and financing activities:
Reduction of deferred tax liability related to the exchange of Paired Units25,159 — 
Establishment of Tax Receivables Agreement liability21,385 — 
Non-cash contributions— 12,122 
Non-cash distributions to Stagwell Media LP— 13,000 
Non-cash payment of deferred acquisition consideration— 7,080 
 Six Months Ended June 30,
20232022
Establishment of Tax Receivables Agreement liability— 21,385 
Non-cash payments for deferred acquisition consideration20,119 — 
Reduction of Deferred tax liability related to exchange of Paired Units— 25,159 

See notesNotes to the Unaudited Condensed Consolidated Financial Statements.
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STAGWELL INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(amounts in thousands)




Three Months Ended June 30, 2023
 Common Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
SharesAmountSharesAmount
Balance at March 31, 2023129,796 $130 160,909 $2 $469,891 $30,324 $(13,253)$487,094 $431,839 $918,933 
Net loss— — — — — (4,693)— (4,693)(5,552)(10,245)
Other comprehensive income— — — — — — 2,929 2,938 
Total other comprehensive income (loss)(4,693)(4,684)(2,623)(7,307)
Distributions to noncontrolling interests— — — — — — — — (2,984)(2,984)
Changes in redemption value of RNCI— — — — — 1,865 — 1,865 — 1,865 
Restricted awards granted or vested1,139 — — (1)— — — — — 
Shares repurchased and cancelled(26,996)(27)— — (174,197)— — (174,224)— (174,224)
Restricted shares forfeited(13)— — — — — — — — — 
Stock-based compensation— — — — 9,441 — — 9,441 — 9,441 
Change in ownership held by Class C holders— — — — (11,109)— — (11,109)11,109 — 
Shares issued, acquisitions2,853 — — 20,116 — — 20,119 — 20,119 
Conversion of Class C to Class A shares9,260 (9,260)— (9)— — — — — 
Other (1)
— — — — (4,611)— — (4,611)958 (3,653)
Balance at June 30, 2023116,039 $116 151,649 $2 $309,521 $27,496 $(13,244)$323,891 $438,299 $762,190 

Three Months Ended
June 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 March 31, 2022133,196 $135 164,815 $2 $373,300 $6,668 $(10,625)$369,480 $528,365 $897,845 
Net income— — — — — 10,463 — 10,463 15,000 25,463 
Other comprehensive loss— — — — — — (23,826)(23,826)— (23,826)
Distributions to noncontrolling interests— — — — — — — — (29,252)(29,252)
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— — — — — (6,863)— (6,863)— (6,863)
Granting of restricted awards202 — — — — — — — — — 
Shares forfeited(108)— — — — — — — — — 
Shares repurchased and cancelled (Approved plan)(1,981)(2)— — (14,839)— — (14,841)— (14,841)
Stock-based compensation— — — — 9,178 — — 9,178 — 9,178 
Conversion of shares388 — (388)— — — — — — — 
Other141 — — 1,706 — — 1,708 (95)1,613 
Balance at June 30, 2022131,838 $135 164,427 $2 $368,345 $10,268 $(34,451)$344,299 $513,085 $857,384 
(1)The Other line within Paid-in-Capital includes $4.6 million in connection with the modification of certain stock-appreciation rights from equity to liability awards.

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

Six Months Ended June 30, 2023
 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, 2022131,724 $132 160,909 $2 $491,899 $29,445 $(38,941)$482,537 $462,097 $944,634 
Net loss— — — — — (4,250)— (4,250)(11,012)(15,262)
Other comprehensive income— — — — — — 25,697 25,697 (18,334)7,363 
Total other comprehensive income (loss)(4,250)25,697 21,447 (29,346)(7,899)
Distributions to noncontrolling interests— — — — — — — — (11,009)(11,009)
Changes in redemption value of RNCI— — — — — 2,941 — 2,941 — 2,941 
Restricted awards granted or vested2,977 — — (3)— — — — — 
Shares repurchased and cancelled(30,762)(31)— — (200,322)— — (200,353)— (200,353)
Restricted shares forfeited(13)— — — — — — — — — 
Stock-based compensation— — — — 16,833 — — 16,833 — 16,833 
Change in ownership held by Class C holders— — — — (14,382)— — (14,382)14,382 — 
Shares issued, acquisitions2,853 — — 20,116 — — 20,119 — 20,119 
Conversion of Class C to Class A shares9,260 (9,260)— (9)— — — — — 
Other (1)
— — — — (4,611)(640)— (5,251)2,175 (3,076)
Balance at June 30, 2023116,039 $116 151,649 $2 $309,521 $27,496 $(13,244)$323,891 $438,299 $762,190 

(1)The Other line within Paid-in-Capital includes $4.6 million in connection with the modification of certain stock-appreciation rights from equity to liability awards.

See Notes to the Unaudited Consolidated Financial Statements.

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

Six Months Ended
June 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— — — — — 23,138 — 23,138 33,537 56,675 
Other comprehensive loss— — — — — — (29,173)(29,173)— (29,173)
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— — — — (5,888)— (5,888)— (5,888)
Granting of restricted awards1,989 — — (2)— — — — — 
Shares repurchased and cancelled (withheld for payroll taxes)(1,998)— — — (14,926)— — (14,926)— (14,926)
Shares forfeited(108)— — — — — — — — — 
Shares repurchased and cancelled (Approved plan)(1,981)(2)— — (14,839)— — (14,841)— (14,841)
Stock-based compensation— — — — 15,892 — — 15,892 — 15,892 
Conversion of shares15,543 15 (15,543)— (15)— — — — — 
Other141 — — 342 — 344 2,151 2,495 
Balance at June 30, 2022131,838 $135 164,427 $2 $368,345 $10,268 $(34,451)$344,299 $513,085 $857,384 

See notes to the Unaudited Condensed Consolidated Financial Statements.
Three Months Ended June 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 March 31, 2022133,196 $135 164,815 $2 $373,300 $6,668 $(10,625)$369,480 $528,365 $897,845 
Net income— — — — — 10,463 — 10,463 14,056 24,519 
Other comprehensive loss— — — — — — (23,826)(23,826)— (23,826)
Total other comprehensive income (loss)10,463 (23,826)(13,363)14,056 693 
Distributions to noncontrolling interests— — — — — — — — (29,252)(29,252)
Changes in redemption value of RNCI— — — — — (6,863)— (6,863)— (6,863)
Restricted awards granted or vested202 — — — — — — — — — 
Shares repurchased and cancelled(1,981)(2)— — (14,839)— — (14,841)— (14,841)
Restricted shares forfeited(108)— — — — — — — — — 
Stock-based compensation— — — — 9,178 — — 9,178 — 9,178 
Conversion of Class C to Class A shares388 — (388)— — — — — — — 
Purchases of noncontrolling interests— — — — (1,000)— — (1,000)(3,600)(4,600)
Acquisition of noncontrolling interest— — — — — — — 2,667 2,667 
Other141 — — 1,706 — — 1,708 849 2,557 
Balance at June 30, 2022131,838 $135 164,427 $2 $368,345 $10,268 $(34,451)$344,299 $513,085 $857,384 


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

Three Months Ended
June 30, 2021
 Members' capitalCommon Shares -
Class A & B
Common Shares -
Class C
Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossStagwell Inc. Shareholders' EquityNoncontrolling InterestsShareholders' Equity
 
SharesAmountSharesAmount
Balance at March 31, 2021$345,122  $  $ $ $ $ $345,122 $30,050 $375,172 
Net income17,345 — — — — — — — 17,345 1,470 18,815 
Other comprehensive loss(487)— — ��� — — — — (487)— (487)
Contributions1,854 — — — — — — — 1,854 — 1,854 
Distributions(11,208)— — — — — — — (11,208)(112)(11,320)
Changes in redemption value of RNCI(2,231)— — — — — — — (2,231)(461)(2,692)
Balance at June 30, 2021$350,395  $  $ $ $ $ $350,395 $30,947 $381,342 
Six Months Ended
June 30, 2021
 Members' capitalCommon 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, 2020$358,756  $  $ $ $ $ $358,756 $39,787 $398,543 
Net income21,710 — — — — — — 21,710 2,623 24,333 
Other comprehensive loss(350)— — — — — — — (350)— (350)
Contributions12,122 — — — — — — — 12,122 — 12,122 
Distributions(39,212)— — — — — — — (39,212)(11,002)(50,214)
Changes in redemption value of RNCI(2,631)— — — — — — — (2,631)(461)(3,092)
Balance at June 30, 2021$350,395  $  $ $ $ $ $350,395 $30,947 $381,342 
Six Months Ended June 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— — — — — 23,138 — 23,138 35,003 58,141 
Other comprehensive loss— — — — — — (29,173)(29,173)— (29,173)
Total other comprehensive income (loss)23,138 (29,173)(6,035)35,003 28,968 
Distributions to noncontrolling interests— — — — — — — — (29,957)(29,957)
Changes in redemption value of RNCI— — — — — (5,888)— (5,888)— (5,888)
Restricted awards granted or vested1,989 — — (2)— — — — — 
Shares repurchased and cancelled(3,979)(2)— — (29,765)— — (29,767)— (29,767)
Restricted shares forfeited(108)— — — — — — — — — 
Stock-based compensation— — — — 15,892 — — 15,892 — 15,892 
Conversion of Class C to Class A shares15,543 15 (15,543)— (15)— — — — — 
Purchases of noncontrolling interests— — — — (1,000)— — (1,000)(3,600)(4,600)
Acquisition of noncontrolling interests— — — — — — — — 2,667 2,667 
Other141 — — 342 — — 344 685 1,029 
Balance at June 30, 2022131,838 $135 164,427 $2 $368,345 $10,268 $(34,451)$344,299 $513,085 $857,384 



See notesNotes to the Unaudited Condensed Consolidated Financial Statements.Statements

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STAGWELL INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, unless otherwise stated)
1. Business and Basis of Presentation
Stagwell Inc. (the “Company”“Company,” “we,” or “Stagwell”), incorporated under the laws of Delaware, conducts its business through its networks and their Brandsits portfolio of marketing services firms (“Brands”), which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment.
The accompanying 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 (“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, pursuant to these rules, the financial statements have been condensed andfootnotes do not include certain information and disclosures pursuant to these rules.disclosures. 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 Annual Report on Form 10-K for the year ended December 31, 20212022 (“20212022 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 and the operating businesses and subsidiaries of 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 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 3 of the Notes included herein for information in connection with the acquisition of MDC.
We continue to monitor the impact on our operations from worldwide events 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 have a material adverse effect on our operations. Our judgments, assumptions and estimates about the potential effects of such events are reflected in the financial statements. The use of different judgements, assumptions or estimates could have a material impact on our condensed consolidated financial statements.
The accompanying financial statements reflect all adjustments, consisting of normallynormal recurring accruals, which in the opinion of management are necessary for a fair presentation,statement, 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 recorded an out-of-period adjustment in the first quarter of 2023 which should have revisedbeen reflected in the presentationprior year financial statements. The impact of Current Liabilitiesthe adjustment was to separately present Accrued media, which was previously included in Accruals andallocate Accumulated other liabilities, of $237,794 as of December 31, 2021.comprehensive loss to noncontrolling interest shareholders. As a result of the accompanying Condensed Consolidated Balance Sheet has been revisedcorrection, Noncontrolling interests and Accumulated other comprehensive loss declined by approximately $24.0 million, but there was no impact to correct this immaterial classification error by decreasingTotal Shareholders’ Equity. The adjustment was reflected within other comprehensive income (loss). There was no impact to Net income in 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,annual or on any other previously reported amounts in our consolidated financial statements forinterim periods within the year ended December 31, 2021.2022. The Company evaluated the impact of the out-of-period adjustment and concluded that this error was not material to the current period or any of its previously issued financial statements.
Recent Developments
On July 12, 2022,In the three and six-month period ended June 30, 2023, we recorded a $5.3 million and $7.4 million out-of-period adjustment, respectively, to increase income tax expense to correct an understatement of the expense which should have been reflected in the prior year financial statements. The Company acquired PEP Group Holdings B.V. (“PEP Group”), an omnichannel content creationevaluated the impact of the out-of-period adjustment and adaption production company for approximately $766, subjectconcluded that the errors were not material to post-closing adjustments, as well as contingent consideration upthe current period or any of its previously issued financial statements. The adjustment is not expected to a maximum value of $2,679. The contingent consideration is based on meeting certain future earnings targets through 2025. Stagwell expectsbe material to the acquisition of PEP Group will bolster its media and content production capabilities across its global network.
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
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payments of $1,000 and $1,500 on or prior to July 1, 2023 and July 1, 2024, respectively. Stagwell expects Apollo will be integrated with Stagwell’s data and insights unification tool, Consumer Understand and Engagement.year ending December 31, 2023.

2. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board, (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, and in January 2021 subsequently issued ASU 2021-01, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective upon issuance, through December 31, 2022. The Combined Credit Agreement (as defined in Note 8 of the Notes 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 amendment replaced any references to LIBOR with references to the Secured Overnight Financing Rate (“SOFR”). Based on the Company’s assessment, the Company has elected to apply the optional expedient and treat the contract modifications as a continuation of an existing contract. This election does not have a material effect on our results of operations or financial position. See Note 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$20.9 million of cash consideration, as well as contingent consideration up to a maximum value of $50,000.$50.0 million. The contingent consideration is due upon meeting certain future earnings targets through 2024, with approximately 67% payable in cash and 33% payable in shares of Class A Common Stock.Stock, par value $.001 per share (the “Class A Common Stock”).
13

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:
Amount
(dollars in thousands)
Cash and cash equivalents$2,7712,766 
Accounts receivable7,63810,147 
Other current assets1,634671 
Fixed assets2,3381,587 
IntangibleIdentifiable intangible assets12,41012,740 
Other assets1,4161,583 
Accounts payable(6,855)(4,771)
Accruals and other liabilities(4,896)(6,880)
Advance billings(1,095)(1,159)
Other liabilities(3,448)(3,642)
Net assets assumed11,91313,042 
Goodwill25,55224,643 
Purchase price consideration$37,46537,685 

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributedattributable to the assembled workforce of BNG. Goodwill of $25,552$24.6 million was assigned to the MediaBrand Performance Network reportable segment. The majority of the goodwill is non-deductible for income tax purposes.
Intangible assets consist of trade names, customer relationships and customer relationships.developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately ten years. The following table presents the details of identifiable intangible assets acquired.acquired:

14
Fair ValueEstimated Useful Life in Years
(dollars in thousands)
Customer relationships$6,150 10
Trade names5,500 10
Developed technology1,090 7
Total acquired intangible assets$12,740 

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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 acquisitionsacquisition been consummated as of that time.

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30, 2022Six Months Ended June 30, 2022
2022202120222021(dollars in thousands)
RevenueRevenue$675,414 $217,590 $1,326,042 $405,071 Revenue$675,414 $1,326,042 
Net Income24,520 19,202 57,396 23,464 
Net incomeNet income$24,520 $57,396 
14

Revenue attributable to BNG, included within the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2023 was $7.5 million and $14.1 million, respectively. Net loss was $0.6 million for the three months ended June 30, 2023 and Net income was $0.5 million for the six months ended June 30, 2023. Revenue attributable to BNG, included within the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2022 was $5.4 million and Net loss was $0.3 million.
Acquisition of TMA Direct, Inc.
On May 31, 2022, the Company acquired approximately 87% of TMA Direct, Inc. (“TMA Direct”) for approximately $19,431$17.2 million of cash consideration and approximately $482$0.5 million of deferred acquisition payments. The Company was also granted an option to purchase the remaining 13% minority interest in TMA Direct for up to approximately $13,330. $13.3 million.
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 estimated fair values assigned to identifiable assets acquired and liabilities assumed are based on the information that was available as of the acquisition date. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the Company is waiting for additional information necessary to finalize those fair values. Therefore, the estimates of fair value 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. The preliminary purchase price allocation is as follows:
Amount
(dollars in thousands)
Accounts receivable$582 
Other current assets54669 
IntangibleIdentifiable intangible assets9,290 
Other assets2,80013,200 
Accounts payable(379)
Other liabilities(270)
Noncontrolling interests(2,667)
Net assets assumed9,41011,135 
Goodwill10,5036,569 
Purchase price consideration$19,91317,704 
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributedattributable to the assembled workforce of TMA Direct. Goodwill of $10,503$6.6 million was assigned to the Communications Network reportable segment. The majority of the goodwill is deductible for income tax purposes.
Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is ten years. The following table presents the details of identifiable intangible assets acquired.acquired:

15
Fair ValueEstimated Useful Life in Years
(dollars in thousands)
Customer relationships$11,400 10
Trade names1,800 10
Total acquired intangible assets$13,200 

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Estimated Fair ValueEstimated Useful Life in Years
Trade Names$6,283 10
Customer Relationships3,007 10
Total Acquired Intangible Assets$9,290 

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 acquisitionsacquisition been consummated as of that time.

Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30, 2022Six Months Ended June 30, 2022
2022202120222021(dollars in thousands)
RevenueRevenue$674,737 $212,378 $1,319,646 $398,671 Revenue$674,737 $1,319,646 
Net Income25,153 19,391 59,494 26,029 
Net incomeNet income$25,153 $59,494 

15

2021 AcquisitionsRevenue attributable to TMA Direct, included within the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2023 was $3.9 million and $6.5 million, respectively and Net income was $0.4 million and $0.4 million, respectively. Revenue attributable to TMA Direct, included within the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2022 was $1.3 million and Net income was $0.3 million.
Acquisition of MDCMaru Group Limited Ltd.
On December 21, 2020, MDC and Stagwell Media announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of the Stagwell Subject Entities. The Stagwell Subject Entities comprised Stagwell Marketing and its direct and indirect subsidiaries.
On August 2, 2021 (the “Closing Date”), we completed the combination of MDC and the Stagwell Subject Entities and a series of steps and related transactions (such combination and transactions, the “Transactions”). In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary ofOctober 3, 2022, the Company converted into a Delaware limited liability company and changed its name to Midas OpCo Holdings LLC, and subsequently to Stagwell Global LLCacquired Maru Group Limited Ltd. (“OpCo”Maru”); (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 for approximately £23.0 million (approximately $25.8 million) in the FASB’s Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). The Transactions were accounted for as a reverse acquisition using the acquisition method of accounting, pursuant to ASC Topic 805-10, Business Combinations, with MDC treated as the legal acquirer and SMG treated as the accounting acquirer. In identifying SMG as the acquiring entity for accounting purposes, MDC and SMG took into account a number of factors, including the relative voting rights and the corporate governance structure of the Company. SMG is considered the accounting acquirer since Stagwell Media controls the board of directors of the Company following the Transactions and received an indirect ownership interest in the Company’s only operating subsidiary, OpCo, of 69.55% ownership of OpCo’s common units. However, no single factor was the sole determinant in the overall conclusion that Stagwell is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion. Under the acquisition method of accounting, the assets and liabilities of MDC, as the accounting acquiree, were recorded at their respective fair value as of the date the Transactions were completed.
On August 2, 2021, an aggregate of 179,970 shares of the Company’s Class C Common Stock were issued to Stagwell Media in exchange for $1.80 (the “Stagwell New MDC Contribution”). The Class C Common Stock does not participate in the earnings of the Company. Additionally, an aggregate of 179,970 OpCo common units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities (the “Stagwell OpCo Contribution”).cash consideration.
The fair value of the purchase consideration is $429,062, consisting of approximately 80,000 shares of the Company’s Class A and B Common Stock and Common 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
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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 to the assets acquired and assumed liabilities of Maru based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The fair value 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.
The preliminary purchase price allocation is as follows:
Amount
(dollars in thousands)
Cash and cash equivalents$130,1531,033 
Accounts receivable413,8397,374 
Other current assets44,198899 
Fixed assets80,047157 
Right-of-use lease assets - operating leases252,739 
IntangibleIdentifiable intangible assets810,90014,300 
Other assets18,4181,920 
Accounts payable(171,019)(4,087)
Accruals and other liabilities(307,281)(9,154)
Advance billings(211,403)(6,462)
Current portion of lease liabilitiesDeferred tax liability(48,517)
Current portion of deferred acquisition consideration(53,054)
Long-term debt(901,736)
Revolving credit facility(109,954)
Long-term portion of deferred acquisition consideration(8,056)
Long-term portion of lease liabilities(289,128)(3,328)
Other liabilities(132,394)
Redeemable noncontrolling interests(25,990)
Preferred shares(209,980)
Noncontrolling interests(151,090)(3,591)
Net liabilitiesassets assumed(869,308)(939)
Goodwill1,298,37026,733 
Purchase price consideration$429,06225,794 
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributedattributable to the assembled workforce of MDC.Maru and expected growth related to new customer relationships and geographic expansion. Goodwill of $1,058,365, $173,633 and $66,372$26.7 million was assigned to the Integrated Agencies Network, the Media Network and the Communications NetworkAll Other reportable segments, respectively.segment. The majority of the goodwill is non-deductiblepartially deductible for income tax purposes. Goodwill has been reduced from the previously reported amount of $1,300,360 to reflect a change in certain assets and liabilities. There has been no change that impacts the Consolidated Statement of Operations.
Intangible assets consist of trade names, customer relationships, and customer relationships.developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is thirteenapproximately eight years. The following table presents the details of identifiable intangible assets acquired.acquired:

Estimated Fair ValueEstimated Useful Life in Years
(dollars in thousands)
Customer relationships$4,900 10
Trade names4,000 10
Developed technology5,400 2-7
Total acquired intangible assets$14,300 

The estimated fair value of assets and liabilities assumed are preliminary and the Company may still make adjustments as we finalize the purchase price allocation, which is expected to be completed within one year from the acquisition date.
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Estimated Fair ValueEstimated Useful Life in Years
Trade Names$98,000 10
Customer Relationships712,900 6-15
Total Acquired Intangible Assets$810,900 
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 acquisitionsacquisition been consummated as of that time.
Three Months Ended June 30, 2021Six Months Ended June 30, 2021
Revenue$555,165 $1,043,992 
Net Income32,996 47,100 

Three Months Ended June 30, 2022Six Months Ended June 30, 2022
(dollars in thousands)
Revenue$683,671 $1,337,046 
Net income$21,190 $49,300 
Revenue attributable to Maru, included within the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2023 was $8.9 million and $17.8 million, respectively and Net loss was $2.2 million and $4.4 million, respectively.
Acquisition of GoodStuff Holdings LimitedWolfgang, LLC.
On December 31, 2021,October 3, 2022, the Company acquired GoodStuff Holdings Limitedthe remaining 80% interest that it did not already own in Wolfgang, LLC., (“Goodstuff”Wolfgang”) for approximately £21,000 (approximately $28,053) of$3.8 million in cash consideration as well as contingent consideration up toand 175 thousand shares of Class A Common Stock with a maximumfair value of £22,000. $1.2 million.
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 GoodstuffWolfgang based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The preliminary purchase price allocation is as follows:
Amount
(dollars in thousands)
Cash and cash equivalents$30,9851,606 
Accounts receivable28,6851,180 
Other current assets3,207100 
FixedIdentifiable intangible assets237 
Right-of-use lease assets - operating leases2,060 
Intangible assets14,9741,055 
Other assets55 
Accounts payable(6,344)
Accruals and other liabilities(27,353)
Advance billings(15,956)46 
Current portion of lease liabilities(857)
Income taxes payable(967)
Long-term portion of lease liabilities(3,744)
Other liabilities(1,204)(278)
Net assets assumed23,7783,709 
Goodwill4,2752,451 
Purchase price consideration including fair value of previously owned interest$28,0536,160 
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributedattributable to the assembled workforce of Goodstuff.Wolfgang. Goodwill of $4,275$2.5 million was assigned to the MediaIntegrated Agencies Network reportable segment. The majority of the goodwill is non-deductibledeductible 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 tenapproximately five years. The following table presents the details of identifiable intangible assets acquired.

The estimated fair value of assets and liabilities assumed are preliminary and the Company may still make adjustments as we finalize the purchase price allocation, which is expected to be completed within one year from the acquisition date.
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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 acquisitionsacquisition been consummated as of that time.

Three Months Ended June 30, 2022Six Months Ended June 30, 2022
Three Months Ended June 30, 2021Six Months Ended June 30, 2021(dollars in thousands)
RevenueRevenue$215,358 $400,786 Revenue$675,622 $1,322,931 
Net Income20,426 25,537 
Net incomeNet income$25,172 $59,654 
Revenue attributable to Wolfgang, included within the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2023 was $1.1 million and $2.1 million, respectively, and Net income was $0.1 million and less than $0.1 million, respectively.
Acquisition of Epicenter Experience LLC.
On October 3, 2022, the Company acquired the assets of Epicenter Experience LLC., (“Epicenter”) for approximately $9.9 million in cash consideration, as well as contingent consideration up to a maximum value of $5.0 million. The contingent consideration is subject to meeting certain future earnings targets through 2024 and can be paid up to 25% in shares of Class A Common Stock.
The consideration has been allocated to the assets acquired and assumed liabilities of Epicenter based upon preliminary estimated fair values. The preliminary purchase price allocation is as follows:
Amount
(dollars in thousands)
Accounts receivable$901 
Other current assets45 
Identifiable intangible assets7,300 
Accounts payable(148)
Other current liabilities(650)
Net assets assumed7,448 
Goodwill4,416 
Purchase price consideration$11,864
The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Epicenter. Goodwill of $4.4 million was assigned to the All Other reportable segment. The majority of the goodwill is deductible for income tax purposes.
The intangible asset acquired was developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is approximately five years.
The estimated fair value of assets and liabilities assumed are preliminary and the Company may still make adjustments as we finalize the purchase price allocation, which is expected to be completed within one year from the acquisition date.

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

Three Months Ended June 30, 2022Six Months Ended June 30, 2022
(dollars in thousands)
Revenue$674,015 $1,317,900 
Net income$24,392 $57,875 
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Revenue attributable to Epicenter, included within the Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2023 was $1.1 million and $2.2 million, respectively. Net loss was $0.6 million for the three months ended June 30, 2023, and Net income was less than $0.1 million for the six months ended June 30, 2023.
Other Acquisitions
On April 25, 2023, the Company acquired Huskies, Ltd. (“Huskies”) for approximately €5.2 million (approximately $5.6 million) of cash consideration, of which €0.9 million (approximately $1.0 million) is deferred. The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Huskies and expected growth related to new customer relationships and geographic expansion. Goodwill of $2.6 million was assigned to the Brand Performance Network reportable segment. The majority of goodwill is non-deductible for income tax purposes.
On July 12, 2022, the Company acquired PEP Group Holdings B.V., an omnichannel content creation and adaption production company for approximately $0.5 million in cash consideration, subject to post-closing adjustments, as well as contingent consideration up to a maximum value of €2.6 million. The contingent consideration is subject to meeting certain future earnings targets through 2025.
On July 15, 2022, the Company acquired Apollo Program II Inc., a real-time artificial intelligence-powered software-as-a-service platform, for approximately $2.3 million in cash consideration, subject to post-closing adjustments, as well as guaranteed deferred payments of $1.0 million and $1.5 million on or prior to July 1, 2023 and July 1, 2024, respectively.
2022 Purchases of Noncontrolling Interests
On April 1, 2022, the Company acquired the remaining interest in Hello Design, LLC (“Hello Design”) that it did not already own for an aggregate purchase price of $4,600,$4.6 million, comprised of a closing cash payment of $3,600$3.6 million and a contingent deferred acquisition payment of $1,000.$1.0 million. The contingent deferred payment will be based on the financial results of the underlying business through 2022 with the payment due$1.0 million was paid 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 seller to delay the second purchase until July 31, 2025. The purchase pricequarter of $73,898 was comprised of a contingent deferred acquisition payment and redeemable noncontrolling interest with estimated present values at the acquisition date of $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 payments with an estimated present value at the acquisition date of $6,477. The contingent deferred payments were based on the financial results of the underlying business through 2022 with final payment due in 2023.
On December 31, 2021, the Company acquired the approximate 49% remaining interest of Instrument it did not already own for an aggregate purchase price of $157,072, comprised of a closing payment of $37,500 in cash and $37,500 in shares of Class A Common Stock and deferred acquisition payments with an estimated present value at the acquisition date of $82,072. The deferred payments are not contingent and will be paid in 2023 and 2024.
4.3. 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.
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. Typically, we do not obtain control prior to transferring these services to our clients; therefore, we primarily act as agent for production and media buying services.                                    
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 agencyBrand arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses. Certain clients may engage with the Company in various geographic locations, across multiple disciplines, and through multiple Brands. Representation of a client rarely means that Stagwell handles marketing communications for all Brands or product lines of the client in every geographical location. The Company’s Brands often cooperate with one another through referrals and the sharing of both services and expertise, which enables Stagwell to service
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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 our principal capabilities for the three and six months ended June 30, 20222023 and 2021:2022:
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
Principal CapabilitiesPrincipal CapabilitiesReportable Segment2022202120222021Principal CapabilitiesReportable Segment2023202220232022
(dollars in thousands)
Digital TransformationDigital TransformationAll Segments$197,915 $70,261 $408,724 $132,698 Digital TransformationAll segments$167,847 $197,915 $358,166 $408,724 
Creativity and CommunicationsCreativity and CommunicationsIntegrated Agencies Network, Media Network, Communications Network307,402 27,986 586,644 52,656 Creativity and CommunicationsAll segments288,008 307,402 549,362 586,644 
Performance Media and DataPerformance Media and DataMedia Network114,260 71,439 214,036 134,047 Performance Media and DataBrand Performance Network, All Other115,527 114,260 225,015 214,036 
Consumer Insights and StrategyConsumer Insights and StrategyIntegrated Agencies Network53,336 39,874 106,412 71,401 Consumer Insights and StrategyIntegrated Agencies Network, All Other60,883 53,336 122,166 106,412 
$672,913 $209,560 $1,315,816 $390,802 $632,265 $672,913 $1,254,709 $1,315,816 
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 newinternational markets. Stagwell’s Brands are located in the United States and United Kingdom, and more than 3032 other countries around the world. In the past,Historically, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which included discretionary components that are easier to reduce in the short term than other operating expenses.
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The following table presents revenue disaggregated by geography for the three and six months ended June 30, 20222023 and 2021:2022:
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
Geographical LocationGeographical LocationReportable Segment2022202120222021Geographical LocationReportable Segment2023202220232022
(dollars in thousands)
United StatesUnited StatesAll$559,635 $183,358 $1,096,866 $350,105 United StatesAll$505,445 $559,635 $1,012,537 $1,096,866 
United KingdomUnited KingdomAll43,363 12,070 83,176 16,775 United KingdomAll47,864 43,363 89,135 83,176 
OtherOtherAll69,915 14,132 135,774 23,922 OtherAll78,956 69,915 153,037 135,774 
$672,913 $209,560 $1,315,816 $390,802 $632,265 $672,913 $1,254,709 $1,315,816 

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 $166,879$153.7 million and $116,558$116.4 million at June 30, 20222023 and December 31, 2021,2022, respectively, and are included as a component of Accounts receivable, net on the Unaudited Condensed Consolidated Balance Sheets. Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $43,583$106.9 million and $63,065$93.1 million at June 30, 20222023 and December 31, 2021,2022, 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.
Contract liabilities consistrepresent advanced billings to customers for fees and reimbursements of fees received fromthird-party costs, whether we act as principal or billed to clients in excess of fees recognized.agent. Such fees and reimbursements of third-party costs are classified as Advance billings presented on the Company’s Unaudited Condensed Consolidated Balance Sheets. In arrangements in which we are acting as an agent, the recognition related to the contract liability is presented on a net basis within the Unaudited Condensed Consolidated Statements of Operations. Advance billings at June 30, 20222023 and December 31, 20212022 were $316,654$306.5 million and $361,885,$337.0 million, respectively. The decrease in the Advance billings balance of $45,231$30.6 million for the six months ended June 30, 20222023 was primarily driven by cash payments received or due in advance of satisfying our performance obligations, offset by $312,171$264.0 million of revenues recognized that were included in the Advance billings balances as of December 31, 20212022 and reductions due to the incurrence of third-party costs.
Changes in the contract asset and liability balances during the six months ended June 30, 20222023 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 $41,103$100.5 million of unsatisfied performance obligations as of June 30, 20222023 of which we expect to recognize approximately 48%50% in the remaining quarters of 2022,2023, 40% in 20232024 and 12%10% in 2024.2025.
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Net income
5.4. Earnings (Loss) Per Share
The following table sets forth the computations of basic and diluted incomeloss per common share:
 Three Months Ended June 30, 2022Six Months Ended June 30, 2022
Earnings Per Share - Basic
Numerator: 
Net income$24,519 $58,141 
Net income attributable to Class C shareholders(14,020)(31,741)
Net loss attributable to other equity interest holders(36)(3,262)
Net income attributable to noncontrolling and redeemable noncontrolling interests(14,056)(35,003)
Net income attributable to Stagwell Inc. common shareholders$       10,463 $       23,138 
Denominator:
Basic - Weighted Average number of common shares outstanding126,425 124,367 
Earnings Per Share - Basic$       0.08 $       0.19 
Earnings Per Share - Diluted
Numerator:
Net income attributable to Stagwell Inc. common shareholders$       10,463 $       23,138 
Net income attributable to Class C shareholders14,020 31,741 
$24,483 $54,879 
Denominator:
Basic - Weighted Average number of common shares outstanding126,425 124,367 
Dilutive shares:
Stock appreciation rights1,966 1,941 
Restricted share and restricted unit awards3,212 4,959 
Class C shares164,811 167,576 
Diluted - Weighted average number of common shares outstanding296,414 298,843 
Earnings Per Share - Diluted$       0.08 $       0.18 
The combination of MDC and SMG, completed on August 2, 2021, was treated as a reverse acquisitionshare for financial reporting purposes. SMG was treated as the accounting acquirer and MDC as 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.
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SMG’s equity structure, prior to the combination with MDC, was a non-unitized single member limited liability company, resulting in all components of equity attributable to the member being reported within Members’ Capital. Given that SMG was a non-unitized single member limited liability company, net income (loss) prior to the combination is not applicable for purposes of calculating earnings per share. Therefore, the earnings per share calculation in the table above includes only the three and six months ended June 30, 20222023:
 Three Months Ended June 30,Six Months Ended June 30,
 20232023
Loss Per Share - Basic and Diluted
Numerator:
Net loss$(10,245)$(15,262)
Net loss attributable to Class C shareholders4,552 7,717 
Net loss attributable to other equity interest holders1,000 3,295 
Net loss attributable to noncontrolling and redeemable noncontrolling interests5,552 11,012 
Net loss attributable to Stagwell Inc. common shareholders$       (4,693)$       (4,250)
Denominator:
Weighted average number of common shares outstanding115,400 120,272 
Loss Per Share - Basic & Diluted$       (0.04)$       (0.04)
Anti-dilutive:
Class C Shares155,821 158,351 
Stock Appreciation Rights and Restricted Awards4,416 4,736 
Class A Shares to settle deferred acquisition obligations4,719 4,620 
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The following table sets forth the computations of basic and does not includediluted earnings per common share for the corresponding prior year period.three and six months ended June 30, 2022:
 Three Months Ended June 30,Six Months Ended June 30,
20222022
Earnings Per Share - Basic(amounts in thousands, except per share amounts)
Numerator:
Net income$24,519 $58,141 
Net income attributable to Class C shareholders(14,020)(31,741)
Net income attributable to other equity interest holders(36)(3,262)
Net income attributable to noncontrolling and redeemable noncontrolling interests(14,056)(35,003)
Net income attributable to Stagwell Inc. common shareholders$       10,463 $       23,138 
Denominator:
Weighted Average number of common shares outstanding126,425 124,367 
Earnings Per Share - Basic$       0.08 $       0.19 
Earnings Per Share - Diluted
Numerator:
Net income attributable to Stagwell Inc. common shareholders$       10,463 $       23,138 
Net income attributable to Class C shareholders14,020 31,741 
$24,483 $54,879 
Denominator:
Basic - Weighted Average number of common shares outstanding126,425 124,367 
Stock appreciation right awards1,966 1,941 
Restricted share and restricted unit awards3,212 4,959 
Class A Shares131,603 131,267 
Class C shares164,811 167,576 
Dilutive - Weighted average number of common shares outstanding296,414 298,843 
Earnings Per Share - Diluted$       0.08 $       0.18 
Restricted stock awards of 1,0053.7 million and 1.0 million as of June 30, 2023 and 2022, arerespectively, were excluded from the computation of diluted incomeearnings (loss) per common share because the performance contingencycontingencies necessary for vesting hadwere not been met as of the reporting date.
6.5. Deferred Acquisition Consideration
Deferred acquisition consideration on the balance sheetUnaudited Consolidated Balance Sheets consists of deferred obligations related to contingent and fixed purchase price payments, and contingent and fixed retention payments tied to continued employment of specific personnel. Contingent deferred acquisition consideration is recorded at the acquisition date fair value and adjusted at each reporting period through operating income.within Office and general expenses on the Unaudited Consolidated Statements of Operations.
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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 sheetsUnaudited Consolidated Balance Sheets as of June 30, 20222023 and December 31, 2021:2022:
June 30,
2022
December 31, 2021
Beginning balance of contingent payments$222,369 $17,847 
Payments(59,538)(12,431)
Adjustment to deferred acquisition consideration (1)
16,014 18,721 
Additions (2)
19,348 198,937 
CTA(696)— 
Other(983)(705)
Ending balance of contingent payments$196,514 $222,369 
June 30,
2023
December 31,
2022
(dollars in thousands)
Beginning balance$161,323 $222,369 
Payments (1)
(51,889)(74,963)
Adjustments to deferred acquisition consideration (2)
4,480 (12,779)
Additions— 26,594 
Currency translation adjustment528 (758)
Other27 860 
Ending balance (3)
$114,469 $161,323 
(1) Includes deferred acquisition consideration payments settled in the shares of Class A Common Stock of $20.1 million and $1.0 million, respectively, for the period ended June 30, 2023 and December 31, 2022.

(2) Adjustment to deferred acquisition consideration contains fair value changes from the Company’s initial estimates of deferred acquisition payments. Adjustment to
(3) The contingent and fixed deferred acquisition consideration obligation was $71.2 million and $43.3 million, respectively, as of June 30, 2023 and $69.9 million and $91.4 million, respectively, as of December 31, 2022. In addition, $31.2 million of the deferred acquisition consideration is recorded within Office and general expenses onexpected to be settled in the Unaudited Condensed Consolidated Statementsshares of Operations.Class A Common Stock.

(2) In 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. As of June 30, 2022, approximately $17,000 of additions represent deferred acquisition consideration acquired in connection with the acquisition of BNG. See Note 3 of the Notes included herein for additional information related to the purchase of BNG.
7.6. 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 20222023 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 determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the commencement date. Lease payments included in the measurement of the lease liability are comprised of non-cancellable lease payments, payments based upon an index or rate, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.
Lease costs are recognized in the 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. 
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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.
From time to time, the Company enters into sublease arrangements with unrelated third parties. These leases are classified as operating leases and expire between years 20222023 through 2032. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company subleases office space in North America Europe and Australia.Europe.
As of June 30, 2022,2023, the Company has entered into 1four operating leaseleases for which the commencement date has not yet occurred primarily because of the premises are in the process of being prepared for occupancy by the landlord. Accordingly, this 1 lease representsthese four leases represent an obligation of the Company that is not reflected within the Unaudited Condensed Consolidated Balance Sheets as of June 30, 2022.2023. The aggregate future liability related to these leases is approximately $367.$6.2 million.
The discount rate used for leases accounted for under ASCthe FASB’s Accounting Standards Codification (“ASC”) 842 is the Company’s collateralized credit adjusted borrowing rate.
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The following table presents lease costs and other quantitative information for the three and six months ended June 30, 20222023 and 2021:2022:
Three Months
Ended June 30,
Six Months
Ended June 30,
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021 2023202220232022
Lease Cost:Lease Cost:Lease Cost:(dollars in thousands)
Operating lease costOperating lease cost$20,947$6,238$34,963$11,743Operating lease cost$18,950$20,947$38,528$34,963
Variable lease costVariable lease cost4,0448849,2041,937Variable lease cost5,6574,04410,2189,204
Sublease rental incomeSublease rental income(4,216)(972)(7,492)(1,931)Sublease rental income(2,564)(4,216)(5,616)(7,492)
Total lease costTotal lease cost$20,775$6,150$36,675$11,749Total lease cost$22,043$20,775$43,130$36,675
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$24,352$7,763$47,133$13,364Operating cash flows$21,925$24,352$44,272$47,133
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$8,527$$22,689$Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments$4,401$8,527$6,536$22,689
As of June 30, 2022,2023, the weighted average remaining lease term (in years) and weighted average discount rate were 6.66.1 and 4.3%4.6%, respectively.
Operating lease expense is included in officeOffice 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 each of the three and six months ended June 30, 2023, the Company recorded a charge of $9.2 million to reduce the carrying value of two of its right-of-use lease assets and related leasehold improvements. The right-of-use lease assets related to agencies within the Integrated Agencies Network.
In the six months ended June 30, 2022, the Company recorded a charge of $0.3 million, to reduce the carrying value of one of its right-of-use lease assets. The right-of-use lease asset related to an agency within the Media Network.
With regard to the aforementioned impairments, the Company evaluated the facts and circumstances related to the use of the assets which indicated that they may not be recoverable. Using estimated sublease income to develop expected future cash flows, it was determined that the fair value of the assets were less than their carrying value. The impairment charges are included in Impairment and other losses within the Unaudited Consolidated Statements of Operations.
The following table presents minimum future rental payments under the Company’s leases atas of June 30, 20222023 and their reconciliation to the corresponding lease liabilities:
 Maturity Analysis
(dollars in thousands)
Remaining 2023$47,657 
202479,186 
202561,160 
202645,716 
202741,230 
Thereafter120,594 
Total395,543 
Less: Present value discount(55,161)
Lease liability$340,382 
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 Maturity Analysis
Remaining 2022$40,873 
202388,144 
202475,167 
202558,646 
202643,455 
2027 and thereafter157,574 
Total463,859 
Less: Present value discount(67,397)
Lease liability$396,462 

8.7. Debt
As of June 30, 20222023 and December 31, 2021,2022, the Company’s indebtedness was comprised as follows:
June 30,
2022
December 31, 2021June 30,
2023
December 31,
2022
Revolving credit facility$298,000 $110,165 
(dollars in thousands)
Credit AgreementCredit Agreement$402,000 $100,000 
5.625% Notes5.625% Notes1,100,000 1,100,000 5.625% Notes1,100,000 1,100,000 
Debt issuance costsDebt issuance costs(16,440)(18,564)Debt issuance costs(14,570)(15,293)
Total long-term debtTotal long-term debt$1,381,560 $1,191,601 Total long-term debt$1,487,430 $1,184,707 
Interest expense related to long-term debt included in Interest expense, net on the Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 20222023 was $17,659$22.4 million and $35,945,$40.6 million, respectively, and for the three and six months ended June 30, 20212022 was $1,467$17.7 million and $3,091,$35.9 million, respectively.
The amortization of debt issuance costs included in Interest expense, net on the Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 20222023 was $605$1.2 million and $1,211,$1.8 million, respectively, and for the three and six months ended June 30, 20212022 was $330$0.6 million and $469,$1.2 million, respectively.
Revolving Credit Agreement
On November 18, 2019, theThe Company entered intois party to 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.maturity with a syndicate of banks (the “Credit Agreement”). On May 4, 2023, the Company amended the Credit Agreement to, among other things, increase the revolving commitments under the Credit Agreement by $140.0 million from $500.0 million to $640.0 million and permit restricted payments for share repurchases or redemptions from certain of its stockholders in an aggregate principal amount of up to $150.0 million.
The Combined Credit Agreement contains sub-limits for revolving loans denominated in pounds and euros not to exceed the U.S. dollar equivalent of $50.0 million in pounds and $50.0 million in euros and $100.0 million in the aggregate. Additionally, the Credit Agreement contains a $15.0 million sub-limit for letters of credit 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) SOFRthe Secured Overnight Financing Rate (“SOFR”) plus 0.10%, plus 1% in each case, plus the applicable margin (calculated based on the Company’s Total Leverage Ratio, as defined in the Combined Credit Agreement) at that time. Additionally,time or (ii) 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, and, 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 Credit Agreement remain unchanged.
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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 effective rate from time to time plus 0.50% and (c) the LIBORSOFR rate plus 1%, in each case,0.10% 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’sborrowers’ total leverage ratio) at that time.
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 atas of June 30, 2022.2023.
A portion of the Combined Credit Agreement in an amount not to exceed $50,000$50.0 million is available for the issuance of standby letters of credit. AtAs of June 30, 20222023 and December 31, 2021,2022, the Company had issued undrawn outstanding letters of credit of $24,404$22.4 million and $24,332,$25.3 million, respectively.
Senior Notes
In August 2021, theThe Company issued $1,100,000had $1.1 billion aggregate principal amount of 5.625% senior notes (“5.625% Notes”) outstanding as of June 30, 2023. 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
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substantially all of the assets of the Company, and any existing and future subsidiary guarantors, including all of the capital stock of each restricted subsidiary.
The Company may, at its option, redeem the 5.625% Notes in whole at any time or in part from time to time, on and after August 15, 2024 at a redemption price of 102.813% of the principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2024, at a redemption price of 101.406% of the principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2025 and at a redemption price of 100% of the principal amount thereof if redeemed on August 15, 2026 and thereafter. Prior to August 15, 2024, the Company may, at its option, redeem some or all of the 5.625% Notes at a price equal to 100% of the principal amount of the 5.625% Notes plus a “make whole” premium and accrued and unpaid interest. The Company may also redeem, at its option, prior to August 15, 2024, up to 40% of the 5.625% Notes with the net proceeds from one or more equity offerings at a redemption price of 105.625% of the principal amount thereof.
If the Company experiences certain kinds of changes of control (as defined in the indenture), holders of the 5.625% Notes may require the Company to repurchase any 5.625% Notes held by them at a price equal to 101% of the principal amount of the 5.625% Notes plus accrued and unpaid interest. In addition, if the Company sells assets under certain circumstances, it mustmay be required to use the net sale proceeds (as defined in the indenture) to offer to repurchase the 5.625% Notes at a price equal to 100% of the principal amount of the 5.625% Notes plus accrued and unpaid interest.
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interest, up to the net sale proceeds amount.
The indenture includes covenants that, among other things, restrict the Company’s ability and the ability of its restricted subsidiaries (as defined in the indenture) to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of the Company; make certain types of investments; create restrictions on the payment of dividends or other amounts from the Company’s restricted subsidiaries; sell assets; enter into transactions with affiliates; create liens; enter into sale and leaseback transactions; and consolidate or merge with or into, or sell substantially all of the Company’s assets to, another person. These covenants are subject to a number of 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 atas of June 30, 2022.
Interest Rate Swap
The Company had an interest rate swap that matured in April 2022. The fair value of the swap was $77 as of December 31, 2021.2023.
9.8. 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 noncontrollingNoncontrolling interests within Shareholder’s Equity 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 redeemableRedeemable noncontrolling interests in mezzanine equity in the Unaudited Consolidated Balance Sheets at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through Retained earnings (but not less than their initial redemption value), except for foreign currency translation adjustments.
Changes in the Company’s ownership interests in its less than 100% owned subsidiaries during the three and six months ended June 30, 2022 and 2021 were as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Net income attributable to Stagwell Inc. common shareholders$10,463 $17,345 $23,138 $21,710 
Transfers from the noncontrolling interest:
Change in Stagwell Inc. Paid-in capital for purchase of noncontrolling interests(1,000)— (1,000)— 
Net transfers from noncontrolling interests(1,000)— (1,000)— 
Change from net income attributable to Stagwell Inc. and transfers to noncontrolling interests$9,463 $17,345 $22,138 $21,710 

The following table presents netNet income (loss) attributable to noncontrolling and redeemable noncontrolling interests between holders of Class C sharescommon stock, par value $0.00001 per share (the “Class C Common Stock”) and other equity interest holders for the three and six months ended June 30, 20222023 and 2021:2022:
Three Months
Ended June 30,
Six Months
Ended June 30,
2022202120222021
Net income attributable to Class C shareholders$14,020 $— $31,741 $— 
Net income attributable to other equity interest holders980 1,470 1,796 2,623 
Net income attributable to noncontrolling interests$15,000 $1,470 $33,537 $2,623 
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(dollars in thousands)
Net income (loss) attributable to Class C shareholders$(4,552)$14,020 $(7,717)$31,741 
Net income (loss) attributable to other equity interest holders(29)980 219 1,796 
Net income (loss) attributable to noncontrolling interests$(4,581)$15,000 $(7,498)$33,537 
Net income (loss) attributable to redeemable noncontrolling interests(971)(944)(3,514)1,466 
Net income (loss) attributable to noncontrolling and redeemable noncontrolling interests$(5,552)$14,056 $(11,012)$35,003 
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The following table presents noncontrolling interests between holders of Class C sharesCommon Stock and other equity interest holders as of June 30, 20222023 and December 31, 2021:2022:
June 30,
2023
December 31,
2022
June 30,
2022
December 31, 2021(dollars in thousands)
Noncontrolling interest of Class C shareholdersNoncontrolling interest of Class C shareholders$483,626 $475,373 Noncontrolling interest of Class C shareholders$408,960 $428,406 
Noncontrolling interest of other equity interest holdersNoncontrolling interest of other equity interest holders29,459 32,914 Noncontrolling interest of other equity interest holders29,339 33,691 
NCI attributable to noncontrolling interests$513,085 $508,287 
Total noncontrolling interestsTotal noncontrolling interests$438,299 $462,097 
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Redeemable Noncontrolling Interests
The following table presents changes in redeemable noncontrolling interests:
June 30,
2022
December 31, 2021
Beginning Balance$43,364 $604 
Redemptions(1,523)(15,231)
Acquisitions (1)
— 53,270 
Changes in redemption value5,888 3,834 
Net income (loss) attributable to redeemable noncontrolling interests1,466 (412)
Other502 1,299 
Ending Balance$49,697 $43,364 
(1) As 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.
June 30,
2023
December 31,
2022
(dollars in thousands)
Beginning balance$39,111 $43,364 
Redemptions— (1,400)
Distributions(4,399)(2,822)
Changes in redemption value(2,942)(8,711)
Net income (loss) attributable to redeemable noncontrolling interests(3,514)8,135 
Other(127)545 
Ending balance$28,129 $39,111 
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 20222023 to 2025.2027. 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 $49,697$28.1 million as of June 30, 2022,2023, consists of $46,041,$24.4 million, assuming that the subsidiaries perform over the relevant periods at their current profit levels,meet certain performance metrics, and $3,656$3.7 million upon termination of such owner’s employment with the applicable subsidiary or death.
These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. ThereAs such, there is no related impact on the Company’s incomeearnings per share calculations.calculations for the three and six months ended June 30, 2023 and 2022.
Comprehensive Loss Attributable to Noncontrolling and Redeemable Noncontrolling Interests
For the three months ended June 30, 2023, comprehensive income attributable to the noncontrolling and redeemable noncontrolling interests was $2.6 million, which consists of $5.6 million of net loss and $2.9 million of other comprehensive income.
For the six months ended June 30, 2023, comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests was $29.3 million, which consists of $11.0 million of net loss and $18.3 million of other comprehensive loss.
10.9. 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 6 and 9 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 unaudited consolidated financial statements with respect to these indemnification guarantees. The Company continues to monitor the conditions that are subject to guarantees and
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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 June 30, 2022,2023, the Company had $24,404$22.4 million of undrawn letters of credit.credit outstanding.
The Company entered into 1four operating leases for which the commencement date has not yet occurred as of June 30, 2022.2023. See Note 76 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 June 30, 2022,2023, the Company estimates its future minimum commitments under these non-cancellable agreements to be: $5,725, $7,198, $2,140, $1,341, $1,134,$4.4 million, $6.2 million, $6.0 million, $3.4 million, $2.6 million and $88$6.3 million for the remainder of 2022, 2023, 2024, 2025, 2026, 2027, and 2027,thereafter, respectively.
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11.10. Share Capital
On March 23, 2022,The authorized and outstanding share capital of the boardCompany is below.
Class A Common Stock
There are 1.0 billion shares of directorsClass A Common Stock authorized, of which 116.0 million shares were issued and outstanding as of June 30, 2023. Each share of Class A Common Stock carries one vote and represents an economic interest in the Company.
Class B Common Stock
During the three months ended June 30, 2023, each remaining share of Class B Common Stock par value $0.001 per share (the “Class B Common Stock”) then issued and outstanding or held by the Company was reclassified as and converted into 1.25 shares of Class A Common Stock, with any fractional shares to which a holder of shares of Class B Common Stock would have been entitled rounded up to the nearest whole share of Class A Common Stock. As a result, there were no shares of Class B Common Stock issued and outstanding as of June 30, 2023.
Class C Common Stock
There are 250.0 million shares of Class C Common Stock authorized, of which 151.6 million shares were issued and outstanding as of June 30, 2023. Each share of Class C Common Stock carries one vote and does not represent an economic interest in the Company. Each share of Class C Common Stock is paired with a corresponding common unit of Stagwell Global LLC (“OpCo”) (each such paired share of Class C Common Stock and common unit of OpCo, a “Paired Unit”). Each holder of Paired Units may, at its option, exchange such Paired Units for shares of Class A Common Stock on a one-to-one basis (i.e., one Paired Unit for one share of Class A Common Stock).
In the three and six months ended June 30, 2023, holders of the Paired Units exchanged approximately 9.3 million Paired Units for the same number of shares of Class A Common Stock.
Class A Common Stock Repurchases
The Company may purchase shares of Class A Common Stock under its stock repurchase program (the “Repurchase Program”) as well as repurchases outside of the Repurchase Program.
On March 1, 2023, the Company’s board of directors (the “Board”) authorized an extension and a $125.0 million increase in the size of the Repurchase Program to an aggregate of $250.0 million, with any previous purchases under which we may repurchase upthe Repurchase Program continuing to $125,000 of shares of our outstanding Class A common stock.count against that limit. The Repurchase Program, as amended, will expire on March 23, 2025.1, 2026.
Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices, (includingincluding through trading plans that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act),Act of 1934, as amended, in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice. Our board of directors will review the Repurchase Program periodically and may authorize adjustments of its terms.
When repurchasing shares, we reduce
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During 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 ofsix months ended June 30, 2022, there were 1,9812023, 6.1 million shares of Class A Common Stock were repurchased underpursuant to the Repurchase Program at an aggregate value, excluding fees, of $14,841.$39.8 million. These shares were purchasedrepurchased at an average share price of $7.49$6.55 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $110,119$158.4 million as of June 30, 2022.2023.
The authorized and outstanding share capital ofIn addition to the repurchases under the Repurchase Program, on May 23, 2023, the Company is below.
repurchased approximately 23.3 million shares of Class A Common Stock (“Classfrom certain affiliates of AlpInvest Partners B.V. at a price of $6.43 per share, for an aggregate total repurchase price of approximately $150.0 million.
Employee Stock Purchase Plan
In March 2023, the Board adopted the 2022 Employee Stock Purchase Plan (the “ESPP”), which was approved at the Company’s annual meeting of shareholders held on June 14, 2023. A Shares”)
There are 1,000,000total of 3.0 million shares of Class A Shares authorized. There were 131,834 Class A Shares issued and outstanding as of June 30, 2022. The Class A Shares carry 1 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 5is reserved for sale under the ESPP to eligible employees as defined in the plan. Under the ESPP, eligible employees can elect to withhold up to 15% of their earnings, subject to certain maximums, to purchase shares of Class B Shares authorized. There were 4 of Class B Shares issued and outstanding as of June 30, 2022.A Common Stock on certain plan-defined dates. The Class B Shares carry 20 votespurchase price for each with a par value of $0.001, convertible at any time at the optionoffering period is 92.5% of the holder into one Class A Share for each Class B Share.
Class C Common Stock (“Class C Shares”)
There are 250,000fair market value of shares of Class C Shares authorized. There were 164,427 Class C Shares issued and outstanding asA Common Stock at the end of June 30, 2022.the offering period. The Class C Shares do not participateplan is considered compensatory resulting in the earningsfair value of the Companydiscount being expensed over the service period.
During the three and have a par value of $.00001. In 2021, an aggregate of 179,970 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 OpCo common unit, is convertible at any time, at the option of the holder, into one Class A Share. In the six months ended June 30, 2022, holders of Class C Shares and OpCo Units (the “Paired Units”) exchanged 15,543 Paired Units for2023, there were no material costs incurred by the same number of Class A Shares. Approximately 5,000 Paired Units exchanged into an equal number of Class A Shares triggered an employee tax withholding obligation of $14,900. The Company repurchased approximately 2,000 of the 5,000 Class A Shares issuedrelated to the employeesESPP and contributions to satisfy their employee tax withholding obligation.the ESPP were nominal.

12.11. 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 atas of June 30, 20222023 and December 31, 2021:2022:
 June 30, 2022December 31, 2021
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
5.625% Notes1,100,000 880,000 1,100,000 1,120,900 
 June 30, 2023December 31, 2022
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
(dollars in thousands)
5.625% Notes$1,100,000 $943,250 $1,100,000 $902,000 
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
Contingent deferred acquisition consideration (Level 3 fair value measurement) is initially recorded at the acquisition date fair value and adjusted at each reporting period. The estimated liability is determined in accordance with models of each business'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 June 30, 2022,2023, the discount rate used to measure these liabilities ranged from 3.0%5.2% to 6.4%5.3%.
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.
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See Note 65 of the Notes included herein for additional information regarding contingent deferred acquisition consideration.
AtAs of June 30, 20222023 and December 31, 2021,2022, the carrying amount of the Company’s financial instruments, including cash, cash equivalents, accounts receivable and accounts payable, approximated fair value because of their short-term maturity.
Non-financial Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
Certain non-financial assets are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value measurement)measurements) and right-of-use lease assets (Level 2 fair value measurement). Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment.
The Company did not recognizerecognized an impairment of goodwill inan intangible asset for the three and six months ended June 30, 20222023. See Note 12 of the Notes included herein for additional information.
The Company recognized an impairment of right-of-use lease assets for the three and 2021.six months ended June 30, 2023 and for the six months ended June 30, 2022. See Note 6 of the Notes included herein for additional information.
13.12. Supplemental Information
SubsidiaryStock Based Awards
Stock-based compensation recognized for awards authorized under the Company’s employee stock incentive plans during the six months ended June 30, 2023 and 2022 was $19.4 million and $16.6 million, respectively. This increase was included as a component of stock-based compensation in Office and general expenses and Cost of services within the Unaudited Consolidated Statements of Operations.
On June 14, 2023, the Company’s compensation committee approved the modification of certain stock appreciation right awards. The modification provides the grantees the option to settle the awards in either cash or Class A Common Stock. As a result, the Company recognized $3.9 million of incremental stock-based compensation expense for the three and six months ended June 30, 2023 and a liability of $8.5 million as of June 30, 2023. The incremental expense is included in Office and general expenses in the Unaudited Consolidated Statement of Operations. The associated liability is included in Accruals and other liabilities in the Unaudited Consolidated Balance Sheets.

Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”). The awards generally provide the employee the right, but not the obligation, to sell itstheir profits interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are primarily settled in cash, andwith certain awards having stock-settlement provisions at the Company’s discretion. The corresponding liability at fair valueassociated with these profits interests awards was $30,379$19.2 million and $21.0 million at June 30, 2023 and December 31, 2022, (Level 3 fair value model),respectively, and is included as a component of Accruals and other liabilities and Other liabilities on the Unaudited Condensed Consolidated Balance Sheets.
Stock-based Compensation    
Total stock-based compensation recognized for these awards was $3.1 million and $4.0 million for the six months ended June 30, 2023 and 2022, respectively. This was $21,152, primarily attributable to $16,572 recognized forincluded as a component of stock-based compensation associated with grantsin Cost of Class A Common Stockservices within the Unaudited Consolidated Statements of Operations.
Transfer of Accounts Receivable
The Company transfers certain of its trade receivable assets to third parties under agreements to sell certain of its accounts receivables. Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer.
The trade receivables transferred to the third parties were $146.5 million and $4,009 recognized$46.8 million for profits interest awards. In the six months ended June 30, 2023 and 2022, respectively. The amount collected and due to the third parties under these arrangements was $2.3 million as of June 30, 2023 and $5.7 million as of December 31, 2022. Fees for these arrangements were recorded in Office and general expenses in the Unaudited Consolidated Statements of Operations and totaled $2.4 million and $0.2 million for the six months ended June 30, 2023 and 2022, respectively.
Impairment and Other Losses
The Company granted approximately 4,488 share based awards.recognized an impairment and other losses charge of $10.6 million for the six months ended June 30, 2023 related to the impairment of an intangible asset totaling $1.4 million, right-of-use lease assets totaling $6.1 million and its related leasehold improvements totaling $3.1 million.
The intangible asset impairment related to the discontinuation of a trade name in the Brand Performance Network reportable segment.
The Company recognized an impairment and other losses charge of $2.3 million and $2.8 million for the three and six months ended June 30, 2022, respectively.

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Current Expected Credit Losses
The Company adopted ASC 326, Current Expected Credit Losses, on January 1, 2023, which requires the measurement and recognition of expected credit losses using a current expected credit loss model. The allowance for credit losses on expected future uncollectible accounts receivable is estimated considering forecasts of future economic conditions in addition to information about past events and current conditions. The adoption resulted in an increase in the allowance for accounts receivables and a decrease to opening Retained earnings of $2.1 million, of which $1.4 million was subsequently allocated to noncontrolling interests. These amounts are presented within the “Other” line on the Statement of Shareholders’ Equity.
14.13. 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.
The Company had an income tax expense for the three months ended June 30, 20222023 of $5,421$5.7 million (on a pre-tax loss of $4.3 million resulting in an effective tax rate of (132.6)%) compared to income tax expense of $5.4 million (on pre-tax income of $30,130$30.1 million resulting in an effective tax rate of 18.0%) compared to income tax expense of $3,348 (on pre-tax income of $22,010 resulting in an effective tax rate of 15.2%) for the three months ended June 30, 2021.2022.
The difference in the effective tax rate of (132.6)% in the three months ended June 30, 2023, as compared to 18.0% in the three months ended June 30, 2022, as comparedis due to 15.2%the pre-tax loss and the tax impact of impairments in the three months ended June 30, 2021 was primarily attributable2023 and out-of-period adjustments. See Note 1 in the Notes to the larger portion of income subject to entity level tax in 2022 as a result of the merger, offset by the impact of increased tax rates recorded in June 30, 2021.
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Unaudited Consolidated Financial Statements.
The Company had an income tax expense for the six months ended June 30, 20222023 of $8,610$8.1 million (on a pre-tax loss of $6.7 million resulting in an effective tax rate of (120.6)%) compared to income tax expense of $8.6 million (on pre-tax income of $65,911$65.9 million resulting in an effective tax rate of 13.1%) compared to income tax expense of $4,021 (on pre-tax income of $27,282 resulting in an effective tax rate of 14.7%) for the six months ended June 30, 2021.2022.
The difference in the effective tax rate of (120.6)% in the six months ended June 30, 2023, as compared to 13.1% in the six months ended June 30, 2022, as comparedis due to 14.7%the pre-tax loss and the tax benefit of impairments offset by an increase in valuation allowance, increase in uncertain tax positions, lower share-based compensation windfalls and out-of-period adjustments in 2023. See Note 1 in the sixNotes to the Unaudited Consolidated Financial Statements.
It is reasonably possible that over the next twelve months ended June 30, 2021 was primarily relatedthe amount of unrecognized tax benefits may decrease by up to deductions for share$2.3 million based compensation vesting in 2022.on expected settlements.
Tax Receivables Agreement
In connection with the closing of the Transactions, we entered into the Tax ReceivablesReceivable Agreement (“TRA”) with OpCo and Stagwell Media, pursuant to which we are, the Company is required to make cash payments to Stagwell Media LP (“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)10) for shares of our Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to us making payments under the TRA.
The Company accounts forTRA liability is an estimate and actual 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 aftercould differ from 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.estimate.
In the first quarter of 2022, the Company had its first exchange of Paired Units for shares of our Class A Common Stock and recorded its initial TRA liability. Further exchanges were made in subsequent quarters in 2022. No exchanges were made in the first half of 2023. As of June 30, 2022,2023, the Company hadhas recorded a TRA liability of $21,385$28.7 million and has recognizedan associated deferred tax benefitsasset of $25,159 as a reduction to the net deferred tax liability on its unaudited condensed consolidated balance sheets in connection with the exchanges of the Paired Units and the projected obligations under the TRA.$33.8 million.
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15.


14. Related Party Transactions
In the ordinary course of business, the Company enters into transactions with related parties, including its affiliates. The transactions may range in the nature and value of services underlying the arrangements. The following table presents significant related party transactions where a third party receives services from the Company:
Total Transaction ValueRevenuesDue From
Related Party
Three Months
Ended June 30,
Six Months
Ended June 30,
June 30,
2022
December 31, 2021
Services2022202120222021
Technological (1)
Ongoing arrangement (6)
$10 $15 $19 $30 $26 $137 
Marketing Services (2)
Ongoing arrangement (6)
$297 $66 $483 $92 $488 $88 
Polling Services (3)
$825$508 $104 $578 $119 $140 $— 
Marketing and Website Development Services (4)
$4,984$1,673 $— $2,923 $— $1,923 $502 
Marketing and Advertising Services (5)
Ongoing arrangement (6)
$2,809 $1,644 $5,367 $1,663 $6,216 4,577 
Polling Services (7)
$3,200$711 $— $953 $— $— $— 
Total Transaction ValueRevenueDue From
Related Party
Three Months Ended June 30,Six Months Ended June 30,June 30,
2023
December 31,
2022
Services2023202220232022
(dollars in thousands)
Marketing and advertising services (1)
Continuous (7)
$444 $147 $1,158 $147 $841 $1,029 
Marketing and advertising services (2)
$3,576 and Continuous (7)
215 507 593 1,072 4,840 4,831 
Marketing and website development services (3)
$7,605 and
Continuous (7)
1,133 2,352 1,943 4,677 299 488 
Polling services (4)
$1,233140 140 292 210 95 280 
Polling services (5)
$683109 368 166 368 118 — 
Polling services (6)
$5,196956 711 956 953 413 — 
Total$2,997 $4,225 $5,108 $7,427 $6,606 $6,628 
(1) Client was founded byA member of the Company’s Chief Executive Officer
(2) Family memberboard of one of the Brands’ partnersdirectors holds an executive leadership position inor is on the clientboard of directors of the client.
(3) Family members of the Brands’ executives hold key leadership positions in the client
(4) Client has significant interest in the Company
(5)(2) Brands’ partners and executives either hold a key leadership position in or are on the Boardboard of Directorsdirectors of the clientclient.
(6) (3)This arrangement was entered into for an indefinite term and is invoiced as services are provided
(7) Founder of the client Client has a significant interest in the CompanyCompany.
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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 June 30,
Six Months
Ended June 30,
June 30,
2022
December 31, 2021
Services2022202120222021
Data Management Services (1)
Ongoing arrangement (4)
$445 $387 $814 $756 $1,062 $623 
Sales and Management Services (2)
Ongoing arrangement (4)
$566 $90 $739 $177 $1,170 $442 
Marketing Services (3)
$120$40 $— $40 $— $40 $— 
(1)(4) FamilyA family member of one of the Brand’s partnersCompany’s Chief Executive Officer holds an executivea key leadership position in the third partyclient.
(2) (5)Chief Executive Officer of the Brand is a shareholder of the affiliate providing the services
(3 ) Family A family member of the Company’s President holds a key leadership position in the clientclient.
(4)(6) This arrangement wasFounder of the client has significant interest in the Company.
(7) Certain of the contractual arrangements within these transactions were entered into for an indefinite term and isare invoiced as services are provided, while others have a fixed definitive contract value.

In 2019, a Brand of the Company, entered into a loan agreement with a thirdrelated party who holds a minority interest in the Brand. The loan receivable of $3,801$1.4 million and $3,784$3.6 million due from the third party is included within Other current assets in the Company’s Unaudited Condensed Consolidated Balance Sheets as of June 30, 20222023 and December 31, 2021,2022, respectively. The Company recognized $77less than $0.1 million and $154$0.1 million for the three and six months ended June 30, 2023, respectively, and less than $0.1 million and $0.2 million for the three and six months ended June 30, 2022, respectively, of interest income within Interest expense, net on its Unaudited Consolidated Statements of Operations. In addition, in 2021, the Brand entered into an arrangement to obtain sales and $76management services from the same third party. Under the arrangement, the Brand has incurred $0.5 million and $151$0.7 million of related party expense for the three and six months ended June 30, 2021,2023, respectively of interest income within interest expense, net on its Unaudited Condensed Consolidated Statements of Operations.
During the three and six months ended June 30, 2021, Stagwell Media made additional non-cash investments in the Company of $1,900$0.5 million and $12,100, respectively. In March 2021, the Company made a non-cash distribution to Stagwell Media of $13,000. Additionally, the Company made cash distributions to Stagwell Media of $11,200 and $26,200$0.7 million for the three and six months ended June 30, 2021,2022, respectively. As of June 30, 2023 and December 31, 2022, $0.5 million and $1.3 million, respectively, was due to the third party.
In 2022, the Company made loans to three employees of a subsidiary each in the amount of approximately $0.9 million, together with interest on the unpaid principal balance at a fixed interest rate equal to 3.5% per annum, compounding quarterly. The cash from the loan was used by the employees to purchase the noncontrolling interest of 13.3% in TMA Direct.
16.15. 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
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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.
DueThe Company made changes to changes in the Company’sits internal management and reporting structure in the secondfirst quarter of 2022,2023, resulting in an update to our reportable segment results for periodssegments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the secondfirst quarter of 20222023 have been recast to reflect the reclassification of certain reporting units (brands)(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 Media 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 aggregation criteria, and includes the elimination of certain intercompany services, as “All Other.” This segment also includes the elimination of intercompany revenue. The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes 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
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complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications. The brandsBrands included in the operating segments that comprise the Integrated Agencies Network reportable segment are as follows: Anomaly Alliance (Anomaly, Concentric Hunter, Mono, YML and Scout (brands)(Brands)), Constellation (72andSunny, Colle McVoy, Hunter, Instrument, Redscout, Hello Design, Team Enterprises, Storyline, and Harris Insights), the Doner Partner Network (Doner, KWT Global, Harris X, Veritas, Doner North, Northstar, which is currently sunsetting, and Yamamoto (brands)(Brands)), Code and Theory (Code and Theory and Y Media Labs) and National Research Group.
These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these operating segments may occasionally compete with each other for new business or have business move between them.
The Stagwell MediaBrand Performance Network (“SMN”BPN”) reportable segment is comprised of a single operating segment. SMNBPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities. Our Brands in this segment aim to provide scaled creative performance through developing and executing sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data. SMN’sBPN’s Brands combineprovide media buyingsolutions such as audience analysis, media planning, and planningbuying across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast, among others) and includes multichannel brandsBrands Assembly, Brand New Galaxy, Crispin Porter Bogusky, Forsman & Bodenfors, Bruce Mau Design, Goodstuff, MMI Agency, digital creative & transformation consultancy Gale, B2B specialist Multiview, Observatory, Vitro, CX specialists Kenna, and travel media experts Ink.
The Communications Network reportable segment is comprised of a single operating segment, our specialist network that provides advocacy, strategic corporate communications, investor relations, public relations, online fundraising and other services to both corporations and political and advocacy organizations and consists of our Allison & Partners, SKDK, (including Sloane & Company), and Targeted Victory brands.
All Other consists of the Company’s digital innovation group and Stagwell Marketing Cloud, including Maru and Epicenter, and products such as PRophet and Reputation Defender (which was sold in September 2021).ARound.
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
33



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 June 30,Six Months Ended June 30,
2023202220232022
(dollars in thousands)
Revenue:
Integrated Agencies Network$354,341 $377,176 $684,133 $725,927 
Brand Performance Network188,028 194,296 401,368 392,083 
Communications Network81,296 98,762 147,756 192,017 
All Other8,600 2,679 21,452 5,789 
Total Revenue$632,265 $672,913 $1,254,709 $1,315,816 
Adjusted EBITDA:
Integrated Agencies Network$74,815 $70,376 $134,200 $139,264 
Brand Performance Network20,773 33,699 44,194 64,947 
Communications Network14,447 17,162 18,460 33,600 
All Other(2,356)(485)(6,161)(609)
Corporate(16,511)(9,433)(27,303)(24,471)
Total Adjusted EBITDA$91,168 $111,319 $163,390 $212,731 
Depreciation and amortization$(35,488)$(32,231)$(68,965)$(63,435)
Impairment and other losses(10,562)(2,266)(10,562)(2,823)
Stock-based compensation(10,546)(13,131)(22,550)(21,152)
Deferred acquisition consideration(392)(13,472)(4,480)(15,369)
Other items, net(12,918)(1,887)(19,338)(6,960)
Total Operating Income$21,262 $48,332 $37,495 $102,992 
Other Income (expenses):
Interest expense, net$(23,680)$(18,151)$(41,869)$(36,880)
Foreign exchange, net(1,478)70 (2,148)(236)
Other, net(416)(121)(196)35 
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates(4,312)30,130 (6,718)65,911 
Income tax expense5,717 5,421 8,101 8,610 
Income (loss) before equity in earnings of non-consolidated affiliates(10,029)24,709 (14,819)57,301 
Equity in income (loss) of non-consolidated affiliates(216)(190)(443)840 
Net income (loss)(10,245)24,519 (15,262)58,141 
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests5,552 (14,056)11,012 (35,003)
Net income (loss) attributable to Stagwell Inc. common shareholders$(4,693)$10,463 $(4,250)$23,138 

Table of Contents
Three Months
Ended June 30,
Six Months
Ended June 30,
2022202120222021
Revenue:(Dollars in Thousands)
Integrated Agencies Network$378,168 $81,639 $728,639 $150,587 
Media Network194,296 70,560 392,083 134,283 
Communications Network97,770 47,738 189,305 90,446 
All Other2,679 9,623 5,789 15,486 
Total Revenue$672,913 $209,560 $1,315,816 $390,802 
Adjusted EBITDA:
Integrated Agencies Network$70,307 $19,755 $139,696 $34,251 
Media Network33,699 9,129 64,947 12,821 
Communications Network17,231 9,962 33,168 17,936 
All Other(485)298 (609)(1,313)
Corporate(9,433)(426)(24,471)(1,135)
Total Adjusted EBITDA$111,319 $38,718 $212,731 $62,560 
Depreciation and amortization$(32,231)$(10,381)$(63,435)$(21,331)
Impairment and other losses(2,266)— (2,823)— 
Stock-based compensation(13,131)— (21,152)— 
Deferred acquisition consideration(13,472)(2,098)(15,369)(6,034)
Other items, net(1,887)(1,808)(6,960)(4,749)
Total Operating Income$48,332 $24,431 $102,992 $30,446 
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Three Months
Ended June 30,
Six Months
Ended June 30,
2022202120222021
(Dollars in Thousands)
Other Income (expenses):
Interest expense, net$(18,151)$(1,935)$(36,880)$(3,286)
Foreign exchange, net70 (385)(236)(1,062)
Other, net(121)(101)35 1,184 
Income before income taxes and equity in earnings of non-consolidated affiliates30,130 22,010 65,911 27,282 
Income tax expense5,421 3,348 8,610 4,021 
Income before equity in earnings of non-consolidated affiliates24,709 18,662 57,301 23,261 
Equity in income (loss) of non-consolidated affiliates(190)(3)840 
Net income24,519 18,659 58,141 23,262 
Net income attributable to noncontrolling and redeemable noncontrolling interests(14,056)(1,314)(35,003)(1,552)
Net income attributable to Stagwell Inc. common shareholders$10,463 $17,345 $23,138 $21,710 
Depreciation and amortization:
Integrated Agencies Network$18,010 $2,691 $36,890 $5,293 
Media Network8,643 5,313 16,839 10,572 
Communications Network2,524 1,395 5,064 2,977 
All Other750 496 1,251 1,518 
Corporate2,304 486 3,391 971 
Total$32,231 $10,381 $63,435 $21,331 
Stock-based compensation
Integrated Agencies Network$4,663 $— $9,736 $— 
Media Network4,969 ��� 6,229 — 
Communications Network649 — 406 — 
All Other— — — 
Corporate2,850 — 4,773 — 
Total$13,131 $— $21,152 $— 
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 43 of the Notes included herein for a summary of the Company’s revenue by geographic region for the three and six months ended June 30, 20222023 and 2021.2022.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis areis based on and should be read in conjunction with our unaudited condensed consolidated financial statements and the notes related thereto included in Part 1, Item 1 of this 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 “Note about Forward-Looking Statements” and “Risk Factors” in this Form 10-Q and “Forward-Looking Statements” and “Risk Factors” in our 20212022 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
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respect to events occurring or periods ending on or after August 2, 2021, to Stagwell Inc. and its direct and indirect subsidiaries. References to a “fiscal year” mean the Company’s year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal 20222023 means the period beginning January 1, 2022,2023, and ending December 31, 2022)2023).

Executive Summary

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 workstrategy is designedintended 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 financial measures described below. Revenue growth is analyzed by reviewing a mix of measurements, including (i) growth by major geographic location, (ii) growth from existing clients and the addition of new clients, (iii) growth by principal capability, (iv) growth from currency changes, and (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 network’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’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.
We continue to monitor the impact on our operations from worldwide events 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 have 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 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 3 of the Unaudited Condensed Consolidated Financial Statements included herein for additional information regarding the Transactions.
Recent Developments
On July 12, 2022, the Company acquired PEP Group Holdings B.V. (“PEP Group”), an omnichannel content creation and adaption production company for approximately $766, 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. Stagwell expects the acquisition of PEP Group will bolster its media and content production capabilities across its global network.
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
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payments of $1,000 and $1,500 on or prior to July 1, 2023 and July 1, 2024, respectively. Stagwell expects Apollo will be integrated with Stagwell’s data and insights unification tool, Consumer Understand and Engagement.
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 brandsportfolio of marketing services firms, which we refer to as “Brands,” offer. A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain an agencya Brand that it may have previously worked with. In addition, if the client is merged or acquired by another company, the marketing communication firm is often changed. 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. In addition, within our Communications Network, client concentration increases during election years due to the cyclical nature of our advocacy Brands. The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season.
Non-GAAP Financial Measures
The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“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
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measures determined in accordance with GAAP. The non-GAAP financial measures included are “organic revenue growth or decline”decline,” “Adjusted EBITDA,” and “Adjusted EBITDA.Diluted EPS.
“Organic revenue growth” and “organic revenue decline” refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the brandsBrands that the Company has held throughout each of the comparable periods presented, and (b) “Net acquisitions (divestitures).” Net acquisitions (divestitures) consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or the same prior year period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year.
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.
This analysis should be read in conjunction withAdjusted Diluted EPS is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income (loss) attributable to Class C shareholders, excluding the interim Unaudited Condensed Consolidated Financial Statements presented in this interim reportimpact of amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, based on total consolidated amounts, then allocated to Stagwell Inc. common shareholders and Class C shareholders, based on their respective income allocation percentage using a normalized effective income tax rate divided by (ii) (a) the annual Audited Consolidated Financial Statementsweighted average number of common shares outstanding plus (b) the weighted average number of shares of Class C common Stock outstanding. Other items includes restructuring costs, acquisition-related expenses, and 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”).non-recurring items. The diluted weighted average shares outstanding include shares of Class C Common Stock as if converted to shares of Class A Common Stock to calculate Adjusted Diluted EPS.
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.
The percentage changes included in the tables hereinin Item 2 herein 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
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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.
DueThe Company made changes to changes in the Company’sits internal management and reporting structure in the secondfirst quarter of 2022,2023, resulting in an update to our reportable segment results for periodssegments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the secondfirst quarter of 20222023 have been recast to reflect the reclassification of certain reporting units (brands)(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 Media 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, and includes the elimination of certain intercompany services, as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Unaudited Condensed Consolidated Financial Statements included herein and Note 2 of the Company’s audited consolidated financial statementsAudited Consolidated Financial Statements included in the 20212022 Form 10-K.
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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 six months ended June 30, 20222023 and 20212022 and the financial condition of the Company as of June 30, 2022.2023.
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Results of Operations:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
(dollars in thousands)
Revenue:
Integrated Agencies Network$354,341 $377,176 $684,133 $725,927 
Brand Performance Network188,028 194,296 401,368 392,083 
Communications Network81,296 98,762 147,756 192,017 
All Other8,600 2,679 21,452 5,789 
Total Revenue$632,265 $672,913 $1,254,709 $1,315,816 
Operating Income$21,262 $48,332 $37,495 $102,992 
Other Income (Expenses):
Interest expense, net$(23,680)$(18,151)$(41,869)$(36,880)
Foreign exchange, net(1,478)70 (2,148)(236)
Other, net(416)(121)(196)35 
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates(4,312)30,130 (6,718)65,911 
Income tax expense5,717 5,421 8,101 8,610 
Income (loss) before equity in earnings of non-consolidated affiliates(10,029)24,709 (14,819)57,301 
Equity in income (loss) of non-consolidated affiliates(216)(190)(443)840 
Net income (loss)(10,245)24,519 (15,262)58,141 
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests5,552 (14,056)11,012 (35,003)
Net income (loss) attributable to Stagwell Inc. common shareholders$(4,693)$10,463 $(4,250)$23,138 
Reconciliation to Adjusted EBITDA:
Net income (loss) attributable to Stagwell Inc. common shareholders$(4,693)$10,463 $(4,250)$23,138 
Non-operating items (1)
25,955 37,869 41,745 79,854 
Operating income21,262 48,332 37,495 102,992 
Depreciation and amortization35,488 32,231 68,965 63,435 
Impairment and other losses10,562 2,266 10,562 2,823 
Stock-based compensation10,546 13,131 22,550 21,152 
Deferred acquisition consideration392 13,472 4,480 15,369 
Other items, net12,918 1,887 19,338 6,960 
Adjusted EBITDA$91,168 $111,319 $163,390 $212,731 
(1) Non-operating items includes items within the Statements of Operations, below Operating Income, and above Net income (loss) attributable to Stagwell Inc. common shareholders.
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Results of Operations:
Three Months
Ended June 30,
Six Months
Ended June 30,
2022202120222021
(Dollars in Thousands)
Revenue
Integrated Agencies Network$378,168 $81,639 $728,639 $150,587 
Media Network194,296 70,560 392,083 134,283 
Communications Network97,770 47,738 189,305 90,446 
All Other2,679 9,623 5,789 15,486 
Total Revenue$672,913 $209,560 $1,315,816 $390,802 
Operating Income$48,332 $24,431 $102,992 $30,446 
Other Income (Expenses)
Interest expense, net$(18,151)$(1,935)$(36,880)$(3,286)
Foreign exchange, net70 (385)(236)(1,062)
Other, net(121)(101)35 1,184 
Income before income taxes and equity in earnings of non-consolidated affiliates30,130 22,010 65,911 27,282 
Income tax expense5,421 3,348 8,610 4,021 
Income before equity in earnings of non-consolidated affiliates24,709 18,662 57,301 23,261 
Equity in income (loss) of non-consolidated affiliates(190)(3)840 
Net income24,519 18,659 58,141 23,262 
Net income attributable to noncontrolling and redeemable noncontrolling interests(14,056)(1,314)(35,003)(1,552)
Net income attributable to Stagwell Inc. common shareholders$10,463 $17,345 $23,138 $21,710 
Reconciliation to Adjusted EBITDA
Net income attributable to Stagwell Inc. common shareholders$10,463 $17,345 $23,138 $21,710 
Non-operating items (1)
37,869 7,086 79,854 8,736 
Operating income48,332 24,431 102,992 30,446 
Depreciation and amortization32,231 10,381 63,435 21,331 
Impairment and other losses2,266 — 2,823 — 
Stock-based compensation13,131 — 21,152 — 
Deferred acquisition consideration13,472 2,098 15,369 6,034 
Other items, net1,887 1,808 6,960 4,749 
Adjusted EBITDA$111,319 $38,718 $212,731 $62,560 
(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 JUNE 30, 20222023 COMPARED TO THREE MONTHS ENDED JUNE 30, 20212022
Consolidated Results of Operations
The components of operating results for the three months ended June 30, 20222023 compared to the three months ended June 30, 20212022 were as follows:
Three Months Ended June 30,Three Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
RevenueRevenue$672,913 $209,560 $463,353 NMRevenue$632,265 $672,913 $(40,648)(6.0)%
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services424,661 122,074 302,587 NMCost of services402,431 424,661 (22,230)(5.2)%
Office and general expensesOffice and general expenses165,423 52,674 112,749 NMOffice and general expenses162,522 165,423 (2,901)(1.8)%
Depreciation and amortizationDepreciation and amortization32,231 10,381 21,850 NMDepreciation and amortization35,488 32,231 3,257 10.1 %
Impairment and other lossesImpairment and other losses2,266 — 2,266 100.0 %Impairment and other losses10,562 2,266 8,296 NM
$624,581 $185,129 $439,452 NM$611,003 $624,581 $(13,578)(2.2)%
Operating income$48,332 $24,431 $23,901 97.8 %
Operating IncomeOperating Income$21,262 $48,332 $(27,070)(56.0)%
Three Months Ended June 30,Three Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
Net RevenueNet Revenue$556,316 $181,844 $374,472 NMNet Revenue$539,060 $556,316 $(17,256)(3.1)%
Billable costsBillable costs116,597 27,716 88,881 NMBillable costs93,205 116,597 (23,392)(20.1)%
RevenueRevenue672,913209,560$463,353 NMRevenue632,265672,913(40,648)(6.0)%
Billable costsBillable costs116,597 27,716 88,881 NMBillable costs93,205 116,597 (23,392)(20.1)%
Staff costsStaff costs349,468 111,781 237,687 NMStaff costs346,193 349,468 (3,275)(0.9)%
Administrative costsAdministrative costs66,349 19,262 47,087 NMAdministrative costs66,192 66,349 (157)(0.2)%
Unbillable and other costs, netUnbillable and other costs, net29,180 12,083 17,097 NMUnbillable and other costs, net35,507 29,180 6,327 21.7 %
Adjusted EBITDAAdjusted EBITDA111,319 38,718 72,601 NMAdjusted EBITDA91,168 111,319 (20,151)(18.1)%
Stock-based compensationStock-based compensation13,131 — 13,131 100.0 %Stock-based compensation10,546 13,131 (2,585)(19.7)%
Depreciation and amortizationDepreciation and amortization32,231 10,381 21,850 NMDepreciation and amortization35,488 32,231 3,257 10.1 %
Deferred acquisition considerationDeferred acquisition consideration13,472 2,098 11,374 NMDeferred acquisition consideration392 13,472 (13,080)(97.1)%
Impairment and other lossesImpairment and other losses2,266 — 2,266 100.0 %Impairment and other losses10,562 2,266 8,296 NM
Other items, netOther items, net1,887 1,808 79 4.4 %Other items, net12,918 1,887 11,031 NM
Operating Income (1)
Operating Income (1)
$48,332 $24,431 $23,901 97.8 %
Operating Income (1)
$21,262 $48,332 $(27,070)(56.0)%
(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 (loss) attributable to Stagwell Inc. common shareholders.
(1) See the Results of Operations section above for a reconciliation of Operating Income to Net income (loss) attributable to Stagwell Inc. common shareholders.
Revenue
Revenue for the three months ended June 30, 20222023 was $672.9$632.3 million, compared to $209.6$672.9 million for the three months ended June 30, 2021, an increase2022, a decrease of $463.4$40.6 million.
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Net Revenue
The components of the fluctuations in net revenue for the three months ended June 30, 20222023 compared to the three months ended June 30, 20212022 were as follows:
Net Revenue - Components of ChangeChangeNet Revenue - Components of ChangeChange
Three Months Ended June 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended June 30, 2022OrganicTotalThree Months Ended June 30, 2022Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended June 30, 2023OrganicTotal
(Dollars in Thousands)(dollars in thousands)
Integrated Agencies NetworkIntegrated Agencies Network$79,400 $2,316 $211,034 $22,092 $235,442 $314,842 27.8 %NMIntegrated Agencies Network$313,441$(1,687)$1,682$(10,281)$(10,286)$303,155(3.3)%(3.3)%
Media Network62,658 263 76,546 32,408 109,217 171,875 51.7 %NM
Brand Performance NetworkBrand Performance Network171,874(2,444)3,812(7,581)(6,213)165,661(4.4)%(3.6)%
Communications NetworkCommunications Network30,170 260 22,460 14,030 36,750 66,920 46.5 %NMCommunications Network68,322(94)849(7,433)(6,678)61,644(10.9)%(9.8)%
All OtherAll Other9,616 (97)(5,694)(1,146)(6,937)2,679 (11.9)%(72.1)%All Other2,6799,931(4,010)5,9218,600NMNM
$181,844 $2,742 $304,346 $67,384 $374,472 $556,316 37.1 %NM$556,316$(4,225)$16,274$(29,305)$(17,256)$539,060(5.3)%(3.1)%
Component % changeComponent % change1.5%NMComponent % change(0.8)%2.9%(5.3)%(3.1)%
For the three months ended June 30, 2022,2023, organic net revenue increased $67.4decreased $29.3 million, or 37.1%5.3%. Organic The decrease in organic revenue grew primarily across all segments. Such growth was primarily attributable to increasedthe loss of clients, and a decline in spending by existing clients and business with new clients. The increase in net acquisitionacquisitions (divestitures) was primarily driven by the acquisition of MDC. In addition, the increase in net acquisition (divestitures) was attributable to the acquisitions of Brand New Galaxy (“BNG”)Maru, BNG, and GoodStuff Holdings Limited (“Goodstuff”).Wolfgang.
The geographic mix in net revenues for the three months ended June 30, 20222023 and 20212022 is as follows:
Three Months Ended June 30,Three Months Ended June 30,
20222021 20232022
(Dollars in Thousands)(dollars in thousands)
United StatesUnited States$450,879 $156,983 United States$423,233 $450,879 
United KingdomUnited Kingdom42,070 17,651 United Kingdom45,656 42,070 
OtherOther63,367 7,210 Other70,171 63,367 
TotalTotal$556,316 $181,844 Total$539,060 $556,316 
Impairment and Other Losses
The Company recognized an impairment and other losses charge of $10.6 million during the three months ended June 30, 2023 related to the impairment of an intangible asset totaling $1.4 million, right-of-use lease assets totaling $6.1 million and the associated leasehold improvements totaling $3.1 million. The expense was recorded within Impairment and other losses on the Unaudited Consolidated Statements of Operations.
Operating Income
Operating Income for the three months ended June 30, 2023 was $21.3 million, compared to operating income of $48.3 million for the three months ended June 30, 2022, representing a decrease of $27.1 million. The change in Operating Income was $48.3 million comparedprimarily attributable to $24.4 million for the three months ended June 30, 2021, representinga decrease in Revenue, Cost of services and Office and general expenses, and an increase of $23.9 million.in Depreciation and amortization and Impairment and other losses.
The three months ended June 30, 2022decrease in Cost of services was impacted primarily attributable to lower billable costs, commensurate with lower revenue, and lower stock-based compensation expense, partially offset by an increase in revenue and expenses dueunbillable costs. The increase in unbillable costs was primarily attributable to the acquisition of MDC,Maru.
The decrease in Office and costs associated withgeneral expenses was primarily attributable to a decrease in deferred acquisition consideration expense, partially offset by an increase in services provided. stock-based compensation expense (as detailed above), and an increase in costs incurred with an event to market the Company.
Stock-based compensation expense increased,decreased approximately $2.6 million, primarily drivenattributable to a decrease in the value of profits interests awards, partially offset by an increase related to the modification of a certain share-based payment award.

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Deferred acquisition consideration decreased approximately $13.1 million, primarily attributable to the reduction in fair value of certain awards issued to employeesas well as the earn out periods for certain other awards ending in 2022 and the first quarter of 2022. 2023.
Depreciation and amortization was higher dueexpense increased approximately $3.3 million, primarily attributable to the recognition of amortizable intangible assets in connection with the acquisitionacquisitions of MDC.Wolfgang and Maru.
Other, net
Other, net, for the three months ended June 30, 20222023 was expense of $0.1$0.4 million, compared to expense of $0.1 million for the three months ended June 30, 2021.2022, representing an increase of $0.3 million.
Foreign Exchange Transaction Gain (Loss)
The foreign exchange loss for the three months ended June 30, 2023 was $1.5 million compared to a gain of $0.1 million for the three months ended June 30, 2022, was $0.1 million comparedprimarily attributable to a loss of $0.4 million for the three months ended June 30, 2021.U.S. dollar strengthening against the Euro and British Pound.
Interest Expense, Net
Interest expense, net, for the three months ended June 30, 20222023 was $18.2$23.7 million, compared to $1.9$18.2 million for the three months ended June 30, 2021,2022, representing an increase of $16.2$5.5 million, primarily driven byattributable to a higher level of debt, principally due to amounts outstanding under the Revolving Credit Agreement.
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Income Tax Expense
The Company had an income tax expense for the three months ended June 30, 20222023 of $5.7 million (on a pre-tax loss of $4.3 million resulting in an effective tax rate of (132.6)%), compared to income tax expense of $5.4 million (on a pre-tax income of $30.1 million resulting in an effective tax rate of 18.0%) compared to income tax expense of $3.3 million (on pre-tax income of $22.0 million resulting in an effective tax rate of 15.2%) for the three months ended June 30, 2021.2022.
The difference in the effective tax rate of (132.6)% in the three months ended June 30, 2023 as compared to 18.0% in the three months ended June 30, 2022, as comparedis due to 15.2%the pre-tax loss and the tax impact of impairments in the three months ended June 30, 2021 was primarily related2023 and out-of-period adjustments. See Note 1 in the Notes to additional deductions for share based compensation vesting in 2022.the Unaudited Consolidated Financial Statements.
Noncontrolling and Redeemable Noncontrolling Interests
The effect of noncontrolling and redeemable noncontrolling interests for the three months ended June 30, 20222023 was $14.1a loss of $5.6 million compared to $1.3income of $14.1 million for the three months ended June 30, 2021.2022, representing a decrease of $19.6 million, primarily attributable to noncontrolling interest income for the three months ended June 30, 2022 associated with holders of Class C Common Stock.
Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders
As a result of the foregoing, net incomeloss attributable to Stagwell Inc. common shareholders for the three months ended June 30, 20222023 was $10.5$4.7 million, compared to net income attributable to Stagwell Inc. common shareholders of $17.3$10.5 million for the three months ended June 30, 2021.2022.
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Earnings (Loss) Per Share
EPS and Adjusted Diluted EPS for the three months ended June 30, 2023 was as follows:
GAAP
Adjustments (1)
Non-GAAP
(dollars in thousands)
Net income (loss) attributable to Stagwell Inc. common shareholders$(4,693)$23,635 $18,942 
Net income attributable to Class C shareholders— 25,529 25,529 
Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income$(4,693)$49,164 $44,471 
Weighted average number of common shares outstanding115,400 9,135 124,535 
Weighted average number of common Class C shares outstanding— 155,821 155,821 
Weighted average number of shares outstanding115,400 164,956 280,356 
EPS and Adjusted Diluted EPS$(0.04)$0.16 
Adjustments to Net income (loss) (1)
Pre-TaxTaxNet
(dollars in thousands)
Amortization$28,690 $(7,401)$21,289 
Impairment and other losses10,562 (1,237)9,325 
Stock-based compensation10,546 (2,786)7,760 
Deferred acquisition consideration392 (212)180 
Other items, net12,918 (3,165)9,753 
Tax adjustments— 5,409 5,409 
Total add-backs$63,108 $(9,392)$53,716 
Net loss attributable to Class C shareholders(4,552)
$49,164 
Allocation of adjustments to Net income (loss)
Net income attributable to Stagwell Inc. common shareholders$23,635 
Net income attributable to Class C shareholders30,081 
Net loss attributable to Class C shareholders(4,552)
25,529 
$49,164 
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

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Diluted EPS and Adjusted Diluted EPS for the three months ended June 30, 2022 was as follows:
GAAP
Adjustments (1)
Non-GAAP
(dollars in thousands)
Net income attributable to Stagwell Inc. common shareholders$10,463 $19,964 $30,427 
Net income attributable to Class C shareholders14,020 25,297 39,317 
Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income$24,483 $45,261 $69,744 
Weighted average number of common shares outstanding131,603 — 131,603 
Weighted average number of common Class C shares outstanding164,811 — 164,811 
Weighted average number of shares outstanding296,414 — 296,414 
Diluted EPS and Adjusted Diluted EPS$0.08 $0.24 
Adjustments to Net income (1)
Pre-TaxTaxNet
(dollars in thousands)
Amortization$25,166 $(5,033)$20,133 
Impairment and other losses2,266 (453)1,813 
Stock-based compensation13,131 (2,626)10,505 
Deferred acquisition consideration13,472 (2,694)10,778 
Other items, net1,887 (407)1,480 
Tax adjustments— 552 552 
$55,922 $(10,661)$45,261 
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

Adjusted EBITDA
Adjusted EBITDA for the three months ended June 30, 20222023 was $111.3$91.2 million, compared to $38.7$111.3 million for the three months ended June 30, 2021,2022, representing an increasea decrease of $72.6$20.2 million, driven byprimarily attributable to the increasedecrease in revenue, partially offset by higherlower operating expenses primarily due to the impact of the acquisition of MDC.expenses.
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Integrated Agencies Network
The components of operating results for the three months ended June 30, 20222023 compared to the three months ended June 30, 20212022 were as follows:
Three Months Ended June 30,Three Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
RevenueRevenue$378,168 $81,639 $296,529 NMRevenue$354,341 $377,176 $(22,835)(6.1)%
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services246,895 46,261 200,634 NMCost of services226,283 246,284 (20,001)(8.1)%
Office and general expensesOffice and general expenses72,561 17,930 54,631 NMOffice and general expenses60,018 72,090 (12,072)(16.7)%
Depreciation and amortizationDepreciation and amortization18,010 2,691 15,319 NMDepreciation and amortization20,214 17,990 2,224 12.4 %
Impairment and other lossesImpairment and other losses784 — 784 100.0 %Impairment and other losses9,175 784 8,391 NM
$338,250 $66,882 $271,368 NM$315,690 $337,148 $(21,458)(6.4)%
Operating income$39,918 $14,757 $25,161 NM
Operating IncomeOperating Income$38,651 $40,028 $(1,377)(3.4)%

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Three Months Ended June 30,

20232022Change
(dollars in thousands)
$%
Net Revenue$303,155 $313,441 $(10,286)(3.3)%
Billable costs51,186 63,735 (12,549)(19.7)%
Revenue354,341 377,176 (22,835)(6.1)%
Billable costs51,186 63,735 (12,549)(19.7)%
Staff costs183,285 194,688 (11,403)(5.9)%
Administrative costs28,285 31,250 (2,965)(9.5)%
Unbillable and other costs, net16,770 17,127 (357)(2.1)%
Adjusted EBITDA74,815 70,376 4,439 6.3 %
Stock-based compensation1,041 4,663 (3,622)(77.7)%
Depreciation and amortization20,214 17,990 2,224 12.4 %
Deferred acquisition consideration1,109 6,181 (5,072)(82.1)%
Impairment and other losses9,175 784 8,391 NM
Other items, net4,625 730 3,895 NM
Operating Income$38,651 $40,028 $(1,377)(3.4)%
Table of Contents`
Three Months Ended June 30,

20222021Change
(Dollars in Thousands)
$%
Net Revenue$314,842 $79,400 $235,442 NM
Billable costs63,326 2,239 61,087 NM
Revenue378,168 81,639 296,529 NM
Billable costs63,326 2,239 61,087 NM
Staff costs195,942 44,807 151,135 NM
Administrative costs31,465 6,036 25,429 NM
Unbillable and other costs, net17,128 8,802 8,326 94.6 %
Adjusted EBITDA70,307 19,755 50,552 NM
Stock-based compensation4,663 — 4,663 100.0 %
Depreciation and amortization18,010 2,691 15,319 NM
Deferred acquisition consideration6,181 2,098 4,083 NM
Impairment and other losses784 — 784 100.0 %
Other items, net751 209 542 NM
Operating Income$39,918 $14,757 $25,161 NM
Revenue
Revenue for the three months ended June 30, 20222023 was $378.2$354.3 million, compared to $81.6$377.2 million for the three months ended June 30, 2021, an increase2022, a decrease of $296.5$22.8 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended June 30, 20222023 compared to the three months ended June 30, 20212022 were as follows:
Net Revenue - Components of ChangeChange
Three Months Ended June 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended June 30, 2022OrganicTotal
(Dollars in Thousands)
Integrated Agencies Network$79,400 $2,316 $211,034 $22,092 $235,442 $314,842 27.8 %NM
Component % change2.9%NM
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Net Revenue - Components of ChangeChange
Three Months Ended June 30, 2022Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended June 30, 2023OrganicTotal
(dollars in thousands)
Integrated Agencies Network$313,441$(1,687)$1,682$(10,281)$(10,286)$303,155(3.3)%(3.3)%
Component % change(0.5)%0.5%(3.3)%(3.3)%
The increasedecline in organic net revenue was primarily attributable to increasedthe loss of clients in the retail sector and clients who withheld spending by existing and new clients, primarily driven by creative, digital transformationin the financial, communications and consumer insights services.products sector due to uncertain macro-economic factors. The increase in net acquisition (divestitures) was primarily driven byattributable to the acquisition of MDC.Wolfgang.
Operating Income
Operating Income for the three months ended June 30, 2023 was $38.7 million, compared to $40.0 million for the three months ended June 30, 2022, representing a decrease of $1.3 million. The increasechange in Operating Income was primarily attributable to a decrease in Revenue, Cost of services and Office and general expenses, was driven by the impact of the acquisition of MDC and costs associated with an increase in Depreciation and amortization and Impairment and other losses.
The decrease in Cost of services provided. was primarily attributable to lower billable costs, commensurate with lower revenue, a decrease in stock-based compensation expense, and a decrease in staff costs, partially offset by an increase in severance related costs, both associated with cost saving initiatives.
Stock-based compensation expense increased,decreased approximately $3.6 million, primarily driven byattributable to awards issued to employees that fully vested in the second half of 2022 and the first quarter of 2022. 2023.
The decrease in Office and general expenses was primarily attributable to a decrease in deferred acquisition consideration expense, staff costs and other compensation-related expenses (as described above) and stock-based compensation expense (as described above).
Deferred acquisition consideration decreased approximately $5.1 million, primarily attributable to the earnout periods for certain awards ending in 2022 and the first quarter of 2023.
Depreciation and amortization grew dueexpense increased approximately $2.2 million, primarily attributable to the recognition of amortizable intangible assets following thein connection with acquisition of MDC. Deferred acquisition consideration expenseWolfgang.
Impairment and other losses increased approximately $8.4 million due to the recognitionimpairment of additional liabilities followingtwo right-of-use assets and the acquisitionrelated leasehold improvements in the second quarter of MDC.2023.
Operating incomeIncome was lower and Adjusted EBITDA werewas higher, driven by an increasethe decrease in revenues, partially offset by higherrevenue and expenses as detailed above.

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MediaBrand Performance Network
The components of operating results for the three months ended June 30, 20222023 compared to the three months ended June 30, 20212022 were as follows:
Three Months Ended June 30,Three Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
RevenueRevenue$194,296 $70,560 $123,736 NMRevenue$188,028 $194,296 $(6,268)(3.2)%
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services113,098 38,949 74,149 NMCost of services116,047 113,098 2,949 2.6 %
Office and general expensesOffice and general expenses57,690 22,772 34,918 NMOffice and general expenses55,622 57,690 (2,068)(3.6)%
Depreciation and amortizationDepreciation and amortization8,643 5,313 3,330 62.7 %Depreciation and amortization8,548 8,643 (95)(1.1)%
Impairment and other lossesImpairment and other losses1,387 — 1,387 100.0 %
$181,604 $179,431 $2,173 1.2 %
$179,431 $67,034 $112,397 NM
Operating income$14,865 $3,526 $11,339 NM
Operating IncomeOperating Income$6,424 $14,865 $(8,441)(56.8)%

Three Months Ended June 30,Three Months Ended June 30,


20222021Change

20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
Net RevenueNet Revenue$171,875 $62,658 $109,217 NMNet Revenue$165,661 $171,874 $(6,213)(3.6)%
Billable costsBillable costs22,421 7,902 14,519 NMBillable costs22,367 22,422 (55)(0.2)%
RevenueRevenue194,296 70,560 123,736 NMRevenue188,028 194,296 (6,268)(3.2)%
Billable costsBillable costs22,421 7,902 14,519 NMBillable costs22,367 22,422 (55)(0.2)%
Staff costsStaff costs102,285 41,477 60,808 NMStaff costs105,868 102,284 3,584 3.5 %
Administrative costsAdministrative costs24,001 9,782 14,219 NMAdministrative costs24,928 24,002 926 3.9 %
Unbillable and other costs, netUnbillable and other costs, net11,890 2,270 9,620 NMUnbillable and other costs, net14,092 11,889 2,203 18.5 %
Adjusted EBITDAAdjusted EBITDA33,699 9,129 24,570 NMAdjusted EBITDA20,773 33,699 (12,926)(38.4)%
Stock-based compensationStock-based compensation4,969 — 4,969 100.0 %Stock-based compensation964 4,969 (4,005)(80.6)%
Depreciation and amortizationDepreciation and amortization8,643 5,313 3,330 62.7 %Depreciation and amortization8,548 8,643 (95)(1.1)%
Deferred acquisition considerationDeferred acquisition consideration3,773 — 3,773 100.0 %Deferred acquisition consideration161 3,773 (3,612)(95.7)%
Impairment and other lossesImpairment and other losses1,387 — 1,387 100.0 %
Other items, netOther items, net1,449 290 1,159 NMOther items, net3,289 1,449 1,840 NM
Operating IncomeOperating Income$14,865 $3,526 $11,339 NMOperating Income$6,424 $14,865 $(8,441)(56.8)%
Revenue
Revenue for the three months ended June 30, 20222023 was $194.3$188.0 million, compared to $70.6$194.3 million for the three months ended June 30, 2021, an increase2022, a decrease of $123.7$6.3 million.
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Net Revenue
The components of the fluctuations in net revenue for the three months ended June 30, 20222023 compared to the three months ended June 30, 20212022 were as follows:
Net Revenue - Components of ChangeChangeNet Revenue - Components of ChangeChange
Three Months Ended June 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended June 30, 2022OrganicTotalThree Months Ended June 30, 2022Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended June 30, 2023OrganicTotal
(Dollars in Thousands)(dollars in thousands)
Media Network62,658 263 76,546 32,408 109,217 171,875 51.7 %NM
Brand Performance NetworkBrand Performance Network$171,874$(2,444)$3,812$(7,581)$(6,213)$165,661(4.4)%(3.6)%
Component % changeComponent % change0.4%NMComponent % change(1.4)%2.2%(4.4)%(3.6)%
The increasedecline in organic net revenue was primarily attributable to new clientsdecreased spending in the communications, retail and increased spending by existing clients, primarily driven by the seasonal business of a new client and the recovery of the travel industry.consumer products sector. The increase in net acquisitionacquisitions (divestitures) was primarily driven by a $2.3 million increase in revenue from the acquisitionsacquisition of MDC, GoodStuff,BNG.
Operating Income
Operating Income for the three months ended June 30, 2023 was $6.4 million compared to $14.9 million for the three months ended June 30, 2022, representing a decrease of $8.4 million. The change in Operating Income was primarily attributable to a decrease in Revenue and BNG.an increase in Costs of services and Impairment and other losses, partially offset by a decrease in Office and general expenses.
The increase in Cost of services was primarily attributable to an increase staff and unbillable costs due to the acquisition of BNG, partially offset by a decrease in stock-based compensation expense.
Stock-based compensation expense decreased approximately $4.0 million, primarily attributable to a decrease in the value of profits interests awards.
The decrease in Office and general expenses was primarily driven byattributable to a decrease in deferred acquisition consideration expense.
Deferred acquisition consideration decreased approximately $3.6 million primarily attributable to the impactreduction in fair value of certain awards as well as the acquisitions of MDC, BNG and Goodstuff and costs associated with an increase in services provided. Stock-based compensation expense increased, primarily driven by awards issued to employeesearn out period for a certain award ending in the first quarter of 2022. Deferred acquisition consideration expense2023.
Impairment and other losses increased by approximately $1.4 million due to the assumptionimpairment of additional liabilities primarilyan intangible asset in connection with the acquisitionssecond quarter of MDC and Goodstuff. Depreciation and amortization expense increased primarily due to the recognition of amortizable intangible assets in connection with the acquisitions of MDC and Goodstuff.2023.
Operating incomeIncome and Adjusted EBITDA were driven bydecreased due to a decrease in revenues and an increase in revenues, partially offset by higher expenses as detailed above.
Communications Network
The components of operating results for the three months ended June 30, 20222023 compared to the three months ended June 30, 20212022 were as follows:
Three Months Ended June 30,Three Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
RevenueRevenue$97,770 $47,738 $50,032 NMRevenue$81,296 $98,762 $(17,466)(17.7)%
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services63,239 31,153 32,086 NMCost of services51,079 63,850 (12,771)(20.0)%
Office and general expensesOffice and general expenses21,511 6,825 14,686 NMOffice and general expenses15,783 21,982 (6,199)(28.2)%
Depreciation and amortizationDepreciation and amortization2,524 1,395 1,129 80.9 %Depreciation and amortization2,719 2,544 175 6.9 %
$87,274 $39,373 $47,901 NM$69,581 $88,376 $(18,795)(21.3)%
Operating income$10,496 $8,365 $2,131 25.5 %
Operating IncomeOperating Income$11,715 $10,386 $1,329 12.8 %
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Three Months Ended June 30,Three Months Ended June 30,


20222021Change

20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
Net RevenueNet Revenue$66,920 $30,170 $36,750 NMNet Revenue$61,644 $68,322 $(6,678)(9.8)%
Billable costsBillable costs30,850 17,568 13,282 75.6 %Billable costs19,652 30,440 (10,788)(35.4)%
RevenueRevenue97,770 47,738 50,032 NMRevenue81,296 98,762 (17,466)(17.7)%
Billable costsBillable costs30,850 17,568 13,282 75.6 %Billable costs19,652 30,440 (10,788)(35.4)%
Staff costsStaff costs42,014 18,683 23,331 NMStaff costs38,357 43,269 (4,912)(11.4)%
Administrative costsAdministrative costs7,520 2,086 5,434 NMAdministrative costs8,714 7,734 980 12.7 %
Unbillable and other costs, netUnbillable and other costs, net155 (561)716 NMUnbillable and other costs, net126 157 (31)(19.7)%
Adjusted EBITDAAdjusted EBITDA17,231 9,962 7,269 73.0 %Adjusted EBITDA14,447 17,162 (2,715)(15.8)%
Stock-based compensationStock-based compensation649 — 649 100.0 %Stock-based compensation418 649 (231)(35.6)%
Depreciation and amortizationDepreciation and amortization2,524 1,395 1,129 80.9 %Depreciation and amortization2,719 2,544 175 6.9 %
Deferred acquisition considerationDeferred acquisition consideration3,518 — 3,518 100.0 %Deferred acquisition consideration(893)3,518 (4,411)NM
Other items, netOther items, net44 202 (158)(78.2)%Other items, net488 65 423 NM
Operating IncomeOperating Income$10,496 $8,365 $2,131 25.5 %Operating Income$11,715 $10,386 $1,329 12.8 %
Revenue
Revenue for the three months ended June 30, 20222023 was $97.8$81.3 million, compared to $47.7$98.8 million for the three months ended June 30, 2021, an increase2022, a decrease of $50.0$17.5 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended June 30, 20222023 compared to the three months ended June 30, 20212022 were as follows:
Net Revenue - Components of ChangeChangeNet Revenue - Components of ChangeChange
Three Months Ended June 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended June 30, 2022OrganicTotalThree Months Ended June 30, 2022Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended June 30, 2023OrganicTotal
(Dollars in Thousands)(dollars in thousands)
Communications NetworkCommunications Network30,170 260 22,460 14,030 36,750 66,920 46.5 %NMCommunications Network$68,322$(94)$849$(7,433)$(6,678)$61,644(10.9)%(9.8)%
Component % changeComponent % change0.9%74.4%Component % change(0.1)%1.2%(10.9)%(9.8)%
The increasedecline in organic net revenue was attributable to increaseddecreased spending, by existing and new clients, primarily driven by higher public relations as well asdue to lower advocacy services as these are typicallycompared to higher during election years.spending in the second quarter of 2022 associated with the 2022 elections and decreased spending in the technology sector.
Operating Income
Operating Income for the three months ended June 30, 2023 was $11.7 million, compared to $10.4 million for the three months ended June 30, 2022, representing an increase of $1.3 million. The increasechange in netOperating Income was primarily attributable to a decrease in Revenue, Costs of services and Office and general expenses.
The decrease in Cost of services was primarily attributable to lower billable costs, commensurate with lower revenue, and a decrease in staff costs associated with cost saving initiatives.
The decrease in Office and general expenses was primarily attributable to a decrease in staff costs (as detailed above) and deferred acquisition (divestitures)consideration expense.
Deferred acquisition consideration decreased approximately $4.4 million, attributable to the reduction in fair value of the awards.
48



Operating Income was primarilyhigher and Adjusted EBITDA was lower, driven by the acquisition of MDC.
The increasedecrease in expenses was driven by the impact from the acquisition of MDCrevenue and costs associated with an increasea decrease in services provided. Deferred acquisition consideration expense increased due to the assumption of additional liabilities in connection with the acquisition of MDC. Depreciation and amortization grew due to the recognition of amortizable intangible assets in connection with the acquisition of MDC.
Operating income and Adjusted EBITDA were driven by an increase in revenues, partially offset by higher expenses as detailed above.
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All Other
The components of operating results for the three months ended June 30, 20222023 compared to the three months ended June 30, 20212022 were as follows:
Three Months Ended June 30,Three Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
RevenueRevenue$2,679 $9,623 $(6,944)(72.2)%Revenue$8,600 $2,679 $5,921 NM
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services1,429 5,711 (4,282)(75.0)%Cost of services8,913 1,429 7,484 NM
Office and general expensesOffice and general expenses1,757 3,614 (1,857)(51.4)%Office and general expenses2,972 1,757 1,215 69.2 %
Depreciation and amortizationDepreciation and amortization750 496 254 51.2 %Depreciation and amortization2,066 750 1,316 NM
Impairment and other lossesImpairment and other losses1,482 — 1,482 100.0 %Impairment and other losses— 1,482 (1,482)(100.0)%
$5,418 $9,821 $(4,403)(44.8)%$13,951 $5,418 $8,533 NM
Operating loss$(2,739)$(198)$(2,541)NM
Operating LossOperating Loss$(5,351)$(2,739)$(2,612)95.4 %

Three Months Ended June 30,Three Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
Net RevenueNet Revenue$2,679 $9,616 $(6,937)(72.1)%Net Revenue$8,600 $2,679 $5,921 NM
Billable costs— (7)(100.0)%
Revenue(1)Revenue(1)2,679 9,623 (6,944)(72.2)%Revenue(1)8,600 2,679 5,921 NM
Billable costs— (7)(100.0)%
Staff costsStaff costs2,664 4,838 (2,174)(44.9)%Staff costs10,246 2,664 7,582 NM
Administrative costs(1)Administrative costs(1)493 2,773 (2,280)(82.2)%Administrative costs(1)(3,800)493 (4,293)NM
Unbillable and other costs, netUnbillable and other costs, net1,707 (1,700)(99.6)%Unbillable and other costs, net4,510 4,503 NM
Adjusted EBITDAAdjusted EBITDA(485)298 (783)NMAdjusted EBITDA(2,356)(485)(1,871)NM
Stock-based compensationStock-based compensation127 — 127 100.0 %
Depreciation and amortizationDepreciation and amortization750 496 254 51.2 %Depreciation and amortization2,066 750 1,316 NM
Deferred acquisition considerationDeferred acquisition consideration15 — 15 100.0 %
Impairment and other lossesImpairment and other losses1,482 — 1,482 100.0 %Impairment and other losses— 1,482 (1,482)(100.0)%
Other items, netOther items, net22 — 22 100.0 %Other items, net787 22 765 NM
Operating LossOperating Loss$(2,739)$(198)$(2,541)NMOperating Loss$(5,351)$(2,739)$(2,612)95.4 %
(1)All Other Revenue and Administrative costs include approximately $6.0 million of eliminations of intercompany services.
Revenue
Revenue for the three months ended June 30, 20222023 was $2.7$8.6 million, compared to $9.6$2.7 million for the three months ended June 30, 2021, a decrease2022, an increase of $6.9$5.9 million.
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Net Revenue
The components of the fluctuations in net revenue for the three months ended June 30, 20222023 compared to the three months ended June 30, 20212022 were as follows:
Net Revenue - Components of ChangeChangeNet Revenue - Components of ChangeChange
Three Months Ended June 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended June 30, 2022OrganicTotalThree Months Ended June 30, 2022Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeThree Months Ended June 30, 2023OrganicTotal
(Dollars in Thousands)(dollars in thousands)
All OtherAll Other$9,616 $(97)$(5,694)$(1,146)$(6,937)$2,679 (11.9)%(72.1)%All Other$2,679$—$9,931$(4,010)$5,921$8,600NMNM
Component % changeComponent % change(1.0)%(59.2)%Component % change—%NMNMNM
The decreasedecline in organic net revenue was primarily attributable to a reductionthe elimination of intercompany revenue during the three months ended June 30, 2023. The increase in services at the central innovations group.
The decrease related to net acquisitions (divestitures) was primarily driven by a $7.6 million increase in revenue from the acquisition of Maru.
Operating Loss
Operating Loss for the three months ended June 30, 2023 was $5.4 million compared to $2.7 million for the three months ended June 30, 2022, representing an increase of $2.6 million. The change in Operating Loss was primarily attributable to an increase in Revenue, more than offset by an increase in Cost of services, Office and general expenses and Depreciation and amortization expense.
The increase in Cost of services was primarily attributable to higher unbillable and staff costs, commensurate with higher revenue, and due to the acquisition of Maru.
The increase in Office and general expenses was primarily attributable to an increase in staff costs primarily associated with the acquisition of Maru, partially offset by intercompany eliminations.
Depreciation and amortization expense increased approximately $1.3 million, primarily attributable to the salerecognition of Reputation Defenderintangible assets in connection with the third quarteracquisition of 2021.Maru.
IncreasesThe increase in operating lossOperating Loss and decreasesdecrease in Adjusted EBITDA were driven by decrease in revenues, partiallyhigher revenue, more than offset by lowerhigher expenses driven by the sale of Reputation Defender.as detailed above.
Corporate
The components of operating results for the three months ended June 30, 20222023 compared to the three months ended June 30, 20212022 were as follows:
Three Months Ended June 30,Three Months Ended June 30,


20222021Change

20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
Staff costsStaff costs$6,563 $1,976 $4,587 NMStaff costs$8,437 $6,563 $1,874 28.6 %
Administrative costsAdministrative costs2,870 (1,415)4,285 NMAdministrative costs8,065 2,870 5,195 NM
Unbillable and other costs, netUnbillable and other costs, net— (135)135 100.0 %Unbillable and other costs, net— 100.0 %
Adjusted EBITDAAdjusted EBITDA(9,433)(426)(9,007)NMAdjusted EBITDA(16,511)(9,433)(7,078)75.0 %
Stock-based compensationStock-based compensation2,850 — 2,850 100.0 %Stock-based compensation7,996 2,850 5,146 NM
Depreciation and amortizationDepreciation and amortization2,304 486 1,818 NMDepreciation and amortization1,941 2,304 (363)(15.8)%
Other items, netOther items, net(379)1,107 (1,486)NMOther items, net3,729 (379)4,108 NM
Operating LossOperating Loss$(14,208)$(2,019)$(12,189)NMOperating Loss$(30,177)$(14,208)$(15,969)NM
Operating expenses increasedLoss for the three months ended June 30, 2023 was $30.2 million, compared to $14.2 million for the three months ended June 30, 2022, representing an increase of $16.0 million. The increase in Operating Loss was primarily in connection with the acquisition of MDC, including professional fees associated with the transaction andattributable to stock-based compensation expense and administrative costs.
Stock-based compensation expense increased approximately $5.1 million, primarily attributable to the modification of a certain share-based payment award, awards issuedgranted in the second quarter of 2023, and the completed vesting of awards in the second half of 2022 as well as the first quarter of 2022.2023.
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Administrative costs increased approximately $5.2 million, primarily attributable to costs associated with an event to market the Company.

SIX MONTHS ENDED JUNE 30, 20222023 COMPARED TO SIX MONTHS ENDED JUNE 30, 20212022
Consolidated Results of Operations
The components of operating results for the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were as follows:
Six Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
RevenueRevenue$1,315,816 $390,802 $925,014 NMRevenue$1,254,709 $1,315,816 $(61,107)(4.6)%
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services836,631 234,073 602,558 NMCost of services816,329 836,631 (20,302)(2.4)%
Office and general expensesOffice and general expenses309,935 104,952 204,983 NMOffice and general expenses321,358 309,935 11,423 3.7 %
Depreciation and amortizationDepreciation and amortization63,435 21,331 42,104 NMDepreciation and amortization68,965 63,435 5,530 8.7 %
Impairment and other lossesImpairment and other losses$2,823 $— $2,823 100.0 %Impairment and other losses10,562 2,823 7,739 NM
$1,212,824 $360,356 $852,468 NM$1,217,214 $1,212,824 $4,390 0.4 %
Operating income$102,992 $30,446 $72,546 NM
Operating IncomeOperating Income$37,495 $102,992 $(65,497)(63.6)%
Six Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
Net RevenueNet Revenue$1,082,953 $339,918 $743,035 NMNet Revenue$1,060,722 $1,082,953 $(22,231)(2.1)%
Billable costsBillable costs232,863 50,884 181,979 NMBillable costs193,987 232,863 (38,876)(16.7)%
RevenueRevenue1,315,816390,802$925,014 NMRevenue1,254,7091,315,816(61,107)(4.6)%
Billable costsBillable costs232,863 50,884 181,979 NMBillable costs193,987 232,863 (38,876)(16.7)%
Staff costsStaff costs690,106 209,691 480,415 NMStaff costs695,870 690,106 5,764 0.8 %
Administrative costsAdministrative costs122,643 39,316 83,327 NMAdministrative costs134,368 122,643 11,725 9.6 %
Unbillable and other costs, netUnbillable and other costs, net57,473 28,351 29,122 NMUnbillable and other costs, net67,094 57,473 9,621 16.7 %
Adjusted EBITDAAdjusted EBITDA212,731 62,560 150,171 NMAdjusted EBITDA163,390 212,731 (49,341)(23.2)%
Stock-based compensationStock-based compensation21,152 — 21,152 100.0 %Stock-based compensation22,550 21,152 1,398 6.6 %
Depreciation and amortizationDepreciation and amortization63,435 21,331 42,104 NMDepreciation and amortization68,965 63,435 5,530 8.7 %
Deferred acquisition considerationDeferred acquisition consideration15,369 6,034 9,335 NMDeferred acquisition consideration4,480 15,369 (10,889)(70.9)%
Impairment and other lossesImpairment and other losses2,823 — 2,823 100.0 %Impairment and other losses10,562 2,823 7,739 NM
Other items, netOther items, net6,960 4,749 2,211 46.6 %Other items, net19,338 6,960 12,378 NM
Operating Income (1)
Operating Income (1)
$102,992 $30,446 $72,546 NM
Operating Income (1)
$37,495 $102,992 $(65,497)(63.6)%
(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 (loss) attributable to Stagwell Inc. common shareholders.
(1) See the Results of Operations section above for a reconciliation of Operating Income to Net income (loss) attributable to Stagwell Inc. common shareholders.
Revenue
Revenue for the six months ended June 30, 20222023 was $1,315.8$1,254.7 million, compared to $390.8$1,315.8 million for the six months ended June 30, 2021, an increase2022, a decrease of $925.0$61.1 million.
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Net Revenue
The components of the fluctuations in net revenue for the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were as follows:
Net Revenue - Components of ChangeChangeNet Revenue - Components of ChangeChange
Six Months Ended June 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeSix Months Ended June 30, 2022OrganicTotalSix Months Ended June 30, 2022Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeSix Months Ended June 30, 2023OrganicTotal
(Dollars in Thousands)(dollars in thousands)
Integrated Agencies NetworkIntegrated Agencies Network$146,513 $5,851 $398,227 $69,845 $473,923 $620,436 47.7 %NMIntegrated Agencies Network$617,107$(4,481)$4,163$(20,730)$(21,048)$596,059(3.4)%(3.4)%
Media Network119,269 4,822 145,225 58,040 208,087 327,356 48.7 %NM
Brand Performance NetworkBrand Performance Network327,356(6,563)9,727(1,925)1,239328,595(0.6)%0.4%
Communications NetworkCommunications Network58,657 1,247 41,504 27,964 70,715 129,372 47.7 %NMCommunications Network132,701(374)1,918(19,629)(18,085)114,616(14.8)%(13.6)%
All OtherAll Other15,479 253 (10,950)1,007 (9,690)5,789 6.5 %(62.6)%All Other5,789(157)18,969(3,149)15,66321,452(54.4)%NM
$339,918 $12,173 $574,006 $156,856 $743,035 $1,082,953 46.1 %NM$1,082,953$(11,575)$34,777$(45,433)$(22,231)$1,060,722(4.2)%(2.1)%
Component % changeComponent % change3.6%NMComponent % change(1.1)%3.2%(4.2)%(2.1)%

For the six months ended June 30, 2023 and 2022, organic net revenue increased $156.9decreased $45.4 million, or 46.1%4.2%. There was The decrease in organic revenue growth across all segments,was primarily attributable to increasedthe loss of clients, and a decline in spending by existing clients and business with new clients. The increase in net acquisitionacquisitions (divestitures) was primarily driven by the acquisition of MDC. In addition, the increase in net acquisition (divestitures) is attributable to the acquisitions of Maru, BNG, and Goodstuff.Wolfgang.
The geographic mix in net revenues for the six months ended June 30, 2023 and 2022 and 2021 iswas as follows:
Six Months Ended June 30,Six Months Ended June 30,
20222021 20232022
(Dollars in Thousands)(dollars in thousands)
United StatesUnited States$880,411 $294,493 United States$839,412 $880,411 
United KingdomUnited Kingdom80,355 30,198 United Kingdom86,284 80,355 
OtherOther122,187 15,227 Other135,026 122,187 
TotalTotal$1,082,953 $339,918 Total$1,060,722 $1,082,953 
Impairment and Other Losses
The Company recognized an impairment and other losses charge of $10.6 million during the six months ended June 30, 2023 related to the impairment of an intangible asset totaling $1.4 million, right-of-use lease assets totaling $6.1 million and the associated leasehold improvements totaling $3.1 million. The expense was recorded within Impairment and other losses on the Unaudited Consolidated Statements of Operations.
Operating Income
Operating incomeIncome for the six months ended June 30, 2023 was $37.5 million, compared to $103.0 million for the six months ended June 30, 2022, representing a decrease of $65.5 million. The change in Operating Income was $103.0 million comparedprimarily attributable to $30.4 million for the six months ended June 30, 2021, representinga decrease in Revenue and Cost of services, and an increase in Office and general expenses, Depreciation and amortization, and Impairment and other losses.
The decrease in Cost of $72.5 million.
Operating income for the six months ended June 30, 2022services was impacted primarily attributable to lower billable costs commensurate with lower revenue, offset by an increase in revenue and expensesunbillable costs, primarily due to the acquisition of Maru. In addition, Cost of services increased as a result of higher staff costs as a result of the acquisitions of MDC,Maru, BNG, and Goodstuff andWolfgang, partially offset by a reduction in compensation-related costs associated with cost saving initiatives.
The increase in Office and general expenses was primarily attributable to an increase in services provided. stock-based compensation expense, and occupancy-related expenses, partially offset by a decrease in deferred acquisition consideration.
Stock-based compensation expense increased approximately $1.4 million, primarily driven byattributable to the modification of a certain share-based payment award, awards issuedgranted in the second quarter of 2023, and the completed vesting of awards in the second half of 2022 as well as the first quarter of 2023.
52



Occupancy-related expenses increased primarily due to employeesnonrecurring credits incurred in the first quarter of 2022 connected with a benefit associated with the initiative to consolidate real estate in New York City.
Deferred acquisition consideration decreased approximately $10.9 million, primarily attributable to the reduction in fair value of certain awards as well as the earn out periods for certain other awards issuedending in connection with2022 and the merger with MDC. first quarter of 2023.
Depreciation and amortization was higherexpense increased approximately $5.5 million, primarily dueattributable to the recognition of amortizabledepreciable fixed assets and intangible assets in connection with the acquisitions of MDC,Wolfgang, BNG and Goodstuff.Maru.
Other, net
Other, net for the six months ended June 30, 20222023 was incomean expense of $0.04$0.2 million, compared to income of $1.2less than $0.1 million for the six months ended June 30, 2021.2022.
Foreign Exchange, Transaction Gain (Loss)Net
The foreign exchange loss for the six months ended June 30, 20222023 was $0.2$2.1 million, compared to a loss of $1.1$0.2 million for the six months ended June 30, 2021.2022, primarily attributable due to the U.S. dollar strengthening against the Euro and British Pound.
Interest Expense, Net
Interest expense, net for the six months ended June 30, 20222023 was $36.9$41.9 million compared to $3.3$36.9 million for the six months ended June 30, 2021,2022, representing an increase of $33.6$5.0 million, primarily driven byattributable to a higher level of debt, in connection withprincipally due to amounts outstanding under the acquisition of MDC.
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Credit Agreement.
Income Tax Expense
The Company had an income tax expense for the six months ended June 30, 20222023 of $8.1 million (on a pre-tax loss of $6.7 million resulting in an effective tax rate of (120.6)%) compared to income tax expense of $8.6 million (on a pre-tax income of $65.9 million resulting in an effective tax rate of 13.1%) compared to income tax expense of $4.0 million (on pre-tax income of $27.3 million resulting in an effective tax rate of 14.7%) for the six months ended June 30, 2021.2022.
The difference in the effective tax rate of (120.6)% in the six months ended June 30, 2023 as compared to 13.1% in the six months ended June 30, 2022 as comparedwas primarily due to 14.7%the pre-tax loss and the tax benefit of impairments offset by an increase in valuation allowance, increase in uncertain tax positions, lower share-based compensation windfalls and out-of-period adjustments in 2023. See Note 1 in the six months ended June 30, 2021 was primarily relatedNotes to additional deductions for share based compensation vesting in 2022.the Unaudited Consolidated Financial Statements.
Noncontrolling and Redeemable Noncontrolling Interests
The effect of noncontrolling and redeemable noncontrolling interests for the six months ended June 30, 20222023 was $35.0a loss of $11.0 million compared to $1.6income of $35.0 million for the six months ended June 30, 2021.2022, representing a decrease of $46.0 million, primarily attributable to noncontrolling interest income for the three months ended June 30, 2022 associated with holders of Class C Common Stock.
Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders
As a result of the foregoing, net incomeloss attributable to Stagwell Inc. common shareholders for the six months ended June 30, 20222023 was $23.1$4.3 million compared to net income attributable to Stagwell Inc. common shareholders of $21.7$23.1 million for the six months ended June 30, 2021.2022.
53



Earnings (Loss) Per Share
EPS and Adjusted Diluted EPS for the six months ended June 30, 2023 was as follows:
GAAP
Adjustments(1)
Non-GAAP
(dollars in thousands, except per share amounts)
Net income (loss) attributable to Stagwell Inc. common shareholders$(4,250)$41,996 $37,746 
Net income attributable to Class C shareholders— 45,732 45,732 
Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income$(4,250)$87,728 $83,478 
Weighted average number of common shares outstanding120,272 9,356 129,628 
Weighted average number of common Class C shares outstanding— 158,351 158,351 
Weighted average number of shares outstanding120,272 167,707 287,979 
EPS and Adjusted Diluted EPS$(0.04)$0.29 
Adjustments to Net Income (loss)(1)
Pre-TaxTaxNet
Amortization$55,422 $(12,747)$42,675 
Impairment and other losses10,562 (1,237)9,325 
Stock-based compensation22,550 (5,187)17,363 
Deferred acquisition consideration4,480 (1,030)3,450 
Other items, net19,338 (4,448)14,890 
Tax adjustments— 7,742 7,742 
Total add-backs$112,352 $(16,907)$95,445 
Net loss attributable to Class C shareholders(7,717)
$87,728 
Allocation of adjustments to net income (loss)
Net income attributable to Stagwell Inc. common shareholders$41,996 
Net income attributable to Class C shareholders53,449 
Net loss attributable to Class C shareholders(7,717)
45,732 
$87,728 
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
54



Diluted EPS and Adjusted Diluted EPS for the six months ended June 30, 2022 was as follows:
GAAP
Adjustments(1)
Non-GAAP
(dollars in thousands, except per share amounts)
Net income attributable to Stagwell Inc. common shareholders$23,138 $35,828 $58,966 
Net income attributable to Class C shareholders31,741 45,397 77,138 
Net income attributable to Stagwell Inc. and Class C and adjusted net income$54,879 $81,225 $136,104 
Weighted average number of common shares outstanding131,267 — 131,267 
Weighted average number of common Class C shares outstanding167,576 — 167,576 
Weighted average number of shares outstanding298,843 — 298,843 
Diluted EPS and Adjusted Diluted EPS$0.18 $0.46 
Adjustments to Net income(1)
Pre-TaxTaxNet
Amortization$50,070 $(10,014)$40,056 
Impairment and other losses2,823(565)2,258 
Stock-based compensation21,152 (4,230)16,922 
Deferred acquisition consideration15,369 (3,074)12,295 
Other items, net6,960 (1,392)5,568 
Tax adjustments— 4,126 4,126 
$96,374 $(15,149)$81,225 
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
Adjusted EBITDA
Adjusted EBITDA for the six months ended June 30, 20222023 was $212.7$163.4 million, compared to $62.6$212.7 million for the six months ended June 30, 2021,2022, representing an increasea decrease of $150.2$49.3 million, primarily driven by the increase in revenue, partially offset by higher operating expenseslower Operating Income and the impact of the acquisitions of MDC, GoodStuff and BNG.Revenue, as discussed above.
Integrated Agencies Network
The components of operating results for the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were as follows:
Six Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
RevenueRevenue$728,639 $150,587 $578,052 NMRevenue$684,133 $725,927 $(41,794)(5.8)%
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services473,811 87,159 386,652 NMCost of services446,480 472,402 (25,922)(5.5)%
Office and general expensesOffice and general expenses131,239 35,687 95,552 NMOffice and general expenses127,442 130,347 (2,905)(2.2)%
Depreciation and amortizationDepreciation and amortization36,890 5,293 31,597 NMDepreciation and amortization38,857 36,850 2,007 5.4 %
Impairment and other lossesImpairment and other losses784 — 784 100.0 %Impairment and other losses9,175 784 8,391 NM
$642,724 $128,139 $514,585 NM$621,954 $640,383 $(18,429)(2.9)%
Operating income$85,915 $22,448 $63,467 NM
Operating IncomeOperating Income$62,179 $85,544 $(23,365)(27.3)%

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Six Months Ended June 30,Six Months Ended June 30,


20222021Change

20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
Net RevenueNet Revenue$620,436 $146,513 $473,923 NMNet Revenue$596,059 $617,107 $(21,048)(3.4)%
Billable costsBillable costs108,203 4,074 104,129 NMBillable costs88,074 108,820 (20,746)(19.1)%
RevenueRevenue728,639 150,587 578,052 NMRevenue684,133 725,927 (41,794)(5.8)%
Billable costsBillable costs108,203 4,074 104,129 NMBillable costs88,074 108,820 (20,746)(19.1)%
Staff costsStaff costs389,242 79,189 310,053 NMStaff costs370,978 386,784 (15,806)(4.1)%
Administrative costsAdministrative costs57,297 11,789 45,508 NMAdministrative costs57,451 56,859 592 1.0 %
Unbillable and other costs, netUnbillable and other costs, net34,201 21,284 12,917 60.7 %Unbillable and other costs, net33,430 34,200 (770)(2.3)%
Adjusted EBITDAAdjusted EBITDA139,696 34,251 105,445 NMAdjusted EBITDA134,200 139,264 (5,064)(3.6)%
Stock-based compensationStock-based compensation9,736 — 9,736 100.0 %Stock-based compensation9,239 9,736 (497)(5.1)%
Depreciation and amortizationDepreciation and amortization36,890 5,293 31,597 NMDepreciation and amortization38,857 36,850 2,007 5.4 %
Deferred acquisition considerationDeferred acquisition consideration4,856 6,034 (1,178)(19.5)%Deferred acquisition consideration7,100 4,856 2,244 46.2 %
Impairment and other lossesImpairment and other losses784 — 784 100.0 %Impairment and other losses9,175 784 8,391 NM
Other items, netOther items, net1,515 476 1,039 NMOther items, net7,650 1,494 6,156 NM
Operating IncomeOperating Income$85,915 $22,448 $63,467 NMOperating Income$62,179 $85,544 $(23,365)(27.3)%
Revenue
Revenue for the six months ended June 30, 20222023 was $728.6$684.1 million compared to $150.6$725.9 million for the six months ended June 30, 2021, an increase2022, a decrease of $578.1$41.8 million.
Net Revenue
The components of the fluctuations in net revenue for the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were as follows:
Net Revenue - Components of ChangeChangeNet Revenue - Components of ChangeChange
Six Months Ended June 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeSix Months Ended June 30, 2022OrganicTotalSix Months Ended June 30, 2022Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeSix Months Ended June 30, 2023OrganicTotal
(Dollars in Thousands)(dollars in thousands)
Integrated Agencies NetworkIntegrated Agencies Network$146,513 $5,851 $398,227 $69,845 $473,923 $620,436 47.7 %NMIntegrated Agencies Network$617,107$(4,481)$4,163$(20,730)$(21,048)$596,059(3.4)%(3.4)%
Component % changeComponent % change4.0%NMComponent % change(0.7)%0.7%(3.4)%(3.4)%
The growthdecline in organic net revenue was primarily attributable to increasedthe loss of clients in the retail sector and clients who withheld spending by existing and new clients, primarily driven by creative, digital transformationin the financial, communications and consumer insights services.products sector due to uncertain macro-economic factors. The increase in net acquisitionacquisitions (divestitures) was primarily driven by a $3.6 million increase in revenue from the acquisition of MDC.Wolfgang.
Operating Income
Operating Income for the six months ended June 30, 2023 was $62.2 million, compared to $85.5 million for the six months ended June 30, 2022, representing a decrease of $23.4 million. The increasechange in Operating Income was primarily attributable to a decrease in Revenue, Cost of services and Office and general expenses, was drivenpartially offset by the impact of the acquisition of MDC and costs associated with an increase in Impairment and other losses.
The decrease in Cost of services provided. Stock-based compensation expensewas primarily attributable to lower billable costs, commensurate with lower revenue, and a decrease in staff costs, partially offset by an increase in severance related costs, both associated with cost saving initiatives.
The decrease in Office and general expenses was primarily attributable to lower staff costs (as detailed above), partially offset by an increase in deferred acquisition consideration expense.
Deferred acquisition consideration increased approximately $2.2 million, primarily driven byattributable to the earn out periods for certain awards issued to employeesending in 2022 and the first quarter of 2023, more than offset by an increase related to a certain award that had a decrease in fair value in 2022 for which the earn out period ended as well as awards issued in connection withof the merger with MDC. Depreciationend of 2022.
56




Impairment and amortization grewother losses increased approximately $8.4 million due to the recognitionimpairment of amortizable intangibletwo right-of-use assets and the related leasehold improvements in connection with the acquisitionsecond quarter of MDC.2023.
Operating incomeIncome and Adjusted EBITDA were higherlower, driven by an increasethe decrease in revenues,revenue, partially offset by highera decrease in expenses as detailed above.
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MediaBrand Performance Network
The components of operating results for the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were as follows:
Six Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
RevenueRevenue$392,083 $134,283 $257,800 NMRevenue$401,368 $392,083 $9,285 2.4 %
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services236,498 79,176 157,322 NMCost of services255,296 236,498 18,798 7.9 %
Office and general expensesOffice and general expenses105,282 42,812 62,470 NMOffice and general expenses107,762 105,282 2,480 2.4 %
Depreciation and amortizationDepreciation and amortization16,839 10,572 6,267 59.3 %Depreciation and amortization16,792 16,839 (47)(0.3)%
Impairment and other lossesImpairment and other losses557 — 557 100.0 %Impairment and other losses1,387 557 830 NM
$359,176 $132,560 $226,616 NM$381,237 $359,176 $22,061 6.1 %
Operating income$32,907 $1,723 $31,184 NM
Operating IncomeOperating Income$20,131 $32,907 $(12,776)(38.8)%

Six Months Ended June 30,Six Months Ended June 30,


20222021Change

20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
Net RevenueNet Revenue$327,356 $119,269 $208,087 NMNet Revenue$328,595 $327,356 $1,239 0.4 %
Billable costsBillable costs64,727 15,014 49,713 NMBillable costs72,773 64,727 8,046 12.4 %
RevenueRevenue392,083 134,283 257,800 NMRevenue401,368 392,083 9,285 2.4 %
Billable costsBillable costs64,727 15,014 49,713 NMBillable costs72,773 64,727 8,046 12.4 %
Staff costsStaff costs198,308 80,369 117,939 NMStaff costs210,464 198,308 12,156 6.1 %
Administrative costsAdministrative costs41,042 18,755 22,287 NMAdministrative costs48,010 41,042 6,968 17.0 %
Unbillable and other costs, netUnbillable and other costs, net23,059 7,324 15,735 NMUnbillable and other costs, net25,927 23,059 2,868 12.4 %
Adjusted EBITDAAdjusted EBITDA64,947 12,821 52,126 NMAdjusted EBITDA44,194 64,947 (20,753)(32.0)%
Stock-based compensationStock-based compensation6,229 — 6,229 100.0 %Stock-based compensation1,621 6,229 (4,608)(74.0)%
Depreciation and amortizationDepreciation and amortization16,839 10,572 6,267 59.3 %Depreciation and amortization16,792 16,839 (47)(0.3)%
Deferred acquisition considerationDeferred acquisition consideration5,905 — 5,905 100.0 %Deferred acquisition consideration(1,018)5,905 (6,923)NM
Impairment and other lossesImpairment and other losses557 — 557 100.0 %Impairment and other losses1,387 557 830 NM
Other items, netOther items, net2,510 526 1,984 NMOther items, net5,281 2,510 2,771 NM
Operating IncomeOperating Income$32,907 $1,723 $31,184 NMOperating Income$20,131 $32,907 $(12,776)(38.8)%
Revenue
Revenue for the six months ended June 30, 20222023 was $392.1$401.4 million, compared to $134.3$392.1 million for the six months ended June 30, 2021,2022, an increase of $257.8$9.3 million.
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Net Revenue
The components of the fluctuations in net revenue for the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were as follows:
Net Revenue - Components of ChangeChangeNet Revenue - Components of ChangeChange
Six Months Ended June 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeSix Months Ended June 30, 2022OrganicTotalSix Months Ended June 30, 2022Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeSix Months Ended June 30, 2023OrganicTotal
(Dollars in Thousands)(dollars in thousands)
Media Network119,269 4,822 145,225 58,040 208,087 327,356 48.7 %NM
Brand Performance NetworkBrand Performance Network$327,356$(6,563)$9,727$(1,925)$1,239$328,595(0.6)%0.4%
Component % changeComponent % change4.0%NMComponent % change(2.0)%3.0%(0.6)%0.4%
The increasedecline in organic net revenue was primarily attributable to new clientsdecreased spending in the communications, retail and increased spending by existing clients, primarily driven by the seasonal business of a new client and the recovery of the travel industry.consumer products sector. The increase in net acquisitionacquisitions (divestitures) was primarily driven by a $7.8 million increase in revenue from the acquisitionsacquisition of MDC, GoodstuffBNG.
Operating Income
Operating Income for the six months ended June 30, 2023 was $20.1 million, compared to $32.9 million for the six months ended June 30, 2022, representing a decrease of $12.8 million. The change in Operating Income was primarily attributable to an increase in Revenue, more than offset by an increase in Costs of services and BNG.Office and general expenses.
The increase in expensesCost of services was driven by the impact of the acquisitions of MDC, BNG and Goodstuff andprimarily attributable to higher billable costs, associatedcommensurate with higher revenue, an increase in services provided. Deferred acquisition consideration expense increasedstaff, administrative and unbillable costs primarily due to the assumption of additional liabilities in connectionassociated with the acquisitionsacquisition of MDC, Goodstuff and BNG. BNG, partially offset by a decrease in staff costs as a result of cost saving initiatives as well as a decrease in stock-based compensation.
Stock-based compensation expense increased,decreased approximately $4.6 million, primarily driven by awards issuedattributable to employeesa decrease in the value of profits interests awards.
The increase in Office and general expenses was primarily attributable due to lower occupancy-related expenses as a result of nonrecurring credits incurred in the first quarter of 2022 connected with a benefit associated with the initiative to consolidate real estate in New York City, higher staff costs primarily attributable to the acquisition of BNG, partially offset by a decrease in deferred acquisition expense.
Deferred acquisition consideration decreased approximately $6.9 million primarily attributable to the reduction in fair value in 2023 associated with a Brand that was acquired in the second quarter of 2022, the reduction in fair value of other awards as well as awards issuedthe earn out period for a certain award ending in connection with the merger with MDC. Depreciation and amortization expense increased due to the recognitionfirst quarter of amortizable intangible assets in connection with the acquisition of MDC, Goodstuff and BNG in results subsequent to the acquisition.2023.
Operating incomeIncome and Adjusted EBITDA were drivendecreased due to an increase in revenues, more than offset by an increase in revenues, partially offset by higher expenses as detailed above.
Communications Network
The components of operating results for the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were as follows:
Six Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
RevenueRevenue$189,305 $90,446 $98,859 NMRevenue$147,756 $192,017 $(44,261)(23.1)%
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services123,270 59,597 63,673 NMCost of services97,960 124,679 (26,719)(21.4)%
Office and general expensesOffice and general expenses37,997 13,115 24,882 NMOffice and general expenses33,000 38,889 (5,889)(15.1)%
Depreciation and amortizationDepreciation and amortization5,064 2,977 2,087 70.1 %Depreciation and amortization5,432 5,104 328 6.4 %
$166,331 $75,689 $90,642 NM$136,392 $168,672 $(32,280)(19.1)%
Operating income$22,974 $14,757 $8,217 55.7 %
Operating IncomeOperating Income$11,364 $23,345 $(11,981)(51.3)%
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Six Months Ended June 30,Six Months Ended June 30,


20222021Change

20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
Net RevenueNet Revenue$129,372 $58,657 $70,715 NMNet Revenue$114,616 $132,701 $(18,085)(13.6)%
Billable costsBillable costs59,933 31,789 28,144 88.5 %Billable costs33,140 59,316 (26,176)(44.1)%
RevenueRevenue189,305 90,446 98,859 NMRevenue147,756 192,017 (44,261)(23.1)%
Billable costsBillable costs59,933 31,789 28,144 88.5 %Billable costs33,140 59,316 (26,176)(44.1)%
Staff costsStaff costs81,637 37,125 44,512 NMStaff costs78,434 84,095 (5,661)(6.7)%
Administrative costsAdministrative costs14,364 4,247 10,117 NMAdministrative costs17,470 14,802 2,668 18.0 %
Unbillable and other costs, netUnbillable and other costs, net203 (651)854 NMUnbillable and other costs, net252 204 48 23.5 %
Adjusted EBITDAAdjusted EBITDA33,168 17,936 15,232 84.9 %Adjusted EBITDA18,460 33,600 (15,140)(45.1)%
Stock-based compensationStock-based compensation406 — 406 100.0 %Stock-based compensation925 406 519 NM
Depreciation and amortizationDepreciation and amortization5,064 2,977 2,087 70.1 %Depreciation and amortization5,432 5,104 328 6.4 %
Deferred acquisition considerationDeferred acquisition consideration4,608 — 4,608 100.0 %Deferred acquisition consideration(354)4,608 (4,962)NM
Other items, netOther items, net116 202 (86)(42.6)%Other items, net1,093 137 956 NM
Operating IncomeOperating Income$22,974 $14,757 $8,217 55.7 %Operating Income$11,364 $23,345 $(11,981)(51.3)%
Revenue
Revenue for the six months ended June 30, 20222023 was $189.3$147.8 million, compared to $90.4$192.0 million for the six months ended June 30, 2021, an increase2022, a decrease of $98.9$44.3 million.
Net Revenue
The components of the fluctuations in net revenue for the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were as follows:
Net Revenue - Components of ChangeChangeNet Revenue - Components of ChangeChange
Six Months Ended June 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeSix Months Ended June 30, 2022OrganicTotalSix Months Ended June 30, 2022Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeSix Months Ended June 30, 2023OrganicTotal
(Dollars in Thousands)(dollars in thousands)
Communications NetworkCommunications Network58,657 1,247 41,504 27,964 70,715 129,372 47.7 %NMCommunications Network$132,701$(374)$1,918$(19,629)$(18,085)$114,616(14.8)%(13.6)%
Component % changeComponent % change2.1%70.8%Component % change(0.3)%1.4%(14.8)%(13.6)%
The increasedecline in organic net revenue was attributable to increaseddecreased spending, by existing and new clients, primarily driven by higher public relations as well asdue to lower advocacy services as these are typicallycompared to higher during election years.spending in the second quarter of 2022 associated with the 2022 elections and decreased spending in the technology sector.
Operating Income
Operating income for the six months ended June 30, 2023 was $11.4 million compared to $23.3 million for the six months ended June 30, 2022, representing a decrease of $12.0 million. The change in Operating Income was primarily attributable to a decrease in Revenue, Costs of services and Office and general expenses.
The decrease in Cost of services was primarily attributable to lower billable costs, commensurate with lower revenue, a decrease in staff costs associated with cost savings initiatives, partially offset by an increase in net acquisition (divestitures)other compensation related expenses due to compensation increases from 2022.
The decrease in Office and general expenses was primarily driven by theattributable to a decrease in deferred acquisition of MDC in results subsequentconsideration expense.
Deferred acquisition consideration decreased approximately $5.0 million, primarily attributable to the acquisition.reduction in fair value of the instruments.
59



The increase in expenses was driven by the impact from the acquisition of MDC and costs associated with an increase in services provided. Deferred acquisition consideration expense increased due to the assumption of additional liabilities in connection with the acquisition of MDC. Depreciation and amortization grew due to the recognition of amortizable intangible assets in connection with the acquisition of MDC.
Operating incomeIncome and Adjusted EBITDA were lower driven by an increase in revenues,lower revenue, partially offset by higherlower expenses as detailed above.
55


All Other
The components of operating results for the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were as follows:
Six Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
RevenueRevenue$5,789 $15,486 $(9,697)(62.6)%Revenue$21,452 $5,789 $15,663 NM
Operating ExpensesOperating ExpensesOperating Expenses
Cost of servicesCost of services3,052 8,141 (5,089)(62.5)%Cost of services16,593 3,052 13,541 NM
Office and general expensesOffice and general expenses3,376 8,658 (5,282)(61.0)%Office and general expenses10,718 3,376 7,342 NM
Depreciation and amortizationDepreciation and amortization1,251 1,518 (267)(17.6)%Depreciation and amortization4,014 1,251 2,763 NM
Impairment and other lossesImpairment and other losses1,482 — 1,482 100.0 %Impairment and other losses— 1,482 (1,482)(100.0)%
$9,161 $18,317 $(9,156)(50.0)%$31,325 $9,161 $22,164 NM
Operating loss$(3,372)$(2,831)$(541)19.1 %
Operating LossOperating Loss$(9,873)$(3,372)$(6,501)NM

Six Months Ended June 30,Six Months Ended June 30,
20222021Change20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
Net RevenueNet Revenue$5,789 $15,479 $(9,690)(62.6)%Net Revenue$21,452 $5,789 $15,663 NM
Billable costs— (7)(100.0)%
Revenue(1)Revenue(1)5,789 15,486 (9,697)(62.6)%Revenue(1)21,452 5,789 15,663 NM
Billable costs— (7)(100.0)%
Staff costsStaff costs5,200 9,861 (4,661)(47.3)%Staff costs20,733 5,200 15,533 NM
Administrative costs(1)Administrative costs(1)1,188 6,546 (5,358)(81.9)%Administrative costs(1)(605)1,188 (1,793)NM
Unbillable and other costs, netUnbillable and other costs, net10 385 (375)(97.4)%Unbillable and other costs, net7,485 10 7,475 NM
Adjusted EBITDAAdjusted EBITDA(609)(1,313)704 (53.6)%Adjusted EBITDA(6,161)(609)(5,552)NM
Stock-based compensationStock-based compensation— 100.0 %Stock-based compensation159 151 NM
Depreciation and amortizationDepreciation and amortization1,251 1,518 (267)(17.6)%Depreciation and amortization4,014 1,251 2,763 NM
Deferred acquisition considerationDeferred acquisition consideration(1,248)— (1,248)(100.0)%
Impairment and other lossesImpairment and other losses1,482 — 1,482 100.0 %Impairment and other losses— 1,482 (1,482)(100.0)%
Other items, netOther items, net22 — 22 100.0 %Other items, net787 22 765 NM
Operating LossOperating Loss$(3,372)$(2,831)$(541)19.1 %Operating Loss$(9,873)$(3,372)$(6,501)NM
(1)All Other Revenue and Administrative costs include approximately $6.0 million of eliminations of intercompany services.
Revenue
Revenue for the six months ended June 30, 20222023 was $5.8$21.5 million, compared to $15.5$5.8 million for the six months ended June 30, 2021, a decrease2022, an increase of $9.7$15.7 million.

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Net Revenue
The components of the fluctuations in net revenue for the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were as follows:
Net Revenue - Components of ChangeChangeNet Revenue - Components of ChangeChange
Six Months Ended June 30, 2021Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeSix Months Ended June 30, 2022OrganicTotalSix Months Ended June 30, 2022Foreign CurrencyNet Acquisitions (Divestitures)OrganicTotal ChangeSix Months Ended June 30, 2023OrganicTotal
(Dollars in Thousands)(dollars in thousands)
All OtherAll Other$15,479 $253 $(10,950)$1,007 $(9,690)$5,789 6.5 %(62.6)%All Other$5,789$(157)$18,969$(3,149)$15,663$21,452(54.4)%NM
Component % changeComponent % change1.6%(70.7)%Component % change(2.7)%NM(54.4)%NM
The decline in organic revenue was primarily attributable to the elimination of intercompany revenue during the six months ended June 30, 2023. The increase in net acquisitions (divestitures) was primarily driven by a $14.8 million increase in revenue from the acquisition of Maru.
Operating Loss
Operating Loss for the six months ended June 30, 2023 was $9.9 million compared to $3.4 million for the six months ended June 30, 2022, representing an increase of $6.5 million. The change in Operating Loss was primarily attributable to an increase in Revenue, more than offset by an increase in Cost of services, Office and general expenses and Depreciation and amortization.
The increase in organic net revenueCost of services was primarily attributable to services athigher unbillable and staff costs, commensurate with higher revenue, and due to the central innovations group.acquisition of Maru.
The decrease relatedincrease in Office and general expenses was primarily attributable to net acquisitions (divestitures) wasan increase in staff costs primarily associated with the acquisition of Maru, partially offset by intercompany eliminations.
Depreciation and amortization expense increased approximately $2.8 million, primarily attributable to the salerecognition of Reputation Defenderintangible assets in the third quarterconnection with acquisition of 2021.Maru.
IncreasesThe increase in operating lossOperating Loss and decrease in Adjusted EBITDA were driven by decrease in revenues, partiallyhigher revenue, more than offset by lowerhigher expenses driven by the sale of Reputation Defender.as detailed above.
Corporate
The components of operating results for the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were as follows:
Six Months Ended June 30,Six Months Ended June 30,


20222021Change

20232022Change
(Dollars in Thousands)(dollars in thousands)
$%$%
Staff costsStaff costs$15,719 $3,147 $12,572 NMStaff costs$15,261 $15,719 $(458)(2.9)%
Administrative costsAdministrative costs8,752 (2,021)10,773 NMAdministrative costs12,042 8,752 3,290 37.6 %
Unbillable and other costs, net— (9)(100.0)%
Adjusted EBITDAAdjusted EBITDA(24,471)(1,135)(23,336)NMAdjusted EBITDA(27,303)(24,471)(2,832)11.6 %
Stock-based compensationStock-based compensation4,773 — 4,773 100.0 %Stock-based compensation10,606 4,773 5,833 NM
Depreciation and amortizationDepreciation and amortization3,391 971 2,420 NMDepreciation and amortization3,870 3,391 479 14.1 %
Other items, netOther items, net2,797 3,545 (748)(21.1)%Other items, net4,527 2,797 1,730 61.9 %
Operating LossOperating Loss$(35,432)$(5,651)$(29,781)NMOperating Loss$(46,306)$(35,432)$(10,874)30.7 %
Operating expenses increasedLoss for the six months ended June 30, 2023 was $46.3 million compared to $35.4 million for the six months ended June 30, 2022, representing an increase of $10.9 million. The increase in Operating Loss was primarily in connection with the acquisition of MDC, including professional fees associated with the transaction. In addition,attributable to stock-based compensation expense and administrative costs.
Stock-based compensation expense increased approximately $5.8 million, primarily driven byattributable to the modification of a certain share-based payment award, awards issued to employeesgranted in the firstsecond quarter of 2023, and the completed vesting of awards in the second half of 2022 as well as awards issued in connectionthe first quarter of 2023.
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Administrative costs increased approximately $3.3 million primarily attributable to costs associated with an event to market the merger with MDC.Company.

Liquidity and Capital Resources:
The following table provides summary information about the Company’s liquidity position:
June 30, 2022June 30, 2021
(Dollars in Thousands)
Net cash (used in) provided by operating activities$(107,271)$39,218 
Net cash used in investing activities$(54,937)$(7,288)
Net cash provided by (used in) financing activities$65,206 $(52,710)
Six Months Ended June 30,
20232022
(dollars in thousands)
Net cash used in operating activities$(144,146)$(107,271)
Net cash used in investing activities(30,118)(54,937)
Net cash provided by financing activities58,521 65,206 
We continue to monitor the impact on our liquidity from worldwide events 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 have a material adverse effect on our liquidity. 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.
57


The Company had cash and cash equivalents of $93.4$105.3 million and $184.0$220.6 million as of June 30, 20222023 and December 31, 2021,2022, respectively. The Company expects to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months.months and subsequent periods. 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 May 4, 2023, the Company amended its Credit Agreement (as defined and discussed in Note 7 of the Notes included herein) to, among other things, increase the revolving commitments under the Credit Agreement by $140.0 million from $500.0 million to $640.0 million and permit restricted payments for share repurchases or redemptions from certain of its stockholders in an aggregate principal amount of up to $150.0 million. As of June 30, 2022,2023, the Company had $298.0$402.0 million of borrowings outstanding, $24.4$22.4 million of outstanding and undrawn letters of credit resulting in $177.6$215.6 million available under the Credit Agreement.
The Company transfers certain of its $500.0trade receivable assets to third parties under agreements to sell certain of its accounts receivables. Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer.
The trade receivables transferred to the third parties were $146.5 million revolving credit agreement.and $46.8 million for the six months ended June 30, 2023 and 2022, respectively. The amount collected and due to the third parties under these arrangements was $2.3 million as of June 30, 2023 and $5.7 million as of December 31, 2022. Fees for these arrangements were recorded in Office and general expenses in the Unaudited Consolidated Statements of Operations and totaled $2.4 million and $0.2 million for the six months ended June 30, 2023 and 2022, respectively.
On March 1, 2023, the Board authorized an extension and a $125.0 million increase in the size of our stock repurchase program (the “Repurchase Program”) to an aggregate of $250.0 million, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program, as amended, will expire on March 1, 2026. During the six months ended June 30, 2023, 6.1 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an aggregate value, excluding fees, of $39.8 million. These shares were repurchased at an average price of $6.55 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $158.4 million as of June 30, 2023. The Board will review the Repurchase Program periodically and may authorize adjustments of its terms. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice.
On May 23, 2023, the Company repurchased approximately 23.3 million shares of Class A Common Stock from certain AlpInvest Partners B.V. at a price of $6.43 per share, for an aggregate total repurchase price of approximately $150.0 million.
The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition consideration payments, purchases of noncontrolling interests, subsidiary awards, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company’s 5.625% Notes and 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 1413 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 (defined(each as defined in Note 1110 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,Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the next twelve months.months and subsequent periods. The Company’s ability to make scheduled deferred acquisition consideration payments, to make principal and interest payments, to refinance indebtedness or to fund planned capital expenditures or other obligations will depend on future performance, which is subject to
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general economic conditions, the competitive environment and other factors, including those described in this Form 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 $125,000 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.
As of June 30, 2022, there were 1,981 shares of Class A Common Stock repurchased under the Repurchase Program at an aggregate value, excluding fees, of $14,841. These were purchased at an average share price of $7.49 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $110,119 as of June 30, 2022.
Cash Flows
Operating Activities
Cash flows used in operating activities for the six months ended June 30, 2023, were $144.1 million, primarily driven by unfavorable working capital requirements, including the timing of media supplier payments, partially offset by earnings.
Cash flows used in operating activities for the six months ended June 30, 2022, were $107.3 million, primarily driven by earnings, more than offset by unfavorable working capital requirements, including the timing of media supplier payments.payments, partially offset by earnings.
Investing Activities
Cash flows provided by operatingused in investing activities were $30.1 million for the six months ended June 30, 2021 were $39.2 million,2023, primarily driven by earnings, partially offset by unfavorable working$10.4 million in capitalized software costs, $8.0 million in capital requirements.
Investing Activitiesexpenditures, and $5.0 million for acquisitions, net of cash acquired.
Cash flows used in investing activities were $54.9 million for the six months ended June 30, 2022, primarily driven by $1.9 million in capital capitalized software costs, $12.5 million in capital expenditures, and $38.3 million in acquisitions, and $14.5 million in capital expenditures.net of cash acquired.
Cash flows used in investing activities were $7.3 million forFinancing Activities
During the six months ended June 30, 2021,2023, cash flows provided by financing activities were $58.5 million, primarily driven by capital expenditures.
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Financing Activities$302.0 million in net borrowings under the Credit Agreement, partially offset by shares repurchased and cancelled of $199.4 million, payments of deferred consideration of $28.6 million, and distributions to noncontrolling interests of $15.4 million.
During the six months ended June 30, 2022, cash flows provided by financing activities were $65.2 million, primarily driven by $187.5 million in net borrowings under the Combined Credit Agreement, (as defined below), partially offset primarily by shares repurchased and cancelled of $29.8 million, payments of deferred consideration of $52.4 million, of deferred acquisition consideration payments, $36.5 million ofand distributions to noncontrolling interests $14.8 million in stock repurchases under the Repurchase Program, and $14.9 million related to shares acquired and cancelled in connection with the vesting of stock awards.
During the six months ended June 30, 2021, cash flows used in financing activities was $52.7 million, driven by $15.5 million in net payments under the revolving credit agreement and distributions of $37.2 million to Stagwell Media.$36.5 million.
Total Debt
Debt, net of debt issuance costs, as of June 30, 20222023, was $1,381.6$1,487.4 million as compared to $1,191.6$1,184.7 million outstanding at December 31, 2021.2022. See Note 87 to the Unaudited Condensed Consolidated Financial Statements included herein for information regarding the Company’s 5.625% Notes, (as defined therein) and restated credit agreement (the “Combinedthe Credit Agreement”),Agreement, which provides for a $500.0$640.0 million senior secured revolving credit facility with a five-year maturity.
The Company is currently in compliance with all of the terms and conditions of the Combined Credit Agreement, and management believes, based on its current financial projections, that the Company will be in compliance with its covenants over the next twelve months.
If the Company loses all or a substantial portion of its lines of credit under the 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 $50,000 in the aggregate, increased 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 $100,000 in any fiscal year. All other substantive terms of the Credit Agreement remain unchanged.
Pursuant to the Credit Agreement, the Company must maintain a Total Leverage Ratio (as defined in the Combined Credit Agreement) below a thresholdan established in the Combined Credit Agreement.threshold. For the period ended June 30, 2022,2023, the Company’s calculation of each of this ratio, and the maximum permitted under the Combined Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:
June 30, 20222023
Total Leverage Ratio3.27 3.59
Maximum per covenant4.50 4.25
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.
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Material Cash Requirements
The Company’s AgenciesBrands 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 agenciesBrands purchase media for clients and act as an agent for a disclosed principal. These commitments are included in Accounts payable and Accruals and other liabilitiesAccrued media when the media services are delivered by the media providers. Stagwell takes precautions against default on payment for these services including the procurement of credit insurance and has historically had a very low incidence of default. Stagwell is still exposed to the risk of significant uncollectible receivables from our clients. The risk of a material loss could significantly increase in periods of severe economic downturn.
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Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments. See Note 65 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for additional information regarding contingent deferred acquisition consideration. As of June 30, 2023, approximately $31.2 million of the deferred acquisition consideration is expected to be settled in shares of Class A Common Stock.
When acquiring less than 100% ownership of an entity, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity. See Note 98 of the Notes to the Unaudited Condensed Consolidated Financial Statements included herein for additional information regarding noncontrolling interests and redeemable noncontrolling interests.
Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”). The awards generally provide the employee the right, but not the obligation, to sell its interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution.
The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the revolving Combined 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 PoliciesEstimates
See the Company’s 20212022 Form 10-K for information regarding the Company’s critical accounting policies.estimates.
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 Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to 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 to 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 that can be accessed through the Company’s websites or these social media channels is not part of this Form 10-Q, and the inclusion of the Company’s website addresses and social media channels are inactive textual references only.

Item 3. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, the Company is exposed to market risk related to interest rates, foreign currencies and impairment risk.
Debt Instruments: At June 30, 2022,2023, the Company’s debt obligations consisted of amounts outstanding under its 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 Secured Overnight Financing Rate (“SOFR”),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.
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On April 28, 2022, the Company amended its Credit Agreement. This amendment replaced references to LIBOR with references to SOFR. With regard to our variable rate debt, a 10% increase or decrease in interest rates would not be material tochange our annual interest expense or cash flows.by approximately $1.9 million.
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 of the Company’s audited consolidated financial statementsAudited Consolidated Financial Statements included in the 20212022 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 reduces 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 three and six months ended June 30, 2022,2023, the Company did not have anyrecorded an impairment charge of goodwill. The Company reviews goodwill for impairment annually as$10.6 million to reduce the carrying value of October 1sttwo of each year or more frequently if indicators of potential impairment exist.its right-of-use lease assets and related leasehold improvements and a long lived asset, specifically a trade name. See the CriticalSignificant Accounting EstimatesPolicies section in “Management's Discussion and Analysis ofthe “Notes to Consolidated Financial Condition and Results of
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Operations”Statements” of the Company’s 20212022 Form 10-K for information related to impairment testing for Goodwill, Right-of-use lease assets and long lived assets and the risk of potential impairment charges in future periods. See the Critical Accounting Estimates section in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information related to 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 ensureprovide reasonable assurance that information required to be includeddisclosed in our SEC reports that we file or submit under the Exchange Act, 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 (“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 Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, and in light of the material weaknesses identified in our internal control over financial reporting as disclosed in our Form 10-K for the fiscal year ended December 31, 2021,2022, our CEO and CFO concluded that, as of June 30, 2022,2023, our disclosure controls and procedures were not effectiveeffective.

Material Weakness Remediation Plan and Status
Under the leadership of our CFO and our Senior Vice President of Sarbanes-Oxley Act, the Company has made significant progress with the remediation of these material weaknesses and continued to execute on the previously communicated remediation activities through June 30, 2023. Particularly:
We continued our enhanced communications with the Audit Committee of the Board of Directors for increased oversight. The Company also formally reports quarterly to the Audit Committee regarding progress against the remediation plan.
We designed and implemented controls over the risk assessment process that include detailed qualitative and quantitative factors to identify and assess risks and implement or modify controls in response to those risks. The risk assessment is regularly updated for new entities and changes in risk profile.
Based on our assessment of the current state of the system of internal control at a reasonable assurance level.the consolidated and brand levels, we enhanced existing business processes and control activities and assessed the adequacy of resources.
Changes in Internal Control Over Financial ReportingWe implemented new controls and enhanced existing controls across our information technology environment including general controls related to access, change management and segregation of duties, and centralized certain IT functions.
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We redesigned and strengthened control activities over reconciliations including enhanced review and approval controls.
We designed and enhanced management review controls to improve monitoring of internal control over financial reporting.
We also formalized internal control policies and procedures and conducted multiple in-depth training with control owners throughout the Company.

The Company identified material weaknesses inhas also continued to roll out its internal controls over financial reporting as of December 31, 2021 as described in its 2021 Form 10-K. We are continuing to formulate our remediation plan to enhance and improve our internal controls over financial reporting, which includes the hiring of third-party consultants and additional staff to assist in the design and implementation of new control activities, enhancing existing control activities and assessing the size and structure of our staff. Given we are performing a finance transformation initiative, which involves a phased deployment of new ERPenterprise resource planning and HRIShuman resource information systems and a shared service platform while we are performingplatform.
During the measures noted above, the remediation plan is expected to continue through the end of the first quarter ofsix months ended June 30, 2023, with the goal of having the systemmanagement evaluated our internal control processes and remediated gaps in design of internal controls designedin line with the previously disclosed remediation plan and timeline. Management is in operation asthe process of March 31, 2023. However,performing operating effectiveness testing of the internal controls. We will consider the above material weaknesses will notto be consideredfully remediated as of March 31, 2023 asonce the system of internalapplicable controls will need to operate for a sufficient period of time and be subject toour management has concluded, through testing, by management in 2023 in order to conclude the system of internalthat these controls isare operating effectively. The Company will provide an update onWe may also conclude that additional measures may be required to remediate the progressmaterial weaknesses in our internal control over financial reporting, which may necessitate further internal control changes.

Change in Internal Control Over Financial Reporting
Other than the changes discussed above in connection with our implementation of itsthe remediation plan, throughoutthere were no other changes in our internal control over financial reporting (as such term is defined in Rules 13a–15(f) and 15d–15(f) under the fiscal year.Exchange Act) that occurred during our most recent quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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 to the risk factors in Part I, Item 1A “Risk Factors” of our 20212022 Form 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 Form 10-Q.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
In the three months ended June 30, 2022,2023, the Company issued 210,6532,897,206 shares of Class A Common Stock in transactions exempt from registration under Section 4(a)(2) of the Securities Act. Of these, 31,25744,562 shares of Class A Common Stock were granted to employees as inducement for employment, and 179,396 shares of Class A Common Stock2,852,644 were issued as paymentpayments in lieu of cash for the Company’s obligation to membersmake deferred payments as part of management of two subsidiariesthe purchase price for acquisitions by the Company of additional interests in the majority-owned subsidiaries.a prior acquisition. The Company received no cash proceeds and no commissions were paid to any person in connection with the issuance of thethese shares.
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Purchase of Equity Securities by the Issuer and Affiliated Purchasers
On March 23, 2022,1, 2023, the boardBoard authorized an extension and a $125.0 million increase in the size of directors authorized a stock repurchase program (the “Repurchase Program”) under whichthe Repurchase Program. Under the Repurchase Program, as amended, we may repurchase up to $125,000,000an aggregate of $250.0 million outstanding shares of our outstanding Class A common stock.Common Stock, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program will expire on March 23, 2025.1, 2026. Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices (including through trading plans that may be adopted in accordance with Rule 10b5-1 of the 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
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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 directorsThe Board will review the Repurchase Program periodically and may authorize adjustments of its terms. Pursuant to its Combined Credit Agreement (as defined and discussed in Note 7 of the Notes included herein) and the indenture governing the 5.625% Notes, the Company is currently limited as to the dollar value of shares it may repurchase in the open market.
The following table details our monthly shares repurchased during the second quarter of 2022:2023 and the approximate dollar value of shares that may yet be purchased pursuant to the Repurchase Program:
PeriodTotal Number of Shares PurchasedAverage 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
4/1/2022 - 4/30/2022— $— — $125,000,000 
5/1/2022 - 5/31/2022963,568 7.40 963,568 117,847,505 
6/1/2022 - 6/30/20221,017,820 7.66 1,017,820 110,119,330 
Total1,981,388 $7.53 1,981,388 $110,119,330 
Period
Total Number of Shares Purchased (1)
Average Price Paid Per Share (1)
Total Number of Shares Purchased as Part of Publicly Announced Program (2)
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (2)
4/1/2023 - 4/30/20231,323,939 $6.51 1,319,504 $171,770,303 
5/1/2023 - 5/31/202325,087,288 $6.39 1,758,868 $161,345,279 
6/1/2023 - 6/30/2023583,555 $7.23 410,270 $158,434,817 
Total26,994,782 $6.42 3,488,642 $158,434,817 

(1) Includes information for all shares repurchased by the Company, including shares repurchased as part of the Company's publicly announced Repurchase Program, 177,986 shares to settle employee tax withholding obligations related to the vesting of restricted stock awards and restricted stock units and, in May 2023, 23,328,154 Class A Common Stock repurchased from AlpInvest Partners B.V. at a share price of $6.43, for an aggregate total value of approximately $150,000,000.

(2) Only includes information for shares repurchased as part of the Company's publicly announced Repurchase Program.

Item 3.    Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5.    Other Information
NoneDuring the quarterly period covered by this Form 10-Q, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K).

Item 6.    Exhibits
The exhibits required by this item are listed on the Exhibit Index.
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EXHIBIT INDEX
 
Exhibit No.Description
Second Amended and Restated Certificate of Incorporation of Stagwell Inc., as amended(incorporated (incorporated by reference to Exhibit 3.1 to the Company’sCompany's Form 10-K10-Q filed on March 17, 2022)May 9, 2023).
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).
10.1
Stock Repurchase Agreement, dated May 9, 2023, between Stagwell Inc. Second Amended and Restated 2016 Stock Incentive Planthe entities listed on Schedule I thereto (incorporated by reference to Exhibit 4.310.1 to the Company’s Form S-88-K filed on June 14, 2022)May 9, 2023).
Amended and Restated Credit Agreement, dated as of August 2, 2021, as amended, among Stagwell Marketing Group LLC, Stagwell Global LLC, , Maxxcom LLC, the other Borrowers and other Loan Parties party thereto, the Lenders and other parties party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.Agent (incorporated by reference to Exhibit 10.3 to the Company's Form 10-Q filed on May 9, 2023).
Stagwell Inc. 2023 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-8 filed on March 7, 2023).
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 June 30, 2022.2023. 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 herewith.
** Furnished herewith
† Indicates management contract or compensatory plan.
6368



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.
 
STAGWELL INC.
 
/s/ Mark Penn
Mark Penn
Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
August 5, 20228, 2023
/s/ Frank Lanuto
Frank Lanuto
Chief Financial Officer (Principal Financial Officer)
August 5, 20228, 2023

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