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, 2022~~March 31, 2023


			☐			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

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 York	10007
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.001 per share	STGW	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated Filer	☐	Accelerated Filer	☒
Non-accelerated Filer	☐	Smaller 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, 2022~~May 3, 2023, was ~~132,132,146~~129,689,614 shares of Class A Common Stock ~~3,946 shares of Class B Common Stock,~~ and ~~164,426,878~~160,909,058 shares of Class C Common Stock.

Table of Contents

STAGWELL INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	54
	Unaudited ~~Condensed~~ Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~June~~ 3 0March 31 , ~~2022~~202 3 and ~~2021~~202 2	4
	Unaudited Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31 , 202 3 and 202 2	5
	Unaudited ~~Condensed~~ Consolidated ~~Statements~~Balance Sheet s as of ~~Comprehensive Income for the Three~~ March 31 , 202 3 and ~~Six~~ ~~Months Ended~~ December 31, 202 ~~June~~ 3 0 ~~, 2022 and 2021~~2	6
	Unaudited ~~Condensed~~ Consolidated ~~Balance Sheet as~~Statements of Cash Flows for the ~~June~~Three Months Ended March 3 01 , ~~2022~~ 202 3 and ~~Condensed Consolidated Balance Sheet as December 31, 2021~~202 2	7
	Unaudited ~~Condensed~~ Consolidated Statements of ~~Cash Flows~~Shareholders’ Equity for the Three ~~Six~~Months Ended ~~June~~March 3 01 , ~~2022~~ 202 3 and ~~2021~~202 2	8
	~~Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the Three~~ ~~and Six~~ ~~Months Ended~~ ~~June~~ 3 0 ~~, 2022 and 2021~~	10
	Notes to Unaudited ~~Condensed~~ Consolidated Financial Statements	1310
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3530
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6047
Item 4.	Controls and Procedures	6147

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	6148
Item 1A.	Risk Factors	6149
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6149
Item 3.	Defaults Upon Senior Securities	6249
Item 4.	Mine Safety Disclosures	6249
Item 5.	Other Information	6249
Item 6.	Exhibits	6250
Signatures		6452

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.

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Report on Form 10-Q (this “Form 10-Q”) for events occurring or periods ending before August 2, 2021 does not reflect the impact of the Transactions or the financial results of MDC and may not be comparable with historical information for events occurring or periods ending on or after August 2, 2021.

~~References in this~~ 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. 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;

•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 manage its growth effectively, including the successful completion and integration of acquisitions which complement and expand the Company’s business capabilities;~~

•~~the Company’s~~unremediated 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 ~~outlined~~described in more detail in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (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.

Table of Contents

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 March 31,
		2022		2021		2022		2021				2023		2022
Revenue	Revenue	$	672,913	$	209,560	$	1,315,816	$	390,802	Revenue		$	622,444	$	642,903
Operating Expenses	Operating Expenses									Operating Expenses
Cost of services	Cost of services	424,661		122,074		836,631		234,073		Cost of services		413,898		411,970
Office and general expenses	Office and general expenses	165,423		52,674		309,935		104,952		Office and general expenses		158,836		144,512
Depreciation and amortization	Depreciation and amortization	32,231		10,381		63,435		21,331		Depreciation and amortization		33,477		31,204
Impairment and other losses	Impairment and other losses	2,266		—		2,823		—		Impairment and other losses		—		557
		624,581		185,129		1,212,824		360,356				606,211		588,243
Operating Income	Operating Income	48,332		24,431		102,992		30,446		Operating Income		16,233		54,660
Other income (expenses):	Other income (expenses):									Other income (expenses):
Interest expense, net	Interest expense, net	(18,151)		(1,935)		(36,880)		(3,286)		Interest expense, net		(18,189)		(18,729)
Foreign exchange, net	Foreign exchange, net	70		(385)		(236)		(1,062)		Foreign exchange, net		(670)		(306)
Other, net	Other, net	(121)		(101)		35		1,184		Other, net		220		156
		(18,202)		(2,421)		(37,081)		(3,164)				(18,639)		(18,879)
Income before income taxes and equity in earnings of non-consolidated affiliates		30,130		22,010		65,911		27,282
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates										Income (loss) before income taxes and equity in earnings of non-consolidated affiliates		(2,406)		35,781
Income tax expense	Income tax expense	5,421		3,348		8,610		4,021		Income tax expense		2,384		3,189
Income before equity in earnings of non-consolidated affiliates		24,709		18,662		57,301		23,261
Income (loss) before equity in earnings of non-consolidated affiliates										Income (loss) before equity in earnings of non-consolidated affiliates		(4,790)		32,592
Equity in income (loss) of non-consolidated affiliates	Equity in income (loss) of non-consolidated affiliates	(190)		(3)		840		1		Equity in income (loss) of non-consolidated affiliates		(227)		1,030
Net income		24,519		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 (loss)										Net income (loss)		(5,017)		33,622
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests										Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests		5,460		(20,947)
Net income attributable to Stagwell Inc. common shareholders	Net income attributable to Stagwell Inc. common shareholders	$	10,463	$	17,345	$	23,138	$	21,710	Net income attributable to Stagwell Inc. common shareholders		$	443	$	12,675
Income Per Common Share:

Income (loss) Per Common Share:										Income (loss) Per Common Share:

Basic	Basic									Basic		$	0.00	$	0.10
Net income attributable to Stagwell Inc. common shareholders		$	0.08	N/A		$	0.19	N/A

Diluted	Diluted									Diluted		$	(0.01)	$	0.10
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:
Basic	Basic	126,425		N/A		124,367		N/A		Basic		125,199		122,285
Diluted	Diluted	296,414		N/A		298,843		N/A		Diluted		289,806		297,484

See notes to the Unaudited ~~Condensed~~Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands)


	Three Months Ended March 31,
		2023		2022
COMPREHENSIVE INCOME (LOSS)
Net income (loss)		$	(5,017)	$	33,622
Other comprehensive income (loss)
Foreign currency translation adjustment		4,425		(5,347)

Other comprehensive income (loss)		4,425		(5,347)
Comprehensive income (loss) for the period		(592)		28,275
Comprehensive (income) loss attributable to the noncontrolling and redeemable noncontrolling interests		26,723		(20,947)
Comprehensive income attributable to Stagwell Inc. common shareholders		$	26,131	$	7,328

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,
2022 2021 2022 2021
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 period 693 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


	March 31, 2023		December 31, 2022

ASSETS
Current Assets
Cash and cash equivalents	$	138,529	$	220,589
Accounts receivable, net	659,068		645,846
Expenditures billable to clients	97,590		93,077
Other current assets	77,930		71,443
Total Current Assets	973,117		1,030,955
Fixed assets, net	94,839		98,878
Right-of-use lease assets - operating leases	260,763		273,567
Goodwill	1,569,532		1,566,956
Other intangible assets, net	888,455		907,529
Other assets	114,227		115,447
Total Assets	$	3,900,933	$	3,993,332
LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	308,759	$	357,253
Accrued media	283,578		240,506
Accruals and other liabilities	152,937		248,477
Advance billings	334,933		337,034
Current portion of lease liabilities - operating leases	75,939		76,349
Current portion of deferred acquisition consideration	94,039		90,183
Total Current Liabilities	1,250,185		1,349,802
Long-term debt	1,235,281		1,184,707
Long-term portion of deferred acquisition consideration	71,645		71,140
Long-term lease liabilities - operating leases	278,978		294,049
Deferred tax liabilities, net	43,023		40,109
Other liabilities	70,371		69,780
Total Liabilities	2,949,483		3,009,587
Redeemable Noncontrolling Interests	32,517		39,111
Commitments, Contingencies and Guarantees (Note 9)
Shareholders' Equity
Common shares - Class A & B	130		132
Common shares - Class C	2		2

Paid-in capital	469,891		491,899
Retained earnings	30,324		29,445
Accumulated other comprehensive loss	(13,253)		(38,941)
Stagwell Inc. Shareholders' Equity	487,094		482,537
Noncontrolling interests	431,839		462,097
Total Shareholders' Equity	918,933		944,634
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity	$	3,900,933	$	3,993,332

See notes to the Unaudited ~~Condensed~~ Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

~~CONDENSED~~UNAUDITED CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF CASH FLOWS

(amounts in thousands)

June 30,
2022 December 31, 2021
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 93,402 $ 184,009
Accounts receivable, net 782,927 696,937
Expenditures billable to clients 43,583 63,065
Other current assets 73,251 61,830
Total Current Assets 993,163 1,005,841
Fixed assets, net 123,662 118,603
Right-of-use lease assets - operating leases 299,553 311,654
Goodwill 1,668,892 1,652,723
Other intangible assets, net 904,812 937,695
Other assets 34,936 29,064
Total Assets $ 4,025,018 $ 4,055,580
LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable $ 254,650 $ 271,769
Accrued media 195,939 237,794
Accruals and other liabilities 222,699 272,533
Advance billings 316,654 361,885
Current portion of lease liabilities - operating leases 68,785 72,255
Current portion of deferred acquisition consideration 76,661 77,946
Total Current Liabilities 1,135,388 1,294,182
Long-term debt 1,381,560 1,191,601
Long-term portion of deferred acquisition consideration 119,853 144,423
Long-term lease liabilities - operating leases 327,677 342,730
Deferred tax liabilities, net 80,311 103,093
Other liabilities 73,148 57,147
Total Liabilities 3,117,937 3,133,176
Redeemable Noncontrolling Interests 49,697 43,364
Commitments, Contingencies and Guarantees (Note 10) 0 0
Shareholders' Equity:
Common shares - Class A & B 135 118
Common shares - Class C 2 2
Paid-in capital 368,345 382,893
Retained earnings (loss) 10,268 (6,982)
Accumulated other comprehensive loss (34,451) (5,278)
Stagwell Inc. Shareholders' Equity 344,299 370,753
Noncontrolling interests 513,085 508,287
Total Shareholders' Equity 857,384 879,040
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity $ 4,025,018 $ 4,055,580


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	(5,017)	$	33,622
Adjustments to reconcile net income to cash used in operating activities:
Stock-based compensation	12,004		8,021
Depreciation and amortization	33,477		31,204
Impairment and other losses	—		557

Deferred income taxes	3,809		(1,350)
Adjustment to deferred acquisition consideration	4,088		1,897

Other, net	(1,550)		(2,647)
Changes in working capital:
Accounts receivable	(12,425)		(70,039)
Expenditures billable to clients	(4,173)		11,996
Other assets	(5,986)		(6,100)
Accounts payable	(51,670)		(32,386)
Accrued expenses and other liabilities	(54,684)		(5,592)
Advance billings	(2,986)		(17,760)

Net cash used in operating activities	(85,113)		(48,577)
Cash flows from investing activities:
Capital expenditures	(3,435)		(4,760)
Acquisitions, net of cash acquired	(220)		(935)
Capitalized software	(6,735)		(1,778)
Other	(425)		(816)
Net cash used in investing activities	(10,815)		(8,289)
Cash flows from financing activities:
Repayment of borrowings under revolving credit facility	(426,500)		(209,500)
Proceeds from borrowings under revolving credit facility	476,500		239,000
Shares acquired and cancelled	(8,263)		(14,926)
Distributions to noncontrolling interests	(10,948)		(6,464)
Payment of deferred consideration	—		(1,581)







Repurchase of Common Stock	(17,866)		—

Net cash provided by financing activities	12,923		6,529
Effect of exchange rate changes on cash and cash equivalents	945		1,481
Net decrease in cash and cash equivalents	(82,060)		(48,856)
Cash and cash equivalents at beginning of period	220,589		184,009
Cash and cash equivalents at end of period	$	138,529	$	135,153

Supplemental Cash Flow Information:
Cash income taxes paid	$	15,107	$	6,623
Cash interest paid	33,459		30,798

Non-cash investing and financing activities:



Establishment of a deferred tax asset related to the exchange	—		24,500
Establishment of Tax Receivables Agreement liability	—		20,846

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,
2022 2021
Cash flows from operating activities:
Net income $ 58,141 $ 23,261
Adjustments to reconcile net income to cash (used in) provided by operating activities:
Stock-based compensation 21,152 —
Depreciation and amortization 63,435 21,331
Impairment and other losses 2,823 —
Provision for bad debt expense 1,641 381
Deferred income taxes (1,325) 138
Adjustment to deferred acquisition consideration 15,390 2,359
Transaction costs contributed by Stagwell Media LP — 5,042
Other (6,059) 952
Changes in working capital:
Accounts receivable (78,342) 28,960
Expenditures billable to clients 20,386 (4,752)
Other assets (8,555) (676)
Accounts payable (33,228) (40,344)
Accrued expenses and other liabilities (109,232) (1,037)
Advance billings (46,391) 3,603
Deferred acquisition related payments (7,107) —
Net cash (used in) provided by operating activities (107,271) 39,218
Cash flows from investing activities:
Capital expenditures (14,467) (7,288)
Current period acquisitions, net of cash acquired (38,326) —
Other (2,144) —
Net cash used in investing activities (54,937) (7,288)
Cash flows from financing activities:
Repayment of borrowings under revolving credit facility (473,000) (25,496)
Proceeds from borrowings under revolving credit facility 660,500 10,000
Shares acquired and cancelled (14,926) —
Distributions to noncontrolling interests and other (36,498) —
Payment of deferred consideration (52,431) —
Purchase of noncontrolling interest (3,600) —
Distributions — (37,214)
Repurchase of Common Stock (14,839) —
Net cash provided by (used in) financing activities 65,206 (52,710)
Effect of exchange rate changes on cash and cash equivalents 6,395 1,773
Net decrease in cash and cash equivalents (90,607) (19,007)
Cash and cash equivalents at beginning of period 184,009 92,457
Cash and cash equivalents at end of period $ 93,402 $ 73,450

~~Table of Contents~~

~~STAGWELL INC. AND SUBSIDIARIES~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)~~

~~(amounts in thousands)~~

Six Months Ended June 30,
2022 2021
Supplemental disclosures:
Cash income taxes paid $ 15,871 $ 4,649
Cash interest paid 30,798 3,047
Non-cash investing and financing activities:
Reduction of deferred tax liability related to the exchange of Paired Units 25,159 —
Establishment of Tax Receivables Agreement liability 21,385 —
Non-cash contributions — 12,122
Non-cash distributions to Stagwell Media LP — 13,000
Non-cash payment of deferred acquisition consideration — 7,080

~~See notes to the Unaudited Condensed Consolidated Financial Statements~~.

~~Table of Contents~~

~~STAGWELL INC. AND SUBSIDIARIES~~

~~UNAUDITED CONDENSED~~ CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(amounts in thousands)

Three Months Ended
June 30, 2022
Common Shares -
Class A & B Common Shares -
Class C Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Stagwell Inc. Shareholders' Equity Noncontrolling Interests Shareholders' Equity
Shares Amount Shares Amount
Balance at March 31, 2022 133,196 $ 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 awards 202 — — — — — — — — —
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 shares 388 — (388) — — — — — — —
Other 141 2 — — 1,706 — — 1,708 (95) 1,613
Balance at June 30, 2022 131,838 $ 135 164,427 $ 2 $ 368,345 $ 10,268 $ (34,451) $ 344,299 $ 513,085 $ 857,384


		Three Months Ended March 31, 2023
	Common Shares - Class A & B		Common Shares - Class C			Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity
		Shares	Amount		Shares	Amount
Balance at December 31, 2022		131,724	$	132	160,909	$	2	$	491,899	$	29,445	$	(38,941)	$	482,537	$	462,097	$	944,634
Net income		—	—		—	—		—		443		—		443		(2,917)		(2,474)
Other comprehensive income		—	—		—	—		—		—		25,688		25,688		(21,263)		4,425
Distributions to noncontrolling interests		—	—		—	—		—		—		—		—		(8,025)		(8,025)



Changes in redemption value of RNCI		—	—		—	—		—		1,076		—		1,076		—		1,076
Restricted awards granted or vested		1,838	2		—	—		(2)		—		—		—		—		—
Shares repurchased and cancelled (withheld for payroll taxes)		(1,181)	(1)		—	—		(8,262)		—		—		(8,263)		—		(8,263)

Shares repurchased and cancelled (Approved plan)		(2,585)	(3)		—	—		(17,863)		—		—		(17,866)		—		(17,866)
Stock-based compensation		—	—		—	—		7,392		—		—		7,392		—		7,392
Change in ownership held by Class C holders		—	—		—	—		(3,273)		—		—		(3,273)		3,273		—



Other		—	—		—	—		—		(640)		—		(640)		(1,326)		(1,966)
Balance at March 31, 2023		129,796	$	130	160,909	$	2	$	469,891	$	30,324	$	(13,253)	$	487,094	$	431,839	$	918,933

See notes to the Unaudited Consolidated Financial Statements.

108

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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 Capital Retained Earnings Accumulated Other Comprehensive Loss Stagwell Inc. Shareholders' Equity Noncontrolling Interests Shareholders' Equity

Shares Amount Shares Amount
Balance at December 31, 2021 118,252 $ 118 179,970 $ 2 $ 382,893 $ (6,982) $ (5,278) $ 370,753 $ 508,287 $ 879,040
Net income — — — — — 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 awards 1,989 2 — — (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 shares 15,543 15 (15,543) — (15) — — — — —
Other 141 2 — — 342 — 344 2,151 2,495
Balance at June 30, 2022 131,838 $ 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~~.

~~Table of Contents~~

~~STAGWELL INC. AND SUBSIDIARIES~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)~~

~~(amounts in thousands)~~

Three Months Ended
June 30, 2021
Members' capital Common Shares -
Class A & B Common Shares -
Class C Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Stagwell Inc. Shareholders' Equity Noncontrolling Interests Shareholders' Equity

Shares Amount Shares Amount
Balance at March 31, 2021 $ 345,122 — $ — — $ — $ — $ — $ — $ 345,122 $ 30,050 $ 375,172
Net income 17,345 — — — — — — — 17,345 1,470 18,815
Other comprehensive loss (487) — — �� — — — — (487) — (487)
Contributions 1,854 — — — — — — — 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' capital Common Shares -
Class A & B Common Shares -
Class C Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Stagwell Inc. Shareholders' Equity Noncontrolling Interests Shareholders' Equity

Shares Amount Shares Amount
Balance at December 31, 2020 $ 358,756 — $ — — $ — $ — $ — $ — $ 358,756 $ 39,787 $ 398,543
Net income 21,710 — — — — — — 21,710 2,623 24,333
Other comprehensive loss (350) — — — — — — — (350) — (350)
Contributions 12,122 — — — — — — — 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



	Three Months Ended March 31, 2022
	Common Shares - Class A & B			Common Shares - Class C			Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	118,252	$	118	179,970	$	2	$	382,893	$	(6,982)	$	(5,278)	$	370,753	$	508,287	$	879,040
Net income attributable to Stagwell Inc.	—	—		—	—		—		12,675		—		12,675		18,537		31,212
Other comprehensive loss	—	—		—	—		—		—		(5,347)		(5,347)		—		(5,347)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		(705)		(705)
Changes in redemption value of RNCI	—	—		—	—		—		975		—		975		—		975
Granting of restricted awards	1,787	2		—	—		(2)		—		—		—		—		—
Shares acquired and cancelled	(1,998)	—		—	—		(14,926)		—		—		(14,926)		—		(14,926)
Stock-based compensation	—	—		—	—		6,714		—		—		6,714		—		6,714
Conversion of shares	15,155	15		(15,155)	—		(15)		—		—		—		—		—
Other	—	—		—	—		(1,364)		—		—		(1,364)		2,246		882
Balance at March 31, 2022	133,196	$	135	164,815	$	2	$	373,300	$	6,668	$	(10,625)	$	369,480	$	528,365	$	897,845

See notes 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 Brands (“Brands”), which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment.

The accompanying ~~condensed~~ consolidated financial statements include the accounts of Stagwell and its subsidiaries. Stagwell has prepared the unaudited ~~condensed~~ consolidated interim financial statements included herein in accordance with accounting principles generally accepted in the United States (“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 and~~footnotes 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, ~~2021~~2022 (“~~2021~~2022 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 ~~normally~~normal 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 ~~revised~~been reflected in the ~~presentation~~prior year financial statements. The impact of ~~Current Liabilities~~the adjustment is to ~~separately present Accrued media, which was previously included in Accruals and~~allocate 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 revised to correct this immaterial classification error~~correction, Noncontrolling interests and Accumulated other comprehensive loss declined by ~~decreasing the previously reported amount for Accruals and other liabilities~~approximately $24.0 million, but did not impact Total Shareholders’ Equity as of ~~December~~March 31, ~~2021 by~~2023. In addition, the ~~$237,794 of Accrued media. This revision had~~adjustment was reflected within other comprehensive for the quarter ended March 31, 2023. There was no ~~effect on our previously reported Total Current Liabilities,~~impact to net income in the annual or ~~on any other previously reported amounts in our consolidated financial statements for~~interim 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

In March 2023, the Company’s board of directors (the “Board”) adopted the 2022 Employee Stock Purchase Plan (the “ESPP”), which will be submitted for approval at the Company’s annual meeting of shareholders in June 2023. If the ESPP is approved, a total of 3.0 million shares of Class A common stock, par value $.001 per share (the “Class A Common Stock”) will be 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, up to certain maximums, to purchase shares of Class A Common Stock on certain plan-defined dates. The purchase price for each offering period is 92.5% of the fair market value of shares of Class A Common Stock at the end of the offering period. The plan is considered compensatory resulting in the fair value of the discount being expensed over the service period.

On ~~July 12, 2022,~~May 4, 2023, 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 bolsteramended 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

~~Table of~~ ~~Contents~~

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.

~~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 87 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~~the amendment ~~replaced any references~~increased the limit of borrowing from $500.0 million to ~~LIBOR with references to~~$640.0 million. All other substantive terms of the ~~Secured Overnight Financing Rate (“SOFR”). Based on the Company’s assessment,~~credit agreement remain unchanged.

On May 9, 2023, the Company ~~has elected~~agreed to ~~apply the optional expedient~~repurchase approximately 23.3 million shares from AlpInvest Partners at a share price of $6.43, for an aggregate total value of approximately $150.0 million. Stagwell Media LP, a shareholder in Stagwell Inc. and ~~treat the contract modifications as a continuation~~AlpInvest are engaged in advanced negotiations to redeem AlpInvest’s remaining interests in Stagwell Media LP., subject to final documentation. Upon completion of these transactions, AlpInvest Partners will no longer be 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.~~investor in Stagwell Inc.

2. 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.

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	$	~~2,771~~2,766
Accounts receivable	~~7,638~~10,147
Other current assets	~~1,634~~671
Fixed assets	~~2,338~~1,587
~~Intangible~~Identifiable intangible assets	~~12,410~~12,740
Other assets	~~1,416~~1,583
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 assumed	~~11,913~~13,042
Goodwill	~~25,552~~24,643
Purchase price consideration	$	~~37,465~~37,685

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily ~~attributed~~attributable to the assembled workforce of BNG. Goodwill of ~~$25,552~~$24.6 million was assigned to the ~~Media~~Brand Performance Network reportable segment. The majority of the goodwill is non-deductible for income tax purposes.

Intangible assets consist of trade names, customer relationships and ~~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:

~~Table of~~ ~~Contents~~

Estimated Fair Value Estimated Useful Life in Years
Trade Names $ 5,930 10
Customer Relationships 5,390 11
Other 1,090 7
Total Acquired Intangible Assets $ 12,410


	Estimated Fair Value		Estimated Useful Life in Years
	(dollars in thousands)
Customer relationships	$	6,150	10
Trade names	5,500		10
Developed technology	1,090		7
Total acquired intangible assets	$	12,740

The purchase price accounting is not yet final as the Company may still make adjustments due to changes in working capital.

Pro Forma Financial Information ~~(unaudited)~~

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

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenue $ 675,414 $ 217,590 $ 1,326,042 $ 405,071
Net Income 24,520 19,202 57,396 23,464


	Three Months Ended March 31, 2022
	(dollars in thousands)
Revenue	$	650,628
Net income	32,876

Revenue and net income attributable to BNG, included within the three months ended March 31, 2023 Unaudited Consolidated Statements of Operations was $6.6 million and $1.0 million, respectively.

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 assets	54669
~~Intangible~~Identifiable intangible assets	~~9,290~~
~~Other assets~~	~~2,800~~13,200
Accounts payable	(379)
Other liabilities	(270)
Noncontrolling interests	(2,667)
Net assets assumed	~~9,410~~11,135
Goodwill	~~10,503~~6,569
Purchase price consideration	$	~~19,913~~17,704

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily ~~attributed~~attributable 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:

~~Table of~~ ~~Contents~~

Estimated Fair Value Estimated Useful Life in Years
Trade Names $ 6,283 10
Customer Relationships 3,007 10
Total Acquired Intangible Assets $ 9,290


	Fair Value		Estimated Useful Life in Years
	(dollars in thousands)
Customer relationships	$	11,400	10
Trade names	1,800		10
Total acquired intangible assets	$	13,200

Pro Forma Financial Information ~~(unaudited)~~

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenue $ 674,737 $ 212,378 $ 1,319,646 $ 398,671
Net Income 25,153 19,391 59,494 26,029

~~2021 Acquisitions~~

~~Acquisition of MDC~~

On December 21, 2020, MDC and Stagwell Media announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of the Stagwell Subject Entities. The Stagwell Subject Entities comprised Stagwell Marketing and its direct and indirect subsidiaries.

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

In respect of the Transactions, the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in the 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”).

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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~~Table of~~ ~~Contents~~

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 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~~Three Months Ended March 31, 2022
	(dollars in thousands)
~~Cash and cash equivalents~~Revenue	$	~~130,153~~
~~Accounts receivable~~	~~413,839~~
~~Other current assets~~	~~44,198~~
~~Fixed assets~~	~~80,047~~
~~Right-of-use lease assets - operating leases~~	~~252,739~~
~~Intangible assets~~	~~810,900~~
~~Other assets~~	~~18,418~~
~~Accounts payable~~	~~(171,019)~~
~~Accruals and other liabilities~~	~~(307,281)~~
~~Advance billings~~	~~(211,403)~~
~~Current portion of lease liabilities~~	~~(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)~~
~~Other liabilities~~	~~(132,394)~~
~~Redeemable noncontrolling interests~~	~~(25,990)~~
~~Preferred shares~~	~~(209,980)~~
~~Noncontrolling interests~~	~~(151,090)~~644,909
Net ~~liabilities assumed~~income	~~(869,308)~~
~~Goodwill~~	~~1,298,370~~
~~Purchase price consideration~~	$	~~429,062~~34,341

~~The excess~~Revenue and net loss attributable to TMA Direct, included within the three months ended March 31, 2023 Unaudited Consolidated Statements of ~~purchase consideration over the fair value of the net assets acquired~~Operations was ~~recorded as goodwill, which is primarily attributed to the assembled workforce of MDC. Goodwill of $1,058,365, $173,633~~$2.6 million and ~~$66,372 was assigned to the Integrated Agencies Network, the Media Network and the Communications Network reportable segments,~~less than $0.1 million, respectively. The majority of the goodwill is non-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 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 thirteen years. The following table presents the details of identifiable intangible assets acquired.

~~Table of~~ ~~Contents~~

Estimated Fair Value Estimated Useful Life in Years
Trade Names $ 98,000 10
Customer Relationships 712,900 6-15
Total Acquired Intangible Assets $ 810,900

~~Pro Forma Financial Information (unaudited)~~

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
Revenue $ 555,165 $ 1,043,992
Net Income 32,996 47,100

Acquisition of ~~GoodStuff Holdings~~Maru Group Limited Ltd.

On ~~December 31, 2021,~~October 3, 2022, the Company acquired ~~GoodStuff Holdings~~Maru Group Limited Ltd. (“~~Goodstuff”~~Maru”) for approximately ~~£21,000~~£23.0 million (approximately ~~$28,053) of~~$25.8 million) in cash ~~consideration as well as contingent consideration up to a maximum of £22,000.~~ consideration.

The cash consideration included an initial payment of £8,000, an excess working capital payment of approximately £9,000 and approximately £4,000 of deferred payments. The contingent consideration is tied to employees’ service and will be recognized as deferred acquisition consideration expense through 2026. Therefore, only the cash consideration has been allocated to the assets acquired and assumed liabilities of ~~Goodstuff~~Maru 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	$	~~30,985~~1,033
Accounts receivable	~~28,685~~7,374
Other current assets	~~3,207~~899
Fixed assets	~~237~~157
~~Right-of-use lease assets - operating leases~~	~~2,060~~
~~Intangible~~Identifiable intangible assets	~~14,974~~14,300
Other assets	551,920
Accounts payable	~~(6,344)~~(4,087)
Accruals and other liabilities	~~(27,353)~~(9,154)
Advance billings	~~(15,956)~~
~~Current portion of lease liabilities~~	~~(857)~~
~~Income taxes payable~~	~~(967)~~
~~Long-term portion of lease liabilities~~	~~(3,744)~~(6,462)
Other liabilities	~~(1,204)~~(3,591)
Net assets assumed	~~23,778~~2,389
Goodwill	~~4,275~~23,404
Purchase price consideration	$	~~28,053~~25,793

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily ~~attributed~~attributable to the assembled workforce of ~~Goodstuff.~~Maru and the expected growth related to new customer relationships and geographic expansion. Goodwill of ~~$4,275~~$23.4 million was assigned to the ~~Media Network~~All Other reportable segment. The ~~majority of the~~ goodwill is ~~non-deductible~~partially 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 ~~ten~~approximately eight years. The following table presents the details of identifiable intangible assets ~~acquired.~~acquired:


	Estimated Fair Value		Estimated Useful Life in Years
	(dollars in thousands)
Customer relationships	$	4,900	10
Trade names	4,000		10
Developed technology	5,400		2-7
Total acquired intangible assets	$	14,300

1813

~~Table of~~ ~~Contents~~

Estimated Fair Value Estimated Useful Life in Years
Trade Names $ 1,349 15
Customer Relationships 13,625 10
Total Acquired Intangible Assets $ 14,974

Pro Forma Financial Information ~~(unaudited)~~

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
Revenue $ 215,358 $ 400,786
Net Income 20,426 25,537


	Three Months Ended March 31, 2022
	(dollars in thousands)
Revenue	$	653,375
Net Income	28,110

Revenue and net loss attributable to Maru, included within the three months ended March 31, 2023 Unaudited Consolidated Statements of Operations was $8.9 million and $2.2 million, respectively.

Acquisition of Wolfgang, LLC.

On October 3, 2022, the Company acquired the remaining 80% interest that it did not already own in Wolfgang, LLC., (“Wolfgang”) for approximately $3.8 million in cash consideration and 175 thousand shares of Class A Common Stock with a fair value of $1.2 million, subject to post-closing adjustments.

The consideration has been allocated to the assets acquired and assumed liabilities of Wolfgang 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	$	1,606
Accounts receivable	1,180
Other current assets	100
Identifiable intangible assets	1,055
Other assets	46
Current liabilities	(278)
Net assets assumed	3,709
Goodwill	2,451
Purchase price consideration including fair value of previously owned interest	$	6,160

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Wolfgang. Goodwill of $2.5 million was assigned to the Integrated Agencies Network reportable segment. The majority of the goodwill is deductible for income tax purposes.

Intangible assets consist of customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is five years. The following table presents the details of identifiable intangible assets acquired:


	Estimated Fair Value		Estimated Useful Life in Years
	(dollars in thousands)
Customer relationships	$	1,055	5
Total acquired intangible assets	$	1,055

Pro Forma Financial Information


	Three Months Ended March 31, 2022
	(dollars in thousands)
Revenue	$	647,309
Net income	34,482

Revenue and net income attributable to Wolfgang, included within the three months ended March 31, 2023 Unaudited Consolidated Statements of Operations was $1.1 million and $0.2 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, subject to post-closing adjustments, 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 assets	45
Identifiable intangible assets	7,300
Accounts payable	(148)
Other current liabilities	(650)
Net assets assumed	7,448
Goodwill	4,416
Purchase price consideration	$	11,864

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributable to the assembled workforce of Epicenter. Goodwill of $4.4 million was assigned to the All Other reportable segment. The majority of the goodwill is deductible for income tax purposes.

The intangible asset acquired was developed technology. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is five years. The following table presents the details of identifiable intangible assets acquired:


	Estimated Fair Value		Estimated Useful Life in Years
	(dollars in thousands)
Developed technology	$	7,300	5
Total acquired intangible assets	$	7,300

Pro Forma Financial Information


	Three Months Ended March 31, 2022
	(dollars in thousands)
Revenue	$	643,885
Net income	33,483

Revenue and net income attributable to Epicenter, included within the three months ended March 31, 2023 Unaudited Consolidated Statements of Operations was $1.1 million and $0.6 million, respectively.

Other Acquisitions

On July 12, 2022, the Company acquired PEP Group Holdings B.V., an omnichannel content creation and adaption production company for 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~~was based on the financial results of the underlying business through the end of 2022 with the payment due in 2023.

~~2021 Purchases of Noncontrolling Interests~~

On October 1, 2021, the Company entered into an agreement to purchase the approximate 27% remaining interest of Targeted Victory it did not already own, stipulating the purchase of 13.3% on October 1, 2021 and the remaining 13.3% on July 31, 2023, with the option for the seller to delay the second purchase until July 31, 2025. The purchase price 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

~~Table of~~ ~~Contents~~

~~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 ~~agency~~Brand arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses. Certain clients may engage with the Company in various geographic locations, across multiple disciplines, and through multiple Brands. Representation of a client rarely means that Stagwell handles marketing communications for all Brands or product lines of the client in every geographical location. The Company’s Brands often cooperate with one another through referrals and the sharing of both services and expertise, which enables Stagwell to service

~~Table of~~ ~~Contents~~

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, 2022~~March 31, 2023 and ~~2021:~~2022:


			Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended March 31,
Principal Capabilities	Principal Capabilities	Reportable Segment	2022		2021		2022		2021		Principal Capabilities	Reportable Segment		2023		2022
														(dollars in thousands)
Digital Transformation	Digital Transformation	All Segments	$	197,915	$	70,261	$	408,724	$	132,698	Digital Transformation	All segments		$	190,319	$	210,809
Creativity and Communications	Creativity and Communications	Integrated Agencies Network, Media Network, Communications Network	307,402		27,986		586,644		52,656		Creativity and Communications	All segments		261,354		279,242
Performance Media and Data	Performance Media and Data	Media Network	114,260		71,439		214,036		134,047		Performance Media and Data	Brand Performance Network, All Other		109,488		99,776
Consumer Insights and Strategy	Consumer Insights and Strategy	Integrated Agencies Network	53,336		39,874		106,412		71,401		Consumer Insights and Strategy	Integrated Agencies Network, All Other		61,283		53,076
			$	672,913	$	209,560	$	1,315,816	$	390,802				$	622,444	$	642,903

Stagwell has historically largely focused where the Company was founded in North America, the largest market for its services in the world. The Company has expanded its global footprint to support clients ~~looking for help to grow their businesses~~ in ~~new~~international 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.

The following table presents revenue disaggregated by geography for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


			Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended March 31,
Geographical Location	Geographical Location	Reportable Segment	2022		2021		2022		2021		Geographical Location	Reportable Segment		2023		2022
														(dollars in thousands)
United States	United States	All	$	559,635	$	183,358	$	1,096,866	$	350,105	United States	All		$	507,092	$	537,231
United Kingdom	United Kingdom	All	43,363		12,070		83,176		16,775		United Kingdom	All		41,271		39,813
Other	Other	All	69,915		14,132		135,774		23,922		Other	All		74,081		65,859
			$	672,913	$	209,560	$	1,315,816	$	390,802				$	622,444	$	642,903

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~~$170.8 million and ~~$116,558~~$116.4 million at ~~June 30, 2022~~March 31, 2023 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~~$97.6 million and ~~$63,065~~$93.1 million at ~~June 30, 2022~~March 31, 2023 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 ~~consist~~represent advanced billings to customers for fees and reimbursements of ~~fees received from~~third-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, 2022~~March 31, 2023 and December 31, ~~2021~~2022 were ~~$316,654~~$334.9 million and ~~$361,885,~~$337.0 million, respectively. The decrease in ~~the~~ Advance billings ~~balance~~ of ~~$45,231~~$2.1 million for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 was primarily driven by ~~cash payments received or due in advance of satisfying our performance obligations, offset by $312,171~~$234.0 million of revenues recognized that were included in the Advance billings balances as of December 31, ~~2021~~2022 and reductions due to the incurrence of third-party ~~costs.~~costs, partially offset by cash payments received or due in advance of satisfying our performance obligations.

Changes in the contract asset and liability balances during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 were not materially impacted by write offs, impairment losses or any other factors.

~~Table of~~ ~~Contents~~

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~~$90.8 million of unsatisfied performance obligations as of ~~June 30, 2022~~March 31, 2023 of which we expect to recognize approximately ~~48% in the remaining quarters of 2022, 40%~~61% in 2023, 33% in 2024 and ~~12%~~6% in ~~2024.~~2025.

~~Net income~~

~~5. Earnings~~4. Income (Loss) Per Share

The following table sets forth the computations of basic and diluted income (loss) per common ~~share:~~

Three Months Ended June 30, 2022 Six 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 outstanding 126,425 124,367
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 shareholders 14,020 31,741
$ 24,483 $ 54,879
Denominator:
Basic - Weighted Average number of common shares outstanding 126,425 124,367
Dilutive shares:
Stock appreciation rights 1,966 1,941
Restricted share and restricted unit awards 3,212 4,959
Class C shares 164,811 167,576
Diluted - Weighted average number of common shares outstanding 296,414 298,843
Earnings Per Share - Diluted $        0.08 $        0.18

~~The combination of MDC and SMG, completed on August 2, 2021, was treated as a reverse acquisition~~share 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.

~~Table of~~ ~~Contents~~

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, 2022~~March 31, 2023 and ~~does not include the corresponding prior year period.~~2022:


	Three Months Ended March 31,
	2023		2022
Income Per Share - Basic	(amounts in thousands, except per share amounts)
Numerator:
Net income (loss)	$	(5,017)	$	33,622

Net (income) loss attributable to Class C shareholders	3,165		(17,721)
Net (income) loss attributable to other equity interest holders	2,295		(3,226)
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests	5,460		(20,947)

Net income attributable to Stagwell Inc. common shareholders	$	443	$	12,675

Denominator:
Weighted Average number of common shares outstanding	125,199		122,285

Income Per Share - Basic	$	0.00	$	0.10

Income (Loss) Per Share - Diluted
Numerator:
Net income attributable to Stagwell Inc. common shareholders	$	443	$	12,675
Net income (loss) attributable to Class C shareholders	(3,165)		17,721
	$	(2,722)	$	30,396

Denominator:
Basic - Weighted Average number of common shares outstanding	125,199		122,285

Stock appreciation right awards	1,929		2,041
Restricted share and restricted unit awards	1,769		2,786
Class A Shares	128,897		127,112
Class C shares	160,909		170,372
Dilutive - Weighted average number of common shares outstanding	289,806		297,484

Income (Loss) Per Share - Diluted	$	(0.01)	$	0.10

Restricted stock awards of ~~1,005~~0.7 million and 1.0 million as of ~~June 30,~~March 31, 2023 and 2022, ~~are~~respectively, were excluded from the computation of diluted ~~income (loss)~~loss per common share because the performance ~~contingency~~contingencies necessary for vesting ~~had~~were not ~~been~~ met as of the reporting date.

6.5. Deferred Acquisition Consideration

Deferred acquisition consideration on the ~~balance sheet~~Unaudited 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.

The following table presents changes in contingent deferred acquisition consideration, ~~which is~~ measured at fair value on a recurring basis using significant unobservable inputs, and a reconciliation to the amounts reported on the ~~balance sheets~~Unaudited Consolidated Balance Sheets as of ~~June 30, 2022~~March 31, 2023 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


	March 31, 2023		December 31, 2022
	(dollars in thousands)
Beginning balance	$	161,323	$	222,369
Payments	—		(73,963)
Adjustments to deferred acquisition consideration (1)	4,088		(12,779)
Additions	—		26,594
Currency translation adjustment and other	273		(898)

Ending balance (2)	$	165,684	$	161,323

(1) Adjustment to deferred acquisition consideration contains fair value changes from the Company’s initial estimates of deferred acquisition payments. ~~Adjustment to deferred acquisition consideration is recorded within Office and general expenses on the Unaudited Condensed Consolidated Statements of Operations.~~

(2) ~~In 2021, approximately $61,000 of additions represent~~The contingent and fixed deferred acquisition consideration ~~acquired in connection with~~obligation was $71.8 million and $93.9 million as of March 31, 2023 and $68.9 million and $92.4 million as of December 31, 2022. In addition, $51.5 million of the ~~acquisition of MDC. Approximately $136,000 of additions represent~~ deferred acquisition consideration ~~acquired~~is expected to be settled in ~~connection with~~ the ~~purchases~~Company’s shares 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.Class A Common Stock.

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 ~~2022~~2023 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.

~~Table of~~ ~~Contents~~

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 ~~2022~~2023 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,~~March 31, 2023, the Company ~~has~~ entered into 1two operating ~~lease~~leases 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 represents~~these two leases represent an obligation of the Company that is not reflected within the Unaudited ~~Condensed~~ Consolidated Balance Sheets as of ~~June 30, 2022.~~March 31, 2023. The aggregate future liability related to these leases is approximately ~~$367.~~$5.1 million.

The discount rate used for leases accounted for under ASC 842 is the Company’s collateralized credit adjusted borrowing rate.

The following table presents lease costs and other quantitative information for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
Lease Cost:	Lease Cost:									Lease Cost:		(dollars in thousands)
Operating lease cost	Operating lease cost	$	20,947	$	6,238	$	34,963	$	11,743	Operating lease cost		$	19,578	$	14,016
Variable lease cost	Variable lease cost	4,044		884		9,204		1,937		Variable lease cost		4,561		5,160
Sublease rental income	Sublease rental income	(4,216)		(972)		(7,492)		(1,931)		Sublease rental income		(3,052)		(3,276)
Total lease cost	Total lease cost	$	20,775	$	6,150	$	36,675	$	11,749	Total lease cost		$	21,087	$	15,900
Additional information:	Additional information:									Additional information:
Cash paid for amounts included in the measurement of lease liabilities for operating leases	Cash paid for amounts included in the measurement of lease liabilities for operating leases									Cash paid for amounts included in the measurement of lease liabilities for operating leases
Operating cash flows	Operating cash flows	$	24,352	$	7,763	$	47,133	$	13,364	Operating cash flows		$	22,347	$	22,781

Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments	Right-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		$	2,135	$	14,162

As of ~~June 30, 2022,~~March 31, 2023, the weighted average remaining lease term (in years) and weighted average discount rate were ~~6.6~~6.3 and ~~4.3%~~4.6%, respectively.

Operating lease expense is included in ~~office~~Office and general expenses in the Unaudited ~~Condensed~~ Consolidated Statements of Operations. The Company’s lease expense for leases with a term of 12 months or less is immaterial.

The following table presents minimum future rental payments under the Company’s leases ~~at June 30, 2022~~as of March 31, 2023 and their reconciliation to the corresponding lease liabilities:

~~Table of~~ ~~Contents~~

Maturity Analysis
Remaining 2022 $ 40,873
2023 88,144
2024 75,167
2025 58,646
2026 43,455
2027 and thereafter 157,574
Total 463,859
Less: Present value discount (67,397)
Lease liability $ 396,462


	Maturity Analysis
	(dollars in thousands)
Remaining 2023	$	68,803
2024	78,098
2025	60,457
2026	45,148
2027	40,652
Thereafter	120,424
Total	413,582
Less: Present value discount	(58,665)
Lease liability	$	354,917

8.7. Debt

As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company’s indebtedness was comprised as follows:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Revolving credit facility		$	298,000	$	110,165
							(dollars in thousands)
Credit Agreement						Credit Agreement	$	150,000	$	100,000
5.625% Notes	5.625% Notes	1,100,000		1,100,000		5.625% Notes	1,100,000		1,100,000
Debt issuance costs	Debt issuance costs	(16,440)		(18,564)		Debt issuance costs	(14,719)		(15,293)
Total long-term debt	Total long-term debt	$	1,381,560	$	1,191,601	Total long-term debt	$	1,235,281	$	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,~~March 31, 2023 and 2022 was ~~$17,659~~$18.3 million and ~~$35,945, respectively, and for the three and six months ended June 30, 2021 was $1,467 and $3,091,~~$18.3 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,~~March 31, 2023 and 2022 was ~~$605~~$0.6 million and ~~$1,211, respectively, and for the three and six months ended June 30, 2021 was $330 and $469,~~$0.6 million, respectively.

Revolving Credit Agreement

~~On November 18, 2019, the~~The Company ~~entered into~~is party to a ~~debt~~credit agreement ~~(“JPM Syndicated Facility”)~~ with a syndicate of banks ~~led by JPMorgan Chase Bank, N.A (“JPM”). The JPM Syndicated Facility consisted~~consisting 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$500.0 million senior secured revolving credit facility with a five-year ~~maturity.~~maturity (the “Credit Agreement”) as of March 31, 2023. See Note 1 of the Notes included herein for additional information related to the amendment to the Credit Agreement.

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.~~$650.0 million.

~~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~~the Secured Overnight Financing Rate, plus ) and ii) 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.

~~Table of~~ ~~Contents~~

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 LIBOR rate plus 1%, in each case, plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time or (ii) the LIBOR rate plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time.

Advances under the ~~Combined~~ Credit Agreement may be prepaid in whole or in part from time to time without penalty or premium. The ~~Combined~~ Credit Agreement commitment may be reduced by the Company from time to time. Principal amounts outstanding under the ~~Combined~~ Credit Agreement are due and payable in full at maturity within five years of the date of the ~~Combined~~ Credit Agreement.

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

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

The Company was in compliance with all covenants ~~at June 30, 2022.~~as of March 31, 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. ~~At June 30, 2022~~As of March 31, 2023 and December 31, ~~2021,~~2022, the Company had issued undrawn outstanding letters of credit of ~~$24,404~~$24.6 million and ~~$24,332,~~$25.3 million, respectively.

Senior Notes

~~In August 2021, the~~The Company ~~issued $1,100,000~~had $1.1 billion aggregate principal amount of 5.625% senior notes (“5.625% Notes”)~~. A portion~~ outstanding as 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.

March 31, 2023. The 5.625% Notes are due August 15, 2029 and bear interest of 5.625% to be paid on February 15 and August 15 of each year, commencing on February 15, 2022.

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

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

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

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

~~Table of~~ ~~Contents~~

The indenture includes covenants that, among other things, restrict the Company’s ability and the ability of its restricted subsidiaries (as defined in the indenture) to incur or guarantee additional indebtedness; pay dividends on or redeem or

repurchase the capital stock of the Company; make certain types of investments; create restrictions on the payment of dividends or other amounts from the Company’s restricted subsidiaries; sell assets; enter into transactions with affiliates; create liens; enter into sale and leaseback transactions; and consolidate or merge with or into, or sell substantially all of the Company’s assets to, another person. These covenants are subject to a number of important limitations and exceptions. The 5.625% Notes are also subject to customary events of default, including cross-payment default and cross-acceleration provisions. The Company was in compliance with all covenants ~~at 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~~March 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 ~~noncontrolling~~Noncontrolling 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 ~~redeemable~~Redeemable 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,
2022 2021 2022 2021
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 net income (loss) attributable to noncontrolling interests between holders of Class C ~~shares~~common 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, 2022~~March 31, 2023 and ~~2021:~~2022:

Three Months
Ended June 30, Six Months
Ended June 30,
2022 2021 2022 2021
Net income attributable to Class C shareholders $ 14,020 $ — $ 31,741 $ —
Net income attributable to other equity interest holders 980 1,470 1,796 2,623
Net income attributable to noncontrolling interests $ 15,000 $ 1,470 $ 33,537 $ 2,623


	Three Months Ended March 31,
		2023		2022
		(dollars in thousands)
Net income (loss) attributable to Class C shareholders		$	(3,165)	$	17,721
Net income attributable to other equity interest holders		248		816
Net income (loss) attributable to noncontrolling interests		$	(2,917)	$	18,537

The following table presents noncontrolling interests between holders of Class C ~~shares~~Common Stock and other equity interest holders as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


							March 31, 2023		December 31, 2022
		June 30, 2022		December 31, 2021			(dollars in thousands)
Noncontrolling interest of Class C shareholders	Noncontrolling interest of Class C shareholders	$	483,626	$	475,373	Noncontrolling interest of Class C shareholders	$	401,427	$	428,406
Noncontrolling interest of other equity interest holders	Noncontrolling interest of other equity interest holders	29,459		32,914		Noncontrolling interest of other equity interest holders	30,412		33,691
NCI attributable to noncontrolling interests		$	513,085	$	508,287
Total noncontrolling interests						Total noncontrolling interests	$	431,839	$	462,097

2722

~~Table of~~ ~~Contents~~

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 value 5,888 3,834
Net income (loss) attributable to redeemable noncontrolling interests 1,466 (412)
Other 502 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.


	March 31, 2023		December 31, 2022
	(dollars in thousands)
Beginning balance	$	39,111	$	43,364
Redemptions	(2,923)		(4,222)

Changes in redemption value	(1,076)		(8,711)

Net income (loss) attributable to redeemable noncontrolling interests	(2,543)		8,135
Other	(52)		545
Ending balance	$	32,517	$	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 ~~2022~~2023 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~~$32.5 million as of ~~June 30, 2022,~~March 31, 2023, consists of ~~$46,041,~~$28.7 million, assuming that the subsidiaries perform over the relevant periods at their current profit levels, and ~~$3,656~~$3.8 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. There is no related impact on the Company’s income per share calculations.

Comprehensive Loss Attributable to Noncontrolling and Redeemable Noncontrolling Interests

~~10.~~For the three months ended March 31, 2023, comprehensive loss attributable to the noncontrolling and redeemable noncontrolling interests was $26.7 million, which consists of $5.5 million of net loss and $21.3 million of other comprehensive loss.

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 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,~~March 31, 2023, the Company had ~~$24,404~~$24.6 million of undrawn letters of ~~credit.~~credit outstanding.

The Company entered into 1two operating leases for which the commencement date has not yet occurred as of ~~June 30, 2022.~~March 31, 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,~~March 31, 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,~~$6.4 million, $5.8 million, $5.4 million, $3.9 million, $3.2 million and ~~$88~~$7.8 million for the remainder of ~~2022,~~ 2023, 2024, 2025, 2026, 2027, and ~~2027,~~thereafter, respectively.

2823

~~Table of~~ ~~Contents~~

~~11.~~10. Share Capital

On March ~~23, 2022,~~1, 2023, the ~~board~~Board authorized an extension and a $125.0 million increase in the size of ~~directors authorized a~~the Company’s stock repurchase program (the “Repurchase Program”) to an aggregate of $250.0 million, with any previous purchases under ~~which we may repurchase up~~the 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, ~~(including~~including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange ~~Act),~~Act of 1934, 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~~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 of June 30, 2022,~~three months ended March 31, 2023, there were ~~1,981~~2.6 million shares of Class A Common Stock repurchased under the Repurchase Program at an aggregate value, excluding fees, of ~~$14,841.~~$17.9 million. These were purchased at an average ~~share~~ price of ~~$7.49~~$6.91 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was ~~$110,119~~$180.4 million as of ~~June 30, 2022.~~March 31, 2023.

The authorized and outstanding share capital of the Company is ~~below.~~below:

Class A Common Stock ~~(“Class A Shares”)~~

There are ~~1,000,000~~1.0 billion shares of Class A ~~Shares authorized. There~~Common Stock authorized, of which 129.8 million shares were ~~131,834 Class A Shares~~ issued and outstanding as of ~~June 30, 2022. The~~March 31, 2023. Each share of Class A ~~Shares carry 1~~Common Stock carries one vote ~~each, with a par value of $0.001, entitled~~and entitles its holder to dividends equal to or greater than each share of 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.~~Common Stock, as defined below.

Class B Common Stock ~~(“Class B Shares”)~~

There are 55.0 thousand shares of Class B ~~Shares authorized. There~~common stock, par value $0.001 per share (the “Class B Common Stock”) authorized, of which 2.3 thousand shares were ~~4 of Class B Shares~~ issued and outstanding as of ~~June 30, 2022. The~~March 31, 2023. Each share of Class B ~~Shares carry 20~~Common Stock carries twenty votes each, ~~with a par value of $0.001, convertible at any time at the option of the holder into one Class A Share for each Class B Share.~~

~~Class C Common Stock (“Class C Shares”)~~

~~There are 250,000 shares of Class C Shares authorized. There were 164,427 Class C Shares issued~~ and outstanding as of June 30, 2022. The Class C Shares do not participate in the earnings of the Company 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 share of Class A ~~Share. In the six months ended June 30, 2022, holders~~Common Stock.

Class C Common Stock

There are 250.0 million shares of Class C ~~Shares~~Common Stock authorized, of which 160.9 million shares were issued and outstanding as of March 31, 2023. Each share of Class C Common Stock carries one vote and does not represent an economic interest in the Company. Each share of Class C Common Stock is paired with a corresponding common unit of 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 ~~(the “Paired Units”) exchanged 15,543~~may, at its option, exchange such Paired Units for ~~the same number~~shares of Class A ~~Shares. Approximately 5,000~~Common Stock on a one-to-one basis (i.e., one Paired Unit for one share of Class A Common Stock).

There were no 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~~during the ~~5,000 Class A Shares issued to the employees to satisfy their employee tax withholding obligation.~~three months ended March 31, 2023.

~~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 ~~at June 30, 2022~~as of March 31, 2023 and December 31, ~~2021:~~2022:

June 30, 2022 December 31, 2021
Carrying
Amount Fair Value Carrying
Amount Fair Value
5.625% Notes 1,100,000 880,000 1,100,000 1,120,900


	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(dollars in thousands)
5.625% Notes	$	1,100,000	$	962,500	$	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,~~March 31, 2023, the discount rate used to measure these liabilities ~~ranged from~~ ~~3.0% to~~ ~~6.4~~%was 5.2%.

As these estimates require the use of assumptions about future performance, which are uncertain at the time of estimation, the fair value measurements presented on the Unaudited ~~Condensed~~ Consolidated Balance Sheets are subject to material uncertainty.

See Note 65 of the Notes included herein for additional information regarding contingent deferred acquisition consideration.

~~At June 30, 2022~~As of March 31, 2023 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 recognize an impairment of goodwill, inintangible assets or right-of-use lease assets for the three ~~and six~~ months ended ~~June 30, 2022 and 2021.~~March 31, 2023.

~~13.~~12. Supplemental Information

~~Subsidiary~~Stock Based Awards

Stock-based compensation recognized for awards authorized under the Company’s employee stock incentive plans during the three months ended March 31, 2023 and 2022 was $7.4 million and $7.2 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.

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~~their profits interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are settled in cash and the corresponding liability was $24.9 million and $21.0 million at ~~fair value was $30,379 at June 30,~~March 31, 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 $4.6 million and $0.7 million for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, respectively. This was ~~$21,152, primarily attributable to $16,572 recognized for~~included as a component of stock-based compensation ~~associated with grants~~in Cost of ~~Class A Common Stock~~services 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 $82.0 million and ~~$4,009 recognized~~$7.5 million for ~~profits interest awards. In~~ the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, respectively. The amount collected and due to the third parties under these arrangements was $2.4 million as of March 31, 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 $1.3 million and less than $0.1 million for the three months ended March 31, 2023 and 2022, respectively.

Current Expected Credit Losses

The Company ~~granted approximately 4,488 share based awards.~~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 $1.2 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, 2022~~March 31, 2023 of ~~$5,421~~$2.4 million (on a pre-tax ~~income~~loss of ~~$30,130~~$2.4 million resulting in an effective tax rate of ~~18.0%~~(99.1)%) compared to income tax expense of ~~$3,348~~$3.2 million (on pre-tax income of ~~$22,010~~$35.8 million resulting in an effective tax rate of ~~15.2%~~8.9%) for the three months ended ~~June 30, 2021.~~March 31, 2022.

The difference in the effective tax rate of ~~18.0%~~(99.1)% in the three months ended ~~June 30, 2022~~March 31, 2023, as compared to ~~15.2%~~8.9% in the three months ended ~~June 30, 2021 was primarily attributable~~March 31, 2022, is due to the ~~larger portion~~pre-tax loss, an increase in valuation allowance, and an increase in uncertain tax positions in 2023.

It is reasonably possible that over the next twelve months the amount of ~~income subject~~unrecognized tax benefits may decrease by up 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.~~

~~Table of~~ ~~Contents~~

The Company had an income tax expense for the six months ended June 30, 2022 of $8,610 (on a pre-tax income of $65,911 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.

~~The difference in the effective tax rate of 13.1% in the six months ended June 30, 2022 as compared to 14.7% in the six months ended June 30, 2021 was primarily related to deductions for share~~$2.6 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 ~~Receivables~~Receivable 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 for~~TRA 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 quarter of 2023. As of ~~June 30, 2022,~~March 31, 2023, the Company ~~had~~has recorded a TRA liability of ~~$21,385~~$28.7 million and ~~has recognized~~an associated deferred tax ~~benefits~~asset 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.

~~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 Value Revenues Due From
Related Party
Three Months
Ended June 30, Six Months
Ended June 30, June 30,
2022 December 31, 2021
Services 2022 2021 2022 2021
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 Value		Revenue						Due From Related Party
		Three Months Ended March 31,				March 31, 2023			December 31, 2022
Services				2023				2022
	(dollars in thousands)
Marketing and advertising services (1)	Continuous (7)			$	694	$	—			$	1,043	$	1,029
Marketing and advertising services (2)	$3,576 and Continuous (7)			378		564				5,939		4,831
Marketing and website development services (3)	$5,884 and Continuous (7)			778		2,468				—		488
Polling services (4)	$1,123			89		48				—		280
Polling services (5)	$683			39		—				158		—
Polling services (6)	$3,450			—		164				—		—



Total				$	1,978	$	3,244			$	7,140	$	6,628

(1) ~~Client was founded by~~A member of the Company’s ~~Chief Executive Officer~~

~~(2)~~ ~~Family member~~board of ~~one of the Brands’ partners~~directors holds an executive leadership position inor is on the ~~client~~board 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 ~~Board~~board of ~~Directors~~directors of the ~~client~~client.

~~(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 ~~Company~~Company.

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~~The following table presents significant related party transactions in which the Company receives services from a third party:~~

Total Transaction Value Expenses Due to Related Party
Three Months
Ended June 30, Six Months
Ended June 30, June 30,
2022 December 31, 2021
Services 2022 2021 2022 2021
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) ~~Family~~A family member of ~~one of~~ the ~~Brand’s partners~~Company’s Chief Executive Officer holds ~~an executive~~a key leadership position in the ~~third party~~client.

~~(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 ~~client~~client.

~~(4)~~(6) ~~This arrangement was~~Founder of the client has significant interest in the Company.

(7) Certain of the contractual arrangements within these transactions were entered into for an indefinite term and 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 third party who holds a minority interest in the Brand. The loan receivable of ~~$3,801~~$3.1 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, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The Company recognized ~~$77~~$0.1 million and ~~$154~~$0.1 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~respectively, and $76 and $151 for the three and six months ended June 30, 2021,~~ respectively, of interest income within ~~interest~~Interest expense, net on its Unaudited ~~Condensed~~ Consolidated Statements of Operations.

~~During~~ In addition, in 2021, the Brand entered into an arrangement to obtain sales and management services from the same third party. Under the arrangement, the Brand has incurred $0.2 million and $0.1 million of related party expense for the three ~~and six~~ months ended ~~June 30, 2021, Stagwell Media made additional non-cash investments in~~March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022, $0.8 million and $1.4 million, respectively, was due to the ~~Company of $1,900 and $12,100, respectively.~~ third party.

In ~~March 2021,~~2022, the Company made loans to three employees of a ~~non-cash distribution~~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 ~~Stagwell Media~~3.5% per annum, compounding quarterly. The cash from the loan was used by the employees to purchase the noncontrolling interest of ~~$13,000. Additionally, the Company made cash distributions to Stagwell Media of $11,200 and $26,200 for the three and six months ended June 30, 2021, respectively.~~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 allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of operating segments is applicable. This determination is based upon a quantitative

analysis of the expected and historic average long-term profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics.

The CODM uses Adjusted EBITDA (defined below) as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions. Adjusted EBITDA is defined as Net income excluding non-operating income or expense to achieve operating income, plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items.

~~Due~~The Company made changes to ~~changes in the Company’s~~its internal management and reporting structure in the ~~second~~first quarter of ~~2022,~~2023, resulting in an update to our reportable ~~segment results for periods~~segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, 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 ~~second~~first quarter of ~~2022~~2023 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 as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes ~~to the Unaudited Condensed Consolidated Financial Statements~~ included herein.

•The Integrated Agencies Network includes five operating segments: the Anomaly Alliance, Constellation, the Doner Partner Network, Code and Theory, and National Research Group. The operating segments offer an array of

~~Table of~~ ~~Contents~~

complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications. The ~~brands~~Brands 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 Media~~Brand Performance Network (“~~SMN”~~BPN”) ~~reportable segment~~ is comprised of a single operating segment. ~~SMN~~BPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities. Our Brands in this segment aim to provide scaled creative performance through developing and executing sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data. ~~SMN’s~~BPN’s Brands ~~combine~~provide media ~~buying~~solutions such as audience analysis, media planning, and ~~planning~~buying across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast, among others) and includes multichannel ~~brands~~Brands 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 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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~~Table of~~ ~~Contents~~


											Three Months Ended March 31,
		Three Months Ended June 30,				Six Months Ended June 30,						2023		2022
		2022		2021		2022		2021				(dollars in thousands)
Revenue:	Revenue:	(Dollars in Thousands)								Revenue:
Integrated Agencies Network	Integrated Agencies Network	$	378,168	$	81,639	$	728,639	$	150,587	Integrated Agencies Network		$	329,792	$	348,751
Media Network		194,296		70,560		392,083		134,283
Brand Performance Network										Brand Performance Network		213,340		197,787
Communications Network	Communications Network	97,770		47,738		189,305		90,446		Communications Network		66,460		93,255
All Other	All Other	2,679		9,623		5,789		15,486		All Other		12,852		3,110
Total Revenue	Total Revenue	$	672,913	$	209,560	$	1,315,816	$	390,802	Total Revenue		$	622,444	$	642,903

Adjusted EBITDA:	Adjusted EBITDA:									Adjusted EBITDA:
Integrated Agencies Network	Integrated Agencies Network	$	70,307	$	19,755	$	139,696	$	34,251	Integrated Agencies Network		$	59,385	$	68,888
Media Network		33,699		9,129		64,947		12,821
Brand Performance Network										Brand Performance Network		23,421		31,248
Communications Network	Communications Network	17,231		9,962		33,168		17,936		Communications Network		4,013		16,438
All Other	All Other	(485)		298		(609)		(1,313)		All Other		(3,805)		(124)
Corporate	Corporate	(9,433)		(426)		(24,471)		(1,135)		Corporate		(10,792)		(15,038)
Total Adjusted EBITDA	Total Adjusted EBITDA	$	111,319	$	38,718	$	212,731	$	62,560	Total Adjusted EBITDA		$	72,222	$	101,412

Depreciation and amortization	Depreciation and amortization	$	(32,231)	$	(10,381)	$	(63,435)	$	(21,331)	Depreciation and amortization		$	(33,477)	$	(31,204)
Impairment and other losses	Impairment and other losses	(2,266)		—		(2,823)		—		Impairment and other losses		—		(557)
Stock-based compensation	Stock-based compensation	(13,131)		—		(21,152)		—		Stock-based compensation		(12,004)		(8,021)
Deferred acquisition consideration	Deferred acquisition consideration	(13,472)		(2,098)		(15,369)		(6,034)		Deferred acquisition consideration		(4,088)		(1,897)
Other items, net	Other items, net	(1,887)		(1,808)		(6,960)		(4,749)		Other items, net		(6,420)		(5,073)
Total Operating Income	Total Operating Income	$	48,332	$	24,431	$	102,992	$	30,446	Total Operating Income		$	16,233	$	54,660

Other Income (expenses):										Other Income (expenses):
Interest expense, net										Interest expense, net		$	(18,189)	$	(18,729)
Foreign exchange, net										Foreign exchange, net		(670)		(306)
Other, net										Other, net		220		156
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates										Income (loss) before income taxes and equity in earnings of non-consolidated affiliates		(2,406)		35,781
Income tax expense										Income tax expense		2,384		3,189
Income (loss) before equity in earnings of non-consolidated affiliates										Income (loss) before equity in earnings of non-consolidated affiliates		(4,790)		32,592
Equity in income (loss) of non-consolidated affiliates										Equity in income (loss) of non-consolidated affiliates		(227)		1,030
Net income (loss)										Net income (loss)		(5,017)		33,622
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests										Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests		5,460		(20,947)
Net income attributable to Stagwell Inc. common shareholders										Net income attributable to Stagwell Inc. common shareholders		$	443	$	12,675

~~Table of~~ ~~Contents~~

Three Months
Ended June 30, Six Months
Ended June 30,
2022 2021 2022 2021
(Dollars in Thousands)
Other Income (expenses):
Interest expense, net $ (18,151) $ (1,935) $ (36,880) $ (3,286)
Foreign exchange, net 70 (385) (236) (1,062)
Other, net (121) (101) 35 1,184
Income before income taxes and equity in earnings of non-consolidated affiliates 30,130 22,010 65,911 27,282
Income tax expense 5,421 3,348 8,610 4,021
Income before equity in earnings of non-consolidated affiliates 24,709 18,662 57,301 23,261
Equity in income (loss) of non-consolidated affiliates (190) (3) 840 1
Net income 24,519 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 Network 8,643 5,313 16,839 10,572
Communications Network 2,524 1,395 5,064 2,977
All Other 750 496 1,251 1,518
Corporate 2,304 486 3,391 971
Total $ 32,231 $ 10,381 $ 63,435 $ 21,331
Stock-based compensation
Integrated Agencies Network $ 4,663 $ — $ 9,736 $ —
Media Network 4,969 �� 6,229 —
Communications Network 649 — 406 —
All Other — — 8 —
Corporate 2,850 — 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, 2022~~March 31, 2023 and ~~2021.~~2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis ~~are~~is 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 ~~2021~~2022 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~~

~~Table of~~ ~~Contents~~

~~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 ~~2022~~2023 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 ~~work~~strategy is ~~designed~~intended 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~~Recent Developments

In March 2023, the ~~impact on our operations from worldwide events such as~~Company’s board of directors (the “Board”) adopted the ~~COVID-19 pandemic and evolving strains~~2022 Employee Stock Purchase Plan (the “ESPP”), which will be submitted for approval at the Company’s annual meeting 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.~~shareholders in June 2023. If the ~~impacts~~ESPP is approved, a total of ~~either~~3 million shares of Class A common stock, par value $.001 per share (the “Class A Common Stock”) will be 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, up to certain maximums, to purchase shares of Class A Common Stock on certain plan-defined dates. The purchase price for each offering period is 92.5% of the ~~aforementioned events are beyond our expectations, we believe we are well positioned to successfully work through such impacts for~~fair market value of shares of Class A Common Stock at the ~~foreseeable future.~~

~~Business Combination~~end of the offering period. The plan is considered compensatory resulting in the fair value of the discount being expensed over the service period.

On ~~December 21, 2020, MDC and~~May 4, 2023, the Company amended its Credit Agreement (as defined in Note 7 of the Notes included herein). Among other things, the amendment increased the limit of borrowing from $500.0 million to $640.0 million. All other substantive terms of the credit agreement remain unchanged.

On May 9, 2023, the Company agreed to repurchase approximately 23.3 million shares from AlpInvest Partners at a share price of $6.43, for an aggregate total value of approximately $150.0 million. Stagwell Media LP, ~~announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the “Stagwell Subject Entities.” The~~a shareholder in Stagwell ~~Subject Entities comprised Stagwell Marketing~~Inc. 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~~AlpInvest are engaged in advanced negotiations to ~~which it emerged as a wholly owned subsidiary of the Company, converted into OpCo; (ii)~~redeem AlpInvest’s remaining interests in Stagwell Media ~~contributed the equity interests~~LP., subject to final documentation. Upon completion 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~~these transactions, AlpInvest Partners will no longer be an investor in 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.

~~Table of~~ ~~Contents~~

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 ~~brands~~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 agency~~a 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, 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 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 ~~brands~~Brands 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 with~~Adjusted Diluted EPS is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income (loss) attributable to Class C shareholders, excluding the ~~interim Unaudited Condensed Consolidated Financial Statements presented in this interim report~~impact of amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, based on total consolidated amounts, then allocated to Stagwell Inc. common shareholders and Class C shareholders, based on their respective income allocation percentage using a normalized effective income tax rate divided by (ii) (a) the ~~annual Audited Consolidated Financial Statements~~weighted 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 ~~herein~~in Item 2 herein that are not considered meaningful are presented as “NM.”

Segments

~~Table of~~ ~~Contents~~

The CODM uses Adjusted EBITDA as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions.

The Company has three reportable segments as follows: “Integrated Agencies Network,” ~~“Media~~“Brand Performance Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies 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 statements~~Audited Consolidated Financial Statements included in the ~~2021~~2022 Form 10-K.

In addition, Stagwell reports its corporate office expenses incurred in connection with the strategic resources provided to the networks, as well as certain other centrally managed expenses that are not fully allocated to the operating segments as Corporate. Corporate provides client and business development support to the networks as well as certain strategic resources, including accounting, administrative, financial, real estate, human resource and legal functions.

The following discussion focuses on the operating performance of the Company for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ and the financial condition of the Company as of ~~June 30, 2022.~~March 31, 2023.

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Results of Operations:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021				2023		2022
		(Dollars in Thousands)										(dollars in thousands)
Revenue
Revenue:										Revenue:
Integrated Agencies Network	Integrated Agencies Network	$	378,168	$	81,639	$	728,639	$	150,587	Integrated Agencies Network		$	329,792	$	348,751
Media Network		194,296		70,560		392,083		134,283
Brand Performance Network										Brand Performance Network		213,340		197,787
Communications Network	Communications Network	97,770		47,738		189,305		90,446		Communications Network		66,460		93,255
All Other	All Other	2,679		9,623		5,789		15,486		All Other		12,852		3,110
Total Revenue	Total Revenue	$	672,913	$	209,560	$	1,315,816	$	390,802	Total Revenue		$	622,444	$	642,903

Operating Income	Operating Income	$	48,332	$	24,431	$	102,992	$	30,446	Operating Income		$	16,233	$	54,660

Other Income (Expenses)
Other Income (Expenses):										Other Income (Expenses):
Interest expense, net	Interest expense, net	$	(18,151)	$	(1,935)	$	(36,880)	$	(3,286)	Interest expense, net		(18,189)		(18,729)
Foreign exchange, net	Foreign exchange, net	70		(385)		(236)		(1,062)		Foreign exchange, net		(670)		(306)
Other, net	Other, net	(121)		(101)		35		1,184		Other, net		220		156
Income before income taxes and equity in earnings of non-consolidated affiliates		30,130		22,010		65,911		27,282
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates										Income (loss) before income taxes and equity in earnings of non-consolidated affiliates		(2,406)		35,781
Income tax expense	Income tax expense	5,421		3,348		8,610		4,021		Income tax expense		2,384		3,189
Income before equity in earnings of non-consolidated affiliates		24,709		18,662		57,301		23,261
Income (loss) before equity in earnings of non-consolidated affiliates										Income (loss) before equity in earnings of non-consolidated affiliates		(4,790)		32,592
Equity in income (loss) of non-consolidated affiliates	Equity in income (loss) of non-consolidated affiliates	(190)		(3)		840		1		Equity in income (loss) of non-consolidated affiliates		(227)		1,030
Net income		24,519		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 (loss)										Net income (loss)		(5,017)		33,622
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests										Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests		5,460		(20,947)
Net income attributable to Stagwell Inc. common shareholders	Net income attributable to Stagwell Inc. common shareholders	$	10,463	$	17,345	$	23,138	$	21,710	Net income attributable to Stagwell Inc. common shareholders		$	443	$	12,675

Reconciliation to Adjusted EBITDA
Reconciliation to Adjusted EBITDA:										Reconciliation to Adjusted EBITDA:
Net income attributable to Stagwell Inc. common shareholders	Net income attributable to Stagwell Inc. common shareholders	$	10,463	$	17,345	$	23,138	$	21,710	Net income attributable to Stagwell Inc. common shareholders		$	443	$	12,675
Non-operating items (1)	Non-operating items (1)	37,869		7,086		79,854		8,736		Non-operating items (1)		15,790		41,985
Operating income	Operating income	48,332		24,431		102,992		30,446		Operating income		16,233		54,660
Depreciation and amortization	Depreciation and amortization	32,231		10,381		63,435		21,331		Depreciation and amortization		33,477		31,204
Impairment and other losses	Impairment and other losses	2,266		—		2,823		—		Impairment and other losses		—		557
Stock-based compensation	Stock-based compensation	13,131		—		21,152		—		Stock-based compensation		12,004		8,021
Deferred acquisition consideration	Deferred acquisition consideration	13,472		2,098		15,369		6,034		Deferred acquisition consideration		4,088		1,897
Other items, net	Other items, net	1,887		1,808		6,960		4,749		Other items, net		6,420		5,073
Adjusted EBITDA	Adjusted EBITDA	$	111,319	$	38,718	$	212,731	$	62,560	Adjusted EBITDA		$	72,222	$	101,412

(1) Non-operating items includes items within the Statements of Operations, below Operating Income, and above Net income attributable to Stagwell Inc. common shareholders.	(1) Non-operating items includes items within the Statements of Operations, below Operating Income, and above Net income attributable to Stagwell Inc. common shareholders.									(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, 2022~~MARCH 31, 2023 COMPARED TO THREE MONTHS ENDED ~~JUNE 30, 2021~~MARCH 31, 2022

Consolidated Results of Operations

The components of operating results for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30, 2021~~March 31, 2022 were as follows:


		Three Months Ended June 30,									Three Months Ended March 31,
		2022		2021		Change					2023		2022		Change
		(Dollars in Thousands)									(dollars in thousands)
						$		%							$		%
Revenue	Revenue	$	672,913	$	209,560	$	463,353	NM		Revenue	$	622,444	$	642,903	$	(20,459)	(3.2)	%
Operating Expenses	Operating Expenses									Operating Expenses
Cost of services	Cost of services	424,661		122,074		302,587		NM		Cost of services	413,898		411,970		1,928		0.5	%
Office and general expenses	Office and general expenses	165,423		52,674		112,749		NM		Office and general expenses	158,836		144,512		14,324		9.9	%
Depreciation and amortization	Depreciation and amortization	32,231		10,381		21,850		NM		Depreciation and amortization	33,477		31,204		2,273		7.3	%
Impairment and other losses	Impairment and other losses	2,266		—		2,266		100.0	%	Impairment and other losses	—		557		(557)		(100.0)	%
		$	624,581	$	185,129	$	439,452	NM			$	606,211	$	588,243	$	17,968	3.1	%
Operating income		$	48,332	$	24,431	$	23,901	97.8	%
Operating Income										Operating Income	$	16,233	$	54,660	$	(38,427)	(70.3)	%


		Three Months Ended June 30,									Three Months Ended March 31,
		2022		2021		Change					2023		2022		Change
		(Dollars in Thousands)									(dollars in thousands)
						$		%							$		%
Net Revenue	Net Revenue	$	556,316	$	181,844	$	374,472	NM		Net Revenue	$	521,662	$	526,637	$	(4,975)	(0.9)	%
Billable costs	Billable costs	116,597		27,716		88,881		NM		Billable costs	100,782		116,266		(15,484)		(13.3)	%
Revenue	Revenue	672,913		209,560		$	463,353	NM		Revenue	622,444		642,903		(20,459)		(3.2)	%

Billable costs	Billable costs	116,597		27,716		88,881		NM		Billable costs	100,782		116,266		(15,484)		(13.3)	%
Staff costs	Staff costs	349,468		111,781		237,687		NM		Staff costs	349,677		340,638		9,039		2.7	%
Administrative costs	Administrative costs	66,349		19,262		47,087		NM		Administrative costs	68,176		56,294		11,882		21.1	%
Unbillable and other costs, net	Unbillable and other costs, net	29,180		12,083		17,097		NM		Unbillable and other costs, net	31,587		28,293		3,294		11.6	%
Adjusted EBITDA	Adjusted EBITDA	111,319		38,718		72,601		NM		Adjusted EBITDA	72,222		101,412		(29,190)		(28.8)	%
Stock-based compensation	Stock-based compensation	13,131		—		13,131		100.0	%	Stock-based compensation	12,004		8,021		3,983		49.7	%
Depreciation and amortization	Depreciation and amortization	32,231		10,381		21,850		NM		Depreciation and amortization	33,477		31,204		2,273		7.3	%
Deferred acquisition consideration	Deferred acquisition consideration	13,472		2,098		11,374		NM		Deferred acquisition consideration	4,088		1,897		2,191		NM
Impairment and other losses	Impairment and other losses	2,266		—		2,266		100.0	%	Impairment and other losses	—		557		(557)		(100.0)	%
Other items, net	Other items, net	1,887		1,808		79		4.4	%	Other items, net	6,420		5,073		1,347		26.6	%
Operating Income (1)	Operating Income (1)	$	48,332	$	24,431	$	23,901	97.8	%	Operating Income (1)	$	16,233	$	54,660	$	(38,427)	(70.3)	%

(1) See the Results of Operations section above for a reconciliation of Operating Income to Net Income attributable to Stagwell Inc. common shareholders.	(1) See the Results of Operations section above for a reconciliation of Operating Income to Net Income attributable to Stagwell Inc. common shareholders.									(1) See the Results of Operations section above for a reconciliation of Operating Income to Net Income attributable to Stagwell Inc. common shareholders.

Revenue

Revenue for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$672.9~~$622.4 million compared to ~~$209.6~~$642.9 million for the three months ended ~~June 30, 2021, an increase~~March 31, 2022, a decrease of ~~$463.4~~$20.5 million.

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Net Revenue

The components of the fluctuations in net revenue for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30, 2021~~March 31, 2022 were as follows:


				Net Revenue - Components of Change										Change						Net Revenue - Components of Change					Change
		Three Months Ended June 30, 2021		Foreign Currency		Net Acquisitions (Divestitures)		Organic		Total Change		Three Months Ended June 30, 2022		Organic		Total			Three Months Ended March 31, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Three Months Ended March 31, 2023	Organic	Total
		(Dollars in Thousands)																	(dollars in thousands)
Integrated Agencies Network	Integrated Agencies Network	$	79,400	$	2,316	$	211,034	$	22,092	$	235,442	$	314,842	27.8	%	NM		Integrated Agencies Network	$303,666	$(2,793)	$2,465	$(10,434)	$(10,762)	$292,904	(3.4)%	(3.5)%
Media Network		62,658		263		76,546		32,408		109,217		171,875		51.7	%	NM
Brand Performance Network																		Brand Performance Network	155,482	(4,118)	5,911	5,659	7,452	162,934	3.6%	4.8%
Communications Network	Communications Network	30,170		260		22,460		14,030		36,750		66,920		46.5	%	NM		Communications Network	64,379	(281)	1,069	(12,195)	(11,407)	52,972	(18.9)%	(17.7)%
All Other	All Other	9,616		(97)		(5,694)		(1,146)		(6,937)		2,679		(11.9)	%	(72.1)	%	All Other	3,110	(157)	9,038	861	9,742	12,852	27.7%	NM
		$	181,844	$	2,742	$	304,346	$	67,384	$	374,472	$	556,316	37.1	%	NM			$526,637	$(7,349)	$18,483	$(16,109)	$(4,975)	$521,662	(3.1)%	(0.9)%
Component % change	Component % change			1.5%		NM												Component % change		(1.4)%	3.5%	(3.1)%	(0.9)%

For the three months ended ~~June 30, 2022,~~March 31, 2023, organic net revenue ~~increased $67.4~~decreased $16.1 million, or ~~37.1%~~(3.1)%. ~~Organic~~The decrease in organic revenue ~~grew primarily across all segments. Such growth~~ was primarily attributable to ~~increased~~a decline in spending by existing clients, ~~and business~~driven partially by lower advocacy services as compared to higher spending in the first quarter of 2022 associated with ~~new clients.~~the 2022 elections. The increase in net ~~acquisition~~acquisitions (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”)~~BNG and ~~GoodStuff Holdings Limited (“Goodstuff”).~~Maru.

The geographic mix in net revenues for the three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021 is~~was as follows:


		Three Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022
		(Dollars in Thousands)					(dollars in thousands)
United States	United States	$	450,879	$	156,983	United States	$	416,581	$	429,532
United Kingdom	United Kingdom	42,070		17,651		United Kingdom	40,628		38,285
Other	Other	63,367		7,210		Other	64,453		58,820
Total	Total	$	556,316	$	181,844	Total	$	521,662	$	526,637

Operating Income

Operating ~~income~~Income for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$48.3~~$16.2 million compared to ~~$24.4~~$54.7 million for the three months ended ~~June 30, 2021,~~March 31, 2022, representing a decrease of $38.4 million. The decrease in Operating Income was primarily attributable to a decrease in Revenue and an increase in Cost of ~~$23.9 million.~~services, Office and general expenses, and Depreciation and amortization.

The ~~three months ended June 30, 2022~~increase in Cost of services was ~~impacted~~ primarily attributable to an increase in compensation expense, including stock-based compensation, in part due to an increase in headcount, partially offset by lower billable costs associated with providing services.

Stock-based compensation expense increased approximately $4.0 million, primarily driven by an increase in ~~revenue~~the value of profits interests awards during the three months ended March 31, 2023.

Office and general expenses ~~due to the acquisition of MDC, and costs associated with an increase in services provided. Stock-based compensation expense~~ increased primarily ~~driven by awards issued~~attributable to ~~employees~~lower occupancy expenses in the first quarter of 2022 connected with a benefit associated with the initiative to consolidate real estate in New York City as well as an increase in deferred acquisition consideration expense.

Deferred acquisition consideration increased approximately $2.2 million, primarily attributable to the change in fair value associated with the awards and new deferred acquisition consideration acquired in association with certain acquisitions occurring in 2022.

Depreciation and amortization ~~was higher due~~expense increased approximately $2.3 million, primarily attributable to the recognition of ~~amortizable~~depreciable fixed assets and intangible assets in connection with ~~the acquisition of MDC.~~acquisitions occurring in 2022.

Other, net

Other, net for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~expense of $0.1~~$0.2 million compared to ~~expense of $0.1~~$0.2 million for the three months ended ~~June 30, 2021.~~March 31, 2022.

Foreign Exchange, ~~Transaction Gain (Loss)~~Net

The foreign exchange ~~gain~~loss for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$0.1~~$0.7 million compared to a loss of ~~$0.4~~$0.3 million for the three months ended ~~June 30, 2021.~~March 31, 2022.

Interest Expense, Net

Interest expense, net for the three months ended ~~June 30, 2022~~March 31, 2023 was $18.2 million compared to ~~$1.9~~$18.7 million for the three months ended ~~June 30, 2021, representing an increase of $16.2 million, primarily driven by a higher level of debt, principally due to amounts outstanding under the Revolving Credit Agreement.~~

~~Table of~~ ~~Contents~~

March 31, 2022.

Income Tax Expense

The Company had an income tax expense for the three months ended ~~June 30, 2022~~March 31, 2023 of ~~$5.4~~$2.4 million (on a pre-tax ~~income~~loss of ~~$30.1~~$2.4 million resulting in an effective tax rate of ~~18.0%~~(99.1)%) compared to income tax expense of ~~$3.3~~$3.2 million (on pre-tax income of ~~$22.0~~$35.8 million resulting in an effective tax rate of ~~15.2%~~8.9%) for the three months ended ~~June 30, 2021.~~March 31, 2022.

The difference in the effective tax rate of ~~18.0%~~(99.1)% in the three months ended ~~June 30, 2022~~March 31, 2023 as compared to ~~15.2%~~8.9% in the three months ended ~~June 30, 2021~~March 31, 2022 was primarily ~~related~~due to ~~additional deductions for share based compensation vesting~~the pre-tax loss, an increase in ~~2022.~~valuation allowance, and an increase in uncertain tax positions in 2023.

Noncontrolling and Redeemable Noncontrolling Interests

The effect of noncontrolling and redeemable noncontrolling interests for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$14.1~~a loss of $5.5 million compared to ~~$1.3~~income of $20.9 million for the three months ended ~~June 30, 2021.~~March 31, 2022. The $5.5 million loss was primarily attributable to noncontrolling interest losses associated with holders of Class C Common Stock.

Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders

As a result of the foregoing, net income attributable to Stagwell Inc. common shareholders for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$10.5~~$0.4 million compared to ~~net income attributable to Stagwell Inc. common shareholders of $17.3~~$12.7 million for the three months ended ~~June 30, 2021.~~March 31, 2022.

Earnings Per Share

Diluted EPS and Adjusted Diluted EPS for the three months ended March 31, 2023 was as follows:


	GAAP		Adjustments(1)		Non-GAAP
	(dollars in thousands, except per share amounts)
Net income attributable to Stagwell Inc. common shareholders	$	443	$	18,623	$	19,066
Net income (loss) attributable to Class C shareholders	(3,165)		23,104		19,939
Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income	$	(2,722)	$	41,727	$	39,005

Weighted average number of common shares outstanding	128,897				128,897
Weighted average number of common Class C shares outstanding	160,909				160,909
Weighted average number of shares outstanding	289,806				289,806

Diluted EPS and Adjusted Diluted EPS	$	(0.01)			$	0.13

Adjustments to Net Income(1)	Pre-Tax		Tax		Net
Amortization	$	26,732	$	(5,346)	$	21,386

Stock-based compensation	12,004		(2,401)		9,603
Deferred acquisition consideration	4,088		(818)		3,270
Other items, net	6,420		(1,283)		5,137
Tax adjustments	—		2,331		2,331
	$	49,244	$	(7,517)	$	41,727

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

Diluted EPS and Adjusted Diluted EPS for the three months ended March 31, 2022 was as follows:


	GAAP		Adjustments(1)		Non-GAAP
	(dollars in thousands, except per share amounts)
Net income attributable to Stagwell Inc. common shareholders	$	12,675	$	15,865	$	28,540
Net income attributable to Class C shareholders	17,721		20,100		37,821
Net income attributable to Stagwell Inc. and Class C and adjusted net income	$	30,396	$	35,965	$	66,361

Weighted average number of common shares outstanding	297,484				297,484



Diluted EPS and Adjusted Diluted EPS	$	0.10			$	0.22

Adjustments to Net Income(1)	Pre-Tax		Tax		Net
Amortization	$	24,904	$	(4,981)	$	19,923
Impairment and other losses	557		(111)		446
Stock-based compensation	8,021		(1,604)		6,417
Deferred acquisition consideration	1,897		(379)		1,518
Other items, net	5,073		(985)		4,088
Tax adjustments	—		3,573		3,573
	$	40,452	$	(4,487)	$	35,965

(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, 2022~~March 31, 2023 was ~~$111.3~~$72.2 million, compared to ~~$38.7~~$101.4 million for the three months ended ~~June 30, 2021,~~March 31, 2022, representing ~~an increase~~a decrease of ~~$72.6~~$29.2 million, primarily driven by ~~the increase in revenue, partially offset by higher operating expenses primarily due to the impact of the acquisition of MDC.~~lower Operating Income as discussed above.

Integrated Agencies Network

The components of operating results for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30, 2021~~March 31, 2022 were as follows:


		Three Months Ended June 30,									Three Months Ended March 31,
		2022		2021		Change					2023		2022		Change
		(Dollars in Thousands)									(dollars in thousands)
						$		%							$		%
Revenue	Revenue	$	378,168	$	81,639	$	296,529	NM		Revenue	$	329,792	$	348,751	$	(18,959)	(5.4)	%
Operating Expenses	Operating Expenses									Operating Expenses
Cost of services	Cost of services	246,895		46,261		200,634		NM		Cost of services	220,197		226,118		(5,921)		(2.6)	%
Office and general expenses	Office and general expenses	72,561		17,930		54,631		NM		Office and general expenses	67,424		58,257		9,167		15.7	%
Depreciation and amortization	Depreciation and amortization	18,010		2,691		15,319		NM		Depreciation and amortization	18,643		18,860		(217)		(1.2)	%
Impairment and other losses		784		—		784		100.0	%
		$	338,250	$	66,882	$	271,368	NM
Operating income		$	39,918	$	14,757	$	25,161	NM
											$	306,264	$	303,235	$	3,029	1.0	%
Operating Income										Operating Income	$	23,528	$	45,516	$	(21,988)	(48.3)	%

~~Table of~~ ~~Contents~~


		Three Months Ended June 30,									Three Months Ended March 31,
		2022		2021		Change					2023		2022		Change
		(Dollars in Thousands)									(dollars in thousands)
						$		%							$		%
Net Revenue	Net Revenue	$	314,842	$	79,400	$	235,442	NM		Net Revenue	$	292,904	$	303,666	$	(10,762)	(3.5)	%
Billable costs	Billable costs	63,326		2,239		61,087		NM		Billable costs	36,888		45,085		(8,197)		(18.2)	%
Revenue	Revenue	378,168		81,639		296,529		NM		Revenue	329,792		348,751		(18,959)		(5.4)	%

Billable costs	Billable costs	63,326		2,239		61,087		NM		Billable costs	36,888		45,085		(8,197)		(18.2)	%
Staff costs	Staff costs	195,942		44,807		151,135		NM		Staff costs	187,693		192,096		(4,403)		(2.3)	%
Administrative costs	Administrative costs	31,465		6,036		25,429		NM		Administrative costs	29,166		25,609		3,557		13.9	%
Unbillable and other costs, net	Unbillable and other costs, net	17,128		8,802		8,326		94.6	%	Unbillable and other costs, net	16,660		17,073		(413)		(2.4)	%
Adjusted EBITDA	Adjusted EBITDA	70,307		19,755		50,552		NM		Adjusted EBITDA	59,385		68,888		(9,503)		(13.8)	%
Stock-based compensation	Stock-based compensation	4,663		—		4,663		100.0	%	Stock-based compensation	8,198		5,073		3,125		61.6	%
Depreciation and amortization	Depreciation and amortization	18,010		2,691		15,319		NM		Depreciation and amortization	18,643		18,860		(217)		(1.2)	%
Deferred acquisition consideration	Deferred acquisition consideration	6,181		2,098		4,083		NM		Deferred acquisition consideration	5,991		(1,325)		7,316		NM
Impairment and other losses		784		—		784		100.0	%

Other items, net	Other items, net	751		209		542		NM		Other items, net	3,025		764		2,261		NM
Operating Income	Operating Income	$	39,918	$	14,757	$	25,161	NM		Operating Income	$	23,528	$	45,516	$	(21,988)	(48.3)	%

Revenue

Revenue for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$378.2~~$329.8 million compared to ~~$81.6~~$348.8 million for the three months ended ~~June 30, 2021, an increase~~March 31, 2022, a decrease of ~~$296.5~~$19.0 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30, 2021~~March 31, 2022 were as follows:

Net Revenue - Components of Change Change
Three Months Ended June 30, 2021 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Three Months Ended June 30, 2022 Organic Total
(Dollars in Thousands)
Integrated Agencies Network $ 79,400 $ 2,316 $ 211,034 $ 22,092 $ 235,442 $ 314,842 27.8 % NM
Component % change 2.9% NM


		Net Revenue - Components of Change					Change
	Three Months Ended March 31, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Three Months Ended March 31, 2023	Organic	Total
	(dollars in thousands)
Integrated Agencies Network	$303,666	$(2,793)	$2,465	$(10,434)	$(10,762)	$292,904	(3.4)%	(3.5)%
Component % change		(0.9)%	0.8%	(3.4)%	(3.5)%

The ~~increase~~decline in organic net revenue was primarily attributable to ~~increased~~decreased spending by existing ~~and new~~ clients primarily driven by ~~creative, digital transformation and consumer insights services. The increase~~clients in ~~net acquisition (divestitures) was primarily driven by~~ the ~~acquisition of MDC.~~

The increase in expenses was driven by the impact of the acquisition of MDC and costs associated with an increase in services provided. Stock-based compensation expense increased, primarily driven by awards issued to employeestechnology sector who withheld spending in the first quarter of ~~2022. Depreciation~~2023.

Operating Income

Operating Income for the three months ended March 31, 2023 was $23.5 million compared to $45.5 million for the three months ended March 31, 2022, representing a decrease of $22.0 million. The decrease in Operating Income was primarily attributable to a decrease in Revenue and ~~amortization grew~~Cost of services, and an increase in Office and general expenses.

The decrease in Cost of services was primarily attributable to an increase in compensation expense, including stock-based compensation, in part due to an increase in headcount, partially offset by lower billable costs associated with providing services.

Stock-based compensation expense increased approximately $3.1 million, primarily attributable to an increase in the ~~recognition~~value of ~~amortizable intangible assets following the~~profits interests awards.

Office and general expenses increased primarily attributable to an increase in deferred acquisition ~~of MDC.~~ consideration expense and an increase in severance expense.

Deferred acquisition consideration ~~expense~~ increased ~~due~~approximately $7.3 million, primarily attributable to an increase in fair value associated with certain of the ~~recognition~~instruments and a Brand that had a significant reduction in fair value in the first quarter of ~~additional liabilities following~~2022 for which the ~~acquisition of MDC.~~final payment was made in Q2 2022.

Operating ~~income~~Income and Adjusted EBITDA were ~~higher,~~lower, driven by ~~an increase~~the decrease in ~~revenues, partially offset by~~revenue and higher expenses as detailed above.

~~Table of~~ ~~Contents~~

~~Media~~Brand Performance Network

The components of operating results for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30, 2021~~March 31, 2022 were as follows:


		Three Months Ended June 30,									Three Months Ended March 31,
		2022		2021		Change					2023		2022		Change
		(Dollars in Thousands)									(dollars in thousands)
						$		%							$		%
Revenue	Revenue	$	194,296	$	70,560	$	123,736	NM		Revenue	$	213,340	$	197,787	$	15,553	7.9	%
Operating Expenses	Operating Expenses									Operating Expenses
Cost of services	Cost of services	113,098		38,949		74,149		NM		Cost of services	139,249		123,400		15,849		12.8	%
Office and general expenses	Office and general expenses	57,690		22,772		34,918		NM		Office and general expenses	52,140		47,592		4,548		9.6	%
Depreciation and amortization	Depreciation and amortization	8,643		5,313		3,330		62.7	%	Depreciation and amortization	8,244		8,196		48		0.6	%
Impairment and other losses										Impairment and other losses	—		557		(557)		(100.0)	%
											$	199,633	$	179,745	$	19,888	11.1	%
		$	179,431	$	67,034	$	112,397	NM
Operating income		$	14,865	$	3,526	$	11,339	NM
Operating Income										Operating Income	$	13,707	$	18,042	$	(4,335)	(24.0)	%


		Three Months Ended June 30,									Three Months Ended March 31,
		2022		2021		Change					2023		2022		Change
		(Dollars in Thousands)									(dollars in thousands)
						$		%							$		%
Net Revenue	Net Revenue	$	171,875	$	62,658	$	109,217	NM		Net Revenue	$	162,934	$	155,482	$	7,452	4.8	%
Billable costs	Billable costs	22,421		7,902		14,519		NM		Billable costs	50,406		42,305		8,101		19.1	%
Revenue	Revenue	194,296		70,560		123,736		NM		Revenue	213,340		197,787		15,553		7.9	%

Billable costs	Billable costs	22,421		7,902		14,519		NM		Billable costs	50,406		42,305		8,101		19.1	%
Staff costs	Staff costs	102,285		41,477		60,808		NM		Staff costs	104,596		96,024		8,572		8.9	%
Administrative costs	Administrative costs	24,001		9,782		14,219		NM		Administrative costs	23,082		17,040		6,042		35.5	%
Unbillable and other costs, net	Unbillable and other costs, net	11,890		2,270		9,620		NM		Unbillable and other costs, net	11,835		11,170		665		6.0	%
Adjusted EBITDA	Adjusted EBITDA	33,699		9,129		24,570		NM		Adjusted EBITDA	23,421		31,248		(7,827)		(25.0)	%
Stock-based compensation	Stock-based compensation	4,969		—		4,969		100.0	%	Stock-based compensation	657		1,260		(603)		(47.9)	%
Depreciation and amortization	Depreciation and amortization	8,643		5,313		3,330		62.7	%	Depreciation and amortization	8,244		8,196		48		0.6	%
Deferred acquisition consideration	Deferred acquisition consideration	3,773		—		3,773		100.0	%	Deferred acquisition consideration	(1,179)		2,132		(3,311)		NM

Impairment and other losses										Impairment and other losses	—		557		(557)		(100.0)	%
Other items, net	Other items, net	1,449		290		1,159		NM		Other items, net	1,992		1,061		931		87.7	%
Operating Income	Operating Income	$	14,865	$	3,526	$	11,339	NM		Operating Income	$	13,707	$	18,042	$	(4,335)	(24.0)	%

Revenue

Revenue for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$194.3~~$213.3 million compared to ~~$70.6~~$197.8 million for the three months ended ~~June 30, 2021,~~March 31, 2022, an increase of ~~$123.7~~$15.6 million.

~~Table of~~ ~~Contents~~

Net Revenue

The components of the fluctuations in net revenue for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30, 2021~~March 31, 2022 were as follows:


			Net Revenue - Components of Change					Change					Net Revenue - Components of Change					Change
		Three Months Ended June 30, 2021	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Three Months Ended June 30, 2022	Organic		Total		Three Months Ended March 31, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Three Months Ended March 31, 2023	Organic	Total
		(Dollars in Thousands)										(dollars in thousands)
Media Network		62,658	263	76,546	32,408	109,217	171,875	51.7	%	NM
Brand Performance Network											Brand Performance Network	$155,482	$(4,118)	$5,911	$5,659	$7,452	$162,934	3.6%	4.8%
Component % change	Component % change		0.4%	NM							Component % change		(2.6)%	3.8%	3.6%	4.8%

The increase in organic net revenue was primarily attributable to new clients and increased spending by existing ~~clients, primarily driven by the seasonal business of a new client and the recovery of the travel industry.~~clients. The increase in net ~~acquisition~~acquisitions (divestitures) ~~was driven by the acquisitions of MDC, GoodStuff, and BNG.~~

~~The increase in expenses~~ was primarily driven by the ~~impact~~acquisition of BNG.

Operating Income

Operating Income for the ~~acquisitions~~three months ended March 31, 2023 was $13.7 million compared to $18.0 million for the three months ended March 31, 2022, representing a decrease of ~~MDC, BNG~~$4.3 million. The decrease in Operating Income was primarily attributable to an increase in Revenue, more than offset by an increase in Costs of services and ~~Goodstuff~~Office and general expenses.

The increase in Cost of services was primarily attributable to higher billable and staff costs associated with ~~an increase in~~providing services ~~provided. Stock-based compensation expense~~as well as due to the acquisition of BNG.

Office and general expenses increased primarily ~~driven by awards issued~~attributable to ~~employees~~lower occupancy expenses in the first quarter of ~~2022.~~ 2022 connected with a benefit associated with the initiative to consolidate real estate in New York City, higher staff costs due to an increase in headcount, and a decrease in deferred acquisition expense.

Deferred acquisition consideration ~~expense increased due~~decreased approximately $3.3 million primarily attributable to the ~~assumption~~reduction in fair value in the first quarter of ~~additional liabilities primarily~~2023 associated with a certain Brand that was acquired in ~~connection with~~ the ~~acquisitions~~second 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.~~2022.

Operating ~~income~~Income and Adjusted EBITDA were lower driven ~~by an increase in revenues, partially offset~~ by higher expenses as detailed ~~above.~~above, partially offset by higher revenue.

Communications Network

The components of operating results for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30, 2021~~March 31, 2022 were as follows:

Three Months Ended June 30,
2022 2021 Change
(Dollars in Thousands)
$ %
Revenue $ 97,770 $ 47,738 $ 50,032 NM
Operating Expenses
Cost of services 63,239 31,153 32,086 NM
Office and general expenses 21,511 6,825 14,686 NM
Depreciation and amortization 2,524 1,395 1,129 80.9 %
$ 87,274 $ 39,373 $ 47,901 NM
Operating income $ 10,496 $ 8,365 $ 2,131 25.5 %

~~Table of~~ ~~Contents~~


	Three Months Ended March 31,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	66,460	$	93,255	$	(26,795)	(28.7)	%
Operating Expenses
Cost of services	46,881		60,829		(13,948)		(22.9)	%
Office and general expenses	17,217		16,907		310		1.8	%
Depreciation and amortization	2,713		2,560		153		6.0	%

	$	66,811	$	80,296	$	(13,485)	(16.8)	%
Operating Income (Loss)	$	(351)	$	12,959	$	(13,310)	NM


		Three Months Ended June 30,									Three Months Ended March 31,
		2022		2021		Change					2023		2022		Change
		(Dollars in Thousands)									(dollars in thousands)
						$		%							$		%
Net Revenue	Net Revenue	$	66,920	$	30,170	$	36,750	NM		Net Revenue	$	52,972	$	64,379	$	(11,407)	(17.7)	%
Billable costs	Billable costs	30,850		17,568		13,282		75.6	%	Billable costs	13,488		28,876		(15,388)		(53.3)	%
Revenue	Revenue	97,770		47,738		50,032		NM		Revenue	66,460		93,255		(26,795)		(28.7)	%

Billable costs	Billable costs	30,850		17,568		13,282		75.6	%	Billable costs	13,488		28,876		(15,388)		(53.3)	%
Staff costs	Staff costs	42,014		18,683		23,331		NM		Staff costs	40,077		40,826		(749)		(1.8)	%
Administrative costs	Administrative costs	7,520		2,086		5,434		NM		Administrative costs	8,756		7,068		1,688		23.9	%
Unbillable and other costs, net	Unbillable and other costs, net	155		(561)		716		NM		Unbillable and other costs, net	126		47		79		NM
Adjusted EBITDA	Adjusted EBITDA	17,231		9,962		7,269		73.0	%	Adjusted EBITDA	4,013		16,438		(12,425)		(75.6)	%
Stock-based compensation	Stock-based compensation	649		—		649		100.0	%	Stock-based compensation	507		(243)		750		NM
Depreciation and amortization	Depreciation and amortization	2,524		1,395		1,129		80.9	%	Depreciation and amortization	2,713		2,560		153		6.0	%
Deferred acquisition consideration	Deferred acquisition consideration	3,518		—		3,518		100.0	%	Deferred acquisition consideration	539		1,090		(551)		(50.6)	%

Other items, net	Other items, net	44		202		(158)		(78.2)	%	Other items, net	605		72		533		NM
Operating Income		$	10,496	$	8,365	$	2,131	25.5	%
Operating Income (Loss)										Operating Income (Loss)	$	(351)	$	12,959	$	(13,310)	NM

Revenue

Revenue for the three months ended ~~June 30, 2022~~March 31, 2023 was ~~$97.8~~$66.5 million compared to ~~$47.7~~$93.3 million for the three months ended ~~June 30, 2021,~~March 31, 2022, a decrease of $26.8 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 were as follows:


		Net Revenue - Components of Change					Change
	Three Months Ended March 31, 2022	Foreign Currency	Net Acquisitions (Divestitures)	Organic	Total Change	Three Months Ended March 31, 2023	Organic	Total
	(dollars in thousands)
Communications Network	$64,379	$(281)	$1,069	$(12,195)	$(11,407)	$52,972	(18.9)%	(17.7)%
Component % change		(0.4)%	1.7%	(18.9)%	(17.7)%

The decline in organic net revenue was attributable to decreased spending, primarily due to lower advocacy services as compared to higher spending in the first quarter of 2022 associated with the 2022 elections.

Operating Income (Loss)

Operating Loss for the three months ended March 31, 2023 was $0.4 million compared to Operating Income of $13.0 million for the three months ended March 31, 2022, representing a decrease of $13.3 million. The decrease in Operating Income was primarily attributable to a decrease in Revenue and a less than offsetting decrease in Costs of services.

The decrease in Cost of services was primarily attributable to a decrease in billable costs associated with providing services.

Operating Loss and the decrease in Adjusted EBITDA were driven by lower revenue partially offset by lower expenses as detailed above.

All Other

The components of operating results for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 were as follows:


	Three Months Ended March 31,
	2023		2022		Change
	(dollars in thousands)
					$		%
Revenue	$	12,852	$	3,110	$	9,742	NM
Operating Expenses
Cost of services	7,680		1,623		6,057		NM
Office and general expenses	7,746		1,619		6,127		NM
Depreciation and amortization	1,948		501		1,447		NM

	$	17,374	$	3,743	$	13,631	NM
Operating Loss	$	(4,522)	$	(633)	$	(3,889)	NM


	Three Months Ended March 31,
	2023		2022		Change
	(dollars in thousands)
					$		%
Net Revenue	$	12,852	$	3,110	$	9,742	NM

Revenue	12,852		3,110		9,742		NM


Staff costs	10,487		2,536		7,951		NM
Administrative costs	3,195		695		2,500		NM
Unbillable and other costs, net	2,975		3		2,972		NM
Adjusted EBITDA	(3,805)		(124)		(3,681)		NM
Stock-based compensation	32		8		24		NM
Depreciation and amortization	1,948		501		1,447		NM
Deferred acquisition consideration	(1,263)		—		(1,263)		(100.0)	%


Operating Loss	$	(4,522)	$	(633)	$	(3,889)	NM

Revenue

Revenue for the three months ended March 31, 2023 was $12.9 million compared to $3.1 million for the three months ended March 31, 2022, an increase of ~~$50.0~~$9.7 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30, 2021~~March 31, 2022 were as follows:

Net Revenue - Components of Change

Change

Net Revenue - Components of Change

Change

Three Months Ended June 30, 2021

Foreign Currency

Net Acquisitions (Divestitures)

Organic

Total Change

Three Months Ended June 30, 2022

Organic

Total

Three Months Ended March 31, 2022

Foreign Currency

Net Acquisitions (Divestitures)

Organic

Total Change

Three Months Ended March 31, 2023

Organic

Total

(Dollars in Thousands)

(dollars in thousands)

Communications Network

30,170

260

22,460

14,030

36,750

66,920

46.5

All Other

$3,110

$(157)

$9,038

$861

$9,742

$12,852

27.7%

Component % change

0.9%

74.4%

Component % change

(5.0)%

27.7%

~~The increase in organic~~Organic net revenue ~~was attributable to increased spending by existing and new clients, primarily driven by higher public relations as well as advocacy services, as these are typically higher during election years.~~remained relatively flat. The increase in net ~~acquisition~~acquisitions (divestitures) was primarily driven by an $8.9 million increase in revenue from the acquisition of ~~MDC.~~Maru.

Operating Loss

Operating Loss for the three months ended March 31, 2023 was $4.5 million compared to $0.6 million for the three months ended March 31, 2022, representing an increase of $3.9 million. The increase in Operating Loss was primarily attributable to an increase in Revenue, more than offset by an increase in Cost of services and Office and general expenses.

The increase in ~~expenses~~Cost of services was ~~driven by the impact from~~primarily attributable to higher staff costs associated with providing services and due to the acquisition of ~~MDC~~Maru.

Office and ~~costs associated with~~general expenses increased primarily attributable to an increase in ~~services provided. Deferred acquisition consideration~~compensation expense ~~increased due to the assumption of additional liabilities in connection~~primarily associated with the acquisition of ~~MDC. Depreciation and amortization grew due to the recognition of amortizable intangible assets in connection with the acquisition of MDC.~~Maru.

Operating ~~income~~Loss and the decrease in Adjusted EBITDA were driven by ~~an increase in revenues, partially~~higher revenue, more than offset by higher expenses as detailed above.

4643

~~Table of~~ ~~Contents~~

~~All Other~~

~~The components of operating results for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 were as follows:~~

Three Months Ended June 30,
2022 2021 Change
(Dollars in Thousands)
$ %
Revenue $ 2,679 $ 9,623 $ (6,944) (72.2) %
Operating Expenses
Cost of services 1,429 5,711 (4,282) (75.0) %
Office and general expenses 1,757 3,614 (1,857) (51.4) %
Depreciation and amortization 750 496 254 51.2 %
Impairment and other losses 1,482 — 1,482 100.0 %
$ 5,418 $ 9,821 $ (4,403) (44.8) %
Operating loss $ (2,739) $ (198) $ (2,541) NM

Three Months Ended June 30,
2022 2021 Change
(Dollars in Thousands)
$ %
Net Revenue $ 2,679 $ 9,616 $ (6,937) (72.1) %
Billable costs — 7 (7) (100.0) %
Revenue 2,679 9,623 (6,944) (72.2) %
Billable costs — 7 (7) (100.0) %
Staff costs 2,664 4,838 (2,174) (44.9) %
Administrative costs 493 2,773 (2,280) (82.2) %
Unbillable and other costs, net 7 1,707 (1,700) (99.6) %
Adjusted EBITDA (485) 298 (783) NM
Depreciation and amortization 750 496 254 51.2 %
Impairment and other losses 1,482 — 1,482 100.0 %
Other items, net 22 — 22 100.0 %
Operating Loss $ (2,739) $ (198) $ (2,541) NM

~~Revenue~~

~~Revenue for the three months ended June 30, 2022 was $2.7 million compared to $9.6 million for the three months ended June 30, 2021, a decrease of $6.9 million.~~

~~Table of~~ ~~Contents~~

~~Net Revenue~~

~~The components of the fluctuations in net revenue for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 were as follows:~~

Net Revenue - Components of Change Change
Three Months Ended June 30, 2021 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Three Months Ended June 30, 2022 Organic Total
(Dollars in Thousands)
All Other $ 9,616 $ (97) $ (5,694) $ (1,146) $ (6,937) $ 2,679 (11.9) % (72.1) %
Component % change (1.0)% (59.2)%

~~The decrease in organic net revenue was attributable to a reduction in services at the central innovations group.~~

~~The decrease related to net acquisitions (divestitures) was attributable to the sale of Reputation Defender in the third quarter of 2021.~~

~~Increases in operating loss and decreases in Adjusted EBITDA were driven by decrease in revenues, partially offset by lower expenses driven by the sale of Reputation Defender.~~

Corporate

The components of operating results for the three months ended ~~June 30, 2022~~March 31, 2023 compared to the three months ended ~~June 30, 2021~~March 31, 2022 were as follows:


		Three Months Ended June 30,									Three Months Ended March 31,
		2022		2021		Change					2023		2022		Change
		(Dollars in Thousands)									(dollars in thousands)
						$		%							$		%
Staff costs	Staff costs	$	6,563	$	1,976	$	4,587	NM		Staff costs	$	6,824	$	9,156	$	(2,332)	(25.5)	%
Administrative costs	Administrative costs	2,870		(1,415)		4,285		NM		Administrative costs	3,977		5,882		(1,905)		(32.4)	%
Unbillable and other costs, net	Unbillable and other costs, net	—		(135)		135		100.0	%	Unbillable and other costs, net	(9)		—		(9)		(100.0)	%
Adjusted EBITDA	Adjusted EBITDA	(9,433)		(426)		(9,007)		NM		Adjusted EBITDA	(10,792)		(15,038)		4,246		(28.2)	%
Stock-based compensation	Stock-based compensation	2,850		—		2,850		100.0	%	Stock-based compensation	2,610		1,923		687		35.7	%
Depreciation and amortization	Depreciation and amortization	2,304		486		1,818		NM		Depreciation and amortization	1,929		1,087		842		77.5	%

Other items, net	Other items, net	(379)		1,107		(1,486)		NM		Other items, net	798		3,176		(2,378)		(74.9)	%
Operating Loss	Operating Loss	$	(14,208)	$	(2,019)	$	(12,189)	NM		Operating Loss	$	(16,129)	$	(21,224)	$	5,095	(24.0)	%

Operating expenses increased primarily in connection with the acquisition of MDC, including professional fees associated with the transaction and stock-based compensation awards issued in the first quarter of 2022.

~~Table of~~ ~~Contents~~

~~SIX MONTHS ENDED JUNE 30, 2022 COMPARED TO SIX MONTHS ENDED JUNE 30, 2021~~

~~Consolidated Results of Operations~~

~~The components of operating results~~Loss for the ~~six~~three months ended ~~June 30, 2022 compared to the six months ended June 30, 2021 were as follows:~~

Six Months Ended June 30,
2022 2021 Change
(Dollars in Thousands)
$ %
Revenue $ 1,315,816 $ 390,802 $ 925,014 NM
Operating Expenses
Cost of services 836,631 234,073 602,558 NM
Office and general expenses 309,935 104,952 204,983 NM
Depreciation and amortization 63,435 21,331 42,104 NM
Impairment and other losses $ 2,823 $ — $ 2,823 100.0 %
$ 1,212,824 $ 360,356 $ 852,468 NM
Operating income $ 102,992 $ 30,446 $ 72,546 NM

Six Months Ended June 30,
2022 2021 Change
(Dollars in Thousands)
$ %
Net Revenue $ 1,082,953 $ 339,918 $ 743,035 NM
Billable costs 232,863 50,884 181,979 NM
Revenue 1,315,816 390,802 $ 925,014 NM
Billable costs 232,863 50,884 181,979 NM
Staff costs 690,106 209,691 480,415 NM
Administrative costs 122,643 39,316 83,327 NM
Unbillable and other costs, net 57,473 28,351 29,122 NM
Adjusted EBITDA 212,731 62,560 150,171 NM
Stock-based compensation 21,152 — 21,152 100.0 %
Depreciation and amortization 63,435 21,331 42,104 NM
Deferred acquisition consideration 15,369 6,034 9,335 NM
Impairment and other losses 2,823 — 2,823 100.0 %
Other items, net 6,960 4,749 2,211 46.6 %
Operating Income (1)
$ 102,992 $ 30,446 $ 72,546 NM
(1) See the Results of Operations section above for a reconciliation of Operating Income to Net Income attributable to Stagwell Inc. common shareholders.

~~Revenue~~

~~Revenue for the six months ended June 30, 2022~~March 31, 2023 was ~~$1,315.8~~$16.1 million compared to ~~$390.8~~$21.2 million for the ~~six~~three months ended ~~June 30, 2021, an increase~~March 31, 2022, representing a decrease of ~~$925.0~~$5.1 million.

~~Table of~~ ~~Contents~~

~~Net Revenue~~

The ~~components of the fluctuations in net revenue for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 were as follows:~~

Net Revenue - Components of Change Change
Six Months Ended June 30, 2021 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Six Months Ended June 30, 2022 Organic Total
(Dollars in Thousands)
Integrated Agencies Network $ 146,513 $ 5,851 $ 398,227 $ 69,845 $ 473,923 $ 620,436 47.7 % NM
Media Network 119,269 4,822 145,225 58,040 208,087 327,356 48.7 % NM
Communications Network 58,657 1,247 41,504 27,964 70,715 129,372 47.7 % NM
All Other 15,479 253 (10,950) 1,007 (9,690) 5,789 6.5 % (62.6) %
$ 339,918 $ 12,173 $ 574,006 $ 156,856 $ 743,035 $ 1,082,953 46.1 % NM
Component % change 3.6% NM

For the six months ended June 30, 2022, organic net revenue increased $156.9 million, or 46.1%. There was organic revenue growth across all segments, primarily attributable to increased spending by existing clients and business with new clients. The increase in net acquisition (divestitures) was primarily driven by the acquisition of MDC. In addition, the increase in net acquisition (divestitures) is attributable to the acquisitions of BNG and Goodstuff.

~~The geographic mix in net revenues for the six months ended June 30, 2022 and 2021 is as follows:~~

Six Months Ended June 30,
2022 2021
(Dollars in Thousands)
United States $ 880,411 $ 294,493
United Kingdom 80,355 30,198
Other 122,187 15,227
Total $ 1,082,953 $ 339,918

~~Operating Income~~

~~Operating income for the six months ended June 30, 2022 was $103.0 million compared to $30.4 million for the six months ended June 30, 2021, representing an increase of $72.5 million.~~

Operating income for the six months ended June 30, 2022 was impacted primarily by an increase in revenue and expenses due to 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 employeesdecrease in the first quarter of 2022 as well as awards issued in connection with the merger with MDC. Depreciation and amortization was higher primarily due to the recognition of amortizable intangible assets in connection with the acquisitions of MDC, BNG and Goodstuff.

~~Other, net~~

~~Other, net, for the six months ended June 30, 2022 was income of $0.04 million, compared to income of $1.2 million for the six months ended June 30, 2021.~~

~~Foreign Exchange Transaction Gain (Loss)~~

~~The foreign exchange loss for the six months ended June 30, 2022 was $0.2 million compared to a loss of $1.1 million for the six months ended June 30, 2021.~~

~~Interest Expense, Net~~

Interest expense, net, for the six months ended June 30, 2022 was $36.9 million compared to $3.3 million for the six months ended June 30, 2021, representing an increase of $33.6 million, primarily driven by a higher level of debt in connection with the acquisition of MDC.

~~Table of~~ ~~Contents~~

~~Income Tax Expense~~

The Company had an income tax expense for the six months ended June 30, 2022 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.

The difference in the effective tax rate of 13.1% in the six months ended June 30, 2022 as compared to 14.7% in the six months ended June 30, 2021 was primarily related to additional deductions for share based compensation vesting in 2022.

~~Noncontrolling and Redeemable Noncontrolling Interests~~

~~The effect of noncontrolling and redeemable noncontrolling interests for the six months ended June 30, 2022 was $35.0 million compared to $1.6 million for the six months ended June 30, 2021.~~

~~Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders~~

As a result of the foregoing, net income attributable to Stagwell Inc. common shareholders for the six months ended June 30, 2022 was $23.1 million compared to net income attributable to Stagwell Inc. common shareholders of $21.7 million for the six months ended June 30, 2021.

~~Adjusted EBITDA~~

Adjusted EBITDA for the six months ended June 30, 2022 was $212.7 million, compared to $62.6 million for the six months ended June 30, 2021, representing an increase of $150.2 million, driven by the increase in revenue, partially offset by higher operating expenses and the impact of the acquisitions of MDC, GoodStuff and BNG.

~~Integrated Agencies Network~~

~~The components of operating results for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 were as follows:~~

Six Months Ended June 30,
2022 2021 Change
(Dollars in Thousands)
$ %
Revenue $ 728,639 $ 150,587 $ 578,052 NM
Operating Expenses
Cost of services 473,811 87,159 386,652 NM
Office and general expenses 131,239 35,687 95,552 NM
Depreciation and amortization 36,890 5,293 31,597 NM
Impairment and other losses 784 — 784 100.0 %
$ 642,724 $ 128,139 $ 514,585 NM
Operating income $ 85,915 $ 22,448 $ 63,467 NM

~~Table of~~ ~~Contents~~

Six Months Ended June 30,

2022 2021 Change
(Dollars in Thousands)
$ %
Net Revenue $ 620,436 $ 146,513 $ 473,923 NM
Billable costs 108,203 4,074 104,129 NM
Revenue 728,639 150,587 578,052 NM
Billable costs 108,203 4,074 104,129 NM
Staff costs 389,242 79,189 310,053 NM
Administrative costs 57,297 11,789 45,508 NM
Unbillable and other costs, net 34,201 21,284 12,917 60.7 %
Adjusted EBITDA 139,696 34,251 105,445 NM
Stock-based compensation 9,736 — 9,736 100.0 %
Depreciation and amortization 36,890 5,293 31,597 NM
Deferred acquisition consideration 4,856 6,034 (1,178) (19.5) %
Impairment and other losses 784 — 784 100.0 %
Other items, net 1,515 476 1,039 NM
Operating Income $ 85,915 $ 22,448 $ 63,467 NM

~~Revenue~~

~~Revenue for the six months ended June 30, 2022 was $728.6 million compared to $150.6 million for the six months ended June 30, 2021, an increase of $578.1 million.~~

~~Net Revenue~~

~~The components of the fluctuations in net revenue for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 were as follows:~~

The growth in organic net revenue was attributable to increased spending by existing and new clients, primarily driven by creative, digital transformation and consumer insights services. The increase in net acquisition (divestitures) was driven by the acquisition of MDC.

The increase in expenses was driven by the impact of the acquisition of MDC and costs associated with an increase in services provided. Stock-based compensation expense increased, primarily driven by awards issued to employees in the first quarter of 2022 as well as awards issued in connection with the merger with 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 higher driven by an increase in revenues, partially offset by higher expenses as detailed above.~~

~~Table of~~ ~~Contents~~

~~Media Network~~

~~The components of operating results for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 were as follows:~~

Six Months Ended June 30,
2022 2021 Change
(Dollars in Thousands)
$ %
Revenue $ 392,083 $ 134,283 $ 257,800 NM
Operating Expenses
Cost of services 236,498 79,176 157,322 NM
Office and general expenses 105,282 42,812 62,470 NM
Depreciation and amortization 16,839 10,572 6,267 59.3 %
Impairment and other losses 557 — 557 100.0 %
$ 359,176 $ 132,560 $ 226,616 NM
Operating income $ 32,907 $ 1,723 $ 31,184 NM

Six Months Ended June 30,

2022 2021 Change
(Dollars in Thousands)
$ %
Net Revenue $ 327,356 $ 119,269 $ 208,087 NM
Billable costs 64,727 15,014 49,713 NM
Revenue 392,083 134,283 257,800 NM
Billable costs 64,727 15,014 49,713 NM
Staff costs 198,308 80,369 117,939 NM
Administrative costs 41,042 18,755 22,287 NM
Unbillable and other costs, net 23,059 7,324 15,735 NM
Adjusted EBITDA 64,947 12,821 52,126 NM
Stock-based compensation 6,229 — 6,229 100.0 %
Depreciation and amortization 16,839 10,572 6,267 59.3 %
Deferred acquisition consideration 5,905 — 5,905 100.0 %
Impairment and other losses 557 — 557 100.0 %
Other items, net 2,510 526 1,984 NM
Operating Income $ 32,907 $ 1,723 $ 31,184 NM

~~Revenue~~

~~Revenue for the six months ended June 30, 2022 was $392.1 million compared to $134.3 million for the six months ended June 30, 2021, an increase of $257.8 million.~~

~~Table of~~ ~~Contents~~

~~Net Revenue~~

~~The components of the fluctuations in net revenue for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 were as follows:~~

~~The increase in organic net revenue~~Loss was primarily attributable to new clients and increased spending by existing clients, primarily driven by the seasonal business of a new client and the recovery of the travel industry. The increase in net acquisition (divestitures) was driven by the acquisitions of MDC, Goodstuff and BNG.

~~The increase in expenses was driven by the impact of the acquisitions of MDC, BNG and Goodstuff and~~lower staff costs, associated with an increase in services provided. Deferred acquisition consideration expense increased primarily due to the assumption of additional liabilities in connection with the acquisitions of MDC, Goodstuff and BNG. Stock-based compensation expense increased, primarily driven by awards issued to employees in the first quarter of 2022 as well as awards issued in connection with the merger with MDC. Depreciation and amortization expense increased due to the recognition of amortizable intangible assets in connection with the acquisition of MDC, Goodstuff and BNG in results subsequent to the acquisition.

~~Operating income and Adjusted EBITDA were driven 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, 2022 compared to the six months ended June 30, 2021 were as follows:~~

Six Months Ended June 30,
2022 2021 Change
(Dollars in Thousands)
$ %
Revenue $ 189,305 $ 90,446 $ 98,859 NM
Operating Expenses
Cost of services 123,270 59,597 63,673 NM
Office and general expenses 37,997 13,115 24,882 NM
Depreciation and amortization 5,064 2,977 2,087 70.1 %
$ 166,331 $ 75,689 $ 90,642 NM
Operating income $ 22,974 $ 14,757 $ 8,217 55.7 %

~~Table of~~ ~~Contents~~

Six Months Ended June 30,

2022 2021 Change
(Dollars in Thousands)
$ %
Net Revenue $ 129,372 $ 58,657 $ 70,715 NM
Billable costs 59,933 31,789 28,144 88.5 %
Revenue 189,305 90,446 98,859 NM
Billable costs 59,933 31,789 28,144 88.5 %
Staff costs 81,637 37,125 44,512 NM
Administrative costs 14,364 4,247 10,117 NM
Unbillable and other costs, net 203 (651) 854 NM
Adjusted EBITDA 33,168 17,936 15,232 84.9 %
Stock-based compensation 406 — 406 100.0 %
Depreciation and amortization 5,064 2,977 2,087 70.1 %
Deferred acquisition consideration 4,608 — 4,608 100.0 %
Other items, net 116 202 (86) (42.6) %
Operating Income $ 22,974 $ 14,757 $ 8,217 55.7 %

~~Revenue~~

~~Revenue for the six months ended June 30, 2022 was $189.3 million compared to $90.4 million for the six months ended June 30, 2021, an increase of $98.9 million.~~

~~Net Revenue~~

~~The components of the fluctuations in net revenue for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 were as follows:~~

The increase in organic net revenue was attributable to increased spending by existing and new clients, primarily driven by higher public relations as well as advocacy services, as these are typically higher during election years. The increase in net acquisition (divestitures) was primarily driven by the acquisition of MDC in results subsequent to the acquisition.

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 income and Adjusted EBITDA were driven by an increase in revenues, partially offset by higher expenses as detailed above.~~

~~All Other~~

~~The components of operating results for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 were as follows:~~

Six Months Ended June 30,
2022 2021 Change
(Dollars in Thousands)
$ %
Revenue $ 5,789 $ 15,486 $ (9,697) (62.6) %
Operating Expenses
Cost of services 3,052 8,141 (5,089) (62.5) %
Office and general expenses 3,376 8,658 (5,282) (61.0) %
Depreciation and amortization 1,251 1,518 (267) (17.6) %
Impairment and other losses 1,482 — 1,482 100.0 %
$ 9,161 $ 18,317 $ (9,156) (50.0) %
Operating loss $ (3,372) $ (2,831) $ (541) 19.1 %

Six Months Ended June 30,
2022 2021 Change
(Dollars in Thousands)
$ %
Net Revenue $ 5,789 $ 15,479 $ (9,690) (62.6) %
Billable costs — 7 (7) (100.0) %
Revenue 5,789 15,486 (9,697) (62.6) %
Billable costs — 7 (7) (100.0) %
Staff costs 5,200 9,861 (4,661) (47.3) %
Administrative costs 1,188 6,546 (5,358) (81.9) %
Unbillable and other costs, net 10 385 (375) (97.4) %
Adjusted EBITDA (609) (1,313) 704 (53.6) %
Stock-based compensation 8 — 8 100.0 %
Depreciation and amortization 1,251 1,518 (267) (17.6) %
Impairment and other losses 1,482 — 1,482 100.0 %
Other items, net 22 — 22 100.0 %
Operating Loss $ (3,372) $ (2,831) $ (541) 19.1 %

~~Revenue~~

~~Revenue for the six months ended June 30, 2022 was $5.8 million compared to $15.5 million for the six months ended June 30, 2021, a decrease of $9.7 million.~~

~~Net Revenue~~

~~The components of the fluctuations in net revenue for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 were as follows:~~

~~The increase in organic net revenue was attributable to services at the central innovations group.~~

~~The decrease related to net acquisitions (divestitures) was attributable to the sale of Reputation Defender in the third quarter of 2021.~~

~~Increases in operating loss and Adjusted EBITDA were driven by decrease in revenues, partially offset by lower expenses driven by the sale of Reputation Defender.~~

~~Corporate~~

~~The components of operating results for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 were as follows:~~

Six Months Ended June 30,

2022 2021 Change
(Dollars in Thousands)
$ %
Staff costs $ 15,719 $ 3,147 $ 12,572 NM
Administrative costs 8,752 (2,021) 10,773 NM
Unbillable and other costs, net — 9 (9) (100.0) %
Adjusted EBITDA (24,471) (1,135) (23,336) NM
Stock-based compensation 4,773 — 4,773 100.0 %
Depreciation and amortization 3,391 971 2,420 NM
Other items, net 2,797 3,545 (748) (21.1) %
Operating Loss $ (35,432) $ (5,651) $ (29,781) NM

~~Operating expenses increased primarily in connection with the acquisition of MDC, including~~ professional fees, ~~associated with the transaction. In addition, stock-based compensation expense increased, primarily driven by awards issued to employees~~and merger related costs incurred in ~~the first quarter of 2022 as well as awards issued in connection with the merger with MDC.~~2022.

Liquidity and Capital Resources:

The following table provides summary information about the Company’s liquidity position:

June 30, 2022 June 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)

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.


	Three Months Ended March 31,
	2023		2022
	(dollars in thousands)
Net cash used in operating activities	$	(85,113)	$	(48,577)
Net cash used in investing activities	(10,815)		(8,289)
Net cash provided by financing activities	12,923		6,529

The Company had cash and cash equivalents of ~~$93.4~~$138.5 million and ~~$184.0~~$220.6 million as of ~~June 30, 2022~~March 31, 2023 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 maintain~~maintained and ~~expand~~expanded 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. ~~At June 30, 2022,~~On March 31, 2023, the Company had ~~$298.0~~$150.0 million of borrowings outstanding, ~~$24.4~~$24.6 million of outstanding and undrawn letters of credit resulting in ~~$177.6~~$325.4 million available under its $500.0 million ~~revolving credit agreement.~~Credit Agreement (as defined and discussed in Note 7 of the Notes to the Unaudited Consolidated Financial Statements included herein).

The trade receivables transferred to the third parties were $82.0 million and $7.5 million for the three months ended March 31, 2023 and 2022, respectively. The amount collected and due to the third parties under these arrangements was $2.4 million as of March 31, 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 $1.3 million and less than $0.1 million for the three months ended March 31, 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 three months ended March 31, 2023, there were 2.6 million shares of Class A Common Stock repurchased under the Repurchase Program at an aggregate value, excluding fees, of $17.9 million. These were purchased at an average price of $6.91 per share. The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $180.4 million as of March 31, 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.

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 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~~three months ended ~~June 30,~~March 31, 2023, were $85.1 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 three months ended March 31, 2022, were ~~$107.3~~$48.6 million, primarily driven by earnings, more than offset by unfavorable working capital requirements, including the timing of media supplier payments.

~~Cash flows provided by operating activities for the six months ended June 30, 2021 were $39.2 million, primarily driven by earnings, partially offset by unfavorable working capital requirements.~~

Investing Activities

Cash flows used in investing activities were ~~$54.9~~$10.8 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, primarily driven by ~~$38.3 million in acquisitions and $14.5~~$3.4 million in capital ~~expenditures.~~expenditures and $6.7 million in capitalized software costs.

Cash flows used in investing activities were ~~$7.3~~$8.3 million for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, primarily driven by $4.8 million in capital ~~expenditures.~~

expenditures and $1.8 million in capital capitalized software costs.

Financing Activities

During the ~~six~~three months ended ~~June 30,~~March 31, 2023, cash flows provided by financing activities were $12.9 million, primarily driven by $50.0 million in net borrowings under the Company’s revolving credit agreement, partially offset by total stock repurchases of $26.2 million and distributions to noncontrolling interests of $10.9 million.

During the three months ended March 31, 2022, cash flows provided by financing activities were ~~$65.2~~$6.5 million, primarily driven by ~~$187.5~~$29.5 million in net borrowings under the ~~Combined Credit Agreement (as defined below),~~Company’s previous revolving credit agreement, partially offset ~~primarily~~ by ~~$52.4~~total stock repurchases of $14.9 million ~~of deferred acquisition consideration payments, $36.5 million of~~and 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.$6.5 million.

Total Debt

Debt, net of debt issuance costs, as of ~~June 30, 2022~~March 31, 2023, was ~~$1,381.6~~$1,235.3 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 “Combined~~the Credit ~~Agreement”),~~Agreement, which provides for a $500.0 million senior secured revolving credit facility with a five-year maturity. See Note 1 of the Notes included herein for additional information related to the amendment to the Credit Agreement.

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 threshold established in the ~~Combined~~ Credit Agreement. For the period ended ~~June 30, 2022,~~March 31, 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:

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.

Material Cash Requirements

The Company’s ~~Agencies~~Brands enter into contractual commitments with media providers and agreements with production companies on behalf of its clients at levels that exceed the revenue from services. Some of our ~~agencies~~Brands purchase media for clients and act as an agent for a disclosed principal. These commitments are included in Accounts payable and ~~Accruals and other liabilities~~Accrued 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.

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 March 31, 2023, approximately $51.5 million of the deferred acquisition consideration is expected to be settled in shares of Class A Common Stock.

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 ~~Policies~~Estimates

See the Company’s ~~2021~~2022 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,~~March 31, 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.

On April 28, 2022, the Company amended ~~its~~the 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 to~~change our annual interest expense ~~or cash flows.~~by $1.1 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 statements~~Audited Consolidated Financial Statements included in the ~~2021~~2022 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: ~~At June 30, 2022,~~For the three months ended March 31, 2023, the Company did not ~~have~~recognize any impairment ~~of goodwill. The Company reviews~~related to goodwill, ~~for impairment annually as of October 1st of each year~~right-of-use leases or ~~more frequently if indicators of potential impairment exist.~~intangible assets. See the ~~Critical~~Significant Accounting ~~Estimates~~Policies section in ~~“Management's Discussion and Analysis of~~the “Notes to Consolidated Financial ~~Condition and Results of~~

~~Operations”~~Statements” of the Company’s ~~2021~~2022 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 ~~ensure~~provide reasonable assurance that information required to be ~~included~~disclosed in our ~~SEC~~ reports that we file or submit under the Securities Exchange Act of 1934, as amended (“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,~~March 31, 2023, our disclosure controls and procedures were not ~~effective at a reasonable assurance level.~~effective.

~~Changes in Internal Control Over Financial Reporting~~

Material Weakness Remediation Plan and Status

The Company ~~identified~~made progress with the remediation of these material weaknesses ~~in its~~and continued to execute on the previously communicated remediation activities through March 31, 2023:

•Continued to emphasize at the executive management level, the importance of internal ~~controls~~control over financial reporting, as well as the integrity of ~~December 31, 2021 as described in its 2021 Form 10-K. We are continuing~~our financial statements throughout the Company.

•Hired a Senior Vice President of Sarbanes-Oxley Act (“SOX”) reporting directly to ~~formulate our~~the CFO with the appropriate level of knowledge and experience to lead the development and execution of the remediation plan.

•Established a SOX Steering Committee, that monitors and advises with respect to the remediation plan and progress.

•Enhanced communications with the Audit Committee of the Board of Directors for increased oversight. The Company also continues to formally report quarterly to the Audit Committee regarding progress against the remediation plan.

•Designed and implemented controls over the risk assessment process that includes detailed qualitative and quantitative factors to identify and assess risks and implement or modify controls in response to those risks.

•Assessed the current state of the system of internal control, including information technology systems and controls, at the consolidated and brand levels. The results of this assessment allowed management to enhance existing business processes and ~~improve~~control activities and assess the adequacy of its resources.

•Implemented new controls across our information technology environment including general controls related to access, change management and segregation of duties.

•Redesigned and strengthened control activities over reconciliations including enhanced review and approval controls.

•Improved monitoring of internal ~~controls~~control over financial reporting ~~which includes~~by designing and enhancing management review controls.

•Formalized internal control policies and procedures and conducted multiple in-depth training with control owners throughout the ~~hiring of third-party consultants and additional staff~~Company.

The Company has also continued 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~~roll out its finance transformation initiative, which involves a phased deployment of new ~~ERP~~enterprise resource planning and ~~HRIS~~human resource information systems and a shared service ~~platform while we are performing~~platform.

During the ~~measures noted above, the remediation plan is expected~~three-months ended March 31, 2023, management continued to ~~continue through the end of the first quarter of 2023 with the goal of having the system~~evaluate our internal control processes and remediate gaps in design of internal controls ~~designed~~in line with the previously disclosed remediation plan and ~~in operation~~timeline. The measures that we are taking are subject to continued testing, ongoing senior management review, as ~~of March 31, 2023. However,~~well as audit committee oversight. We will consider the above material weaknesses ~~will not~~to be ~~considered~~fully remediated ~~as of March 31, 2023 as~~once the ~~system of internal~~applicable controls ~~will need to~~ operate for a sufficient period of time and ~~be subject to~~our management has concluded, through testing, ~~by management in 2023 in order to conclude the system of internal~~that these controls isare operating effectively. ~~The Company will provide an update on~~We may also conclude that additional measures may be required to remediate the ~~progress~~material 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 ~~its~~the remediation plan, ~~throughout~~there 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 ~~2021~~2022 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,~~March 31, 2023, the Company ~~issued 210,653~~granted 3,556 shares of Class A Common Stock in transactions exempt from registration under Section 4(a)(2) of the Securities Act. ~~Of these, 31,257~~The shares ~~of Class A Common Stock~~ were granted to ~~employees~~an employee as inducement for employment, and 179,396 shares of Class A Common Stock were issued as payment to members of management of two subsidiaries for acquisitions by the Company of additional interests in the majority-owned subsidiaries.employment. The Company received no cash proceeds and no commissions were paid to any person in connection with the issuance of ~~the~~these shares.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

On March ~~23, 2022,~~1, 2023, the ~~board~~Board authorized an extension and a $125.0 million increase in the size of ~~directors authorized a stock repurchase program (the “Repurchase Program”) under which~~the Repurchase Program. Under the Repurchase Program, as amended, we may repurchase up to ~~$125,000,000~~an 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 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~~The 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~~first quarter of ~~2022:~~2023 and the approximate dollar value of shares that may yet be purchased pursuant to the Repurchase Program:

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
4/1/2022 - 4/30/2022 — $ — — $ 125,000,000
5/1/2022 - 5/31/2022 963,568 7.40 963,568 117,847,505
6/1/2022 - 6/30/2022 1,017,820 7.66 1,017,820 110,119,330
Total 1,981,388 $ 7.53 1,981,388 $ 110,119,330


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
1/1/2023 - 1/31/2023	1,544,375	$	6.56	1,156,022	$	65,458,469
2/1/2023 - 2/28/2023	1,365,091	$	7.06	1,066,967	$	57,987,710
3/1/2023 - 3/31/2023	856,812	$	9.09	361,802	$	180,391,911
Total	3,766,278	$	7.57	2,584,791	$	180,391,911

(1) Includes 1,181,487 shares repurchased to settle employee tax withholding obligations related to the vesting of restricted stock awards and restricted stock units.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None~~On May 4, 2023, certain subsidiaries of Stagwell Inc., entered into Amendment No. 4 to the Amended and Restated Credit Agreement (the “Amendment”), by and among Stagwell Marketing Group LLC, Stagwell Global LLC and Maxxcom LLC

(together, the “Borrowers”), the other Loan Parties, Lenders and Issuing Banks (each as defined therein) party thereto and JPMorgan ChaseBank, N.A., as Administrative Agent thereunder. The Amendment amends that certain Amended and Restated Credit Agreement, dated as of August 2, 2021, as heretofore amended or modified from time to time and as further amended by the Amendment (the “Credit Agreement”), by and among the Borrowers, the other Loan Parties, Lenders and Issuing Banks party thereto, and the Administrative Agent.

The Amendment amends the Credit Agreement, effective as of May 4, 2023, to, among other things, (i) provide additional revolving commitments under the Credit Agreement in an aggregate principal amount of $140.0 million; (ii) permit restricted payments for share repurchases or redemptions from certain stockholders of the Company in an aggregate principal amount of up to $150.0 million, subject to certain limitations; (iii) permit certain investments and financings with respect to Borrowers’ business related to a suite of software-as-a-service and data-as-a-service technology solutions for in-house marketers and exclude, in some instances, such businesses from having the obligation to provide a guaranty and security; and (iv) make any other changes or modifications as agreed with the lenders.

The foregoing summary of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Credit Agreement, as amended, which is attached hereto as Exhibit 10.3 and incorporated herein by reference.

Item 6. Exhibits

The exhibits required by this item are listed on the Exhibit Index.

6250

EXHIBIT INDEX


Exhibit No.						Description
3.1						Second Amended and Restated Certificate of Incorporation of Stagwell Inc., as ~~amended(incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K filed on March 17, 2022).~~ amended. *
3.2						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†						~~Stagwell Inc. Second Amended~~Stock Appreciation Rights Agreement by and ~~Restated 2016 Stock Incentive Plan~~between the Company and Mark Penn, dated as of March 1, 2023 (incorporated by reference to Exhibit ~~4.3~~10.9.3 to the Company’s Form ~~S-8~~10-K filed on ~~June 14, 2022)~~March 6, 2023).


10.2*10.2						Stock Repurchase Agreement, dated May 9, 2023, between Stagwell Inc. and the entities listed on Schedule I thereto (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on May 9, 2023).
10.3						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. *
31.1						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.*
31.2						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.*
32.1						Certification by Chief Executive Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2						Certification by Chief Financial Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101						Interactive Data File, for the period ended ~~June 30, 2022.~~March 31, 2023. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.*
104						Cover 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.~~

6351

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, 2022~~May 9, 2023

/s/ Frank Lanuto
Frank Lanuto
Chief Financial Officer (Principal Financial Officer)
~~August 5, 2022~~May 9, 2023


	June 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	93,402	$	184,009
Accounts receivable, net	782,927		696,937
Expenditures billable to clients	43,583		63,065
Other current assets	73,251		61,830
Total Current Assets	993,163		1,005,841
Fixed assets, net	123,662		118,603
Right-of-use lease assets - operating leases	299,553		311,654
Goodwill	1,668,892		1,652,723
Other intangible assets, net	904,812		937,695

Other assets	34,936		29,064
Total Assets	$	4,025,018	$	4,055,580
LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	254,650	$	271,769
Accrued media	195,939		237,794
Accruals and other liabilities	222,699		272,533
Advance billings	316,654		361,885
Current portion of lease liabilities - operating leases	68,785		72,255
Current portion of deferred acquisition consideration	76,661		77,946
Total Current Liabilities	1,135,388		1,294,182
Long-term debt	1,381,560		1,191,601
Long-term portion of deferred acquisition consideration	119,853		144,423
Long-term lease liabilities - operating leases	327,677		342,730
Deferred tax liabilities, net	80,311		103,093
Other liabilities	73,148		57,147
Total Liabilities	3,117,937		3,133,176
Redeemable Noncontrolling Interests	49,697		43,364
Commitments, Contingencies and Guarantees (Note 10)	0		0
Shareholders' Equity:

Common shares - Class A & B	135		118
Common shares - Class C	2		2
Paid-in capital	368,345		382,893
Retained earnings (loss)	10,268		(6,982)
Accumulated other comprehensive loss	(34,451)		(5,278)
Stagwell Inc. Shareholders' Equity	344,299		370,753
Noncontrolling interests	513,085		508,287
Total Shareholders' Equity	857,384		879,040
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity	$	4,025,018	$	4,055,580



		Three Months Ended
		June 30, 2022
	Common Shares - Class A & B		Common Shares - Class C			Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity


		Shares	Amount		Shares	Amount
Balance at March 31, 2022		133,196	$	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 awards		202	—		—	—		—		—		—		—		—		—

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 shares		388	—		(388)	—		—		—		—		—		—		—
Other		141	2		—	—		1,706		—		—		1,708		(95)		1,613
Balance at June 30, 2022		131,838	$	135	164,427	$	2	$	368,345	$	10,268	$	(34,451)	$	344,299	$	513,085	$	857,384



		Six Months Ended
		June 30, 2022
	Common Shares - Class A & B		Common Shares - Class C			Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity


		Shares	Amount		Shares	Amount
Balance at December 31, 2021		118,252	$	118	179,970	$	2	$	382,893	$	(6,982)	$	(5,278)	$	370,753	$	508,287	$	879,040
Net income		—	—		—	—		—		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 awards		1,989	2		—	—		(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 shares		15,543	15		(15,543)	—		(15)		—		—		—		—		—
Other		141	2		—	—		342				—		344		2,151		2,495
Balance at June 30, 2022		131,838	$	135	164,427	$	2	$	368,345	$	10,268	$	(34,451)	$	344,299	$	513,085	$	857,384



				Three Months Ended
				June 30, 2021
	Members' capital		Common Shares - Class A & B		Common Shares - Class C			Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity


				Shares	Amount		Shares	Amount
Balance at March 31, 2021	$	345,122		—	$	—	—	$	—	$	—	$	—	$	—	$	345,122	$	30,050	$	375,172
Net income	17,345			—	—		—	—		—		—		—		17,345		1,470		18,815
Other comprehensive loss	(487)			—	—		��	—		—		—		—		(487)		—		(487)
Contributions	1,854			—	—		—	—		—		—		—		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


	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
Revenue	$	555,165	$	1,043,992
Net Income	32,996		47,100


	Three Months Ended June 30, 2022		Six 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 outstanding	126,425		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 shareholders	14,020		31,741
	$	24,483	$	54,879

Denominator:
Basic - Weighted Average number of common shares outstanding	126,425		124,367
Dilutive shares:
Stock appreciation rights	1,966		1,941
Restricted share and restricted unit awards	3,212		4,959
Class C shares	164,811		167,576
Diluted - Weighted average number of common shares outstanding	296,414		298,843
Earnings Per Share - Diluted	$	0.08	$	0.18


	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


	Maturity Analysis
Remaining 2022	$	40,873
2023	88,144
2024	75,167
2025	58,646
2026	43,455
2027 and thereafter	157,574
Total	463,859
Less: Present value discount	(67,397)
Lease liability	$	396,462


	Total Transaction Value	Revenues								Due From Related Party
		Three Months Ended June 30,				Six Months Ended June 30,				June 30, 2022		December 31, 2021
Services		2022		2021		2022		2021
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 Value	Expenses								Due to Related Party
		Three Months Ended June 30,				Six Months Ended June 30,				June 30, 2022		December 31, 2021
Services		2022		2021		2022		2021
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	$	—


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
4/1/2022 - 4/30/2022	—	$	—	—	$	125,000,000
5/1/2022 - 5/31/2022	963,568	7.40		963,568	117,847,505
6/1/2022 - 6/30/2022	1,017,820	7.66		1,017,820	110,119,330
Total	1,981,388	$	7.53	1,981,388	$	110,119,330

~~June 30, 2022~~March 31, 2023

Total Leverage Ratio

~~3.27~~ 2.79

Maximum per covenant

~~4.50~~ 4.25