STAGWELL TRANSFORMING MARKETING FORWARD LOOKING STATEMENTS & OTHER INFORMATION 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 a ...

Stagwell Inc. (NASDAQ:STGW) Q3 2023 Results Earnings Conference Call November 6, 2023 8:30 AM ET Company Participants Ben Allanson - Director, Investor Relations Mark Penn - Chairman and Chief Executive Officer Frank Lanuto - Chief Financial Officer Conference Call Participants Ben Allanson Good morning from Stagwell's offices in Miami, Florida. And welcome to Stagwell Inc's Earnings Webcast for Q3 2023. My name is Ben Allanson and I lead the Investor Relations function here at Stagwell. With me today are M ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number: 001-13718 Stagwell Inc. (Exact name of registrant as specified in its charter) Delaware 86 ...

Table of Contents 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, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number: 001-13718 Stagwell Inc. (Exact name of registrant as specified in its charter) Delaware 86-1390 ...

Stagwell Inc. (NASDAQ:STGW) Q2 2023 Earnings Conference Call August 8, 2023 8:30 AM ET Company Participants Ben Allanson - Investor Relations Mark Penn - Chairman and Chief Executive Officer Frank Lanuto - Chief Financial Officer Conference Call Participants Ben Allanson Good morning from Stagwell's global headquarters at One World Trade Center in New York City and welcome to Stagwell Inc's Earnings Webcast for Q2 2023. My name is Ben Allanson and I lead the Investor Relations function here at Stagwell. Wit ...

Financial Data and Key Metrics Changes - The company reported Q1 revenue of $622 million, a decline of 3% year-over-year, while net revenue, excluding pass-through costs, decreased by 0.9% to $522 million [80] - Adjusted EBITDA for the quarter was $72 million, which was in line with internal expectations, but net income attributable to common shareholders fell to $443,000 from $12.7 million in the prior year [55][28] - Earnings per share were negative $0.01, while adjusted EPS was positive $0.13 for the quarter [55] Business Line Data and Key Metrics Changes - Digital Transformation organic net revenue declined by 9%, primarily due to a cyclical decline in the Advocacy business, with a 3% decline when excluding Advocacy [52] - Consumer Insights & Strategy saw a 1% growth in organic net revenue, following a strong 56% growth in the prior year [53] - Performance Media & Data experienced a 5% growth in organic net revenue, driven by strong performance from Ink and Assembly businesses [81] Market Data and Key Metrics Changes - The tech industry, which constitutes 18% of net revenue, grew only 3% in Q1, a significant slowdown compared to the 32% growth in 2022 [45] - The finance and banking sector, making up about 6% of the business, declined by 3% in the quarter, although exposure to recent banking issues was limited [74] Company Strategy and Development Direction - The company plans to invest up to $20 million in Cloud development this year, focusing on building media studio products and enhancing capabilities [48] - A strategic combination of digital, creative, and media is being emphasized through the Brand Performance Network to disrupt competitors [8] - The company is committed to deploying AI tools across all agencies to enhance efficiency and drive growth [9] Management's Comments on Operating Environment and Future Outlook - Management views the decline in Digital Transformation as a temporary blip, expecting significant growth as clients adapt to new technologies [59][87] - The company reaffirms its full-year guidance for organic net revenue growth of 7.5% to 10% and adjusted EBITDA of $450 million to $490 million [57] - There is optimism regarding new business wins and industry recognition, which are expected to drive growth in the latter half of the year [43] Other Important Information - The company announced a share repurchase of over 23 million shares, reducing the number of shares outstanding by 8% to about 267 million [2] - Deferred acquisition consideration obligations increased slightly to $166 million but decreased year-over-year by 26% [16] - The company expanded its revolving credit agreement, raising the credit limit to $640 million from $500 million, providing additional borrowing capacity [17] Q&A Session Summary Question: How will generative AI impact your business moving forward? - The company is exploring various applications of generative AI across its network, believing it will be a key differentiator [20] Question: What does your net new business look like since the last reported figure? - The company reported $53 million in Q1 and an additional $40 million in new business wins in April, indicating strong client growth [62] Question: Can you explain the Cloud-related investments in the quarter? - The company is focusing on creating experiences that clients enjoy and will monetize, with plans to break out Cloud finances in the next quarter [25] Question: Why didn't you provide more specific guidance for the March quarter? - Management noted the high comparison to Q1 of the previous year and emphasized a more normal structure for the year as tech companies recover [100] Question: Can you discuss the share repurchase approach? - The share repurchase will not change the overall share increase, and management's holdings remain unchanged [101] Question: What areas are you most optimistic and cautious about in the near term? - Digital Transformation showed a slowdown but is expected to grow as clients seek generative AI solutions [96]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements for Q1 2023 and 2022, detailing revenue, net loss, cash flows, and balance sheet changes with explanatory notes [Unaudited Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) The company reported a 3.2% revenue decrease and a shift from net income to a net loss of $5.0 million for Q1 2023 | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | Revenue | $622,444 | $642,903 | $(20,459) | -3.2% | | Operating Income | $16,233 | $54,660 | $(38,427) | -70.3% | | Net income (loss) | $(5,017) | $33,622 | $(38,639) | -114.9% | | Net income attributable to Stagwell Inc. common shareholders | $443 | $12,675 | $(12,232) | -96.5% | | Basic Income Per Common Share | $0.00 | $0.10 | $(0.10) | -100.0% | | Diluted Income (Loss) Per Common Share | $(0.01) | $0.10 | $(0.11) | -110.0% | [Unaudited Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Comprehensive income shifted to a loss of $0.6 million in Q1 2023, primarily due to the net loss and foreign currency adjustments | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | Net income (loss) | $(5,017) | $33,622 | $(38,639) | -114.9% | | Foreign currency translation adjustment | $4,425 | $(5,347) | $9,772 | -182.7% | | Comprehensive income (loss) for the period | $(592) | $28,275 | $(28,867) | -102.1% | | Comprehensive income attributable to Stagwell Inc. common shareholders | $26,131 | $7,328 | $18,803 | 256.6% | [Unaudited Consolidated Balance Sheets](index=7&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) Cash and cash equivalents decreased by 37.2% to $138.5 million, while total assets and liabilities also saw declines | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $138,529 | $220,589 | $(82,060) | -37.2% | | Total Current Assets | $973,117 | $1,030,955 | $(57,838) | -5.6% | | Total Assets | $3,900,933 | $3,993,332 | $(92,399) | -2.3% | | Total Current Liabilities | $1,250,185 | $1,349,802 | $(99,617) | -7.4% | | Total Liabilities | $2,949,483 | $3,009,587 | $(60,104) | -2.0% | | Total Shareholders' Equity | $918,933 | $944,634 | $(25,701) | -2.7% | [Unaudited Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased by 75.2% to $85.1 million, leading to a total cash decrease of $82.1 million | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | Net cash used in operating activities | $(85,113) | $(48,577) | $(36,536) | 75.2% | | Net cash used in investing activities | $(10,815) | $(8,289) | $(2,526) | 30.5% | | Net cash provided by financing activities | $12,923 | $6,529 | $6,394 | 98.0% | | Net decrease in cash and cash equivalents | $(82,060) | $(48,856) | $(33,204) | 68.0% | [Unaudited Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Total shareholders' equity decreased by $25.7 million, influenced by share repurchases and changes in noncontrolling interests | Metric | Balance at December 31, 2022 (in thousands) | Balance at March 31, 2023 (in thousands) | Change (in thousands) | | :--------------------------------------- | :------------------------------------------ | :----------------------------------------- | :-------------------- | | Stagwell Inc. Shareholders' Equity | $482,537 | $487,094 | $4,557 | | Noncontrolling interests | $462,097 | $431,839 | $(30,258) | | Total Shareholders' Equity | $944,634 | $918,933 | $(25,701) | - The company repurchased and cancelled **2.6 million shares** of Class A & B Common Stock under an approved plan, totaling **$17.9 million** for the three months ended March 31, 2023[24](index=24&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Provides detailed context on business operations, acquisitions, revenue, debt, equity, and other significant accounting details [1. Business and Basis of Presentation](index=11&type=section&id=1.%20Business%20and%20Basis%20of%20Presentation) Stagwell focuses on modern marketing services, with recent updates including an ESPP, increased credit limits, and a share repurchase agreement - The Company's strategy focuses on building, growing, and acquiring market-leading businesses that offer modern marketing services by leveraging data and creativity[28](index=28&type=chunk)[159](index=159&type=chunk) - The Board adopted the 2022 Employee Stock Purchase Plan (ESPP) in March 2023, reserving **3.0 million shares** of Class A common stock for eligible employees[32](index=32&type=chunk)[161](index=161&type=chunk) - The Credit Agreement was amended on May 4, 2023, increasing the borrowing limit from **$500.0 million** to **$640.0 million**[33](index=33&type=chunk)[162](index=162&type=chunk) - On May 9, 2023, the Company agreed to repurchase approximately **23.3 million shares** from AlpInvest Partners for an aggregate total value of approximately **$150.0 million**[34](index=34&type=chunk)[163](index=163&type=chunk) [2. Acquisitions](index=12&type=section&id=2.%20Acquisitions) Stagwell completed multiple acquisitions in 2022, adding goodwill and intangible assets across various segments - Acquired Brand New Galaxy (BNG) for approximately **$20.9 million cash** and up to **$50.0 million contingent consideration**, adding **$24.6 million in goodwill** to the Brand Performance Network[36](index=36&type=chunk)[38](index=38&type=chunk) - Acquired approximately **87% of TMA Direct, Inc.** for **$17.2 million cash** and **$0.5 million deferred acquisition payments**, assigning **$6.6 million in goodwill** to the Communications Network[44](index=44&type=chunk)[46](index=46&type=chunk) - Acquired Maru Group Limited Ltd. for approximately **$25.8 million cash**, resulting in **$23.4 million in goodwill** assigned to the All Other reportable segment[51](index=51&type=chunk)[52](index=52&type=chunk) - Acquired the remaining **80% interest in Wolfgang, LLC.** for **$3.8 million cash** and **175 thousand Class A shares** (**$1.2 million fair value**), adding **$2.5 million in goodwill** to the Integrated Agencies Network[57](index=57&type=chunk)[58](index=58&type=chunk) - Acquired Epicenter Experience LLC. for approximately **$9.9 million cash** and up to **$5.0 million contingent consideration**, assigning **$4.4 million in goodwill** to the All Other reportable segment[63](index=63&type=chunk)[65](index=65&type=chunk) [3. Revenue](index=17&type=section&id=3.%20Revenue) Total revenue decreased by 3.2% in Q1 2023, with declines in Digital Transformation and Creativity, offset by growth in Performance Media and Data | Principal Capabilities | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | Digital Transformation | $190,319 | $210,809 | $(20,490) | -9.7% | | Creativity and Communications | $261,354 | $279,242 | $(17,888) | -6.4% | | Performance Media and Data | $109,488 | $99,776 | $9,712 | 9.7% | | Consumer Insights and Strategy | $61,283 | $53,076 | $8,207 | 15.5% | | Total Revenue | $622,444 | $642,903 | $(20,459) | -3.2% | | Geographical Location | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :---------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | United States | $507,092 | $537,231 | $(30,139) | -5.6% | | United Kingdom | $41,271 | $39,813 | $1,458 | 3.7% | | Other | $74,081 | $65,859 | $8,207 | 12.5% | | Total Revenue | $622,444 | $642,903 | $(20,459) | -3.2% | - Unbilled service fees (contract assets) increased to **$170.8 million** at March 31, 2023, from **$116.4 million** at December 31, 2022[77](index=77&type=chunk) - Unsatisfied performance obligations totaled approximately **$90.8 million** as of March 31, 2023, with **61%** expected to be recognized in 2023[80](index=80&type=chunk) [4. Income (Loss) Per Share](index=19&type=section&id=4.%20Income%20(Loss)%20Per%20Share) The company reported a diluted loss per common share of $(0.01) for the three months ended March 31, 2023, a decrease from $0.10 income per share in the prior year, primarily due to the shift from net income to net loss | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Basic Income Per Common Share | $0.00 | $0.10 | | Diluted Income (Loss) Per Common Share | $(0.01) | $0.10 | | Weighted Average Number of Common Shares Outstanding (Basic, in thousands) | 125,199 | 122,285 | | Weighted Average Number of Common Shares Outstanding (Diluted, in thousands) | 289,806 | 297,484 | [5. Deferred Acquisition Consideration](index=19&type=section&id=5.%20Deferred%20Acquisition%20Consideration) Contingent deferred acquisition consideration increased to $165.7 million, with adjustments reflecting fair value changes | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Beginning balance | $161,323 | $222,369 | | Adjustments to deferred acquisition consideration | $4,088 | $(12,779) | | Ending balance | $165,684 | $161,323 | - Approximately **$51.5 million** of the deferred acquisition consideration is expected to be settled in the Company's shares of Class A Common Stock[84](index=84&type=chunk) [6. Leases](index=20&type=section&id=6.%20Leases) Total lease costs increased to $21.1 million in Q1 2023, with operating lease liabilities totaling $354.9 million Lease Cost Metrics | Lease Cost Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :------------------ | :------------------------------------------------- | :------------------------------------------------- | | Operating lease cost | $19,578 | $14,016 | | Variable lease cost | $4,561 | $5,160 | | Sublease rental income | $(3,052) | $(3,276) | | Total lease cost | $21,087 | $15,900 | - As of March 31, 2023, the weighted average remaining lease term was **6.3 years** and the weighted average discount rate was **4.6%**[92](index=92&type=chunk) Lease Maturity Analysis (as of March 31, 2023) | Lease Maturity Analysis (as of March 31, 2023) | Amount (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 | [7. Debt](index=21&type=section&id=7.%20Debt) Total long-term debt increased to $1.24 billion, primarily due to increased Credit Agreement borrowings and a higher limit | Debt Component | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------- | :-------------------------------- | :-------------------------------- | | Credit Agreement | $150,000 | $100,000 | | 5.625% Notes | $1,100,000 | $1,100,000 | | Debt issuance costs | $(14,719) | $(15,293) | | Total long-term debt | $1,235,281 | $1,184,707 | - The Credit Agreement was amended on May 4, 2023, increasing the revolving credit facility limit from **$500.0 million** to **$640.0 million**[33](index=33&type=chunk)[96](index=96&type=chunk) - The Company was in compliance with all covenants of the Credit Agreement as of March 31, 2023[100](index=100&type=chunk)[108](index=108&type=chunk) [8. Noncontrolling and Redeemable Noncontrolling Interests](index=23&type=section&id=8.%20Noncontrolling%20and%20Redeemable%20Noncontrolling%20Interests) Net income attributable to noncontrolling interests shifted to a loss of $2.9 million, with redeemable interests decreasing Net Income (Loss) Attributable to Noncontrolling Interests | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :------------------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | | Net income (loss) attributable to Class C shareholders | $(3,165) | $17,721 | | Net income (loss) attributable to noncontrolling interests | $(2,917) | $18,537 | Noncontrolling and Redeemable Noncontrolling Interests Balances | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Total noncontrolling interests | $431,839 | $462,097 | | Redeemable Noncontrolling Interests (Ending balance) | $32,517 | $39,111 | - Comprehensive loss attributable to noncontrolling and redeemable noncontrolling interests was **$26.7 million** for the three months ended March 31, 2023, comprising **$5.5 million net loss** and **$21.3 million other comprehensive loss**[115](index=115&type=chunk) [9. Commitments, Contingencies, and Guarantees](index=24&type=section&id=9.%20Commitments,%20Contingencies,%20and%20Guarantees) The company faces various legal proceedings and has $24.6 million in undrawn letters of credit and future commitments - The Company does not expect legal proceedings or claims to have a **material adverse effect** on its financial condition or results of operations[116](index=116&type=chunk) - As of March 31, 2023, the Company had **$24.6 million** of undrawn letters of credit outstanding[118](index=118&type=chunk) Future Minimum Commitments (as of March 31, 2023) | Future Minimum Commitments (as of March 31, 2023) | Amount (in millions) | | :------------------------------------------------- | :------------------- | | Remainder of 2023 | $6.4 | | 2024 | $5.8 | | 2025 | $5.4 | | 2026 | $3.9 | | 2027 | $3.2 | | Thereafter | $7.8 | | Total | $32.5 | [10. Share Capital](index=25&type=section&id=10.%20Share%20Capital) The stock repurchase program was increased to $250.0 million, with $17.9 million in repurchases in Q1 2023 - The stock repurchase program was extended and increased by **$125.0 million** to an aggregate of **$250.0 million**, expiring on March 1, 2026[120](index=120&type=chunk) - During Q1 2023, **2.6 million shares** of Class A Common Stock were repurchased under the program for **$17.9 million**, at an average price of **$6.91 per share**[122](index=122&type=chunk) - As of March 31, 2023, **$180.4 million** remained available for repurchases under the program[122](index=122&type=chunk) - On May 9, 2023, the Company agreed to repurchase approximately **23.3 million shares** from AlpInvest Partners for **$150.0 million** at **$6.43 per share**[123](index=123&type=chunk) [11. Fair Value Measurements](index=25&type=section&id=11.%20Fair%20Value%20Measurements) The 5.625% Notes had a fair value of $962.5 million, and no impairment was recognized for assets in Q1 2023 Fair Value of Financial Instruments | Financial Instrument | March 31, 2023 Carrying Amount (in thousands) | March 31, 2023 Fair Value (in thousands) | | :------------------- | :-------------------------------------------- | :--------------------------------------- | | 5.625% Notes | $1,100,000 | $962,500 | - The fair value of the **5.625% Notes** is based on quoted market prices in inactive markets, classifying it as **Level 2** within the fair value hierarchy[129](index=129&type=chunk) - Contingent deferred acquisition consideration is a **Level 3** fair value measurement, with a discount rate of **5.2%** used as of March 31, 2023[130](index=130&type=chunk) - No impairment of goodwill, intangible assets, or right-of-use lease assets was recognized for the three months ended March 31, 2023[134](index=134&type=chunk) [12. Supplemental Information](index=26&type=section&id=12.%20Supplemental%20Information) Stock-based compensation increased to $7.4 million, and trade receivables transferred to third parties rose significantly Stock-Based Compensation | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | | Stock-based compensation (employee stock incentive plans) | $7,400 | $7,200 | | Stock-based compensation (profits interests awards) | $4,600 | $700 | - Trade receivables transferred to third parties increased significantly to **$82.0 million** for the three months ended March 31, 2023, from **$7.5 million** in the prior year[138](index=138&type=chunk) - The adoption of ASC 326 (Current Expected Credit Losses) on January 1, 2023, resulted in a **$2.1 million decrease** in opening Retained Earnings[139](index=139&type=chunk) [13. Income Taxes](index=27&type=section&id=13.%20Income%20Taxes) The company reported an income tax expense of $2.4 million on a pre-tax loss, resulting in a (99.1)% effective tax rate Income Tax Metrics | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | | Income tax expense | $2,384 | $3,189 | | Income (loss) before income taxes | $(2,406) | $35,781 | | Effective tax rate | (99.1)% | 8.9% | - The significant change in effective tax rate was primarily due to the **pre-tax loss**, an increase in **valuation allowance**, and an increase in **uncertain tax positions** in 2023[142](index=142&type=chunk) - As of March 31, 2023, the Company recorded a Tax Receivables Agreement (TRA) liability of **$28.7 million** with an associated deferred tax asset of **$33.8 million**[144](index=144&type=chunk) [14. Related Party Transactions](index=28&type=section&id=14.%20Related%20Party%20Transactions) Related party revenue decreased to $2.0 million, with amounts due from related parties increasing to $7.1 million Related Party Revenue | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | | Total Related Party Revenue | $1,978 | $3,244 | Due From Related Party | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Due From Related Party | $7,140 | $6,628 | - Related party transactions include marketing, advertising, website development, and polling services with clients where company board members, executives, or family members hold key positions or significant interests[146](index=146&type=chunk) [15. Segment Information](index=28&type=section&id=15.%20Segment%20Information) Total revenue decreased by 3.2% and Adjusted EBITDA by 28.8%, with varied performance across updated segments - The Company updated its reportable segments in Q1 2023, reclassifying certain brands between the Integrated Agencies Network and Communications Network[151](index=151&type=chunk) Segment Performance | Segment | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | **Revenue:** | | | | | | Integrated Agencies Network | $329,792 | $348,751 | $(18,959) | -5.4% | | Brand Performance Network | $213,340 | $197,787 | $15,553 | 7.9% | | Communications Network | $66,460 | $93,255 | $(26,795) | -28.7% | | All Other | $12,852 | $3,110 | $9,742 | NM | | Total Revenue | $622,444 | $642,903 | $(20,459) | -3.2% | | **Adjusted EBITDA:** | | | | | | Integrated Agencies Network | $59,385 | $68,888 | $(9,503) | -13.8% | | Brand Performance Network | $23,421 | $31,248 | $(7,827) | -25.0% | | Communications Network | $4,013 | $16,438 | $(12,425) | -75.6% | | All Other | $(3,805) | $(124) | $(3,681) | NM | | Corporate | $(10,792) | $(15,038) | $4,246 | -28.2% | | Total Adjusted EBITDA | $72,222 | $101,412 | $(29,190) | -28.8% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial performance, highlighting revenue declines, increased expenses, and a net loss, alongside liquidity and accounting estimates [Executive Summary](index=31&type=section&id=Executive%20Summary) Stagwell's strategy focuses on modern marketing services, with recent corporate developments and key factors influencing business performance - Stagwell's strategy is to build, grow, and acquire market-leading businesses that deliver modern marketing services by combining data and creativity[159](index=159&type=chunk) - Key performance indicators include revenue, operating expenses, capital expenditures, and non-GAAP measures like **organic revenue growth**, **Adjusted EBITDA**, and **Adjusted Diluted EPS**[160](index=160&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) - Significant factors affecting business include **economic conditions**, **client profitability**, **M&A activity**, changes in client management, and the ability to attract and retain key employees[164](index=164&type=chunk) - The company typically generates its highest quarterly revenue during the **fourth quarter**, with client concentration increasing during election years[166](index=166&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Q1 2023 saw a 3.2% revenue decrease and a 70.3% drop in operating income, leading to a net loss due to lower client spending [Consolidated Results of Operations](index=34&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated revenue decreased by 3.2% to $622.4 million, leading to a net loss of $5.0 million and a 28.8% Adjusted EBITDA decline | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | Revenue | $622,444 | $642,903 | $(20,459) | -3.2% | | Net Revenue | $521,662 | $526,637 | $(4,975) | -0.9% | | Operating Income | $16,233 | $54,660 | $(38,427) | -70.3% | | Adjusted EBITDA | $72,222 | $101,412 | $(29,190) | -28.8% | | Net income attributable to Stagwell Inc. common shareholders | $443 | $12,675 | $(12,232) | -96.5% | | Diluted EPS | $(0.01) | $0.10 | $(0.11) | -110.0% | | Adjusted Diluted EPS | $0.13 | $0.22 | $(0.09) | -40.9% | - Organic net revenue decreased by **$16.1 million** (**3.1%**), primarily due to a decline in spending by existing clients, particularly lower advocacy services compared to higher spending in Q1 2022 associated with elections[182](index=182&type=chunk) - Cost of services increased due to higher compensation expense, including stock-based compensation, and an increase in headcount, partially offset by lower billable costs[185](index=185&type=chunk) - Office and general expenses increased due to lower occupancy expense benefits in Q1 2022 and an increase in deferred acquisition consideration expense[186](index=186&type=chunk) [Integrated Agencies Network](index=39&type=section&id=Integrated%20Agencies%20Network) Revenue decreased by 5.4% to $329.8 million, with operating income down 48.3% due to reduced technology sector client spending | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | Revenue | $329,792 | $348,751 | $(18,959) | -5.4% | | Net Revenue | $292,904 | $303,666 | $(10,762) | -3.5% | | Operating Income | $23,528 | $45,516 | $(21,988) | -48.3% | | Adjusted EBITDA | $59,385 | $68,888 | $(9,503) | -13.8% | - The decline in organic net revenue was primarily attributable to decreased spending by existing clients, particularly in the **technology sector**, who withheld spending in Q1 2023[201](index=201&type=chunk) - Office and general expenses increased due to higher deferred acquisition consideration expense (up **$7.3 million**) and an increase in severance expense[204](index=204&type=chunk) [Brand Performance Network](index=40&type=section&id=Brand%20Performance%20Network) Revenue increased by 7.9% to $213.3 million, but operating income and Adjusted EBITDA declined due to higher costs | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | Revenue | $213,340 | $197,787 | $15,553 | 7.9% | | Net Revenue | $162,934 | $155,482 | $7,452 | 4.8% | | Operating Income | $13,707 | $18,042 | $(4,335) | -24.0% | | Adjusted EBITDA | $23,421 | $31,248 | $(7,827) | -25.0% | - The increase in organic net revenue was primarily attributable to **new clients** and **increased spending by existing clients**[209](index=209&type=chunk) - Cost of services increased due to higher billable and staff costs associated with providing services and the acquisition of Brand New Galaxy[211](index=211&type=chunk) - Deferred acquisition consideration decreased by approximately **$3.3 million** due to a reduction in fair value associated with a brand acquired in Q2 2022[212](index=212&type=chunk) [Communications Network](index=42&type=section&id=Communications%20Network) Revenue decreased by 28.7% to $66.5 million, shifting to an operating loss due to lower advocacy services spending | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | Revenue | $66,460 | $93,255 | $(26,795) | -28.7% | | Net Revenue | $52,972 | $64,379 | $(11,407) | -17.7% | | Operating Income (Loss) | $(351) | $12,959 | $(13,310) | NM | | Adjusted EBITDA | $4,013 | $16,438 | $(12,425) | -75.6% | - The decline in organic net revenue was attributable to decreased spending, primarily due to lower advocacy services as compared to higher spending in Q1 2022 associated with the **2022 elections**[217](index=217&type=chunk) - The decrease in Operating Income and Adjusted EBITDA was driven by lower revenue, partially offset by a decrease in billable costs associated with providing services[218](index=218&type=chunk)[219](index=219&type=chunk) [All Other](index=43&type=section&id=All%20Other) Revenue significantly increased to $12.9 million due to acquisitions, but operating loss widened from higher costs | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | Revenue | $12,852 | $3,110 | $9,742 | NM | | Net Revenue | $12,852 | $3,110 | $9,742 | NM | | Operating Loss | $(4,522) | $(633) | $(3,889) | NM | | Adjusted EBITDA | $(3,805) | $(124) | $(3,681) | NM | - The increase in net acquisitions (divestitures) was primarily driven by an **$8.9 million increase** in revenue from the acquisition of Maru[223](index=223&type=chunk) - The increase in Operating Loss and decrease in Adjusted EBITDA were driven by higher staff and administrative costs associated with providing services and the acquisition of Maru, which more than offset the revenue growth[224](index=224&type=chunk)[225](index=225&type=chunk) [Corporate](index=45&type=section&id=Corporate) Corporate operating loss decreased by 24.0% to $16.1 million, driven by lower staff and administrative costs | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :-------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :------- | | Operating Loss | $(16,129) | $(21,224) | $5,095 | -24.0% | | Adjusted EBITDA | $(10,792) | $(15,038) | $4,246 | -28.2% | | Staff costs | $6,824 | $9,156 | $(2,332) | -25.5% | | Administrative costs | $3,977 | $5,882 | $(1,905) | -32.4% | - The decrease in Operating Loss was primarily attributable to lower staff costs, professional fees, and merger-related costs incurred in 2022[226](index=226&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased to $138.5 million, with increased cash used in operating activities and higher total debt | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (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 | - Cash and cash equivalents decreased to **$138.5 million** as of March 31, 2023, from **$220.6 million** at December 31, 2022[227](index=227&type=chunk) - As of March 31, 2023, the Company had **$325.4 million** available under its **$500.0 million Credit Agreement**[227](index=227&type=chunk) - The remaining value of shares permitted to be repurchased under the Repurchase Program was **$180.4 million** as of March 31, 2023[231](index=231&type=chunk) - The Company's Total Leverage Ratio was **2.79** as of March 31, 2023, well below the maximum permitted covenant of **4.25**[242](index=242&type=chunk) [Critical Accounting Estimates](index=47&type=section&id=Critical%20Accounting%20Estimates) This section refers to the company's 2022 Form 10-K for detailed information regarding its critical accounting estimates - Information regarding the Company's critical accounting estimates is detailed in its **2022 Form 10-K**[249](index=249&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Stagwell is exposed to interest rate, foreign currency, and impairment risks, with no impairment charges in Q1 2023 - The Company is exposed to market risk related to **interest rates**, **foreign currencies**, and **impairment risk**[251](index=251&type=chunk) - A **10% increase or decrease** in variable interest rates would change the Company's annual interest expense by **$1.1 million**[253](index=253&type=chunk) - The Company's non-U.S. operations primarily transact in their functional currency, which reduces the impact of exchange rate fluctuations on profit margins, and it generally does not use foreign currency hedging instruments[254](index=254&type=chunk) - No impairment related to goodwill, right-of-use leases, or intangible assets was recognized for the three months ended March 31, 2023[255](index=255&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective due to material weaknesses in internal control, with remediation efforts underway - The Company's disclosure controls and procedures were **not effective** as of March 31, 2023, due to identified **material weaknesses** in internal control over financial reporting[258](index=258&type=chunk) - Remediation efforts include hiring a **Senior Vice President of SOX reporting**, establishing a **SOX Steering Committee**, enhancing communications with the Audit Committee, and designing and implementing controls over risk assessment and information technology[259](index=259&type=chunk) - The material weaknesses will be considered fully remediated once applicable controls operate effectively for a sufficient period and are tested by management[260](index=260&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings but does not anticipate a material adverse effect on its financials - The Company is involved in various legal proceedings but does not expect them to have a **material adverse effect** on its financial condition or results of operations[263](index=263&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors; additional risks are in other sections of this Form 10-Q - No material changes to the risk factors described in the Company's **2022 Form 10-K** have occurred[264](index=264&type=chunk) - Additional risks are outlined in the 'Note About Forward-Looking Statements' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations' sections of this Form 10-Q[264](index=264&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Stagwell granted shares in unregistered sales and increased its stock repurchase program to $250.0 million - In Q1 2023, **3,556 shares** of Class A Common Stock were granted to an employee as an inducement for employment in an unregistered sale[265](index=265&type=chunk) - The stock repurchase program was extended and increased by **$125.0 million** to an aggregate of **$250.0 million**, expiring on March 1, 2026[266](index=266&type=chunk) Stock Repurchase Program Activity | Period | Total Number of Shares Purchased (under program) | Average Price Paid Per Share | Approximate Dollar Value Remaining (in millions) | | :------------------- | :--------------------------------------------- | :--------------------------- | :----------------------------------------------- | | 1/1/2023 - 1/31/2023 | 1,156,022 | $6.56 | $65.5 | | 2/1/2023 - 2/28/2023 | 1,066,967 | $7.06 | $58.0 | | 3/1/2023 - 3/31/2023 | 361,802 | $9.09 | $180.4 | | Total (Q1 2023) | 2,584,791 | $6.91 (average for program) | $180.4 (as of 3/31/2023) | [Item 3. Defaults Upon Senior Securities](index=50&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities for the period - There were no defaults upon senior securities[268](index=268&type=chunk) [Item 4. Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Stagwell Inc - Mine Safety Disclosures are not applicable to the Company[269](index=269&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) The Credit Agreement was amended to increase revolving commitments and permit share repurchases and certain investments - On May 4, 2023, the Credit Agreement was amended to provide additional revolving commitments of **$140.0 million**[272](index=272&type=chunk) - The amendment permits restricted payments for share repurchases or redemptions from certain stockholders up to an aggregate principal amount of **$150.0 million**[272](index=272&type=chunk) - The amendment also allows certain investments and financings for the Borrowers' business related to **software-as-a-service** and **data-as-a-service technology solutions**[272](index=272&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents and certifications - The Exhibit Index lists documents such as the Second Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Stock Repurchase Agreement, and the Amended and Restated Credit Agreement[277](index=277&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002 are included[277](index=277&type=chunk) [Signatures](index=53&type=section&id=Signatures) The Form 10-Q is duly signed by the Chairman and CEO, and CFO, dated May 9, 2023 - The report is signed by **Mark Penn**, Chairman of the Board and Chief Executive Officer, and **Frank Lanuto**, Chief Financial Officer, on **May 9, 2023**[282](index=282&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number: 001-13718 Stagwell Inc. (Exact name of registrant as specified in its charter) Delaware 86-1390679 (State or other ju ...

12 E X - A D V O C A C Y N E T R E V E N U E & A D J U S T E D E B I T D A 2021 % Change 2022 2021 % Change 520 12.3% 123 104 19.0% | --- | --- | --- | --- | --- | --- | --- | --- | |---------------|-----------------------|-------|-------|-----------------------------|-------|-------|-------| | | | | | | | | | | $ in Millions | | | | Net Revenue Adjusted EBITDA | | | | | | | 2022 | | | | | | | Q4 | Total 583 | | | | | | | | | Advocacy 53 | | | | | | | | | Total Ex Advocacy 531 | | | | | | | 2021 % Change 20 ...

Stagwell Inc. (NASDAQ:STGW) Q4 2022 Earnings Conference Call March 2, 2023 8:30 AM ET Company Participants Jason Reid – Chief Investment Officer Mark Penn – Chairman and Chief Executive Officer Frank Lanuto – Chief Financial Officer Conference Call Participants Barton Crockett – Rosenblatt Securities Jason Reid Good morning from Stagwell’s headquarters at One World Trade Center in New York City, and welcome to Stagwell’s Inc.’s earnings webcast for Q4 and full year 2022. My name is Jason Reid, Chief Investm ...