Stagwell (STGW) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This part presents Stagwell Inc.'s unaudited consolidated financial statements and management's discussion and analysis Item 1. Financial Statements This section presents Stagwell Inc.'s unaudited consolidated financial statements for the three and six months ended June 30, 2025 and 2024, including statements of operations, comprehensive income (loss), balance sheets, cash flows, and shareholders' equity, along with detailed notes explaining accounting policies, acquisitions, revenue disaggregation, debt, equity, and other financial disclosures Unaudited Consolidated Statements of Operations This section details the company's revenues, operating income, and net loss for the specified periods Consolidated Statements of Operations | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Revenue | $706,818 | $671,168 | $1,358,558 | $1,341,227 | | Operating Income | $23,172 | $21,907 | $41,457 | $47,761 | | Net loss | $(4,634) | $(3,954) | $(9,959) | $(4,667) | | Net loss attributable to Stagwell Inc. common shareholders | $(5,261) | $(2,965) | $(8,178) | $(4,247) | | Basic Loss Per Common Share | $(0.02) | $(0.03) | $(0.04) | $(0.04) | | Diluted Loss Per Common Share | $(0.02) | $(0.03) | $(0.06) | $(0.04) | Unaudited Consolidated Statements of Comprehensive Income (Loss) This section presents the company's net loss and other comprehensive income (loss) components Consolidated Statements of Comprehensive Income (Loss) | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net loss | $(4,634) | $(3,954) | $(9,959) | $(4,667) | | Other comprehensive income (loss) - Foreign currency translation adjustment | $24,068 | $(5,479) | $34,566 | $(12,625) | | Comprehensive income (loss) for the period | $19,434 | $(9,433) | $24,607 | $(17,292) | | Comprehensive income (loss) attributable to Stagwell Inc. common shareholders | $18,807 | $(4,964) | $20,361 | $(9,110) | Unaudited Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity at specific dates Consolidated Balance Sheet Highlights | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Total Current Assets | $1,263,067 | $1,135,148 | | Total Assets | $4,317,175 | $3,908,221 | | Total Current Liabilities | $1,464,471 | $1,367,296 | | Total Liabilities | $3,535,979 | $3,122,904 | | Total Shareholders' Equity | $771,948 | $776,905 | Unaudited Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Consolidated Cash Flow Summary | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by (used in) operating activities | $54,738 | $(67,618) | | Net cash used in investing activities | $(34,936) | $(52,183) | | Net cash provided by financing activities | $21,062 | $138,304 | | Net increase in cash and cash equivalents | $49,970 | $16,341 | | Cash and cash equivalents at end of period | $181,309 | $136,078 | - Cash income taxes paid increased to $14.3 million in H1 2025 from $10.6 million in H1 2024. Cash interest paid increased to $46.8 million in H1 2025 from $42.4 million in H1 2024[28] Unaudited Consolidated Statements of Shareholders' Equity This section tracks changes in the company's equity, including share capital and noncontrolling interests - As of June 30, 2025, Stagwell Inc. Shareholders' Equity was $750.1 million, up from $331.7 million at December 31, 2024. This significant increase is primarily due to the conversion of Class C to Class A shares, which resulted in a reclassification of $447.4 million from noncontrolling interests to paid-in capital[31][34] - The Company repurchased and cancelled 13,005 thousand shares of Class A Common Stock for $68.17 million during the six months ended June 30, 2025[34] Notes to the Unaudited Consolidated Financial Statements This section provides detailed notes to the unaudited consolidated financial statements, covering the Company's business and accounting policies, recent accounting pronouncements, significant acquisitions in 2025 and 2024, disaggregated revenue data, loss per share computations, deferred acquisition consideration, lease obligations, debt structure, noncontrolling interests, commitments, contingencies, guarantees, share capital activities, fair value measurements, supplemental information on stock-based awards and accounts receivable transfers, income taxes, related party transactions, and segment information Note 1. Business and Basis of Presentation This note describes Stagwell Inc.'s business model and the basis for preparing its financial statements - Stagwell Inc. provides marketing and business solutions by combining data and creativity, aiming to build, grow, and acquire market-leading businesses in a rapidly evolving environment[42] - The unaudited consolidated interim financial statements are prepared in accordance with GAAP and SEC rules for interim reporting, with certain information and disclosures omitted from footnotes[43] Note 2. New Accounting Pronouncements This note discusses the impact of recently issued accounting standards on the company's financial reporting - ASU 2024-03 (Income Statement—Reporting Comprehensive Income - Expense Disaggregation Disclosures) is effective for annual periods beginning after December 15, 2026, and interim periods after December 15, 2027, requiring disaggregated income statement expense information. The Company is evaluating its impact[45] - ASU 2023-09 (Income Taxes - Improvements to Income Tax Disclosures) is effective for annual periods beginning after December 15, 2024, requiring disaggregated information on effective tax rate reconciliation and taxes paid. Interim disclosures are not impacted[46] Note 3. Acquisitions This note details the company's significant acquisitions, including purchase prices and strategic rationale - In 2025, Stagwell acquired ADK Global ($25.7 million), Jetfuel Studio LLC ($22.2 million), and Create Group Holding Limited ($15.7 million), expanding its marketing solutions in APAC, experiential marketing, and digital communications in the Middle East, respectively. These acquisitions involved a mix of cash, Class A common stock, and deferred payments, with contingent consideration tied to future performance[48][53][54] - In 2024, key acquisitions included UNICEPTA Holding GmbH ($62 million), Consulum (Cayman) Limited ($82.8 million), Team Epiphany, LLC ($16.7 million), L.D.R.S. Group Ltd. ($7 million), PROS Agency ($8.5 million), What's Next Partners ($5 million), and Sidekick Live Limited ($6 million). These acquisitions bolstered media monitoring, government advisory, consumer marketing, and other specialized services, with significant goodwill recorded[55][62][71][74][76][77][78] Acquisition Summary | Acquisition (2025) | Purchase Price (approx.) | Payment Method (Primary) | Goodwill Assigned (approx.) | Segment | | :----------------- | :----------------------- | :----------------------- | :-------------------------- | :-------------------------- | | ADK Global | $25.7 million | Cash | N/A (purchase price not final) | Brand Performance Network | | Jetfuel | $22.2 million | Cash & Class A Stock | $11.9 million | Integrated Agencies Network | | Create | $15.7 million | Cash & Class A Stock | $7.3 million | Integrated Agencies Network | | Acquisition (2024) | Purchase Price (approx.) | Payment Method (Primary) | Goodwill Assigned (approx.) | Segment | | :----------------- | :----------------------- | :----------------------- | :-------------------------- | :-------------------------- | | Unicepta | $62 million | Cash & Class A Stock | $34.6 million | Stagwell Marketing Cloud Group | | Consulum | $82.8 million | Cash & Class A Stock | $16.7 million | Communications Network | | Epiphany | $16.7 million | Cash & Class A Stock | $8.5 million | Integrated Agencies Network | | Leaders | $7 million | Cash & Class A Stock | $4.9 million | All Other | | PROS | $8.5 million | Cash & Class A Stock | $5.4 million | Communications Network | | WNP | $5 million | Cash | $5.4 million | Integrated Agencies Network | | Sidekick | $6 million | Cash & Class A Stock | $2.2 million | Communications Network | Note 4. Revenue This note disaggregates revenue by principal capabilities and geographical locations - Stagwell's primary revenue sources are fees for services, commissions, and performance incentives from its marketing services firms (Brands) globally[79] Revenue by Principal Capabilities | Principal Capabilities | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Digital Transformation | $125,947 | $125,342 | $242,413 | $241,101 | | Creativity and Communications | $340,762 | $316,761 | $643,796 | $608,414 | | Performance Media and Data | $112,368 | $116,541 | $222,185 | $273,561 | | Consumer Insights and Strategy | $49,655 | $47,717 | $98,546 | $93,486 | | Stagwell Marketing Cloud Group | $78,086 | $64,807 | $151,618 | $124,665 | | Total Revenue | $706,818 | $671,168 | $1,358,558 | $1,341,227 | Revenue by Geographical Location | Geographical Location | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | United States | $557,395 | $551,080 | $1,070,013 | $1,114,730 | | United Kingdom | $38,051 | $40,515 | $75,935 | $78,276 | | Other | $111,372 | $79,573 | $212,610 | $148,221 | | Total | $706,818 | $671,168 | $1,358,558 | $1,341,227 | - Contract assets (fees and reimbursable costs not yet invoiced) increased to $192.2 million as of June 30, 2025, from $135.9 million at December 31, 2024. Advance billings (contract liabilities) increased to $339.6 million from $294.6 million over the same period, primarily due to $231.1 million of revenue recognized from prior period advance billings[82][83] - As of June 30, 2025, the Company had $174.7 million in unsatisfied performance obligations for contracts longer than one year, with 48% expected to be recognized in 2025[85] Note 5. Loss Per Share This note provides the computation of basic and diluted loss per common share Loss Per Share Details | Metric | 3 Months Ended June 30, 2025 (in thousands, except per share) | 3 Months Ended June 30, 2024 (in thousands, except per share) | 6 Months Ended June 30, 2025 (in thousands, except per share) | 6 Months Ended June 30, 2024 (in thousands, except per share) | | :------------------------------------------------------- | :------------------------------------------------------------ | :------------------------------------------------------------ | :------------------------------------------------------------ | :------------------------------------------------------------ | | Net loss attributable to Stagwell Inc. common shareholders | $(5,261) | $(2,965) | $(8,178) | $(4,247) |\n| Basic Loss Per Share | $(0.02) | $(0.03) | $(0.04) | $(0.04) |\n| Diluted Loss Per Share | $(0.02) | $(0.03) | $(0.06) | $(0.04) |\n| Weighted Average Number of Common Shares Outstanding (Basic) | 260,774 | 113,484 | 186,843 | 113,059 |\n| Weighted Average Number of Common Shares Outstanding (Diluted) | 260,774 | 113,484 | 265,600 | 113,059 | - Anti-dilutive shares for the six months ended June 30, 2025, included 7,503 thousand Class A Shares to settle deferred acquisition obligations, 4,812 thousand Stock Appreciation Rights and Restricted Awards, and 60 thousand Employee Stock Purchase Plan shares[87] Note 6. Deferred Acquisition Consideration This note explains the accounting for deferred acquisition payments and their fair value adjustments - Deferred acquisition consideration includes contingent purchase price payments and retention payments tied to continued employment. Non-employment contingent arrangements are remeasured at fair value each period, while employment-contingent arrangements are expensed over the vesting period[91] Deferred Acquisition Consideration Movement | Metric | 6 Months Ended June 30, 2025 (in thousands) | Year Ended December 31, 2024 (in thousands) | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Beginning balance | $102,115 | $101,058 | | Payments | $(16,103) | $(67,895) | | Adjustments | $3,437 | $23,005 | | Additions | — | $46,598 | | Currency translation adjustment | $2,214 | $(651) | | Ending balance | $91,663 | $102,115 | - As of June 30, 2025, $40.0 million of the deferred acquisition consideration is expected to be settled in Class A Common Stock[92] Note 7. Leases This note outlines the company's lease obligations, right-of-use assets, and lease costs - The Company leases office space globally, classified as operating leases expiring between 2025 and 2036. Lease costs are recognized straight-line over the lease term[93][94] Lease Cost Breakdown | Lease Cost Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :---------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Operating lease cost | $16,957 | $18,702 | $34,075 | $39,648 | | Variable lease cost | $5,138 | $5,889 | $11,145 | $11,826 | | Sublease rental income | $(2,161) | $(1,935) | $(4,296) | $(4,415) | | Total lease cost | $19,934 | $22,656 | $40,924 | $47,059 | - As of June 30, 2025, the weighted average remaining lease term was 5.6 years, and the weighted average discount rate was 5.8%. Total lease liability was $288.3 million[99][100] Note 8. Debt This note details the company's debt structure, including credit agreements and notes Debt Structure | Debt Instrument | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------- | :--------------------------- | :------------------------------- | | Credit Agreement | $377,000 | $264,000 | | 5.625% Notes | $1,100,000 | $1,100,000 | | Debt issuance costs | $(12,758) | $(10,376) | | Total long-term debt | $1,464,242 | $1,353,624 | - Interest expense, net for the six months ended June 30, 2025, was $46.4 million, up from $43.5 million in the prior year. The Credit Agreement was amended on April 23, 2025, increasing the borrowing limit from $640 million to $750 million and extending maturity to April 30, 2030. The Company was in compliance with all debt covenants as of June 30, 2025[101][103][104][106] Note 9. Noncontrolling and Redeemable Noncontrolling Interests This note explains the accounting for noncontrolling interests and their impact on equity - Net loss attributable to noncontrolling and redeemable noncontrolling interests for the six months ended June 30, 2025, was $1.781 million, compared to a loss of $0.420 million in the prior year[108] - On April 4, 2025, Stagwell Media LP exchanged all 151,648,741 shares of Class C Common Stock for an equal number of Class A Common Stock, eliminating Class C noncontrolling interests. Total noncontrolling interests decreased to $21.8 million as of June 30, 2025, from $445.2 million at December 31, 2024, primarily due to this conversion[109] - Redeemable noncontrolling interests increased to $9.2 million as of June 30, 2025, from $8.4 million at December 31, 2024. These obligations are subject to certain conditions and staggered exercise dates between 2025 and 2031[109] Note 10. Commitments, Contingencies, and Guarantees This note discloses the company's legal proceedings, contractual commitments, and guarantees - The Company is involved in various legal proceedings but does not expect a material adverse effect on its financial condition. It also provides indemnification guarantees for asset purchasers, with no significant payments historically[111][112] - As of June 30, 2025, significant commitments include $15.3 million in undrawn letters of credit, $1.2 million for two operating leases not yet commenced, and future minimum commitments under long-term non-cancellable contracts: $20.9 million for partner associations (through 2030), $47.1 million for cloud services (through 2029), and $37.5 million for a software license agreement (through 2027)[113][114][115][116] Note 11. Share Capital This note describes changes in the company's share capital, including stock repurchases and conversions - On April 4, 2025, all 151,648,741 shares of Class C Common Stock were exchanged for an equal number of newly issued Class A Common Stock, resulting in no Class C shares outstanding as of June 30, 2025[119] - The Company has a stock repurchase program authorizing up to $375 million of Class A Common Stock, expiring November 6, 2027. During the six months ended June 30, 2025, 10.6 million shares were repurchased for $53.3 million. The remaining repurchase value was $116.4 million as of June 30, 2025[120][122][123] Note 12. Fair Value Measurements This note explains the fair value hierarchy and measurements for financial instruments - The Company uses a three-level hierarchy for fair value measurements: Level 1 (quoted active market prices), Level 2 (observable prices corroborated by market data), and Level 3 (unobservable inputs). The 5.625% Notes are classified as Level 2, with a fair value of $1,054.4 million as of June 30, 2025, compared to a carrying amount of $1,100.0 million[125][132] - Contingent deferred acquisition consideration is a Level 3 fair value measurement, adjusted each reporting period based on models of future performance, including revenue growth and free cash flows. Discount rates for these liabilities ranged from 4.7% to 7.9% as of June 30, 2025[126] Note 13. Supplemental Information This note provides additional details on stock-based compensation and accounts receivable transfers - Stock-based compensation for employee stock incentive plans was $23.4 million for the six months ended June 30, 2025, up from $19.1 million in the prior year. The liability for profits interests awards, primarily cash-settled, was $21.4 million as of June 30, 2025, contributing an $8.0 million increase to stock-based compensation for the six months ended June 30, 2025[131][133] - The Company transferred $243.5 million in trade receivables to third parties for the six months ended June 30, 2025, incurring $2.8 million in fees, up from $141.7 million transferred and $1.9 million in fees in the prior year[135] Note 14. Income Taxes This note details the company's income tax expense, effective tax rate, and deferred tax assets - For the six months ended June 30, 2025, the Company reported an income tax expense of $4.4 million on a pre-tax loss of $5.6 million, resulting in an effective tax rate of (78.7%). This was primarily due to current losses subject to valuation allowance, withholding taxes, and a shortfall in share-based compensation deductions[138] - The recently enacted One Big Beautiful Bill Act (OBBBA) and the proposed OECD global minimum tax (Pillar 2) are being evaluated for their impact on the Company's financial statements and effective tax rate, with no material impact expected from OBBBA in 2025[141][142] - Following the Class C Exchange on April 4, 2025, the Company recorded a $204.7 million increase to deferred tax assets and a $200.1 million increase to its Tax Receivables Agreement (TRA) liability. As of June 30, 2025, the TRA liability was $225.7 million[146] Note 15. Related Party Transactions This note discloses transactions with related parties, including revenue from services Related Party Revenue | Service Type | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Marketing and advertising services | $1,261 | $1,172 | $1,884 | $1,282 | | Marketing and website development services | $689 | $514 | $1,452 | $1,269 | | Polling services | $130 | $363 | $130 | $823 | | Polling and public relation services | $161 | $194 | $267 | $298 | | Total Revenue from Related Parties | $2,241 | $2,243 | $3,733 | $3,672 | - As of June 30, 2025, $2.7 million was due from employees for loans made in 2022 to purchase noncontrolling interest in a subsidiary[147] Note 16. Segment Information This note provides financial data for the company's reportable segments, including revenue and Adjusted EBITDA - The Company operates through three reportable segments: Integrated Agencies Network, Brand Performance Network, and Communications Network, with 'All Other' for non-aggregated operating segments and 'Corporate' for central expenses. Adjusted EBITDA is the key metric used by the CODM (CEO Mark Penn) to evaluate segment performance[148][150][151][152][153][154] Segment Performance (Q2 2025) | Segment (3 Months Ended June 30, 2025) | Revenue (in thousands) | Adjusted EBITDA (in thousands) | | :------------------------------------- | :--------------------- | :----------------------------- | | Integrated Agencies Network | $406,190 | $77,510 | | Brand Performance Network | $170,099 | $15,581 | | Communications Network | $106,128 | $19,355 | | All Other | $24,401 | $(6,945) | | Corporate | N/A | $(12,646) | | Total Consolidated | $706,818 | $92,855 | Segment Performance (H1 2025) | Segment (6 Months Ended June 30, 2025) | Revenue (in thousands) | Adjusted EBITDA (in thousands) | | :------------------------------------- | :--------------------- | :----------------------------- | | Integrated Agencies Network | $783,544 | $154,679 | | Brand Performance Network | $332,317 | $27,124 | | Communications Network | $193,756 | $31,112 | | All Other | $48,941 | $(13,275) | | Corporate | N/A | $(26,203) | | Total Consolidated | $1,358,558 | $173,437 | - Long-lived assets totaled $285.0 million as of June 30, 2025, with $214.9 million in the United States and $70.1 million in other countries[160] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed discussion and analysis of Stagwell Inc.'s financial condition and results of operations for the three and six months ended June 30, 2025 and 2024. It covers the Company's business overview, key performance indicators, significant factors affecting the business, seasonality, definitions of non-GAAP financial measures, and a comprehensive review of consolidated and segment-level performance, liquidity, capital resources, and critical accounting estimates Executive Summary This section summarizes Stagwell's strategy, key performance indicators, and significant business factors - Stagwell's strategy focuses on building, growing, and acquiring market-leading businesses that offer modern marketing and business solutions, leveraging data, creativity, and technology for transformative growth[165] - Key performance indicators monitored include revenue, operating expenses, capital expenditures, net income (loss), net income (loss) per share, and non-GAAP measures like net revenue and Adjusted EBITDA. Revenue growth is analyzed by geography, client activity, principal capability, currency changes, and acquisitions[166] - Significant factors affecting the business include economic conditions, client profitability, M&A of clients, changes in client management, and the ability to attract and retain key employees. New business wins and client losses are primarily driven by clients' desire to change marketing firms and the digital/data-driven products offered by Stagwell's Brands[167] - The Company typically generates its highest quarterly revenue in the fourth quarter, with client concentration in the Communications Network increasing during election years due to advocacy Brands[168] - Non-GAAP financial measures used include 'net revenue' (revenue excluding billable costs), 'organic net revenue growth (decline)' (year-over-year change in net revenue adjusted for acquisitions/divestitures and foreign currency), 'Adjusted EBITDA' (Net income excluding non-operating items, plus D&A, stock-based comp, deferred acquisition adjustments, and other items), and 'Adjusted Diluted EPS'[170][171][174][175] Results of Operations: Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 For the three months ended June 30, 2025, Stagwell Inc. reported a 5.3% increase in total revenue to $706.8 million and a 5.8% increase in operating income to $23.2 million, compared to the same period in 2024. Net revenue grew by 7.9% to $598.1 million, driven by acquisitions and organic growth in the Integrated Agencies Network and All Other segments, despite declines in Brand Performance and Communications Networks. Adjusted EBITDA increased by 7.8% to $92.9 million. Net loss attributable to common shareholders widened to $5.3 million from $3.0 million, primarily due to higher stock-based compensation and income tax expense Consolidated Results of Operations This section presents a consolidated overview of the company's financial performance for the period Consolidated Results (Q2 2025) | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Revenue | $706,818 | $671,168 | $35,650 | 5.3% | | Operating Income | $23,172 | $21,907 | $1,265 | 5.8% | | Net Revenue | $598,129 | $554,392 | $43,737 | 7.9% | | Adjusted EBITDA | $92,855 | $86,103 | $6,752 | 7.8% | | Net loss attributable to Stagwell Inc. common shareholders | $(5,261) | $(2,965) | $(2,296) | 77.4% | | Diluted EPS | $(0.02) | $(0.03) | $0.01 | (33.3)% | | Adjusted Diluted EPS | $0.17 | $0.14 | $0.03 | 21.4% | - Organic net revenue increased by $3.3 million (0.6%), primarily due to new wins and increased spending in automotive and retail sectors, partially offset by client budget cuts in consumer products. Net acquisitions contributed $37.2 million to net revenue growth[185] - Stock-based compensation increased by $14.1 million (239.6%), mainly due to higher fair value of profit interest awards and more awards expensed, alongside a reversal of expense in Q2 2024. Deferred acquisition consideration decreased by $10.5 million due to fair value reductions[189][190] - Income tax expense for Q2 2025 was $2.7 million on a pre-tax loss of $2.0 million, resulting in an effective tax rate of (134.9%), primarily due to current losses subject to valuation allowance and withholding taxes[191] Integrated Agencies Network This section analyzes the financial performance of the Integrated Agencies Network segment Integrated Agencies Network Performance (Q2 2025) | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Revenue | $406,190 | $385,133 | $21,057 | 5.5% | | Net Revenue | $344,888 | $321,870 | $23,018 | 7.2% | | Operating Income | $46,101 | $37,114 | $8,987 | 24.2% | | Adjusted EBITDA | $77,510 | $67,995 | $9,515 | 14.0% | - Organic net revenue increased by 4.1%, driven by new client wins and increased spending in technology, retail, and automotive sectors. Acquisitions of Jetfuel and Create also contributed to net revenue growth[200] - Operating Income increased by $9.0 million, primarily due to higher revenue and decreased office and general expenses, partially offset by increased cost of services. Stock-based compensation increased by $7.4 million due to higher fair value of profit interest awards[201][202] Brand Performance Network This section analyzes the financial performance of the Brand Performance Network segment Brand Performance Network Performance (Q2 2025) | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Revenue | $170,099 | $177,245 | $(7,146) | (4.0)% | | Net Revenue | $154,868 | $157,108 | $(2,240) | (1.4)% | | Operating Income | $102 | $6 | $96 | NM | | Adjusted EBITDA | $15,581 | $17,706 | $(2,125) | (12.0)% | - Organic net revenue decreased by 3.0%, primarily due to lower client spending in the Communication sector. Operating Income increased by $0.1 million, despite a decline in net revenue, due to a larger decline in cost of services[207][208] - Depreciation and amortization decreased by $3.6 million, mainly due to accelerated amortization of certain tradenames in Q2 2024[209] Communications Network This section analyzes the financial performance of the Communications Network segment Communications Network Performance (Q2 2025) | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Revenue | $106,128 | $105,570 | $558 | 0.5% | | Net Revenue | $74,342 | $72,393 | $1,949 | 2.7% | | Operating Income | $14,481 | $14,433 | $48 | 0.3% | | Adjusted EBITDA | $19,355 | $22,173 | $(2,818) | (12.7)% | - Organic net revenue decreased by 12.5%, primarily due to reduced spending in Public Affairs (following the 2024 presidential election year) and client losses/budget cuts in Consumer Products and Healthcare. The acquisition of Consulum drove an increase in net acquisitions[213] - Deferred acquisition consideration decreased by $5.8 million, mainly due to a reduction in the fair value of a certain Brand[215] All Other This section analyzes the financial performance of the All Other operating segments All Other Segment Performance (Q2 2025) | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Revenue | $24,401 | $3,220 | $21,181 | 657.8% | | Net Revenue | $24,031 | $3,021 | $21,010 | 695.5% | | Operating Loss | $(13,945) | $(8,775) | $(5,170) | 58.9% | | Adjusted EBITDA | $(6,945) | $(3,149) | $(3,796) | 120.5% | - Organic net revenue increased by 126.4%, driven by new wins and increased spending in technology and consumer products. Acquisitions of Leaders and Unicepta significantly contributed to net acquisitions[220] - Operating Loss increased by $5.2 million, primarily due to higher Cost of services ($10.4 million increase) and Office and general expenses ($16.0 million increase) from acquired entities, despite increased revenue[221][222] Corporate This section details the financial performance and expenses attributable to corporate functions Corporate Segment Performance (Q2 2025) | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Staff costs | $12,978 | $12,154 | $824 | 6.8% | | Administrative costs | $(332) | $6,468 | $(6,800) | NM | | Adjusted EBITDA | $(12,646) | $(18,622) | $5,976 | (32.1)% | | Operating Loss | $(23,567) | $(20,871) | $(2,696) | 12.9% | - Operating Loss increased by $2.7 million, primarily due to a $7.4 million increase in stock-based compensation, influenced by an increase in awards and a reversal of expense in Q2 2024[223][224] Results of Operations: Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 For the six months ended June 30, 2025, Stagwell Inc. reported a 1.3% increase in total revenue to $1,358.6 million, but a 13.2% decrease in operating income to $41.5 million, compared to the same period in 2024. Net revenue grew by 6.9% to $1,162.3 million, driven by acquisitions and organic growth in the Integrated Agencies Network and All Other segments, partially offset by declines in Brand Performance and Communications Networks. Adjusted EBITDA decreased by 1.7% to $173.4 million. Net loss attributable to common shareholders widened to $8.2 million from $4.2 million, primarily due to increased expenses, including stock-based compensation and depreciation, and higher interest expense Consolidated Results of Operations This section presents a consolidated overview of the company's financial performance for the period Consolidated Results (H1 2025) | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Revenue | $1,358,558 | $1,341,227 | $17,331 | 1.3% | | Operating Income | $41,457 | $47,761 | $(6,304) | (13.2)% | | Net Revenue | $1,162,316 | $1,086,846 | $75,470 | 6.9% | | Adjusted EBITDA | $173,437 | $176,419 | $(2,982) | (1.7)% | | Net loss attributable to Stagwell Inc. common shareholders | $(8,178) | $(4,247) | $(3,931) | 92.6% |\n| Diluted EPS | $(0.06) | $(0.04) | $(0.02) | 50.0% |\n| Adjusted Diluted EPS | $0.29 | $0.30 | $(0.01) | (3.3)% | - Organic net revenue increased by $5.9 million (0.5%), driven by new wins and increased spending in technology and retail sectors, partially offset by client budget cuts in consumer products. Net acquisitions contributed $68.7 million to net revenue growth[228] - Cost of services decreased by $12.1 million, but excluding billable costs, increased by $46.0 million due to acquired entities. Office and general expenses increased by $30.9 million due to acquired entities and higher staff costs[231] - Stock-based compensation increased by $9.5 million (43.2%), primarily due to higher fair value of profit interest awards and more awards expensed. Depreciation and amortization increased by $6.5 million due to business acquisitions[232][233] - Interest expense, net increased by $2.3 million to $46.8 million, primarily due to higher debt levels under the Credit Agreement. Foreign exchange loss decreased to $0.1 million from $3.6 million[234][235] - Income tax expense for H1 2025 was $4.4 million on a pre-tax loss of $5.6 million, resulting in an effective tax rate of (78.7%), primarily due to current losses subject to valuation allowance and withholding taxes[236] Integrated Agencies Network This section analyzes the financial performance of the Integrated Agencies Network segment Integrated Agencies Network Performance (H1 2025) | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Revenue | $783,544 | $737,852 | $45,692 | 6.2% | | Net Revenue | $670,682 | $614,642 | $56,040 | 9.1% | | Operating Income | $94,144 | $59,464 | $34,680 | 58.3% | | Adjusted EBITDA | $154,679 | $128,103 | $26,576 | 20.7% | - Organic net revenue increased by 6.9%, driven by new client wins and higher spending in technology, retail, automotive, and financials sectors. Acquisitions of Jetfuel and Create also contributed to net acquisitions[245] - Operating Income increased by $34.7 million, primarily due to higher net revenue and decreased office and general expenses. Other items, net decreased by $8.5 million, mainly due to a $3.5 million gain on lease termination and a $3.5 million decrease in severance[246][248] Brand Performance Network This section analyzes the financial performance of the Brand Performance Network segment Brand Performance Network Performance (H1 2025) | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Revenue | $332,317 | $391,207 | $(58,890) | (15.1)% | | Net Revenue | $301,726 | $319,670 | $(17,944) | (5.6)% | | Operating Income | $183 | $13,701 | $(13,518) | (98.7)% | | Adjusted EBITDA | $27,124 | $45,200 | $(18,076) | (40.0)% | - Organic net revenue decreased by 6.0%, primarily due to decreased spending by existing clients in the business services and transportation sectors. Operating Income decreased by $13.5 million, largely due to the decline in net revenue[253][254] Communications Network This section analyzes the financial performance of the Communications Network segment Communications Network Performance (H1 2025) | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Revenue | $193,756 | $199,316 | $(5,560) | (2.8)% | | Net Revenue | $141,340 | $139,881 | $1,459 | 1.0% | | Operating Income | $19,029 | $30,706 | $(11,677) | (38.0)% | | Adjusted EBITDA | $31,112 | $41,557 | $(10,445) | (25.1)% | - Organic net revenue decreased by 17.0%, primarily due to lower advocacy services compared to the 2024 election year and client losses/budget cuts in healthcare and consumer products. The acquisition of Consulum contributed to net acquisitions[258] - Operating Income decreased by $11.7 million, driven by decreased revenue, increased cost of services (due to acquired entities), and higher depreciation and amortization ($4.2 million increase)[259][260][261] All Other This section analyzes the financial performance of the All Other operating segments All Other Segment Performance (H1 2025) | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Revenue | $48,941 | $12,852 | $36,089 | 280.8% | | Net Revenue | $48,568 | $12,653 | $35,915 | 283.8% | | Operating Loss | $(25,979) | $(15,454) | $(10,525) | 68.1% | | Adjusted EBITDA | $(13,275) | $(7,135) | $(6,140) | 86.1% | - Organic net revenue increased by 49.2%, driven by new wins and increased spending in consumer products and technology sectors. Acquisitions of Leaders and Unicepta significantly contributed to net acquisitions[265] - Operating Loss increased by $10.5 million, primarily due to higher Cost of services ($17.2 million increase) and Office and general expenses ($27.5 million increase) from acquired entities and software license fees, despite increased revenue[266][267] Corporate This section details the financial performance and expenses attributable to corporate functions Corporate Segment Performance (H1 2025) | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Staff costs | $24,876 | $22,261 | $2,615 | 11.7% | | Administrative costs | $1,327 | $9,045 | $(7,718) | (85.3)% | | Adjusted EBITDA | $(26,203) | $(31,306) | $5,103 | (16.3)% | | Operating Loss | $(45,920) | $(40,656) | $(5,264) | 12.9% | - Operating Loss increased by $5.3 million, primarily due to a $9.0 million increase in stock-based compensation expense, influenced by an increase in awards and a reversal of expense in Q2 2024[270][271] Liquidity and Capital Resources This section discusses the company's cash position, debt, and ability to meet its financial obligations Cash Flow Summary | Cash Flow Activity | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :---------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by (used in) operating activities | $54,738 | $(67,618) | | Net cash used in investing activities | $(34,936) | $(52,183) | | Net cash provided by financing activities | $21,062 | $138,304 | - Cash and cash equivalents increased to $181.3 million as of June 30, 2025, from $131.3 million at December 31, 2024. The Company expects to maintain sufficient liquidity through cash and available borrowings under its Credit Agreement, which was increased to $750 million with $357.7 million unused capacity as of June 30, 2025[272] - Operating activities provided $54.7 million in cash for H1 2025, a significant improvement from $67.6 million used in H1 2024. Investing activities used $34.9 million, primarily for capitalized software and capital expenditures. Financing activities provided $21.1 million, mainly from net borrowings under the Credit Agreement, partially offset by share repurchases and deferred consideration payments[279][280][282] - Total debt, net of issuance costs, was $1,464.2 million as of June 30, 2025, up from $1,353.6 million at December 31, 2024. The Company was in compliance with all debt covenants, maintaining a Total Leverage Ratio of 3.16 against a maximum of 4.25[284][285][287] - Material cash requirements include deferred acquisition payments, purchases of noncontrolling interests, subsidiary awards, capital expenditures, lease obligations, and interest payments. The Company also has long-term non-cancellable contracts for services like revenue/profit share, cloud services, and software licensing[278][289][290][291][292][293] Critical Accounting Estimates This section highlights the company's key accounting estimates that require significant judgment - Information regarding the Company's critical accounting estimates is referenced in Note 2 of the 2024 Form 10-K[294] Website Access to Company Reports and Information This section provides information on how to access Stagwell Inc.'s public filings and investor communications - Stagwell Inc. makes its SEC filings (10-K, 10-Q, 8-K) available free of charge on its website (