# Stagwell Inc: Form 10-Q for the period ended Sep 30, 2024

- Company: [Stagwell Inc](/companies/stgw.md) (CIK 876883)
- Form: 10-Q
- Filed: 2024-11-07
- Accepted by EDGAR: Nov 7, 2024, 11:41 ET
- Period: 2024-09-30
- Accession: 0000876883-24-000030
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/876883/000087688324000030/stgw-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/876883/000087688324000030/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $711.3m | us-gaap:Revenues |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $2.05bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $457.0m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $1.34bn | us-gaap:CostOfGoodsAndServicesSold |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $41.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $89.5m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $5.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $9.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $3.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$976.0k | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 112,190,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 111,436,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$69.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $16.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $101.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $145.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $1.11bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $3.80bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $1.16bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $3.03bn | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $1.46bn | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-09-30 | $286.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 89,718 characters.

Th**e** following discussion and analysis are based on and should be read in conjunction with our Unaudited Consolidated Financial Statements and the notes thereto included elsewhere in this Form 10-Q. The following discussion and analysis contain forward-looking statements and should be read in conjunction with the disclosures and information contained and referenced under the captions “Forward-Looking Statements” and “Risk Factors” in this Form 10-Q. The following discussion and analysis also include 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 measures are below.

In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” refer 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 2024 means the period beginning January 1, 2024 and ending December 31, 2024).

### 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 strategy is intended to challenge the industry status quo, realize 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.

### Revision of Previously Issued Consolidated Financial Statements

In connection with the preparation of the consolidated financial statements during 2023, the Company identified errors in the areas of income taxes, noncontrolling interests, and accumulated other comprehensive loss related to its previously filed 2022 financial statements. The Company revised the 2022 annual financial statements in its 2023 Form 10-K. See Notes 1, 21 and 22 of the Notes in the Company’s 2023 Form 10-K for additional information regarding the correction of the errors. See Notes 1 and 17 of the Notes included herein for information regarding the revisions made to the previously issued unaudited financial statements for the second quarter of 2023.

### Recent Developments

On November 6, 2024, the Board authorized an extension and a $125.0 million increase in the size of our previously approved stock repurchase program (the “Repurchase Program”). Under the Repurchase Program, as amended, we may repurchase up to an aggregate of $375.0 million of shares of our outstanding Class A common stock, par value $0.001 per share (“Class A Common Stock”), with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program will expire on November 6, 2027.

On October 1, 2024, the Company acquired Consulum (Cayman) Limited (“Consulum”), a government advisory firm in the Middle East and North Africa (“MENA”) region that provides public relations management and media and marketing services, for $71.2 million, of which $58.3 million was paid in cash and $12.9 million in 1,810,274 shares of the Company’s Class A Common Stock subject to post-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of $90.0 million, partially subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion. Due to the timing of the closing of the acquisition and delivery of related data, there was insufficient time to incorporate additional disclosures related to the preliminary purchase price allocation and fair value of the assets acquired and liabilities assumed.

### 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 portfolio of marketing services firms, which we refer to as “Brands,” offer. A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain 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, within our Communications Network, client concentration increases during election years due to the cyclical nature of our advocacy Brands. The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season.

### Non-GAAP Financial Measures

The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”). In addition, the Company has included non-GAAP financial measures and ratios, which management uses to operate the business, which it believes provide useful supplemental information to both management and readers of this report in making period-to-period comparisons in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP. The non-GAAP financial measures included are “net revenue,” “organic net revenue growth (decline),” “Adjusted EBITDA,” and “Adjusted Diluted EPS.”

“Net revenue” refers to revenue excluding billable costs. The Company believes billable costs and their fluctuations are not indicative of the operating performance of its underlying business.

“Organic net revenue growth (decline)” reflects the year-over-year change in the Company’s reported net revenue attributable to the Company’s management of the entities it owns. We calculate organic net revenue growth (decline) by subtracting the net impact of acquisitions (divestitures) and the impact of foreign currency exchange fluctuations from the aggregate year-over-year increase or decrease in the Company’s reported net revenue.

The net impact of acquisitions (divestitures) reflects the year-over-year change in the Company’s reported net revenue attributable to the impact of all individual entities that were acquired or divested in the current and prior year. We calculate impact of an acquisition as follows: (a) for an entity acquired during the current year, we present the entity’s prior year net revenue for the same period during which we owned it in the current year as impact of the acquisition in the current year; and (b) for an entity acquired in the prior year, we present the entity’s prior year net revenue for the period during which we did not own the entity in the prior year as impact of the acquisition in the current year. We calculate impact of a divestiture as follows: (a) for a divestiture in the current year, we present the entity’s prior year net revenue for the same period during which we no longer owned it in the current year as impact of the divestiture in the current year; and (b) for a divestiture in the prior year, we present the entity’s prior year net revenue for the period during which we owned it in the prior year as impact of the divestiture in the current year. We calculate the impact of any acquisition or divestiture without adjusting for foreign currency exchange fluctuations.

The impact of foreign currency exchange fluctuations reflects the year-over-year change in the Company’s reported net revenue attributable to changes in foreign currency exchange rates. We calculate the impact of foreign currency exchange fluctuations for the portion of the reporting period in which we recognized revenue from a foreign entity in both the current year and the prior year. The impact is calculated as the difference between (1) reported prior period net revenue (converted to U.S. dollars at historical foreign currency exchange rates) and (2) prior period net revenue converted to U.S. dollars at current period foreign exchange rates.

“Adjusted EBITDA” is defined as Net income (loss) attributable to Stagwell Inc. common shareholders excluding non-operating income or expense to achieve operating income (loss), plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items. Adjusted EBITDA for our reportable segments is reconciled to Operating Income (Loss), as Net Income (Loss) is not a relevant reportable segment financial metric.

“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 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 weighted average number of common shares outstanding plus (b) the weighted average number of shares of Class C Common Stock outstanding. Other items include restructuring costs, acquisition-related expenses, and 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 U.S. 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 in Item 2 herein that are not considered meaningful are presented as “NM.”

### Segments

The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of operating segments is applicable. This determination is based upon a quantitative analysis of the expected and historic average long-term profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics.

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

The Company made changes to its internal management and reporting structure in the first quarter of 2024, resulting in a change to its reportable segments (Networks). Specifically, certain agencies previously within the Brand Performance Network are now in the Integrated Agencies Network. Periods presented prior to the first quarter of 2024 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

The Company has three reportable segments as follows: “Integrated Agencies Network,” “Brand Performance Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria, and includes the elimination of certain intercompany services, as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Unaudited Consolidated Financial Statements included herein and in Note 2 of the Company’s Audited Consolidated Financial Statements included in the 2023 Form 10-K.

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

The following discussion focuses on the operating performance of the Company for the three and nine months ended September 30, 2024 and 2023 and the financial condition of the Company as of September 30, 2024.

### Results of Operations:

*(dollars in thousands)*

| Revenue: | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Integrated Agencies Network | $389,668 | $358,069 | $1,127,520 | $1,064,909 |
| Brand Performance Network | 172,349 | 164,073 | 563,556 | 542,734 |
| Communications Network | 135,980 | 82,505 | 335,296 | 230,261 |
| All Other | 13,284 | 12,926 | 26,136 | 34,378 |
| **Total Revenue** | $711,281 | $617,573 | $2,052,508 | $1,872,282 |
| Operating Income | $41,779 | $33,742 | $89,540 | $71,237 |
| **Other Income (Expenses):** |  |  |  |  |
| Interest expense, net | $(23,781) | $(25,886) | $(68,279) | $(67,755) |
| Foreign exchange, net | 1,312 | (140) | (2,301) | (2,288) |
| Other, net | 249 | (271) | (825) | (467) |
| Income before income taxes and equity in earnings of non-consolidated affiliates | 19,559 | 7,445 | 18,135 | 727 |
| Income tax expense | 5,691 | 4,324 | 9,441 | 4,997 |
| Income (loss) before equity in earnings of non-consolidated affiliates | 13,868 | 3,121 | 8,694 | (4,270) |
| Equity in income (loss) of non-consolidated affiliates | (4) | (4) | 503 | (447) |
| Net income (loss) | 13,864 | 3,117 | 9,197 | (4,717) |
| Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests | (10,593) | (2,464) | (10,173) | 3,565 |
| Net income (loss) attributable to Stagwell Inc. common shareholders | $3,271 | $653 | $(976) | $(1,152) |
| **Reconciliation to Adjusted EBITDA:** |  |  |  |  |
| Net income (loss) attributable to Stagwell Inc. common shareholders | $3,271 | $653 | $(976) | $(1,152) |
| Non-operating items (1) | 38,508 | 33,089 | 90,516 | 72,389 |
| Operating income | 41,779 | 33,742 | 89,540 | 71,237 |
| Depreciation and amortization | 36,044 | 38,830 | 112,881 | 107,795 |
| Impairment and other losses | — | — | 1,715 | 10,562 |
| Stock-based compensation | 16,935 | 12,065 | 38,926 | 34,615 |
| Deferred acquisition consideration | 560 | 6,401 | 7,950 | 10,881 |
| Other items, net | 15,851 | 10,731 | 36,576 | 30,069 |
| **Adjusted EBITDA** | $111,169 | $101,769 | $287,588 | $265,159 |
| (1) Non-operating items includes items within the Statements of Operations, below Operating Income, and above Net income (loss) attributable to Stagwell Inc. common shareholders. |  |  |  |  |

39

### THREE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2023

### Consolidated Results of Operations

The components of operating results for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $711,281 | $617,573 | $93,708 | 15.2% |
| Operating Expenses |  |  |  |  |
| Cost of services | 457,018 | 384,980 | 72,038 | 18.7% |
| Office and general expenses | 176,440 | 160,021 | 16,419 | 10.3% |
| Depreciation and amortization | 36,044 | 38,830 | (2,786) | (7.2)% |
|  | $669,502 | $583,831 | $85,671 | 14.7% |
| Operating Income | $41,779 | $33,742 | $8,037 | 23.8% |

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net Revenue | $580,193 | $534,864 | $45,329 | 8.5% |
| Billable costs | 131,088 | 82,709 | 48,379 | 58.5% |
| **Revenue** | 711,281 | 617,573 | 93,708 | 15.2% |
| Billable costs | 131,088 | 82,709 | 48,379 | 58.5% |
| Staff costs | 361,979 | 338,914 | 23,065 | 6.8% |
| Administrative costs | 69,556 | 62,339 | 7,217 | 11.6% |
| Unbillable and other costs, net | 37,489 | 31,842 | 5,647 | 17.7% |
| **Adjusted EBITDA** | 111,169 | 101,769 | 9,400 | 9.2% |
| Stock-based compensation | 16,935 | 12,065 | 4,870 | 40.4% |
| Depreciation and amortization | 36,044 | 38,830 | (2,786) | (7.2)% |
| Deferred acquisition consideration | 560 | 6,401 | (5,841) | (91.3)% |
| Other items, net | 15,851 | 10,731 | 5,120 | 47.7% |
| **Operating Income (1)** | $41,779 | $33,742 | $8,037 | 23.8% |
| (1) See the Results of Operations section above for a reconciliation of Operating Income to Net income (loss) attributable to Stagwell Inc. common shareholders. |  |  |  |  |

### Revenue

Revenue for the three months ended September 30, 2024 was $711.3 million, compared to $617.6 million for the three months ended September 30, 2023, an increase of $93.7 million.

The components of the fluctuations in net revenue for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | Net Revenue - Components of Change Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Three Months Ended September 30, 2024 | Change Organic | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Integrated Agencies Network | $306,327 | $217 | $906 | $16,294 | $17,417 | $323,744 | 5.3% | 5.7% |
| Brand Performance Network | 153,169 | 767 | — | 2,984 | 3,751 | 156,920 | 1.9% | 2.4% |
| Communications Network | 62,416 | 79 | 2,970 | 20,755 | 23,804 | 86,220 | 33.3% | 38.1% |
| All Other | 12,952 | (253) | (263) | 873 | 357 | 13,309 | 6.7% | 2.8% |
|  | $534,864 | $810 | $3,613 | $40,906 | $45,329 | $580,193 | 7.6% | 8.5% |
| Component % change |  | 0.2% | 0.7% | 7.6% | 8.5% |  |  |  |

For the three months ended September 30, 2024, organic net revenue increased $40.9 million, or 7.6%. The increase was primarily attributable to new wins in the technology and retail sectors, as well as new wins and increased revenue in the public affairs sector driven by the ongoing election year. This increase was partially offset by a decrease in client spending due to budget cuts in the food and beverage sectors. The increase in net acquisitions (divestitures) was impacted by acquisitions and dispositions, including the acquisitions of Team Epiphany, LLC (“Epiphany”), Movers and Shakers LLC (“Movers and Shakers”), PROS Agency (“PROS”) and Left Field Labs LLC (“Left Field Labs”), partially offset by the sale of ConcentricLife (“Concentric”) in the fourth quarter of 2023.

The geographic mix in net revenues for the three months ended September 30, 2024 and 2023 is as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| United States | $469,092 | $426,422 |
| United Kingdom | 39,854 | 42,114 |
| Other | 71,247 | 66,328 |
| Total | $580,193 | $534,864 |

### Operating Income

Operating Income for the three months ended September 30, 2024 was $41.8 million, compared to Operating Income of $33.7 million for the three months ended September 30, 2023, representing an increase of $8.0 million. The change in Operating Income was primarily attributable to an increase in Revenue, partially offset by an increase in Cost of services and Office and general expenses.

The increase in Cost of services was primarily attributable to higher billable and staff costs, commensurate with the increase in revenues as well as the inclusion of costs from acquired entities, and higher stock-based compensation.

The increase in Office and general expenses was primarily attributable to an increase in staff costs and acquisition related expenses, partially offset by a decrease in deferred acquisition consideration expense.

Stock-based compensation increased $4.9 million, primarily due to an increase in the fair value and number of awards.

Deferred acquisition consideration decreased $5.8 million, primarily attributable to a reduction in the fair value of the deferred acquisition consideration liability associated with certain Brands in the third quarter of 2024.

Depreciation and amortization decreased $2.8 million, primarily attributable to the acceleration of amortization of certain tradenames in the third quarter of 2023. As a result, amortization expense of $4.3 million was recorded in the three months ended September 30, 2023, representing the remaining amortization expense associated with these tradenames.

### Interest Expense, Net

Interest expense, net, for the three months ended September 30, 2024 was $23.8 million, compared to $25.9 million for the three months ended September 30, 2023, a decrease of $2.1 million, primarily attributable to lower levels of debt outstanding under the Credit Agreement (as discussed in Note 8 of the Notes to the Unaudited Consolidated Financial Statements included herein), and a lower interest rate on amounts outstanding under the Credit Agreement.

### Foreign Exchange, Net

The foreign exchange gain for the three months ended September 30, 2024 was $1.3 million, compared to a loss of $0.1 million for the three months ended September 30, 2023, primarily attributable to the movement in the British Pound.

### Other, Net

Other, net, for the three months ended September 30, 2024 was income of $0.2 million, compared to an expense of $0.3 million for the three months ended September 30, 2023, a change of $0.5 million.

### Income Tax Expense

The Company had an income tax expense for the three months ended September 30, 2024 of $5.7 million (on a pre-tax income of $19.6 million resulting in an effective tax rate of 29.1%), compared to income tax expense of $4.3 million (on pre-tax income of $7.4 million resulting in an effective tax rate of 58.1%) for the three months ended September 30, 2023.

The difference in the effective tax rate of 29.1% in the three months ended September 30, 2024, compared to 58.1% in the three months ended September 30, 2023, is primarily due to an increase in tax benefit from the disregarded entity structure which is partially offset by a reduction in tax benefits recognized with respect to uncertain tax positions.

### Noncontrolling and Redeemable Noncontrolling Interests

The effect of noncontrolling and redeemable noncontrolling interests for the three months ended September 30, 2024 was income of $10.6 million, compared to income of $2.5 million for the three months ended September 30, 2023. The amounts are driven by the mix of income and loss derived from entities not entirely owned by the Company.

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

As a result of the foregoing, net income attributable to Stagwell Inc. common shareholders for the three months ended September 30, 2024 was $3.3 million, compared to net income of $0.7 million for the three months ended September 30, 2023.

### Earnings (Loss) Per Share

Diluted EPS and Adjusted Diluted EPS for the three months ended September 30, 2024 were as follows:

*(amounts in thousands, except per share amounts)*

|  | GAAP | Adjustments (1) | Non-GAAP |
| --- | ---: | ---: | ---: |
| Net income attributable to Stagwell Inc. common shareholders | $3,271 | $19,762 | $23,033 |
| Net income attributable to Class C shareholders | — | 36,060 | 36,060 |
| Net income attributable to Stagwell Inc. and Class C shareholders and adjusted net income | $3,271 | $55,822 | $59,093 |
| Weighted average number of common shares outstanding | 112,190 | 1,497 | 113,687 |
| Weighted average number of common Class C shares outstanding | — | 151,649 | 151,649 |
| Weighted average number of shares outstanding | 112,190 | 153,146 | 265,336 |
| Diluted EPS and Adjusted Diluted EPS | $0.03 |  | $0.22 |
| **Adjustments to Net income (1)** |  |  |  |
| Amortization |  | $28,659 |  |
| Stock-based compensation |  | 16,935 |  |
| Deferred acquisition consideration |  | 560 |  |
| Other items, net |  | 15,851 |  |
|  |  | $62,005 |  |
| Adjusted tax expense |  | (15,615) |  |
|  |  | 46,390 |  |
| Net income attributable to Class C shareholders |  | 9,432 |  |
|  |  | $55,822 |  |
| **Allocation of adjustments to Net income** |  |  |  |
| Net income attributable to Stagwell Inc. common shareholders - add-backs |  | $19,762 |  |
| Net income attributable to Class C shareholders - add-backs |  | 26,628 |  |
| Net income attributable to Class C shareholders |  | 9,432 |  |
|  |  | 36,060 |  |
|  |  | $55,822 |  |

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

Diluted EPS and Adjusted Diluted EPS for the three months ended September 30, 2023 were as follows:

*(amounts in thousands, except per share amounts)*

|  | GAAP | Adjustments (1) | Non-GAAP |
| --- | ---: | ---: | ---: |
| Net income attributable to Stagwell Inc. common shareholders | $653 | $20,844 | $21,497 |
| Net income attributable to Class C shareholders | 33 | 26,530 | 26,563 |
| Net income attributable to Stagwell Inc. and Class C and adjusted net income | $686 | $47,374 | $48,060 |
| Weighted average number of common shares outstanding | 113,357 | 5,663 | 119,020 |
| Weighted average number of common Class C shares outstanding | 151,649 | — | 151,649 |
| Weighted average number of shares outstanding | 265,006 | 5,663 | 270,669 |
| Diluted EPS and Adjusted Diluted EPS | $— |  | $0.18 |
| **Adjustments to Net income (1)** |  |  |  |
| Amortization |  | $31,182 |  |
| Stock-based compensation |  | 12,065 |  |
| Deferred acquisition consideration |  | 6,401 |  |
| Other items, net |  | 10,731 |  |
|  |  | 60,379 |  |
| Adjusted tax expense |  | (13,005) |  |
|  |  | $47,374 |  |

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

### Adjusted EBITDA

Adjusted EBITDA for the three months ended September 30, 2024 was $111.2 million, compared to $101.8 million for the three months ended September 30, 2023, representing an increase of $9.4 million, primarily driven by an increase in Revenue, partially offset by an increase in expenses, as discussed above.

### Integrated Agencies Network

The components of operating results for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $389,668 | $358,069 | $31,599 | 8.8% |
| Operating Expenses |  |  |  |  |
| Cost of services | 258,071 | 228,000 | 30,071 | 13.2% |
| Office and general expenses | 69,469 | 67,048 | 2,421 | 3.6% |
| Depreciation and amortization | 19,878 | 22,817 | (2,939) | (12.9)% |
|  | $347,418 | $317,865 | $29,553 | 9.3% |
| Operating Income | $42,250 | $40,204 | $2,046 | 5.1% |

44

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net Revenue | $323,744 | $306,327 | $17,417 | 5.7% |
| Billable costs | 65,924 | 51,742 | 14,182 | 27.4% |
| **Revenue** | 389,668 | 358,069 | 31,599 | 8.8% |
| Billable costs | 65,924 | 51,742 | 14,182 | 27.4% |
| Staff costs | 198,252 | 185,034 | 13,218 | 7.1% |
| Administrative costs | 31,593 | 30,983 | 610 | 2.0% |
| Unbillable and other costs, net | 15,993 | 14,173 | 1,820 | 12.8% |
| **Adjusted EBITDA** | 77,906 | 76,137 | 1,769 | 2.3% |
| Stock-based compensation | 11,000 | 6,051 | 4,949 | 81.8% |
| Depreciation and amortization | 19,878 | 22,817 | (2,939) | (12.9)% |
| Deferred acquisition consideration | 1,114 | 1,018 | 96 | 9.4% |
| Other items, net | 3,664 | 6,047 | (2,383) | (39.4)% |
| **Operating Income** | $42,250 | $40,204 | $2,046 | 5.1% |

### Revenue

Revenue for the three months ended September 30, 2024 was $389.7 million, compared to $358.1 million for the three months ended September 30, 2023, an increase of $31.6 million.

### Net Revenue

The components of the fluctuations in net revenue for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | Net Revenue - Components of Change Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Three Months Ended September 30, 2024 | Change Organic | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Integrated Agencies Network | $306,327 | $217 | $906 | $16,294 | $17,417 | $323,744 | 5.3% | 5.7% |
| Component % change |  | 0.1% | 0.3% | 5.3% | 5.7% |  |  |  |

The increase in organic net revenue was primarily attributable to new client wins and increased spending in the technology and retail sectors, partially offset by lower spending due to budget cuts by large clients in the food and beverage and business services sectors. The increase in net acquisitions (divestitures) was primarily driven by acquisitions and dispositions, including the acquisitions of Epiphany, Movers and Shakers and Left Field Labs, partially offset by the sale of Concentric in the fourth quarter of 2023.

### Operating Income

Operating Income for the three months ended September 30, 2024 was $42.3 million, compared to $40.2 million for the three months ended September 30, 2023, representing an increase of $2.0 million, primarily attributable to an increase in Revenue, partially offset by an increase in Cost of services and Office and general expenses.

The increase in Cost of services was primarily attributable to higher billable and staff costs, commensurate with the increase in revenues as well as the inclusion of costs from acquired entities, and an increase in stock-based compensation.

Stock-based compensation increased $4.9 million, primarily due to an increase in the fair value, partially offset by a decrease in the number of shares being expensed.

Adjusted EBITDA increased $1.8 million, primarily driven by an increase in Revenue, partially offset by an increase in expenses, as discussed above.

### Brand Performance Network

The components of operating results for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $172,349 | $164,073 | $8,276 | 5.0% |
| Operating Expenses |  |  |  |  |
| Cost of services | 105,939 | 95,709 | 10,230 | 10.7% |
| Office and general expenses | 49,931 | 51,997 | (2,066) | (4.0)% |
| Depreciation and amortization | 7,295 | 8,971 | (1,676) | (18.7)% |
|  | $163,165 | $156,677 | $6,488 | 4.1% |
| Operating Income | $9,184 | $7,396 | $1,788 | 24.2% |

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net Revenue | $156,920 | $153,169 | $3,751 | 2.4% |
| Billable costs | 15,429 | 10,904 | 4,525 | 41.5% |
| **Revenue** | 172,349 | 164,073 | 8,276 | 5.0% |
| Billable costs | 15,429 | 10,904 | 4,525 | 41.5% |
| Staff costs | 98,716 | 95,488 | 3,228 | 3.4% |
| Administrative costs | 22,600 | 20,580 | 2,020 | 9.8% |
| Unbillable and other costs, net | 16,498 | 12,868 | 3,630 | 28.2% |
| **Adjusted EBITDA** | 19,106 | 24,233 | (5,127) | (21.2)% |
| Stock-based compensation | 1,500 | 2,399 | (899) | (37.5)% |
| Depreciation and amortization | 7,295 | 8,971 | (1,676) | (18.7)% |
| Deferred acquisition consideration | (6,949) | 2,130 | (9,079) | NM |
| Other items, net | 8,076 | 3,337 | 4,739 | NM |
| **Operating Income** | $9,184 | $7,396 | $1,788 | 24.2% |

### Revenue

Revenue for the three months ended September 30, 2024 was $172.3 million, compared to $164.1 million for the three months ended September 30, 2023, an increase of $8.3 million.

The components of the fluctuations in net revenue for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | Net Revenue - Components of Change Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Three Months Ended September 30, 2024 | Change Organic | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Brand Performance Network | $153,169 | $767 | $— | $2,984 | $3,751 | $156,920 | 1.9% | 2.4% |
| Component % change |  | 0.5% | —% | 1.9% | 2.4% |  |  |  |

The increase in organic net revenue was primarily attributable to new clients and increased spending by existing clients in the business services, retail and consumer products sectors.

### Operating Income

Operating Income for the three months ended September 30, 2024 was $9.2 million, compared to $7.4 million for the three months ended September 30, 2023, representing an increase of $1.8 million. The increase in Operating Income was primarily attributable to an increase in Revenue and a decrease in Office and general expenses, partially offset by an increase in Cost of services.

The increase in Cost of services was primarily attributable to higher billable and unbillable costs, commensurate with the increase in revenues.

The decrease in office and general expenses was primarily attributable to a decrease in deferred acquisition consideration expense, partially offset by an increase in staff costs due to an increase in salaries.

Deferred acquisition consideration decreased $9.1 million, primarily attributable to a reduction in the fair value of the deferred acquisition consideration liability associated with certain Brands in the third quarter of 2024.

Adjusted EBITDA decreased $5.1 million, primarily driven by an increase in Revenue, more than offset by an increase in expenses, as discussed above.

### Communications Network

The components of operating results for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $135,980 | $82,505 | $53,475 | 64.8% |
| Operating Expenses |  |  |  |  |
| Cost of services | 85,504 | 51,913 | 33,591 | 64.7% |
| Office and general expenses | 25,423 | 18,551 | 6,872 | 37.0% |
| Depreciation and amortization | 3,023 | 2,784 | 239 | 8.6% |
|  | $113,950 | $73,248 | $40,702 | 55.6% |
| Operating Income | $22,030 | $9,257 | $12,773 | NM |

47

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net Revenue | $86,220 | $62,416 | $23,804 | 38.1% |
| Billable costs | 49,760 | 20,089 | 29,671 | NM |
| **Revenue** | 135,980 | 82,505 | 53,475 | 64.8% |
| Billable costs | 49,760 | 20,089 | 29,671 | NM |
| Staff costs | 42,644 | 37,412 | 5,232 | 14.0% |
| Administrative costs | 9,034 | 7,626 | 1,408 | 18.5% |
| Unbillable and other costs, net | 424 | 84 | 340 | NM |
| **Adjusted EBITDA** | 34,118 | 17,294 | 16,824 | 97.3% |
| Stock-based compensation | 855 | 1,252 | (397) | (31.7)% |
| Depreciation and amortization | 3,023 | 2,784 | 239 | 8.6% |
| Deferred acquisition consideration | 6,778 | 3,757 | 3,021 | 80.4% |
| Other items, net | 1,432 | 244 | 1,188 | NM |
| **Operating Income** | $22,030 | $9,257 | $12,773 | NM |

### Revenue

Revenue for the three months ended September 30, 2024 was $136.0 million, compared to $82.5 million for the three months ended September 30, 2023, an increase of $53.5 million.

The components of the fluctuations in net revenue for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | Net Revenue - Components of Change Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Three Months Ended September 30, 2024 | Change Organic | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Communications Network | $62,416 | $79 | $2,970 | $20,755 | $23,804 | $86,220 | 33.3% | 38.1% |
| Component % change |  | 0.1% | 4.8% | 33.3% | 38.1% |  |  |  |

The increase in organic net revenue was primarily attributable to new clients and increased spend in the retail and public affairs sectors as a result of the current political campaign year. The increase in net acquisitions (divestitures) was primarily driven by the acquisition of PROS.

### Operating Income

Operating Income for the three months ended September 30, 2024 was $22.0 million, compared to $9.3 million for the three months ended September 30, 2023, representing an increase of $12.8 million. The change in Operating Income was primarily attributable to an increase in Revenue, partially offset by an increase in Costs of services and Office and general expenses.

The increase in Cost of services was primarily attributable to higher billable costs, commensurate with higher revenue.

The increase in Office and general expenses was primarily attributable to an increase in deferred acquisition consideration and staff costs due to the inclusion of costs from acquired entities as well as an increase in salaries and commissions.

Deferred acquisition consideration increased $3.0 million, primarily as a result of an increase in the fair value of a certain brand in the third quarter of 2024.

Adjusted EBITDA increased $16.8 million, primarily driven by an increase in Revenue, partially offset by an increase in billable costs, as discussed above.

### All Other

The components of operating results for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $13,284 | $12,926 | $358 | 2.8% |
| Operating Expenses |  |  |  |  |
| Cost of services | 7,485 | 9,203 | (1,718) | (18.7)% |
| Office and general expenses | 10,343 | 7,784 | 2,559 | 32.9% |
| Depreciation and amortization | 2,573 | 2,138 | 435 | 20.3% |
|  | $20,401 | $19,125 | $1,276 | 6.7% |
| Operating Loss | $(7,117) | $(6,199) | $(918) | 14.8% |

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net Revenue | $13,309 | $12,952 | $357 | 2.8% |
| Billable costs | (25) | (26) | 1 | (3.8)% |
| **Revenue** | 13,284 | 12,926 | 358 | 2.8% |
| Billable costs | (25) | (26) | 1 | (3.8)% |
| Staff costs | 9,207 | 10,391 | (1,184) | (11.4)% |
| Administrative costs | 3,978 | 1,849 | 2,129 | NM |
| Unbillable and other costs, net | 4,574 | 4,717 | (143) | (3.0)% |
| **Adjusted EBITDA** | (4,450) | (4,005) | (445) | 11.1% |
| Stock-based compensation | 379 | 268 | 111 | 41.4% |
| Depreciation and amortization | 2,573 | 2,138 | 435 | 20.3% |
| Deferred acquisition consideration | (383) | (504) | 121 | (24.0)% |
| Other items, net | 98 | 292 | (194) | (66.4)% |
| **Operating Loss** | $(7,117) | $(6,199) | $(918) | 14.8% |

### Revenue

Revenue for the three months ended September 30, 2024 was $13.3 million, compared to $12.9 million for the three months ended September 30, 2023, an increase of $0.4 million.

The components of the fluctuations in net revenue for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2023 | Net Revenue - Components of Change Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Three Months Ended September 30, 2024 | Change Organic | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| All Other | $12,952 | $(253) | $(263) | $873 | $357 | $13,309 | 6.7% | 2.8% |
| Component % change |  | (2.0)% | (2.0)% | 6.7% | 2.8% |  |  |  |

The increase in organic net revenue was primarily attributable to new wins and increased spend in the technology sector.

### Operating Loss

Operating Loss for the three months ended September 30, 2024 was $7.1 million, compared to $6.2 million for the three months ended September 30, 2023, representing an increase of $0.9 million. The increase in Operating Loss was primarily attributable to an increase in Office and general expense, partially offset by a decrease in Cost of services.

The decrease in Cost of services was primarily attributable to a decrease in staff costs related to employees of a Brand that was derecognized in the first quarter of 2024.

The increase in Office and general expenses was primarily attributable to a reduction in bonus expenses in 2023 related to cost saving initiatives.

Adjusted EBITDA decreased $0.4 million, primarily driven by an increase in Office and general expenses partially offset by a decrease in Cost of services, as discussed above.

### Corporate

The components of operating results for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Three Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Staff costs | $13,160 | $10,589 | $2,571 | 24.3% |
| Administrative costs | 2,351 | 1,301 | 1,050 | 80.7% |
| **Adjusted EBITDA** | (15,511) | (11,890) | (3,621) | 30.5% |
| Stock-based compensation | 3,201 | 2,095 | 1,106 | 52.8% |
| Depreciation and amortization | 3,275 | 2,120 | 1,155 | 54.5% |
| Other items, net | 2,581 | 811 | 1,770 | NM |
| **Operating Loss** | $(24,568) | $(16,916) | $(7,652) | 45.2% |

Operating Loss for the three months ended September 30, 2024 was $24.6 million, compared to $16.9 million for the three months ended September 30, 2023, representing an increase of $7.7 million. The increase in Operating Loss was primarily attributable to higher Staff costs and Stock-based compensation.

Staff costs increased $2.6 million, primarily as a result of higher health insurance costs and a reduction in bonus expense in 2023 related to cost savings initiatives.

Stock-based compensation increased $1.1 million, primarily due to an increase in the fair value of awards, partially offset by a decrease in the number of shares being expensed.

### NINE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2023

### Consolidated Results of Operations

The components of operating results for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $2,052,508 | $1,872,282 | $180,226 | 9.6% |
| Operating Expenses |  |  |  |  |
| Cost of services | 1,340,456 | 1,201,309 | 139,147 | 11.6% |
| Office and general expenses | 507,916 | 481,379 | 26,537 | 5.5% |
| Depreciation and amortization | 112,881 | 107,795 | 5,086 | 4.7% |
| Impairment and other losses | 1,715 | 10,562 | (8,847) | (83.8)% |
|  | $1,962,968 | $1,801,045 | $161,923 | 9.0% |
| Operating Income | $89,540 | $71,237 | $18,303 | 25.7% |

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net Revenue | $1,667,039 | $1,601,387 | $65,652 | 4.1% |
| Billable costs | 385,469 | 270,895 | 114,574 | 42.3% |
| **Revenue** | 2,052,508 | 1,872,282 | 180,226 | 9.6% |
| Billable costs | 385,469 | 270,895 | 114,574 | 42.3% |
| Staff costs | 1,059,485 | 1,034,645 | 24,840 | 2.4% |
| Administrative costs | 206,253 | 196,846 | 9,407 | 4.8% |
| Unbillable and other costs, net | 113,713 | 104,737 | 8,976 | 8.6% |
| **Adjusted EBITDA** | 287,588 | 265,159 | 22,429 | 8.5% |
| Stock-based compensation | 38,926 | 34,615 | 4,311 | 12.5% |
| Depreciation and amortization | 112,881 | 107,795 | 5,086 | 4.7% |
| Deferred acquisition consideration | 7,950 | 10,881 | (2,931) | (26.9)% |
| Impairment and other losses | 1,715 | 10,562 | (8,847) | (83.8)% |
| Other items, net | 36,576 | 30,069 | 6,507 | 21.6% |
| **Operating Income (1)** | $89,540 | $71,237 | $18,303 | 25.7% |
| (1) See the Results of Operations section above for a reconciliation of Operating Income to Net income (loss) attributable to Stagwell Inc. common shareholders. |  |  |  |  |

### Revenue

Revenue for the nine months ended September 30, 2024 was $2,052.5 million, compared to $1,872.3 million for the nine months ended September 30, 2023, an increase of $180.2 million.

The components of the fluctuations in net revenue for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2023 | Net Revenue - Components of Change Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Nine Months Ended September 30, 2024 | Change Organic | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Integrated Agencies Network | $930,660 | $200 | $2,408 | $5,118 | $7,726 | $938,386 | 0.5% | 0.8% |
| Brand Performance Network | 459,291 | 2,145 | 2,252 | 12,902 | 17,299 | 476,590 | 2.8% | 3.8% |
| Communications Network | 177,032 | (70) | 6,421 | 42,718 | 49,069 | 226,101 | 24.1% | 27.7% |
| All Other | 34,404 | (822) | (3,559) | (4,061) | (8,442) | 25,962 | (11.8)% | (24.5)% |
|  | $1,601,387 | $1,453 | $7,522 | $56,677 | $65,652 | $1,667,039 | 3.5% | 4.1% |
| Component % change |  | 0.1% | 0.5% | 3.5% | 4.1% |  |  |  |

For the nine months ended September 30, 2024, organic net revenue increased $56.7 million, or 3.5%. The increase was primarily attributable to new wins and increased spending by clients in the retail, and consumer products sectors. This increase was further driven by new wins and increased revenue in the public affairs sector as a result of the current political campaign year. This increase was partially offset by a decrease in client spending due to budget cuts in the business services and financial sectors. The increase in net acquisitions (divestitures) was impacted by acquisitions and dispositions, including the acquisitions of Epiphany, Movers and Shakers and Left Field Labs, partially offset by the sale of Concentric in the fourth quarter of 2023.

The geographic mix in net revenues for the nine months ended September 30, 2024 and 2023 was as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| United States | $1,350,022 | $1,290,132 |
| United Kingdom | 116,040 | 114,474 |
| Other | 200,977 | 196,781 |
| Total | $1,667,039 | $1,601,387 |

### Operating Income

Operating Income for the nine months ended September 30, 2024 was $89.5 million, compared to $71.2 million for the nine months ended September 30, 2023, representing an increase of $18.3 million. The change in Operating Income was primarily attributable to an increase in Revenue and a decrease in Impairment and other losses, partially offset by an increase in Cost of services, Office and general expenses, and Depreciation and amortization.

The increase in Cost of services was primarily attributable to higher billable costs, unbillable costs and staff costs, commensurate with the increase in revenue as well as the inclusion of costs from acquired entities, and higher stock-based compensation.

The increase in Office and general expenses was primarily attributable to an increase in staff costs, commensurate with the increase in revenue as well as the inclusion of costs from acquired entities, partially offset by a decrease in deferred acquisition consideration.

Stock-based compensation increased $4.3 million, primarily due to an increase in the fair value and number of awards, partially offset by the reversal of expense in the second quarter of 2024 associated with stock-based performance awards for which the performance targets were not probable of being met.

Deferred acquisition consideration decreased $2.9 million, primarily attributable to a reduction in the fair value of the deferred acquisition consideration liability associated with certain Brands and the earn out period of certain brands ending in the second quarter of 2024, partially offset by acquisitions occurred in the fourth quarter of 2023 and the increase in the fair value of certain obligations.

Depreciation and amortization increased $5.1 million, primarily attributable to the acceleration of amortization of certain tradenames during the nine months ended September 30, 2024 as the Company ceased use of certain Brand names.

Impairment and other losses for the nine months ended September 30, 2024 was $1.7 million. This was attributable to a charge to reduce the carrying value of right-of-use lease assets and related leasehold improvements within the Integrated Agencies Network and Corporate. Impairment and other losses for the nine months ended September 30, 2023 was $10.6 million, primarily related to the impairment of right-of-use lease assets totaling $6.1 million and the associated leasehold improvements totaling $3.1 million.

### Interest Expense, Net

Interest expense, net for the nine months ended September 30, 2024 was $68.3 million, compared to $67.8 million for the nine months ended September 30, 2023, an increase of $0.5 million, primarily attributable to higher levels of debt outstanding under the Credit Agreement (as discussed in Note 8 of the Notes to the Unaudited Consolidated Financial Statements included herein), and a higher interest rate on amounts outstanding under the Credit Agreement.

### Foreign Exchange, Net

The foreign exchange loss for the nine months ended September 30, 2024 was $2.3 million, compared to a loss of $2.3 million for the nine months ended September 30, 2023, primarily attributable to the movement in the British Pound.

### Other, Net

Other, net for the nine months ended September 30, 2024 was an expense of $0.8 million, compared to an expense of $0.5 million for the nine months ended September 30, 2023.

### Income Tax Expense

The Company had an income tax expense for the nine months ended September 30, 2024 of $9.4 million (on a pre-tax income of $18.1 million resulting in an effective tax rate of 52.1%), compared to income tax expense of $5.0 million (on pre-tax income of $0.7 million resulting in an effective tax rate of 687.3%) for the nine months ended September 30, 2023.

The difference in the effective tax rate of 52.1% in the nine months ended September 30, 2024, compared to 687.3% in the nine months ended September 30, 2023, is primarily due to the small pre-tax income in 2023 as compared to 2024 as well as an increase in the tax benefit of the disregarded entity structure and a reduction in tax expense for uncertain tax positions, partially offset by an increase in current losses subject to valuation allowance, a reduction in tax benefits for share based compensation, and a reduction in tax benefits recognized with respect to lease impairments.

### Noncontrolling and Redeemable Noncontrolling Interests

The effect of noncontrolling and redeemable noncontrolling interests for the nine months ended September 30, 2024 was income of $10.2 million, compared to a loss of $3.6 million for the nine months ended September 30, 2023. The amounts are driven by the mix of income and loss derived from entities not entirely owned by the Company.

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

As a result of the foregoing, net loss attributable to Stagwell Inc. common shareholders for the nine months ended September 30, 2024 was $1.0 million, compared to net loss of $1.2 million for the nine months ended September 30, 2023.

### Earnings (Loss) Per Share

Diluted EPS and Adjusted Diluted EPS for the nine months ended September 30, 2024 were as follows:

*(amounts in thousands, except per share amounts)*

|  | GAAP | Adjustments(1) | Non-GAAP |
| --- | ---: | ---: | ---: |
| Net income (loss) attributable to Stagwell Inc. common shareholders | $(976) | $58,177 | $57,201 |
| Net income attributable to Class C shareholders | — | 83,442 | 83,442 |
| Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income | $(976) | $141,619 | $140,643 |
| Weighted average number of common shares outstanding | 111,436 | 5,780 | 117,216 |
| Weighted average number of common Class C shares outstanding | — | 151,649 | 151,649 |
| Weighted average number of shares outstanding | 111,436 | 157,429 | 268,865 |
| Diluted EPS and Adjusted Diluted EPS | $(0.01) |  | $0.52 |
| **Adjustments to Net Income (loss) (1)** |  |  |  |
| Amortization |  | $91,870 |  |
| Impairment and other losses |  | 1,715 |  |
| Stock-based compensation |  | 38,926 |  |
| Deferred acquisition consideration |  | 7,950 |  |
| Other items, net |  | 36,576 |  |
|  |  | 177,037 |  |
| Adjusted tax expense |  | (41,268) |  |
|  |  | 135,769 |  |
| Net loss attributable to Class C shareholders |  | 5,850 |  |
|  |  | $141,619 |  |
| **Allocation of adjustments to net income (loss) 1** |  |  |  |
| Net income attributable to Stagwell Inc. common shareholders - add-backs |  | $58,177 |  |
| Net income attributable to Class C shareholders - add-backs |  | 77,592 |  |
| Net income attributable to Class C shareholders |  | 5,850 |  |
|  |  | 83,442 |  |
|  |  | $141,619 |  |

(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 nine months ended September 30, 2023 were as follows:

*(amounts in thousands, except per share amounts)*

|  | GAAP | Adjustments(1) | Non-GAAP |
| --- | ---: | ---: | ---: |
| Net income (loss) attributable to Stagwell Inc. common shareholders | $(1,152) | $57,927 | $56,775 |
| Net income attributable to Class C shareholders | (2,702) | 73,725 | 71,023 |
| Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income | $(3,854) | $131,652 | $127,798 |
| Weighted average number of common shares outstanding | 118,772 | 10,736 | 129,508 |
| Weighted average number of common Class C shares outstanding | 156,092 | — | 156,092 |
| Weighted average number of shares outstanding | 274,864 | 10,736 | 285,600 |
| Diluted EPS and Adjusted Diluted EPS | $(0.01) |  | $0.45 |
| **Adjustments to Net income (loss) (1)** |  |  |  |
| Amortization |  | $86,605 |  |
| Impairment and other losses |  | 10,562 |  |
| Stock-based compensation |  | 34,615 |  |
| Deferred acquisition consideration |  | 10,881 |  |
| Other items, net |  | 30,069 |  |
|  |  | 172,732 |  |
| Adjusted tax expense |  | (41,080) |  |
|  |  | $131,652 |  |

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

### Adjusted EBITDA

Adjusted EBITDA for the nine months ended September 30, 2024 was $287.6 million, compared to $265.2 million for the nine months ended September 30, 2023, representing an increase of $22.4 million, primarily driven by an increase in Operating Income, as discussed above.

### Integrated Agencies Network

The components of operating results for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $1,127,520 | $1,064,909 | $62,611 | 5.9% |
| Operating Expenses |  |  |  |  |
| Cost of services | 754,510 | 688,878 | 65,632 | 9.5% |
| Office and general expenses | 211,065 | 202,339 | 8,726 | 4.3% |
| Depreciation and amortization | 58,731 | 62,277 | (3,546) | (5.7)% |
| Impairment and other losses | 1,500 | 10,562 | (9,062) | (85.8)% |
|  | $1,025,806 | $964,056 | $61,750 | 6.4% |
| Operating Income | $101,714 | $100,853 | $861 | 0.9% |

55

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net Revenue | $938,386 | $930,660 | $7,726 | 0.8% |
| Billable costs | 189,134 | 134,249 | 54,885 | 40.9% |
| **Revenue** | 1,127,520 | 1,064,909 | 62,611 | 5.9% |
| Billable costs | 189,134 | 134,249 | 54,885 | 40.9% |
| Staff costs | 579,979 | 572,893 | 7,086 | 1.2% |
| Administrative costs | 96,097 | 93,000 | 3,097 | 3.3% |
| Unbillable and other costs, net | 56,301 | 53,665 | 2,636 | 4.9% |
| **Adjusted EBITDA** | 206,009 | 211,102 | (5,093) | (2.4)% |
| Stock-based compensation | 25,170 | 15,470 | 9,700 | 62.7% |
| Depreciation and amortization | 58,731 | 62,277 | (3,546) | (5.7)% |
| Deferred acquisition consideration | 5,690 | 8,118 | (2,428) | (29.9)% |
| Impairment and other losses | 1,500 | 10,562 | (9,062) | (85.8)% |
| Other items, net | 13,204 | 13,822 | (618) | (4.5)% |
| **Operating Income** | $101,714 | $100,853 | $861 | 0.9% |

### Revenue

Revenue for the nine months ended September 30, 2024 was $1,127.5 million, compared to $1,064.9 million for the nine months ended September 30, 2023, an increase of $62.6 million.

The components of the fluctuations in net revenue for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2023 | Net Revenue - Components of Change Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Nine Months Ended September 30, 2024 | Change Organic | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Integrated Agencies Network | $930,660 | $200 | $2,408 | $5,118 | $7,726 | $938,386 | 0.5% | 0.8% |
| Component % change |  | —% | 0.3% | 0.5% | 0.8% |  |  |  |

The increase in organic net revenue was primarily attributable to new client wins and higher spend in the technology and retail sectors, partially offset by budget cuts and client losses in the food and beverage, business services, and financial services sectors. The increase in net acquisitions (divestitures) was primarily driven by the acquisitions of Epiphany, Movers and Shakers, Left Field Labs, PROS and Huskies, Ltd. (“Huskies”), partially offset by the sale of Concentric in the fourth quarter of 2023.

### Operating Income

Operating Income for the nine months ended September 30, 2024 was $101.7 million, compared to $100.9 million for the nine months ended September 30, 2023, representing an increase of $0.9 million. The increase in Operating Income was primarily attributable to an increase in Revenue and a decrease in Impairment and other losses and Depreciation and amortization, partially offset by an increase in Cost of services and Office and general expenses.

The increase in Cost of sales was primarily attributable to higher billable costs, commensurate with the increase in revenue as well as the inclusion of costs from acquired entities, and higher stock-based compensation.

The increase in Office and general expenses was primarily attributable to the inclusion of costs from acquired entities, partially offset by a decrease in deferred acquisition consideration.

Stock-based compensation increased $9.7 million, primarily due to an increase in the fair value and number of awards.

Deferred acquisition consideration decreased $2.4 million, primarily attributable to the earn out period of certain brands ending in the second quarter of 2024, partially offset by acquisitions occurring in the third and fourth quarter of 2023 and first quarter of 2024.

Impairment and other losses for the nine months ended September 30, 2024 was $1.5 million. This was attributable to a charge to reduce the carrying value of a right-of-use lease asset and related leasehold improvements. Impairment and other losses for the nine months ended September 30, 2023 was $10.6 million, primarily related to right-of-use lease assets totaling $6.1 million and the associated leasehold improvements totaling $3.1 million.

Depreciation and amortization decreased $3.5 million, primarily attributable to the acceleration of amortization of a tradename in the third quarter of 2023. As a result, amortization expense of $3.1 million was recorded in the three months ended September 30, 2023, representing the remaining amortization expense associated with this tradename.

Adjusted EBITDA decreased $5.1 million, primarily driven by an increase in Revenue, more than offset by an increase in billable costs, as discussed above.

### Brand Performance Network

The components of operating results for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $563,556 | $542,734 | $20,822 | 3.8% |
| Operating Expenses |  |  |  |  |
| Cost of services | 355,144 | 336,607 | 18,537 | 5.5% |
| Office and general expenses | 159,003 | 151,910 | 7,093 | 4.7% |
| Depreciation and amortization | 26,524 | 25,160 | 1,364 | 5.4% |
|  | $540,671 | $513,677 | $26,994 | 5.3% |
| Operating Income | $22,885 | $29,057 | $(6,172) | (21.2)% |

57

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net Revenue | $476,590 | $459,291 | $17,299 | 3.8% |
| Billable costs | 86,966 | 83,443 | 3,523 | 4.2% |
| **Revenue** | 563,556 | 542,734 | 20,822 | 3.8% |
| Billable costs | 86,966 | 83,443 | 3,523 | 4.2% |
| Staff costs | 296,411 | 288,932 | 7,479 | 2.6% |
| Administrative costs | 69,196 | 64,163 | 5,033 | 7.8% |
| Unbillable and other costs, net | 46,677 | 38,534 | 8,143 | 21.1% |
| **Adjusted EBITDA** | 64,306 | 67,662 | (3,356) | (5.0)% |
| Stock-based compensation | 4,988 | 3,840 | 1,148 | 29.9% |
| Depreciation and amortization | 26,524 | 25,160 | 1,364 | 5.4% |
| Deferred acquisition consideration | (6,454) | 1,112 | (7,566) | NM |
| Other items, net | 16,363 | 8,493 | 7,870 | 92.7% |
| **Operating Income** | $22,885 | $29,057 | $(6,172) | (21.2)% |

### Revenue

Revenue for the nine months ended September 30, 2024 was $563.6 million, compared to $542.7 million for the nine months ended September 30, 2023, an increase of $20.8 million.

The components of the fluctuations in net revenue for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2023 | Net Revenue - Components of Change Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Nine Months Ended September 30, 2024 | Change Organic | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Brand Performance Network | $459,291 | $2,145 | $2,252 | $12,902 | $17,299 | $476,590 | 2.8% | 3.8% |
| Component % change |  | 0.5% | 0.5% | 2.8% | 3.8% |  |  |  |

The increase in organic net revenue was primarily attributable to new clients and increased spending by existing clients in the consumer products and food and beverage sectors. The increase in net acquisitions (divestitures) was driven by the acquisition of Huskies.

### Operating Income

Operating Income for the nine months ended September 30, 2024 was $22.9 million, compared to $29.1 million for the nine months ended September 30, 2023 representing a decrease of $6.2 million, primarily attributable to an increase in Cost of services and Office and general expenses, partially offset by an increase in Revenue.

The increase in Cost of services was primarily attributable to higher unbillable costs, commensurate with the increase in revenue, and an increase in staff costs, primarily due to a reduction in bonus expense in 2023 related to cost savings initiatives.

The increase in Office and general expenses was primarily attributable to an increase in severance expenses and reduction in bonus expense in 2023 related to cost savings initiatives, partially offset by a decrease in deferred acquisition consideration.

Deferred acquisition consideration decreased $7.6 million, primarily attributable to a reduction in the fair value of the deferred acquisition consideration liability associated with certain Brands.

Adjusted EBITDA decreased $3.4 million, primarily driven by an increase in Revenue, more than offset by an increase in expenses, as discussed above.

### Communications Network

The components of operating results for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $335,296 | $230,261 | $105,035 | 45.6% |
| Operating Expenses |  |  |  |  |
| Cost of services | 211,964 | 149,873 | 62,091 | 41.4% |
| Office and general expenses | 61,589 | 51,551 | 10,038 | 19.5% |
| Depreciation and amortization | 9,007 | 8,216 | 791 | 9.6% |
|  | $282,560 | $209,640 | $72,920 | 34.8% |
| Operating Income | $52,736 | $20,621 | $32,115 | NM |

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net Revenue | $226,101 | $177,032 | $49,069 | 27.7% |
| Billable costs | 109,195 | 53,229 | 55,966 | NM |
| **Revenue** | 335,296 | 230,261 | 105,035 | 45.6% |
| Billable costs | 109,195 | 53,229 | 55,966 | NM |
| Staff costs | 123,039 | 115,846 | 7,193 | 6.2% |
| Administrative costs | 26,117 | 25,096 | 1,021 | 4.1% |
| Unbillable and other costs, net | 1,270 | 336 | 934 | NM |
| **Adjusted EBITDA** | 75,675 | 35,754 | 39,921 | NM |
| Stock-based compensation | 2,731 | 2,177 | 554 | 25.4% |
| Depreciation and amortization | 9,007 | 8,216 | 791 | 9.6% |
| Deferred acquisition consideration | 9,097 | 3,403 | 5,694 | NM |
| Other items, net | 2,104 | 1,337 | 767 | 57.4% |
| **Operating Income** | $52,736 | $20,621 | $32,115 | NM |

### Revenue

Revenue for the nine months ended September 30, 2024 was $335.3 million, compared to $230.3 million for the nine months ended September 30, 2023, an increase of $105.0 million.

The components of the fluctuations in net revenue for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2023 | Net Revenue - Components of Change Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Nine Months Ended September 30, 2024 | Change Organic | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Communications Network | $177,032 | $(70) | $6,421 | $42,718 | $49,069 | $226,101 | 24.1% | 27.7% |
| Component % change |  | —% | 3.6% | 24.1% | 27.7% |  |  |  |

The increase in organic net revenue was primarily attributable to new clients and increased spend in the retail and public affairs sectors as a result of the current political campaign year. The increase in net acquisitions (divestitures) was primarily driven by the acquisition of PROS.

### Operating Income

Operating Income for the nine months ended September 30, 2024 was $52.7 million, compared to $20.6 million for the nine months ended September 30, 2023, representing an increase of $32.1 million. The change in Operating Income was primarily attributable to an increase in Revenue, partially offset by an increase in Cost of services and Office and general expenses.

The increase in Cost of services was primarily attributable to an increase in billable costs, commensurate with higher revenue.

The increase in Office and general expenses was primarily attributable to an increase in deferred acquisition consideration.

Deferred acquisition consideration increased $5.7 million, primarily attributable to an increase in the fair value of certain obligations.

Adjusted EBITDA increased $39.9 million, primarily driven by an increase in Revenue, partially offset by an increase in billable costs, as discussed above.

### All Other

The components of operating results for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $26,136 | $34,378 | $(8,242) | (24.0)% |
| Operating Expenses |  |  |  |  |
| Cost of services | 18,838 | 25,796 | (6,958) | (27.0)% |
| Office and general expenses | 19,931 | 18,502 | 1,429 | 7.7% |
| Depreciation and amortization | 9,938 | 6,152 | 3,786 | 61.5% |
|  | $48,707 | $50,450 | $(1,743) | (3.5)% |
| Operating Loss | $(22,571) | $(16,072) | $(6,499) | 40.4% |

60

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net Revenue | $25,962 | $34,404 | $(8,442) | (24.5)% |
| Billable costs | 174 | (26) | 200 | NM |
| **Revenue (1)** | 26,136 | 34,378 | (8,242) | (24.0)% |
| Billable costs | 174 | (26) | 200 | NM |
| Staff costs | 24,635 | 31,124 | (6,489) | (20.8)% |
| Administrative costs (1) | 3,447 | 1,244 | 2,203 | NM |
| Unbillable and other costs, net | 9,465 | 12,202 | (2,737) | (22.4)% |
| **Adjusted EBITDA** | (11,585) | (10,166) | (1,419) | 14.0% |
| Stock-based compensation | 729 | 427 | 302 | 70.7% |
| Depreciation and amortization | 9,938 | 6,152 | 3,786 | 61.5% |
| Deferred acquisition consideration | (383) | (1,752) | 1,369 | (78.1)% |
| Other items, net | 702 | 1,079 | (377) | (34.9)% |
| **Operating Loss** | $(22,571) | $(16,072) | $(6,499) | 40.4% |

(1) All Other Revenue and Administrative costs include approximately $8 million and $6 million of eliminations of intercompany services for the nine months ended September 30, 2024 and 2023, respectively.

### Revenue

Revenue for the nine months ended September 30, 2024 was $26.1 million, compared to $34.4 million for the nine months ended September 30, 2023, a decrease of $8.2 million.

The components of the fluctuations in net revenue for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2023 | Net Revenue - Components of Change Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Nine Months Ended September 30, 2024 | Change Organic | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| All Other | $34,404 | $(822) | $(3,559) | $(4,061) | $(8,442) | $25,962 | (11.8)% | (24.5)% |
| Component % change |  | (2.4)% | (10.3)% | (11.8)% | (24.5)% |  |  |  |

The decrease in organic net revenue was primarily attributable to budget cuts and client losses from clients in the food and beverage, travel and transportation, consumer products, healthcare, and financial services sectors. The decrease in net acquisitions (divestitures) was driven by the derecognition of certain noncontrolling interest in the first quarter of 2024.

### Operating Loss

Operating Loss for the nine months ended September 30, 2024 was $22.6 million, compared to $16.1 million for the nine months ended September 30, 2023, representing an increase of $6.5 million. The increase in Operating Loss was primarily attributable to a decrease in Revenue and an increase in Office and general expenses and Depreciation and amortization, partially offset by a decrease in Cost of services.

The decrease in Cost of Services was primarily attributable to lower unbillable costs, commensurate with lower revenue and a lower staff costs primarily related to employees of a Brand that was derecognized in the first quarter of 2024.

The increase in Office and general expenses was primarily attributable to increase in deferred acquisition consideration.

Depreciation and amortization increased $3.8 million, primarily attributable to the acceleration of amortization of certain tradenames. As a result, amortization expense of $2.8 million was recorded in the nine months ended September 30, 2024, representing the remaining amortization expense associated with these tradenames.

Deferred acquisition consideration increased $1.4 million, primarily due to a decrease in the fair value of a certain Brand during 2023.

Adjusted EBITDA decreased $1.4 million, primarily driven by a decrease in Revenue, offset by a decrease in expenses, as discussed above.

### Corporate

The components of operating results for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 were as follows:

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Staff costs | $35,421 | $25,850 | $9,571 | 37.0% |
| Administrative costs | 11,396 | 13,343 | (1,947) | (14.6)% |
| **Adjusted EBITDA** | (46,817) | (39,193) | (7,624) | 19.5% |
| Stock-based compensation | 5,308 | 12,701 | (7,393) | (58.2)% |
| Depreciation and amortization | 8,681 | 5,990 | 2,691 | 44.9% |
| Impairment and other losses | 215 | — | 215 | 100.0% |
| Other items, net | 4,203 | 5,338 | (1,135) | (21.3)% |
| **Operating Loss** | $(65,224) | $(63,222) | $(2,002) | 3.2% |

Operating Loss for the nine months ended September 30, 2024 was $65.2 million, compared to $63.2 million for the nine months ended September 30, 2023, representing an increase of $2.0 million. The increase in Operating Loss was primarily attributable to an increase in Staff costs, partially offset by a decrease in Stock-based compensation.

Staff costs increased $9.6 million, primarily as a result of higher health insurance costs and a reduction in bonus expense in 2023 related to cost savings initiatives.

Stock-based compensation expense decreased $7.4 million, primarily due to the reversal of expense in the second quarter of 2024 associated with stock-based performance awards for which the performance targets were not probable of being met.

### Liquidity and Capital Resources:

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

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(69,230) | $(127,542) |
| Net cash used in investing activities | (66,485) | (44,848) |
| Net cash provided by financing activities | 159,131 | 51,688 |

The Company had cash and cash equivalents of $145.8 million and $119.7 million as of September 30, 2024 and December 31, 2023, respectively. The Company expects to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months and subsequent periods. The Company has historically maintained and expanded its business using cash generated from operating activities, funds available under the Credit Agreement, and other initiatives, such as obtaining additional debt and equity financing. The Credit Agreement provides revolving commitments of up to $640.0 million and permits restricted payments for share repurchases or redemptions from certain of its stockholders in an aggregate principal amount of up to $150.0 million. As of September 30, 2024, the Company had $375.0 million of borrowings outstanding and $15.5 million of issued and undrawn letters of credit resulting in $249.5 million unused amount under the Credit Agreement.

The Company transfers certain of its trade receivable assets to third parties under certain agreements. 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 $224.8 million and $173.1 million for the nine months ended September 30, 2024 and 2023, respectively. The amount collected and due to the third parties under these arrangements was $14.5 million as of September 30, 2024 and $1.8 million as of December 31, 2023. Fees for these arrangements were recorded in Office and general expenses in the Unaudited Consolidated Statements of Operations and totaled $1.0 million and $3.0 million for the three and nine months ended September 30, 2024, respectively, and $1.0 million and $2.8 million for the three and nine months ended September 30, 2023, respectively.

The Company may purchase shares of outstanding Class A Common Stock under its Repurchase Program. See Note 1 for information regarding the Board’s authorization to extend and increase the size of share repurchases under the Repurchase Program.

During the nine months ended September 30, 2024, 13.8 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an average price of $6.29 per share, for an aggregate value, excluding fees, of $86.7 million. The repurchased shares included 4 million shares of Class A Common Stock repurchased from certain affiliates of The Goldman Sachs Group, Inc. at a price of $6.34 per share, for an aggregate purchase price of $25.4 million.

The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $51.8 million as of September 30, 2024.

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 (as defined in Note 8 of the Notes included herein) and Credit Agreement. The Company expects to make estimated cash payments in the future to satisfy obligations under our Tax Receivables Agreement with Stagwell Media LP and OpCo (“TRA”) (see Note 14 of the Notes included herein for additional details). The amount and timing of payments are contingent on the Company achieving certain tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize as a result of (i) increases in the tax basis of OpCo’s assets resulting from exchanges of Paired Units (each as defined in Note 11 of the Notes included herein) for shares of 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 Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the next twelve months and subsequent periods. The Company’s ability to make payments 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.

### Cash Flows

#### Operating Activities

Cash flows used in operating activities for the nine months ended September 30, 2024 were $69.2 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 nine months ended September 30, 2023 were $127.5 million, primarily driven by unfavorable working capital requirements, including the timing of media supplier payments, partially offset by earnings.

#### Investing Activities

Cash flows used in investing activities were $66.5 million for the nine months ended September 30, 2024, primarily driven by $19.3 million in capitalized software spend, $16.7 million in capital expenditures, and $23.8 million for acquisitions, net of cash acquired.

Cash flows used in investing activities were $44.8 million for the nine months ended September 30, 2023, primarily driven by $19.0 million in capitalized software spend, $12.2 million in capital expenditures, and $6.7 million in acquisitions, net of cash acquired.

#### Financing Activities

During the nine months ended September 30, 2024, cash flows provided by financing activities were $159.1 million, primarily driven by $316.0 million in net borrowings under the Credit Agreement, partially offset by shares repurchased and cancelled of $101.2 million, payments of deferred consideration of $28.7 million, and distributions to noncontrolling interests of $23.6 million.

During the nine months ended September 30, 2023, cash flows provided by financing activities were $51.7 million, primarily driven by $312.0 million in net borrowings under the Credit Agreement, shares repurchased and cancelled of $204.0 million, payments of deferred consideration of $31.7 million, and distributions to noncontrolling interests of $24.5 million.

### Total Debt

Debt, net of debt issuance costs, as of September 30, 2024, was $1,463.9 million, compared to $1,145.8 million outstanding as of December 31, 2023. See Note 8 to the Unaudited Consolidated Financial Statements included herein for information regarding the Company’s 5.625% Notes, and the Credit Agreement, which provides for a $640.0 million senior secured revolving credit facility maturing on August 3, 2026.

The Company is currently in compliance with all of the terms and conditions of the 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.

Pursuant to the Credit Agreement, the Company must maintain a Total Leverage Ratio (as defined in the Credit Agreement) below an established threshold. For the period ended September 30, 2024, the Company’s calculation of this ratio, and the maximum permitted under the Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:

|  | September 30, 2024 |
| --- | ---: |
| Total Leverage Ratio | 3.54 |
| Maximum per covenant | 4.25 |

These ratios and measures are not based on GAAP and are not presented as alternative measures of operating performance or liquidity. Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one-time charges, and other items, as defined in the Credit Agreement. They are presented here to demonstrate compliance with the covenants in the Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.

### Material Cash Requirements

The Company’s 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 Brands purchase media for clients and act as an agent for a disclosed principal. These commitments are included in Accounts payable and 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 6 of the Notes included herein for additional information regarding contingent deferred acquisition consideration.

When acquiring less than 100% ownership of an entity, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity. See Note 9 of the Notes included herein for additional information regarding noncontrolling interests and redeemable noncontrolling interests.

Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”). The awards generally provide the employee the right, but not the obligation, to sell its interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution.

The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the 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 Estimates

See Note 2 of the Company’s 2023 Form 10-K for information regarding the Company’s critical accounting estimates.

### Website Access to Company Reports and Information

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 X (formerly Twitter) (@stagwell), Instagram (@stagwellglobal) 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.

## Market risk

As filed, 2,931 characters.

In the normal course of business, the Company is exposed to market risk related to interest rates, foreign currencies and impairment risk.

*Debt Instruments:* As of September 30, 2024, the Company’s debt obligations consisted of amounts outstanding under its Credit Agreement and the 5.625% Notes. The Credit Agreement bears interest at variable rates based upon 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.

With regard to our variable rate debt, a 10% increase or decrease in interest rates would change our annual interest expense by $2.8 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 included in the 2023 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). From time to time, the Company may 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:* For the nine months ended September 30, 2024, the Company recorded an impairment charge of $1.7 million to reduce the carrying value of its right-of-use lease assets and related leasehold improvements. See Note 7 of the Notes included herein for additional information.

See the Significant Accounting Policies section in the “Notes to Audited Consolidated Financial Statements” of the Company’s 2023 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” of the Company’s 2023 Form 10-K for information related to the risk of potential impairment charges in future periods.

## Controls and procedures

As filed, 3,727 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in 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.

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 Rule 13a-15(b) and 15d- 15(b) 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, 2023, our CEO and CFO concluded that, as of September 30, 2024, our disclosure controls and procedures were not effective.

### Material Weakness Remediation Plan and Status

The Company, under the leadership of our CEO and CFO, has continued progressing with our previously disclosed plan to remediate the material weaknesses in our internal control over financial reporting.

- We enhanced communications between management and the Audit Committee of the Board of Directors (the “Audit Committee”) for increased oversight by formally reporting specific progress against the remediation plan to the Audit Committee each quarter.
- In the prior year, we designed and implemented controls over our risk assessment process that included detailed qualitative and quantitative factors to identify and assess risks and implement or modify controls in response to those risks. In the current year, we further enhanced our risk assessment processes to identify potential risks in ongoing control performance at both the agency and consolidated Company level.
- We improved existing controls across business processes covering significant accounts, including controls over the review of journal entries and account reconciliations, resolved segregation of duties conflicts, and increased and realigned personnel with appropriate levels of accounting knowledge, experience, and training in finance and accounting functions.
- During the third quarter of 2024, we completed staffing our new compliance function, whose objective is to provide continuous monitoring and improvement of internal controls at our agencies.

Management is in the process of testing the operating effectiveness of our internal control over financial reporting. We will consider our previously identified material weaknesses to be fully remediated once the applicable controls operate for a sufficient period of time and our management has concluded, through such testing, that these controls are operating effectively.

In addition, as we continue to monitor the effectiveness of our internal control over financial reporting, we may perform additional internal control changes as necessary.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 557 characters.

There have been no material changes to the risk factors in Part I, Item 1A “Risk Factors” of our 2023 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 to 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.

Filed Nov 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000876883-24-000030. Last ingested by Listed: Nov 4, 2026, 20:05 ET. No prices; not investment advice.