Stagwell Inc: Form 10-Q for the period ended Mar 31, 2025

The 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 Quarterly Report on Form 10-Q for the period ended March 31, 2025 (the “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 2025 means the period beginning January 1, 2025, and ending December 31, 2025).

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. We believe 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, net income (loss), net income (loss) attributable to Stagwell Inc. common shareholders, net income (loss) per share 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.

Recent Developments

On May 1, 2025, the Company acquired JetFuel Studio LLC and Powered by JetFuel LLC, an experiential marketing company, for $21.6 million, of which $10.3 million was paid in cash and $11.3 million was paid in 2,017,857 shares of the Company’s Class A Common Stock, par value $0.001 per share (“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 $59.5 million, 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, 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.

On April 23, 2025, the Company entered into the Second Amended and Restated Credit Agreement (as defined in Note 8 of the Notes included herein). Among other things, the Second Amended and Restated Credit Agreement (i) provides additional revolving commitments in an aggregate principal amount of $110 million for a total of $750 million; (ii) extends the maturity date to April 23, 2030; and (iii) amends the applicable margin used to calculate the interest rate or borrowings thereunder.

On April 2, 2025, the Company acquired Create Group Holding Limited, a strategic digital communications group in Middle East, for $15.5 million, of which $11.5 million was paid in cash and $4.0 million was paid in 653,663 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 approximately $24.0 million, 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, 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.

On April 2, 2025, the Company announced that it had received a Notice of Exercise of Exchange Right from Stagwell Media LP (“Stagwell Media”) pursuant to which Stagwell Media exercised in full its right to exchange all of its 151,648,741

Class C Common Stock, par value $0.00001 per share (“Class C Common Stock”) for an equal number of newly issued shares of Class A Common Stock. The Company completed such exchange (the “Class C Exchange”) on April 2, 2025.

Following the Class C Exchange, the Company no longer has any shares of Class C Common Stock outstanding and Stagwell Media’s noncontrolling interest balance (approximately $424 million as of March 31, 2025) has been reclassified to the respective Stagwell Inc. Shareholders’ Equity accounts. In addition, in connection with the Class C Exchange, the Company will realize an increase in the tax basis of Stagwell Global LLC (“OpCo”)’s assets through a deferred tax asset and, under its Tax Receivables Agreement (“TRA”), an increase to the amounts due Stagwell Media equal to 85% of certain tax savings. The Company is evaluating the likelihood that it will realize the benefit represented by the deferred tax asset and, to the extent that the Company estimates that it is more likely than not that it will not realize the benefit, it will reduce the carrying amount of the deferred tax asset with a valuation allowance and a corresponding reduction to the TRA liability. The Company is currently evaluating the value of the deferred tax asset and TRA liability and will reflect such amounts in its financial statements within its Quarterly Report on Form 10-Q for the period ended June 30, 2025.

On January 1, 2025, the Company entered into a stock purchase agreement to acquire ADK Group, an integrated marketing solutions company. The purchase price is dependent on the closing balance sheet but is estimated to be approximately $24 million. The acquisition is expected to close in the second quarter of 2025.

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. We believe 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 of 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,” “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.

“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 primarily includes restructuring, certain system implementation and acquisition-related expenses. 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 (as defined above), 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 outstanding shares of Class C Common Stock. 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. All segments follow the same basis of presentation and accounting policies as those described throughout the Notes included herein.

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

The Company has three reportable segments as follows: “Integrated Agencies Network,” “Brand Performance Network” and the “Communications Network.” The composition of these segments are as follows:

• The Integrated Agencies Network includes five operating segments: the Anomaly Alliance, Constellation, the Doner Partner Network, Code and Theory Network, and National Research Group. The operating segments offer an array of complementary services spanning our core capabilities of Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, Stagwell Marketing Cloud Group and Creativity & Communications. The Brands included in the operating segments that comprise the Integrated Agencies Network reportable segment includes: Anomaly Alliance (Anomaly, What’s Next Partners), Constellation (72andSunny, Crispin LLC, Colle McVoy, Hunter, Redscout, Team Enterprises, Harris Insights, Movers and Shakers, and Team Epiphany), the Doner Partner Network (Doner, KWT Global, Harris X, Veritas, Doner North, and Yamamoto), Code and Theory Network (Code and Theory, Instrument, Left Field Labs), and National Research Group.

These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these operating segments may occasionally compete with each other for new business or have business move between them.

• The **Brand Performance Network (“**BPN”) comprises a single operating segment. BPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities. Our Brands in this segment aim to provide scaled creative performance through developing and executing sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data. BPN’s Brands provide media solutions such as audience analysis, media planning, and buying across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast, among others) and includes multichannel Brands Assembly, CPB International, Stagwell Production, Vitro, Forsman & Bodenfors, Goodstuff, Bruce Mau, digital creative & transformation consultancy Gale, B2B specialist Multiview, CX specialists Kenna, and travel media experts Ink.
• The Communications Network reportable segment comprises a single operating segment, our specialist network that provides advocacy, strategic corporate communications, investor relations, public relations, online fundraising and other services to both corporations and political and advocacy organizations and includes Allison, SKDK, Targeted Victory, and Consulum.

The Company combines and discloses operating segments that do not meet the aggregation criteria and includes the elimination of certain intercompany services and revenue, within “All Other.” All Other consists of the Company’s “software as a service” (“SaaS”) and “data as a service” (“DaaS”) technology tools.

The Company reports corporate expenses as “Corporate.” Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office.

The following discussion focuses on the operating performance of the Company for the three months ended March 31, 2025, and 2024 and the financial condition of the Company as of March 31, 2025.

Results of Operations:

(dollars in thousands)

35

THREE MONTHS ENDED MARCH 31, 2025 COMPARED TO THREE MONTHS ENDED MARCH 31, 2024

Consolidated Results of Operations

The components of operating results for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, were as follows:

(dollars in thousands)

(dollars in thousands)

Revenue

Revenue for the three months ended March 31, 2025 was $651.7 million, compared to $670.1 million for the three months ended March 31, 2024, a decrease of $18.3 million.

Net revenue for the three months ended March 31, 2025 was $564.2 million, compared to $532.5 million for the three months ended March 31, 2024, an increase of $31.7 million or 6.0%, primarily driven by the acquisitions of What’s Next Partners (“WNP”), PROS Agency (“PROS”), Consulum (Cayman) Limited (“Consulum”), and UNICEPTA Holding GmbH (“Unicepta”).

The geographic mix in Net revenue for the three months ended March 31, 2025 and 2024 was as follows:

(dollars in thousands)

Operating Income

Operating Income for the three months ended March 31, 2025, was $18.3 million, compared to $25.9 million for the three months ended March 31, 2024, representing a decrease of $7.6 million. The decrease in Operating Income was primarily attributable to the increase in Net revenue of $31.7 million, partially offset by higher expenses as detailed below.

Cost of services decreased by $32.4 million. Excluding the decline in Billable costs of $50.1 million, Cost of services increased $17.6 million, primarily attributable to the inclusion of expenses of acquired entities.

Office and general expenses increased by $16.0 million, primarily attributable to the inclusion of expenses of acquired entities and higher deferred acquisition consideration.

Deferred acquisition consideration increased by $6.5 million, primarily attributable to an increase in the fair value of certain obligations.

Stock-based compensation decreased by $4.6 million, primarily due to a decrease in the fair value of awards, partially offset by an increase in the number of awards.

Depreciation and amortization increased by $7.2 million, primarily attributable to the Company’s acquisition of businesses.

Interest Expense, Net

Interest expense, net for the three months ended March 31, 2025 was $23.4 million, compared to $21.0 million for the three months ended March 31, 2024, an increase of $2.4 million, primarily attributable to higher levels of debt outstanding under the Credit Agreement (as defined and discussed in Note 8 of the Notes to the Unaudited Consolidated Financial Statements included herein), partially offset by a lower average interest rate.

Foreign Exchange, Net

The foreign exchange gain for the three months ended March 31, 2025, was $1.2 million, compared to a loss of $2.3 million for the three months ended March 31, 2024, primarily attributable to the movement in the British Pound and Euro.

Income Tax Expense

The Company had an income tax expense for the three months ended March 31, 2025 of $1.7 million (on a pre-tax loss of $3.6 million resulting in an effective tax rate of (47.8)%), primarily due to the tax benefit of the small pre-tax loss being more than offset by the current losses subject to valuation allowance and withholding taxes recorded in the period.

The Company had income tax expense for the three months ended March 31, 2024 of $2.6 million (on pre-tax income of $1.4 million resulting in an effective tax rate of 189.5%) primarily driven by nominal pre-tax profit, current losses subject to valuation allowance and a shortfall in deductions for share based compensation expense vested during the period.

Noncontrolling and Redeemable Noncontrolling Interests

The effect of noncontrolling and redeemable noncontrolling interests for the three months ended March 31, 2025 was loss of $2.4 million, compared to an income of $0.6 million for the three months ended March 31, 2024. 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 three months ended March 31, 2025, was $2.9 million, compared to a net loss of $1.3 million for the three months ended March 31, 2024.

Earnings Per Share

Diluted EPS and Adjusted Diluted EPS for the three months ended March 31, 2025, were as follows:

(amounts in thousands, except per share amounts)

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

Diluted EPS and Adjusted Diluted EPS for the three months ended March 31, 2024, were as follows:

(amounts in thousands, except per share amounts)

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

Adjusted EBITDA

Adjusted EBITDA for the three months ended March 31, 2025, was $80.6 million, compared to $90.3 million for the three months ended March 31, 2024, representing a decrease of $9.7 million, primarily driven by a decrease in Operating Income, as discussed above.

Integrated Agencies Network

The components of operating results for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 were as follows:

(dollars in thousands)

(dollars in thousands)

Revenue

Revenue for the three months ended March 31, 2025 was $377.4 million, compared to $352.7 million for the three months ended March 31, 2024, an increase of $24.6 million.

Net revenue for the three months ended March 31, 2025 was $325.8 million, compared to $292.8 million for the three months ended March 31, 2024, an increase of $33.0 million or 11.3%. The increase was primarily attributable to new client wins and higher spending in the technology and retail sectors.

Operating Income

Operating Income for the three months ended March 31, 2025, was $48.0 million, compared to $22.4 million for the three months ended March 31, 2024, representing an increase of $25.7 million. The increase in Operating Income was primarily attributable to an increase in Net revenue of $33.0 million, partially offset by higher Cost of services, excluding Billable costs. Cost of services decreased $2.2 million. Excluding the decline in Billable costs of $8.4 million, Cost of services increased $6.2 million, primarily attributable to higher staff costs.

Adjusted EBITDA increased by $17.1 million, primarily driven by higher Net revenue, partially offset by an increase in expenses, as discussed above.

Brand Performance Network

The components of operating results for the three months ended March 31, 2025, compared to the three months ended March 31, 2024 were as follows:

(dollars in thousands)

(dollars in thousands)

Revenue

Revenue for the three months ended March 31, 2025, was $162.2 million, compared to $214.0 million for the three months ended March 31, 2024, a decrease of $51.7 million.

Net revenue for the three months ended March 31, 2025, was $146.9 million, compared to $162.6 million for the three months ended March 31, 2024, a decrease of $15.7 million, or 9.7%. The decrease in Net revenue was primarily attributable to lower spending by an existing client in the business services sector and client losses and lower spending in the travel and financial services sectors.

Operating Income

Operating Income for the three months ended March 31, 2025, was $0.1 million, compared to $13.7 million for the three months ended March 31, 2024, representing a decrease of $13.6 million. The decrease in Operating Income was primarily attributable to a decline in Net revenue of $15.7 million, partially offset by a decline in Cost of services, excluding Billable costs. Cost of services decreased $37.1 million. Excluding the decline in Billable costs of $36.0 million, Cost of services decreased $1.1 million.

Adjusted EBITDA decreased by $16.0 million, primarily driven by a decrease in Operating Income, as discussed above.

Communications Network

The components of operating results for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, were as follows:

(dollars in thousands)

42

(dollars in thousands)

Revenue

Revenue for the three months ended March 31, 2025 was $87.6 million, compared to $93.7 million for the three months ended March 31, 2024, a decrease of $6.1 million.

Net revenue for the three months ended March 31, 2025, was $67.0 million, compared to $67.5 million for the three months ended March 31, 2024, a decrease of $0.5 million, or 0.7%. Net revenue decreased primarily due to lower advocacy services as compared to the political year in 2024, partially offset by Net revenue from the acquisitions of PROS and Consulum.

Operating Income

Operating Income for the three months ended March 31, 2025, was $4.5 million, compared to $16.3 million for the three months ended March 31, 2024, representing a decrease of $11.7 million. The change in Operating Income was primarily attributable to lower advocacy services and higher Office and general expenses, primarily due to an increase in Deferred acquisition consideration.

Deferred acquisition consideration increased by $2.3 million, primarily attributable to an increase in the fair value of a certain obligation.

Adjusted EBITDA decreased by $7.6 million, primarily due to lower advocacy services in a non-political year, partially offset by the impact of acquired entities.

All Other

The components of operating results for the three months ended March 31, 2025, compared to the three months ended March 31, 2024 were as follows:

(dollars in thousands)

(dollars in thousands)

(1) All Other Revenue and Administrative costs include approximately $5 million and $6 million of eliminations of intercompany services for the three months ended March 31, 2025, and 2024, respectively.

Revenue

Revenue for the three months ended March 31, 2025, was $24.5 million, compared to $9.6 million for the three months ended March 31, 2024, an increase of $14.9 million.

Net revenue for the three months ended March 31, 2025 was $24.5 million, compared to $9.6 million for the three months ended March 31, 2024, an increase of $14.9 million or 154.7%. The increase was primarily attributable to the acquisition of Unicepta.

Operating Loss

Operating Loss for the three months ended March 31, 2025, was $12.0 million, compared to $6.7 million for the three months ended March 31, 2024, representing an increase of $5.4 million. The increase in Operating Loss was primarily driven by an increase in Net revenue, more than offset by higher Cost of services and Office and general expenses, as detailed below.

Cost of services increased by $6.9 million primarily attributable to inclusion of costs from acquired entities.

The $11.5 million increase in Office and general expenses was primarily attributable to inclusion of costs from acquired entities as well as higher software license fees.

Adjusted EBITDA decreased by $2.3 million, primarily driven by an increase in Office and general expenses, as discussed above.

Corporate

The components of operating results for the three months ended March 31, 2025, compared to the three months ended March 31, 2024 were as follows:

(dollars in thousands)

Operating Loss

Operating Loss for the three months ended March 31, 2025, was $22.4 million, compared to $19.8 million for the three months ended March 31, 2024, representing an increase of $2.6 million, primarily attributable to higher Staff costs and Stock-based compensation.

Staff costs increased by $1.8 million, primarily as a result of an increase in headcount in connection with centralization initiatives.

Stock-based compensation expense increased by $1.5 million, primarily attributable to an increase in the number of awards partially offset by a decrease in the fair value of the awards.

Liquidity and Capital Resources:

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

(dollars in thousands)

45

The Company had cash and cash equivalents of $137.7 million and $131.3 million as of March 31, 2025, and December 31, 2024, 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, as of March 31, 2025, 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 March 31, 2025, the Company had $375.0 million of borrowings outstanding and $15.3 million of issued and undrawn letters of credit resulting in $249.7 million unused borrowing capacity under the Credit Agreement. On April 23, 2025 the Company entered into the Second Amended and Restated Credit Agreement which amended and restated the Credit Agreement to, among other things, increase the revolving commitment by $110.0 million to a total of $750.0 million. See Executive Summary to the Management’s Discussion and Analysis of Financial Condition and Results of Operations, for additional details.

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 $129.3 million and $69.8 million for the three months ended March 31, 2025 and 2024, respectively. The amount collected and due to the third parties under these arrangements was $10.4 million as of March 31, 2025 and $19.5 million as of December 31, 2024. Fees for these arrangements were recorded in Office and general expenses in the Unaudited Consolidated Statements of Operations and totaled $1.5 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively.

The Company may repurchase up to an aggregate of $375.0 million of shares of our outstanding Class A Common Stock under its stock repurchase program (the “Repurchase Program”). The Repurchase Program will expire on November 6, 2027.

Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices, including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Exchange Act, as amended, in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified, or discontinued at any time without prior notice. Our Board of Directors will review the Repurchase Program periodically and may authorize adjustments of its terms.

During the three months ended March 31, 2025, 0.9 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an average price of $6.07 per share, for an aggregate value, excluding fees, of $5.7 million.

The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $164.2 million as of March 31, 2025.

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 TRA (see Notes 14 and 1 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 three months ended March 31, 2025 were $60.0 million, and for the three months ended March 31, 2024 were $53.1 million. The use of cash from operating activities was to fund working capital requirements during the period.

Investing Activities

Cash flows used in investing activities were $20.4 million for the three months ended March 31, 2025, primarily driven by $12.0 million in capitalized software spend and $3.9 million in capital expenditures.

Cash flows used in investing activities were $26.1 million for the three months ended March 31, 2024, primarily driven by $8.8 million in capitalized software spend, $5.4 million in capital expenditures, and $11.7 million in acquisitions, net of cash acquired.

Financing Activities

During the three months ended March 31, 2025, cash flows provided by financing activities were $83.2 million, primarily driven by $111.0 million in net proceeds borrowed under the Credit Agreement, partially offset by shares repurchased of $11.1 million and payments of deferred consideration of $16.1 million.

During the three months ended March 31, 2024, cash flows provided by financing activities were $91.1 million, primarily driven by $123.0 million in net borrowings under the Credit Agreement, shares repurchased and cancelled of $29.7 million, payments of deferred consideration of $1.7 million, and distributions to noncontrolling interests of $0.6 million.

Total Debt

As of March 31, 2025, Debt, net of debt issuance costs, was $1,465.3 million, compared to $1,353.6 million outstanding as of December 31, 2024. See Note 8 of the Notes included herein for information regarding the Company’s 5.625% Notes, and the Credit Agreement. See Executive Summary to the Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional details.

As of March 31, 2025, the Company was 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 March 31, 2025, 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:

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 their 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 principle. 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 purchase price payments and retention payments tied to continued employment of specific personnel. 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 with the right, but not the obligation, to sell their profits interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are primarily settled in cash, with certain awards having stock-settlement provisions at the Company’s discretion. The corresponding liability associated with these profits interests awards is included as a component of Accruals and other liabilities and Other liabilities on the Consolidated Balance Sheets.

The Company enters into certain long-term non-cancellable contracts for services such as revenue or profit share arrangements, cloud-based services, or software licensing. See Note 10 of the Notes included herein for additional information regarding these material commitments.

Critical Accounting Estimates

See Note 2 of the Company’s 2024 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 (http://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.

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 March 31, 2025, 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 $2.5 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 2024 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: The Company did not record any impairment charge for the three months ended March 31, 2025.

See the Significant Accounting Policies section in the “Notes to Audited Consolidated Financial Statements” of the 2024 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 2024 Form 10-K for information related to the risk of potential impairment charges in future periods.

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the 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 disclosure.

We conducted an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rules 13a-15(b) and 15d-15(b) of the Exchange Act. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025.

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors in Part I, Item 1A “Risk Factors” of our 2024 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.