STGW 8-K
Stagwell Inc (STGW)
8-K
2023-08-08
For: 2023-08-08
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Added on
April 10, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) — August 8, 2023
(Exact Name of Registrant as Specified in its Charter)
| (Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices and zip code)
(646 ) 429-1800
(Registrant’s Telephone Number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On August 8, 2023, Stagwell Inc. (the “Company”) issued an earnings release reporting its financial results for the three and six months ended June 30, 2023. A copy of this earnings release is attached as Exhibit 99.1 hereto. Following the issuance of this earnings release, the Company will host an earnings call in which its financial results for the three and six months ended June 30, 2023 will be discussed. The investor presentation to be used for the call is attached as Exhibit 99.2 hereto.
The Company has posted the materials attached as Exhibit 99.1, and 99.2 on its website (www.stagwellglobal.com). The information found on, or otherwise accessible through, the Company’s website is not incorporated into, and does not form a part of, this Current Report on Form 8-K.
The foregoing information (including the exhibits hereto) is being furnished under “Item 2.02 - Results of Operations and Financial Condition”. Such information (including the exhibits hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
The foregoing information and the exhibits hereto contain forward-looking statements within the meaning of the federal securities laws. These statements are based on present expectations, and are subject to the limitations listed therein and in the Company’s other SEC reports, including that actual events or results may differ materially from those in the forward-looking statements.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed by the undersigned hereunto duly authorized.
Date: August 8, 2023 | Stagwell Inc. | |||||||
| By: | /s/ Frank Lanuto | |||||||
| Frank Lanuto | ||||||||
| Chief Financial Officer | ||||||||
FOR IMMEDIATE ISSUE
STAGWELL INC. (NASDAQ: STGW) REPORTS RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023
Revenue of $632 million
Net revenue of $539 million
Q2 net new business of $75 million, bringing LTM net new business to record $256 million
International revenue grew 9% led by particularly strong growth in Asia-Pacific of 17%
Adjusts full-year outlook
New York, NY, August 8, 2023 (NASDAQ: STGW) – Stagwell Inc. (“Stagwell”) today announced financial results for the three and six months ended June 30, 2023.
SECOND QUARTER AND SIX MONTHS HIGHLIGHTS:
•Q2 revenue of $632 million, a decrease of 6% versus the prior year period; YTD revenue of $1,255 million, a decrease of 5% versus the prior year period
•Q2 net revenue of $539 million, a decrease of 3% versus the prior period; YTD net revenue of $1,061 million, a decrease of 2% versus the prior year period
•Q2 organic net revenue declined 5% versus the prior year period and 4.5% ex-Advocacy; YTD organic net revenue declined 4% versus the prior year period and 2.8% ex-Advocacy. This follows 16% organic net revenue growth in 2022
•Q2 net loss of $10 million versus net income of $25 million in the prior year period; YTD net loss of $15 million versus net income of $58 million in the prior year period
•Q2 net loss attributable to Stagwell Inc. common shareholders of $5 million versus net income of $10 million in the prior year period; YTD net loss attributable to Stagwell Inc. common shareholders of $4 million versus net income of $23 million in the prior year period
•Q2 Adjusted EBITDA of $91 million, a decrease of 18% versus the prior year period; YTD Adjusted EBITDA of $163 million, a decrease of 23% versus the prior year period
•Q2 Adjusted EBITDA Margin of 17% on net revenue; YTD Adjusted EBITDA Margin of 15% on net revenue
•Q2 loss per share attributable to Stagwell Inc. common shareholders of $0.04
•Q2 Adjusted earnings per share attributable to Stagwell Inc. common shareholders of $0.16; YTD Adjusted earnings per share of $0.29
•Q2 net new business of $75 million; YTD net new business of $128 million
“Stagwell posted sequential quarter-over-quarter improvements in revenue, EBITDA and margin, and our new business wins hit a quarter billion dollars in the last 12 months as they accelerated to record levels,” said Mark Penn, Chairman and CEO of Stagwell. “We remain bullish about H2 2023 and 2024 and we expect to see significant growth across all metrics throughout the rest of the year,” he added. “It is clear, however, that our
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industry is facing headwinds caused by economic uncertainty and especially tech client reorganizations, the effects of which we believe are temporary.”
“We are beginning to see a return to a more normal business environment, and the emergence of Generative AI is providing a runway for future work that we believe will explode in the next 12 to 18 months,” Penn said. “We are already in the market with Generative AI products, and our Stagwell Marketing Cloud Group revenue was nearly $50 million this quarter as we push the frontiers of technology in marketing AI and AR.”
Frank Lanuto, Chief Financial Officer, commented: “Management responded appropriately, adjusting costs to align with our revenue structure as we continue to strengthen our balance sheet, cash flow generation, and initiatives to centralize our shared service platform, all of which will result in stronger margins over the next couple of quarters. We believe we are coming off the bottom of an economic and political cycle.”
Financial Outlook
2023 financial guidance is as follows:
•Organic Net Revenue growth of 0% – 2%
•Adjusted EBITDA of $410 million – $440 million
•Free Cash Flow Conversion of 50% – 60%
•Adjusted EPS of $0.76 - $0.85
•Guidance assumes no impact from foreign exchange, acquisitions or dispositions.
| * The Company has excluded a quantitative reconciliation with respect to the Company’s 2023 guidance under the “unreasonable efforts” exception in Item 10(e)(1)(i)(B) of Regulation S-K. See "Non-GAAP Financial Measures" below for additional information. | |||||
Video Webcast
Management will host a video webcast on Tuesday, August 8, 2023, at 8:30 a.m. (ET) to discuss results for Stagwell Inc. for the three and six months ended June 30, 2023. The video webcast will be accessible at https://stgw.io/Q2Earnings. An investor presentation has been posted on our website at www.stagwellglobal.com and may be referred to during the webcast.
A recording of the webcast will be accessible one hour after the webcast and available for ninety days at www.stagwellglobal.com.
Stagwell Inc.
Stagwell is the challenger network built to transform marketing. We deliver scaled creative performance for the world's most ambitious brands, connecting culture-moving creativity with leading-edge technology to harmonize the art and science of marketing. Led by entrepreneurs, our 13,000+ specialists in 34+ countries are unified under a single purpose: to drive effectiveness and improve business results for their clients. Join us at www.stagwellglobal.com.
Contacts
For Investors:
Ben Allanson
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For Press:
Beth Sidhu
Non-GAAP Financial Measures
In addition to its reported results, Stagwell Inc. has included in this earnings release certain financial results that the Securities and Exchange Commission (SEC) defines as "non-GAAP Financial Measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. Such non-GAAP financial measures include the following:
(1) Organic Revenue: “Organic revenue growth” and “organic revenue decline” refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the partner firms that the Company has held throughout each of the comparable periods presented, and (b) “non-GAAP acquisitions (dispositions), net”. Non-GAAP acquisitions (dispositions), net consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or same period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year.
(2) Net New Business: Estimate of annualized revenue for new wins less annualized revenue for losses incurred in the period.
(3) Adjusted EBITDA: defined as Net income excluding non-operating income or expense to achieve operating income, plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items.
(4) Adjusted Diluted EPS is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income attributable to Class C shareholders, excluding amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, divided by (ii) (a) the per weighted average number of common shares outstanding plus (b) the weighted average number of Class C shares outstanding, (if dilutive). Other items includes restructuring costs, acquisition-related expenses, and non-recurring items, and subject to the anti-dilution rules.
(5) Free Cash Flow: defined as Adjusted EBITDA less capital expenditures, change in net working capital, cash taxes, interest, and distributions to minority interests, but excludes contingent M&A payments.
(6) Financial Guidance: The Company provides guidance on a non-GAAP basis as it cannot predict certain elements which are included in reported GAAP results.
Included in this earnings release are tables reconciling reported Stagwell Inc. results to arrive at certain of these non-GAAP financial measures.
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This document contains forward-looking statements. within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s representatives may also make forward-looking statements orally or in writing from time to time. Statements in this document that are not historical facts, including, statements about the Company’s beliefs and expectations, future financial performance and future prospects, business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Forward-looking statements, which are generally denoted by words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “create,” “estimate,” “expect,” “focus,” “forecast,” “foresee,” “future,” “guidance,” “intend,” “look,” “may,” “opportunity,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” or the negative of such terms or other variations thereof and terms of similar substance used in connection with any discussion of current plans, estimates and projections are subject to change based on a number of factors, including those outlined in this section.
Forward-looking statements in this document are based on certain key expectations and assumptions made by the Company. Although the management of the Company believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. The material assumptions upon which such forward-looking statements are based include, among others, assumptions with respect to general business, economic and market conditions, the competitive environment, anticipated and unanticipated tax consequences and anticipated and unanticipated costs. These forward-looking statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:
•risks associated with international, national and regional unfavorable economic conditions that could affect the Company or its clients;
•the continued impact of the coronavirus pandemic (“COVID-19”), and evolving strains of COVID-19 on the economy and demand for the Company’s services, which may precipitate or exacerbate other risks and uncertainties;
•inflation and actions taken by central banks to counter inflation;
•the Company’s ability to attract new clients and retain existing clients;
•the impact of a reduction in client spending and changes in client advertising, marketing and corporate communications requirements;
•financial failure of the Company’s clients;
•the Company’s ability to retain and attract key employees;
•the Company’s ability to compete in the markets in which it operates;
•the Company’s ability to achieve its cost saving initiatives;
•the Company’s implementation of strategic initiatives;
•the Company’s ability to remain in compliance with its debt agreements and the Company’s ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to redeemable noncontrolling interests and deferred acquisition consideration;
•the Company’s ability to manage its growth effectively, including the successful completion and integration of acquisitions that complement and expand the Company’s business capabilities;
•the Company’s ability to develop products incorporating new technologies, including augmented reality, artificial intelligence, and virtual reality, and realize benefits from such products;
•an inability to realize expected benefits of the combination of the Company’s business with the business of MDC Partners Inc. (the “Transactions”) and other completed, pending, or contemplated acquisitions;
•adverse tax consequences in connection with the Transactions for the Company, its operations and its shareholders, that may differ from the expectations of the Company, including that future changes in tax law, potential increases to corporate tax rates in the United States and disagreements with the tax authorities on the Company’s determination of value and computations of its attributes may result in increased tax costs;
•the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Transactions;
•the Company’s unremediated material weaknesses in internal control over financial reporting and its ability to establish and maintain an effective system of internal control over financial reporting;
•the Company’s ability to protect client data from security incidents or cyberattacks;
•economic disruptions resulting from war and other geopolitical tensions (such as the ongoing military conflict between Russia and Ukraine), terrorist activities and natural disasters;
•stock price volatility; and
•foreign currency fluctuations.
Investors should carefully consider these risk factors, other risk factors described herein, and the additional risk factors outlined in more detail in our 2022 Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 6,
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2023, and accessible on the SEC’s website at www.sec.gov, under the caption “Risk Factors,” and in the Company’s other SEC filings.
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SCHEDULE 1
STAGWELL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share amounts)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenue | $ | 632,265 | $ | 672,913 | $ | 1,254,709 | $ | 1,315,816 | |||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Cost of services | 402,431 | 424,661 | 816,329 | 836,631 | |||||||||||||||||||
| Office and general expenses | 162,522 | 165,423 | 321,358 | 309,935 | |||||||||||||||||||
| Depreciation and amortization | 35,488 | 32,231 | 68,965 | 63,435 | |||||||||||||||||||
| Impairment and other losses | 10,562 | 2,266 | 10,562 | 2,823 | |||||||||||||||||||
| 611,003 | 624,581 | 1,217,214 | 1,212,824 | ||||||||||||||||||||
| Operating Income | 21,262 | 48,332 | 37,495 | 102,992 | |||||||||||||||||||
| Other income (expenses): | |||||||||||||||||||||||
| Interest expense, net | (23,680) | (18,151) | (41,869) | (36,880) | |||||||||||||||||||
| Foreign exchange, net | (1,478) | 70 | (2,148) | (236) | |||||||||||||||||||
| Other, net | (416) | (121) | (196) | 35 | |||||||||||||||||||
| (25,574) | (18,202) | (44,213) | (37,081) | ||||||||||||||||||||
| Income (loss) before income taxes and equity in earnings of non-consolidated affiliates | (4,312) | 30,130 | (6,718) | 65,911 | |||||||||||||||||||
| Income tax expense | 5,717 | 5,421 | 8,101 | 8,610 | |||||||||||||||||||
| Income (loss) before equity in earnings of non-consolidated affiliates | (10,029) | 24,709 | (14,819) | 57,301 | |||||||||||||||||||
| Equity in income (loss) of non-consolidated affiliates | (216) | (190) | (443) | 840 | |||||||||||||||||||
| Net income (loss) | (10,245) | 24,519 | (15,262) | 58,141 | |||||||||||||||||||
| Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests | 5,552 | (14,056) | 11,012 | (35,003) | |||||||||||||||||||
| Net income (loss) attributable to Stagwell Inc. common shareholders | $ | (4,693) | $ | 10,463 | $ | (4,250) | $ | 23,138 | |||||||||||||||
| Earnings (Loss) Per Common Share: | |||||||||||||||||||||||
| Basic | $ | (0.04) | $ | 0.08 | $ | (0.04) | $ | 0.19 | |||||||||||||||
| Diluted | $ | (0.04) | $ | 0.08 | $ | (0.04) | $ | 0.18 | |||||||||||||||
| Weighted Average Number of Common Shares Outstanding: | |||||||||||||||||||||||
| Basic | 115,400 | 126,425 | 120,272 | 124,367 | |||||||||||||||||||
| Diluted | 115,400 | 296,414 | 120,272 | 298,843 | |||||||||||||||||||
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SCHEDULE 2
STAGWELL INC.
UNAUDITED COMPONENTS OF NET REVENUE CHANGE
(amounts in thousands)
| Net Revenue - Components of Change | Change | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2022 | Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Three Months Ended June 30, 2023 | Organic | Total | ||||||||||||||||||||||||||||||||||||||||
| Integrated Agencies Network | $ | 313,441 | $ | (1,687) | $ | 1,682 | $ | (10,281) | $ | (10,286) | $ | 303,155 | (3.3) | % | (3.3) | % | |||||||||||||||||||||||||||||||
| Brand Performance Network | 171,874 | (2,444) | 3,812 | (7,581) | (6,213) | 165,661 | (4.4) | % | (3.6) | % | |||||||||||||||||||||||||||||||||||||
| Communications Network | 68,322 | (94) | 849 | (7,433) | (6,678) | 61,644 | (10.9) | % | (9.8) | % | |||||||||||||||||||||||||||||||||||||
| All Other | 2,679 | — | 9,931 | (4,010) | 5,921 | 8,600 | (149.7) | % | 221.0 | % | |||||||||||||||||||||||||||||||||||||
| $ | 556,316 | $ | (4,225) | $ | 16,274 | $ | (29,305) | $ | (17,256) | $ | 539,060 | (5.3) | % | (3.1) | % | ||||||||||||||||||||||||||||||||
| Net Revenue - Components of Change | Change | ||||||||||||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2022 | Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Six Months Ended June 30, 2023 | Organic | Total | ||||||||||||||||||||||||||||||||||||||||
| Integrated Agencies Network | $ | 617,107 | $ | (4,481) | $ | 4,163 | $ | (20,730) | $ | (21,048) | $ | 596,059 | (3.4) | % | (3.4) | % | |||||||||||||||||||||||||||||||
| Brand Performance Network | 327,356 | (6,563) | 9,727 | (1,925) | 1,239 | 328,595 | (0.6) | % | 0.4 | % | |||||||||||||||||||||||||||||||||||||
| Communications Network | 132,701 | (374) | 1,918 | $ | (19,629) | (18,085) | 114,616 | (14.8) | % | (13.6) | % | ||||||||||||||||||||||||||||||||||||
| All Other | 5,789 | (157) | 18,969 | (3,149) | 15,663 | 21,452 | (54.4) | % | 270.6 | % | |||||||||||||||||||||||||||||||||||||
| $ | 1,082,953 | $ | (11,575) | $ | 34,777 | $ | (45,433) | $ | (22,231) | $ | 1,060,722 | (4.2) | % | (2.1) | % | ||||||||||||||||||||||||||||||||
(1) See Non-GAAP Financial Measures section above for the definition of Adjusted EBITDA, Other items, net and Pro Forma Adjusted EBITDA.
Note: The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.
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SCHEDULE 3
STAGWELL INC.
UNAUDITED PRO FORMA SEGMENT OPERATING RESULTS
(amounts in thousands)
For the Three Months Ended June 30, 2023
| Integrated Agencies Network | Brand Performance Network | Communications Network | All Other | Corporate | Total | ||||||||||||||||||||||||||||||
| Net Revenue | $ | 303,155 | $ | 165,661 | $ | 61,644 | $ | 8,600 | $ | — | $ | 539,060 | |||||||||||||||||||||||
| Billable costs | 51,186 | 22,367 | 19,652 | — | — | 93,205 | |||||||||||||||||||||||||||||
| Revenue | 354,341 | 188,028 | 81,296 | 8,600 | — | 632,265 | |||||||||||||||||||||||||||||
| Billable costs | 51,186 | 22,367 | 19,652 | — | — | 93,205 | |||||||||||||||||||||||||||||
| Staff costs | 183,285 | 105,868 | 38,357 | 10,246 | 8,437 | 346,193 | |||||||||||||||||||||||||||||
| Administrative costs | 28,285 | 24,928 | 8,714 | (3,800) | 8,065 | 66,192 | |||||||||||||||||||||||||||||
| Unbillable and other costs, net | 16,770 | 14,092 | 126 | 4,510 | 9 | 35,507 | |||||||||||||||||||||||||||||
Adjusted EBITDA (1) | 74,815 | 20,773 | 14,447 | (2,356) | (16,511) | 91,168 | |||||||||||||||||||||||||||||
| Stock-based compensation | 1,041 | 964 | 418 | 127 | 7,996 | 10,546 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 20,214 | 8,548 | 2,719 | 2,066 | 1,941 | 35,488 | |||||||||||||||||||||||||||||
| Deferred acquisition consideration | 1,109 | 161 | (893) | 15 | — | 392 | |||||||||||||||||||||||||||||
| Impairment and other losses | 9,175 | 1,387 | — | — | — | 10,562 | |||||||||||||||||||||||||||||
Other items, net (1) | 4,625 | 3,289 | 488 | 787 | 3,729 | 12,918 | |||||||||||||||||||||||||||||
| Operating income (loss) | $ | 38,651 | $ | 6,424 | $ | 11,715 | $ | (5,351) | $ | (30,177) | $ | 21,262 | |||||||||||||||||||||||
(1) See Non-GAAP Financial Measures section above for the definition of Adjusted EBITDA, Other items, net and Pro Forma Adjusted EBITDA.
Note: The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.
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SCHEDULE 4
STAGWELL INC.
UNAUDITED SEGMENT OPERATING RESULTS
(amounts in thousands)
For the Six Months Ended June 30, 2023
| Integrated Agencies Network | Brand Performance Network | Communications Network | All Other | Corporate | Total | ||||||||||||||||||||||||||||||
| Net Revenue | $ | 596,059 | $ | 328,595 | $ | 114,616 | $ | 21,452 | $ | — | $ | 1,060,722 | |||||||||||||||||||||||
| Billable costs | 88,074 | 72,773 | 33,140 | — | — | 193,987 | |||||||||||||||||||||||||||||
| Revenue | 684,133 | 401,368 | 147,756 | 21,452 | — | 1,254,709 | |||||||||||||||||||||||||||||
| Billable costs | 88,074 | 72,773 | 33,140 | — | — | 193,987 | |||||||||||||||||||||||||||||
| Staff costs | 370,978 | 210,464 | 78,434 | 20,733 | 15,261 | 695,870 | |||||||||||||||||||||||||||||
| Administrative costs | 57,451 | 48,010 | 17,470 | (605) | 12,042 | 134,368 | |||||||||||||||||||||||||||||
| Unbillable and other costs, net | 33,430 | 25,927 | 252 | 7,485 | — | 67,094 | |||||||||||||||||||||||||||||
Adjusted EBITDA (1) | 134,200 | 44,194 | 18,460 | (6,161) | (27,303) | 163,390 | |||||||||||||||||||||||||||||
| Stock-based compensation | 9,239 | 1,621 | 925 | 159 | 10,606 | 22,550 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 38,857 | 16,792 | 5,432 | 4,014 | 3,870 | 68,965 | |||||||||||||||||||||||||||||
| Deferred acquisition consideration | 7,100 | (1,018) | (354) | (1,248) | — | 4,480 | |||||||||||||||||||||||||||||
| Impairment and other losses | 9,175 | 1,387 | — | — | — | 10,562 | |||||||||||||||||||||||||||||
Other items, net (1) | 7,650 | 5,281 | 1,093 | 787 | 4,527 | 19,338 | |||||||||||||||||||||||||||||
| Operating income (loss) | $ | 62,179 | $ | 20,131 | $ | 11,364 | $ | (9,873) | $ | (46,306) | $ | 37,495 | |||||||||||||||||||||||
(1) See Non-GAAP Financial Measures section above for the definition of Adjusted EBITDA and Other items, net.
Note: The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.
Page 9
SCHEDULE 5
STAGWELL INC.
UNAUDITED PRO FORMA SEGMENT OPERATING RESULTS
(amounts in thousands)
For the Three Months Ended June 30, 2022
| Integrated Agencies Network | Brand Performance Network | Communications Network | All Other | Corporate | Total | ||||||||||||||||||||||||||||||
| Net Revenue | $ | 313,441 | $ | 171,874 | $ | 68,322 | $ | 2,679 | $ | — | $ | 556,316 | |||||||||||||||||||||||
| Billable costs | 63,735 | 22,422 | 30,440 | — | — | 116,597 | |||||||||||||||||||||||||||||
| Revenue | 377,176 | 194,296 | 98,762 | 2,679 | — | 672,913 | |||||||||||||||||||||||||||||
| Billable costs | 63,735 | 22,422 | 30,440 | — | — | 116,597 | |||||||||||||||||||||||||||||
| Staff costs | 194,688 | 102,284 | 43,269 | 2,664 | 6,563 | 349,468 | |||||||||||||||||||||||||||||
| Administrative costs | 31,250 | 24,002 | 7,734 | 493 | 2,870 | 66,349 | |||||||||||||||||||||||||||||
| Unbillable and other costs, net | 17,127 | 11,889 | 157 | 7 | — | 29,180 | |||||||||||||||||||||||||||||
Adjusted EBITDA (1) | 70,376 | 33,699 | 17,162 | (485) | (9,433) | 111,319 | |||||||||||||||||||||||||||||
| Stock-based compensation | 4,663 | 4,969 | 649 | — | 2,850 | 13,131 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 17,990 | 8,643 | 2,544 | 750 | 2,304 | 32,231 | |||||||||||||||||||||||||||||
| Deferred acquisition consideration | 6,181 | 3,773 | 3,518 | — | — | 13,472 | |||||||||||||||||||||||||||||
| Impairment and other losses | 784 | — | — | 1,482 | — | 2,266 | |||||||||||||||||||||||||||||
Other items, net (1) | 730 | 1,449 | 65 | 22 | (379) | 1,887 | |||||||||||||||||||||||||||||
| Operating income (loss) | $ | 40,028 | $ | 14,865 | $ | 10,386 | $ | (2,739) | $ | (14,208) | $ | 48,332 | |||||||||||||||||||||||
(1) See Non-GAAP Financial Measures section above for the definition of Adjusted EBITDA, Other items, net and Pro Forma Adjusted EBITDA.
Note: The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.
Page 10
SCHEDULE 6
STAGWELL INC.
UNAUDITED SEGMENT OPERATING RESULTS
(amounts in thousands)
For the Six Months Ended June 30, 2022
| Integrated Agencies Network | Brand Performance Network | Communications Network | All Other | Corporate | Total | ||||||||||||||||||||||||||||||
| Net Revenue | $ | 617,107 | $ | 327,356 | $ | 132,701 | $ | 5,789 | $ | — | $ | 1,082,953 | |||||||||||||||||||||||
| Billable costs | 108,820 | 64,727 | 59,316 | — | — | 232,863 | |||||||||||||||||||||||||||||
| Revenue | 725,927 | 392,083 | 192,017 | 5,789 | — | 1,315,816 | |||||||||||||||||||||||||||||
| Billable costs | 108,820 | 64,727 | 59,316 | — | — | 232,863 | |||||||||||||||||||||||||||||
| Staff costs | 386,784 | 198,308 | 84,095 | 5,200 | 15,719 | 690,106 | |||||||||||||||||||||||||||||
| Administrative costs | 56,859 | 41,042 | 14,802 | 1,188 | 8,752 | 122,643 | |||||||||||||||||||||||||||||
| Unbillable and other costs, net | 34,200 | 23,059 | 204 | 10 | — | 57,473 | |||||||||||||||||||||||||||||
Adjusted EBITDA (1) | 139,264 | 64,947 | 33,600 | (609) | (24,471) | 212,731 | |||||||||||||||||||||||||||||
| Stock-based compensation | 9,736 | 6,229 | 406 | 8 | 4,773 | 21,152 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 36,850 | 16,839 | 5,104 | 1,251 | 3,391 | 63,435 | |||||||||||||||||||||||||||||
| Deferred acquisition consideration | 4,856 | 5,905 | 4,608 | — | — | 15,369 | |||||||||||||||||||||||||||||
| Impairment and other losses | 784 | 557 | — | 1,482 | — | 2,823 | |||||||||||||||||||||||||||||
Other items, net (1) | 1,494 | 2,510 | 137 | 22 | 2,797 | 6,960 | |||||||||||||||||||||||||||||
| Operating income (loss) | $ | 85,544 | $ | 32,907 | $ | 23,345 | $ | (3,372) | $ | (35,432) | $ | 102,992 | |||||||||||||||||||||||
(1) See Non-GAAP Financial Measures section above for the definition of Adjusted EBITDA and Other items, net.
Note: The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.
Page 11
SCHEDULE 7
STAGWELL INC.
UNAUDITED RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP MEASURE)
(amounts in thousands, except per share amounts)
For the Three Months Ended June 30, 2023
| GAAP | Adjustments | Non-GAAP | ||||||||||||||||||
| Net income (loss) attributable to Stagwell Inc. common shareholders | $ | (4,693) | $ | 23,635 | $ | 18,942 | ||||||||||||||
| Net income attributable to Class C shareholders | — | 25,529 | 25,529 | |||||||||||||||||
| Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income | $ | (4,693) | $ | 49,164 | $ | 44,471 | ||||||||||||||
| Weighted average number of common shares outstanding | 115,400 | 9,135 | 124,535 | |||||||||||||||||
| Weighted average number of common Class C shares outstanding | — | 155,821 | 155,821 | |||||||||||||||||
| Weighted average number of shares outstanding | 115,400 | 164,956 | 280,356 | |||||||||||||||||
| EPS and Adjusted Diluted EPS | $ | (0.04) | $ | 0.16 | ||||||||||||||||
Adjustments to Net income (loss) (1) | ||||||||||||||||||||
| Pre-Tax | Tax | Net | ||||||||||||||||||
| Amortization | $ | 28,690 | $ | (7,401) | $ | 21,289 | ||||||||||||||
| Impairment and other losses | 10,562 | (1,237) | 9,325 | |||||||||||||||||
| Stock-based compensation | 10,546 | (2,786) | 7,760 | |||||||||||||||||
| Deferred acquisition consideration | 392 | (212) | 180 | |||||||||||||||||
| Other items, net | 12,918 | (3,165) | 9,753 | |||||||||||||||||
| Tax adjustments | — | 5,409 | 5,409 | |||||||||||||||||
| Total add-backs | $ | 63,108 | $ | (9,392) | $ | 53,716 | ||||||||||||||
| Net loss attributable to Class C shareholders | (4,552) | |||||||||||||||||||
| $ | 49,164 | |||||||||||||||||||
| Allocation of adjustments to Net income (loss) | ||||||||||||||||||||
| Net income attributable to Stagwell Inc. common shareholders | $ | 23,635 | ||||||||||||||||||
| Net income attributable to Class C shareholders | 30,081 | |||||||||||||||||||
| Net loss attributable to Class C shareholders | (4,552) | |||||||||||||||||||
| 25,529 | ||||||||||||||||||||
| $ | 49,164 | |||||||||||||||||||
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
Page 12
SCHEDULE 8
STAGWELL INC.
UNAUDITED RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP MEASURE)
(amounts in thousands, except per share amounts)
For the Six Months Ended June 30, 2023
| GAAP | Adjustments | Non-GAAP | ||||||||||||||||||
| Net income (loss) attributable to Stagwell Inc. common shareholders | $ | (4,250) | $ | 41,996 | $ | 37,746 | ||||||||||||||
| Net income attributable to Class C shareholders | — | 45,732 | 45,732 | |||||||||||||||||
| Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income | (4,250) | 87,728 | 83,478 | |||||||||||||||||
| Weighted average number of common shares outstanding | 120,272 | 9,356 | 129,628 | |||||||||||||||||
| Weighted average number of common Class C shares outstanding | — | 158,351 | 158,351 | |||||||||||||||||
| Weighted average number of shares outstanding | 120,272 | 167,707 | 287,979 | |||||||||||||||||
| EPS and Adjusted Diluted EPS | $ | (0.04) | $ | 0.29 | ||||||||||||||||
Adjustments to Net Income (loss)(1) | ||||||||||||||||||||
| Pre-Tax | Tax | Net | ||||||||||||||||||
| Amortization | $ | 55,422 | $ | (12,747) | $ | 42,675 | ||||||||||||||
| Impairment and other losses | 10,562 | (1,237) | 9,325 | |||||||||||||||||
| Stock-based compensation | 22,550 | (5,187) | 17,363 | |||||||||||||||||
| Deferred acquisition consideration | 4,480 | (1,030) | 3,450 | |||||||||||||||||
| Other items, net | 19,338 | (4,448) | 14,890 | |||||||||||||||||
| Tax adjustments | — | 7,742 | 7,742 | |||||||||||||||||
| Total add-backs | $ | 112,352 | $ | (16,907) | $ | 95,445 | ||||||||||||||
| Net loss attributable to Class C shareholders | (7,717) | |||||||||||||||||||
| $ | 87,728 | |||||||||||||||||||
| Allocation of adjustments to net income (loss) | ||||||||||||||||||||
| Net income attributable to Stagwell Inc. common shareholders | $ | 41,996 | ||||||||||||||||||
| Net income attributable to Class C shareholders | 53,449 | |||||||||||||||||||
| Net loss attributable to Class C shareholders | (7,717) | |||||||||||||||||||
| 45,732 | ||||||||||||||||||||
| $ | 87,728 | |||||||||||||||||||
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
Page 13
SCHEDULE 9
STAGWELL INC.
UNAUDITED RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP MEASURE)
(amounts in thousands, except per share amounts)
For the Three Months Ended June 30, 2022
| GAAP | Adjustments | Non-GAAP | ||||||||||||||||||
| Net income attributable to Stagwell Inc. common shareholders | $ | 10,463 | $ | 19,964 | $ | 30,427 | ||||||||||||||
| Net income attributable to Class C shareholders | 14,020 | 25,297 | 39,317 | |||||||||||||||||
| Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income | 24,483 | 45,261 | 69,744 | |||||||||||||||||
| Weighted average number of common shares outstanding | 131,603 | — | 131,603 | |||||||||||||||||
| Weighted average number of common Class C shares outstanding | 164,811 | — | 164,811 | |||||||||||||||||
| Weighted average number of shares outstanding | 296,414 | — | 296,414 | |||||||||||||||||
| Diluted EPS and Adjusted Diluted EPS | $ | 0.08 | $ | 0.24 | ||||||||||||||||
Adjustments to Net income (1) | ||||||||||||||||||||
| Pre-Tax | Tax | Net | ||||||||||||||||||
| Amortization | $ | 25,166 | $ | (5,033) | $ | 20,133 | ||||||||||||||
| Impairment and other losses | 2,266 | (453) | 1,813 | |||||||||||||||||
| Stock-based compensation | 13,131 | (2,626) | 10,505 | |||||||||||||||||
| Deferred acquisition consideration | 13,472 | (2,694) | 10,778 | |||||||||||||||||
| Other items, net | 1,887 | (407) | 1,480 | |||||||||||||||||
| Tax adjustments | — | 552 | 552 | |||||||||||||||||
| $ | 55,922 | $ | (10,661) | $ | 45,261 | |||||||||||||||
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
Page 14
SCHEDULE 10
STAGWELL INC.
UNAUDITED RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP MEASURE)
(amounts in thousands, except per share amounts)
For the Six Months Ended June 30, 2022
| GAAP | Adjustments | Non-GAAP | ||||||||||||||||||
| Net income attributable to Stagwell Inc. common shareholders | $ | 23,138 | $ | 35,828 | $ | 58,966 | ||||||||||||||
| Net income attributable to Class C shareholders | 31,741 | 45,397 | 77,138 | |||||||||||||||||
| Net income attributable to Stagwell Inc. and Class C and adjusted net income | 54,879 | 81,225 | 136,104 | |||||||||||||||||
| Weighted average number of common shares outstanding | 131,267 | — | 131,267 | |||||||||||||||||
| Weighted average number of common Class C shares outstanding | 167,576 | — | 167,576 | |||||||||||||||||
| Weighted average number of shares outstanding | 298,843 | — | 298,843 | |||||||||||||||||
| Diluted EPS and Adjusted Diluted EPS | $ | 0.18 | $ | 0.46 | ||||||||||||||||
Adjustments to Net income(1) | ||||||||||||||||||||
| Pre-Tax | Tax | Net | ||||||||||||||||||
| Amortization | $ | 50,070 | $ | (10,014) | $ | 40,056 | ||||||||||||||
| Impairment and other losses | 2,823 | (565) | 2,258 | |||||||||||||||||
| Stock-based compensation | 21,152 | (4,230) | 16,922 | |||||||||||||||||
| Deferred acquisition consideration | 15,369 | (3,074) | 12,295 | |||||||||||||||||
| Other items, net | 6,960 | (1,392) | 5,568 | |||||||||||||||||
| Tax adjustments | — | 4,126 | 4,126 | |||||||||||||||||
| $ | 96,374 | $ | (15,149) | $ | 81,225 | |||||||||||||||
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
Page 15
SCHEDULE 11
STAGWELL INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
| June 30, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 105,284 | $ | 220,589 | |||||||
| Accounts receivable, net | 646,310 | 645,846 | |||||||||
| Expenditures billable to clients | 106,871 | 93,077 | |||||||||
| Other current assets | 97,083 | 71,443 | |||||||||
| Total Current Assets | 955,548 | 1,030,955 | |||||||||
| Fixed assets, net | 86,929 | 98,878 | |||||||||
| Right-of-use assets - operating leases | 242,733 | 273,567 | |||||||||
| Goodwill | 1,578,832 | 1,566,956 | |||||||||
| Other intangible assets, net | 868,928 | 907,529 | |||||||||
| Other assets | 120,064 | 115,447 | |||||||||
| Total Assets | $ | 3,853,034 | $ | 3,993,332 | |||||||
| LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable | $ | 338,613 | $ | 357,253 | |||||||
| Accrued media | 162,219 | 240,506 | |||||||||
| Accruals and other liabilities | 205,751 | 248,477 | |||||||||
| Advance billings | 306,470 | 337,034 | |||||||||
| Current portion of lease liabilities - operating leases | 76,494 | 76,349 | |||||||||
| Current portion of deferred acquisition consideration | 96,781 | 90,183 | |||||||||
| Total Current Liabilities | 1,186,328 | 1,349,802 | |||||||||
| Long-term debt | 1,487,430 | 1,184,707 | |||||||||
| Long-term portion of deferred acquisition consideration | 17,688 | 71,140 | |||||||||
| Long-term lease liabilities - operating leases | 263,888 | 294,049 | |||||||||
| Deferred tax liabilities, net | 46,783 | 40,109 | |||||||||
| Other liabilities | 60,598 | 69,780 | |||||||||
| Total Liabilities | 3,062,715 | 3,009,587 | |||||||||
| Redeemable Noncontrolling Interests | 28,129 | 39,111 | |||||||||
| Commitments, Contingencies and Guarantees | |||||||||||
| Shareholders' Equity | |||||||||||
| Common shares - Class A & B | 116 | 132 | |||||||||
| Common shares - Class C | 2 | 2 | |||||||||
| Paid-in capital | 309,521 | 491,899 | |||||||||
| Retained earnings | 27,496 | 29,445 | |||||||||
| Accumulated other comprehensive loss | (13,244) | (38,941) | |||||||||
| Stagwell Inc. Shareholders' Equity | 323,891 | 482,537 | |||||||||
| Noncontrolling interests | 438,299 | 462,097 | |||||||||
| Total Shareholders' Equity | 762,190 | 944,634 | |||||||||
| Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity | $ | 3,853,034 | $ | 3,993,332 | |||||||
Page 16
SCHEDULE 12
STAGWELL INC.
UNAUDITED SUMMARY CASH FLOW DATA
(amounts in thousands)
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | (15,262) | $ | 58,141 | |||||||
Adjustments to reconcile net income to cash used in operating activities: | |||||||||||
| Stock-based compensation | 22,550 | 21,152 | |||||||||
| Depreciation and amortization | 68,965 | 63,435 | |||||||||
| Impairment and other losses | 10,562 | 2,823 | |||||||||
| Deferred income taxes | 3,884 | (1,325) | |||||||||
| Adjustment to deferred acquisition consideration | 4,480 | 15,390 | |||||||||
| Other, net | (3,328) | (4,418) | |||||||||
| Changes in working capital: | |||||||||||
| Accounts receivable | 4,255 | (78,342) | |||||||||
| Expenditures billable to clients | (13,180) | 20,386 | |||||||||
| Other assets | 4,117 | (8,555) | |||||||||
| Accounts payable | (25,972) | (33,228) | |||||||||
| Accrued expenses and other liabilities | (169,210) | (109,232) | |||||||||
| Advance billings | (32,795) | (46,391) | |||||||||
| Deferred acquisition related payments | (3,212) | (7,107) | |||||||||
Net cash used in operating activities | (144,146) | (107,271) | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | (7,953) | (12,539) | |||||||||
| Acquisitions, net of cash acquired | (4,965) | (38,326) | |||||||||
| Capitalized software | (10,356) | (1,928) | |||||||||
| Other | (6,844) | (2,144) | |||||||||
Net cash used in investing activities | (30,118) | (54,937) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Repayment of borrowings under revolving credit facility | (800,500) | (473,000) | |||||||||
| Proceeds from borrowings under revolving credit facility | 1,102,500 | 660,500 | |||||||||
| Shares repurchased and cancelled | (199,363) | (29,765) | |||||||||
| Distributions to noncontrolling interests | (15,408) | (36,498) | |||||||||
| Payment of deferred consideration | (28,558) | (52,431) | |||||||||
| Purchase of noncontrolling interest | — | (3,600) | |||||||||
| Debt issuance costs | (150) | — | |||||||||
Net cash provided by financing activities | 58,521 | 65,206 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 438 | 6,395 | |||||||||
| Net decrease in cash and cash equivalents | (115,305) | (90,607) | |||||||||
| Cash and cash equivalents at beginning of period | 220,589 | 184,009 | |||||||||
| Cash and cash equivalents at end of period | $ | 105,284 | $ | 93,402 | |||||||
Page 17
Second Quarter 2023 EARNINGS PRESENTATION AUGUST 8 | 2023
This document contains forward-looking statements. within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s representatives may also make forward-looking statements orally or in writing from time to time. Statements in this document that are not historical facts, including, statements about the Company’s beliefs and expectations, future financial performance and future prospects, business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Forward-looking statements, which are generally denoted by words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “create,” “estimate,” “expect,” “focus,” “forecast,” “foresee,” “future,” “guidance,” “intend,” “look,” “may,” “opportunity,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” or the negative of such terms or other variations thereof and terms of similar substance used in connection with any discussion of current plans, estimates and projections are subject to change based on a number of factors, including those outlined in this section. Forward-looking statements in this document are based on certain key expectations and assumptions made by the Company. Although the management of the Company believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. The material assumptions upon which such forward-looking statements are based include, among others, assumptions with respect to general business, economic and market conditions, the competitive environment, anticipated and unanticipated tax consequences and anticipated and unanticipated costs. These forward-looking statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. These forward- looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following: • risks associated with international, national and regional unfavorable economic conditions that could affect the Company or its clients; • inflation and actions taken by central banks to counter inflation; • the Company’s ability to attract new clients and retain existing clients; • the impact of a reduction in client spending and changes in client advertising, marketing and corporate communications requirements; • financial failure of the Company’s clients; • the Company’s ability to retain and attract key employees; • the Company’s ability to compete in the markets in which it operates; • the Company’s ability to achieve its cost saving initiatives; • the Company’s implementation of strategic initiatives; • the Company’s ability to remain in compliance with its debt agreements and the Company’s ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to redeemable noncontrolling interests and deferred acquisition consideration; • the Company’s ability to manage its growth effectively, including the successful completion and integration of acquisitions that complement and expand the Company’s business capabilities; • the Company’s ability to develop products incorporating new technologies, including augmented reality, artificial intelligence, and virtual reality, and realize benefits from such products; • an inability to realize expected benefits of the combination of the Company’s business with the business of MDC Partners Inc. (the “Transactions”) and other completed, pending, or contemplated acquisitions; • adverse tax consequences in connection with the Transactions for the Company, its operations and its shareholders, that may differ from the expectations of the Company, including that future changes in tax law, potential increases to corporate tax rates in the United States and disagreements with the tax authorities on the Company’s determination of value and computations of its attributes may result in increased tax costs; • the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Transactions; • the Company’s unremediated material weaknesses in internal control over financial reporting and its ability to establish and maintain an effective system of internal control over financial reporting; • the Company’s ability to protect client data from security incidents or cyberattacks; • economic disruptions resulting from war and other geopolitical tensions, terrorist activities and natural disasters; • stock price volatility; and • foreign currency fluctuations. Investors should carefully consider these risk factors, other risk factors described herein, and the additional risk factors outlined in more detail in our 2022 Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2023, and accessible on the SEC’s website at www.sec.gov, under the caption “Risk Factors,” and in the Company’s other SEC filings. FORWARD LOOKING STATEMENTS & OTHER INFORMATION 2
DEFINITIONS OF NON-GAAP FINANCIAL MEASURES 3 In addition to its reported results, Stagwell Inc. has included in this earnings presentation certain financial results that the Securities and Exchange Commission (SEC) defines as "non-GAAP Financial Measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. Such non-GAAP financial measures include the following: Pro Forma Results: The Pro Forma amounts presented for each period were prepared by combining the historical standalone statements of operations for each of legacy MDC and SMG. The unaudited pro forma results are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or consolidated financial condition would have been had the combination actually occurred on the date indicated, nor do they purport to project the future consolidated results of operations or consolidated financial condition for any future period or as of any future date. The Company has excluded a quantitative reconciliation of Adjusted Pro Forma EBITDA to net income under the “unreasonable efforts” exception in Item 10(e)(1)(i)(B) of Regulation S-K. (1) Organic Revenue: “Organic revenue growth” and “organic revenue decline” refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the partner firms that the Company has held throughout each of the comparable periods presented, and (b) “non- GAAP acquisitions (dispositions), net”. Non-GAAP acquisitions (dispositions), net consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or same period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year. (2) Net New Business: Estimate of annualized revenue for new wins less annualized revenue for losses incurred in the period. (3) Adjusted EBITDA: defined as Net income excluding non-operating income or expense to achieve operating income, plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and nonrecurring items. (4) Adjusted Diluted EPS is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income attributable to Class C shareholders, excluding amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, divided by (ii) (a) the per weighted average number of common shares outstanding plus (b) the weighted average number of Class C shares outstanding (if dilutive). Other items includes restructuring costs, acquisition-related expenses, and non-recurring items, and subject to the anti-dilution rules. (5) Free Cash Flow: defined as Adjusted EBITDA less capital expenditures, change in net working capital, cash taxes, interest, and distributions to minority interests, but excludes contingent M&A payments. (6) Financial Guidance: The Company provides guidance on a non-GAAP basis as it cannot predict certain elements which are included in reported GAAP results. Included in this earnings presentation are tables reconciling reported Stagwell Inc. results to arrive at certain of these non-GAAP financial measures.
4 FINANCIAL Outlook Adjusting Full-Year 2023 Outlook 0.0 – 2.0% Organic Net Revenue Growth $410M - $440M In Adjusted EBITDA 50 - 60% EBITDA Conversion on Free Cash Flow $0.76 - $0.85 In Adjusted Earnings Per Share Note: Guidance as of 8/08/2023. The Company has excluded a quantitative reconciliation with respect to the Company’s 2023 guidance under the “unreasonable efforts” exception in Item 10(e)(1)(i)(B) of Regulation S-K. See "Non-GAAP Financial Measures" below for additional information on definitions for Organic Net Revenue, Organic Net Revenue Ex-Advocacy, Adjusted EBITDA, Adjusted Earnings Per Share, and Free Cash Flow. Please refer to our investor website at stagwellglobal.com/investors for information on Forward Looking Statements and risk factors outlined in our 2022 Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2023, and accessible on the SEC’s website at www.sec.gov, under the caption “Risk Factors,” and in the Company’s other SEC filings.
S E C O N D Q U A R T E R H I G H L I G H T S Growing INDUSTRY RECOGNITION Winning RECORD NEW BUSINESS Expanding TECHNOLOGY CAPES Managing COSTS Created and executed SPORT BEACH, transformative Cannes Lions experience 38 athletes, 23 partners and 17 agencies convened to talk about the future of sports, fandom and culture Ad Industry publications hailed event as the "winner" of largest creativity festival in the world. Generating multi-million dollar deals for Stagwell agencies Proactive management of staffing levels & costs $48M of annualized staff cost savings realized in the quarter On track to realize $30M of operational efficiencies by YE 2023 $75 million in net new business secured in Q2 Record LTM new business of $256 million $1 billion of pitches participated in, on track to exceed $1.2 billion in FY23 Q2 2023 Stagwell Marketing Cloud Group net revenue in excess of $48 million PRophet signed four new enterprise clients and 1000+ trial users for generative AI platform. Harris Brand Terminal has 130 corporate clients, integrating with Maru Strategic hiring to build out industry leading sales force NET REVENUE: $539M | NET LEVERAGE RATIO: 3.48x | ADJ. EBITDA: $91M Note: Net Leverage Ratio defined as Net Debt divided by LTM Adjusted EBITDA. 5
S U M M A R Y C O M B I N E D F I N A N C I A L S Note: Figures may not foot due to rounding. Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net Revenue $ 539,060 $ 556,316 $ 1,060,722 $ 1,082,953 Billable Costs 93,205 116,597 193,987 232,863 Revenue $ 632,265 $ 672,913 $ 1,254,709 $ 1,315,816 Billable Costs 93,205 116,597 193,987 232,863 Staff costs 346,193 349,468 695,870 690,106 Administrative costs 66,192 66,349 134,368 122,643 Unbillable and other costs, net 35,507 29,180 67,094 57,473 Adjusted EBITDA $ 91,168 $ 111,319 $ 163,390 $ 212,731 Stock-based compensation 10,546 13,131 22,550 21,152 Depreciation and amortization 35,488 32,231 68,965 63,435 Deferred acquisition consideration 392 13,472 4,480 15,369 Impairment and other losses 10,562 2,266 10,562 2,823 Other items, net 12,918 1,887 19,338 6,960 Operating income (loss) $ 21,262 $ 48,332 $ 37,495 $ 102,992 Adjusted EBITDA margin (on net revenue) 16.9% 20.0% 15.4% 19.6% 6 $ in Thousands
2 Q 2 3 N E T R E V E N U E Note: Figures may not foot due to rounding. Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 Net Revenue Change Net Revenue Change June 30, 2022 $ 556,316 $ 1,082,953 Organic revenue (29,305) (5.3%) (45,433) (4.2%) Acquisitions (divestitures), net 16,274 2.9% 34,777 3.2% Foreign currency (4,225) (0.8%) (11,575) (1.1%) Total Change $ (17,257) (3.1%) $ (22,232) (2.1%) June 30, 2023 $ 539,060 $ 1,060,722 7 $ in Thousands
78.5% 8.5% 13.0% 2 Q N E T R E V E N U E B Y G E O G R A P H Y Note: Figures may not foot due to rounding. 2Q Organic Growth Y/Y Geography 2Q23 YTD United States (8.0)% (6.5)% United Kingdom 8.6% 10.4% Other 4.8% 2.9% TOTAL (5.3)% (4.2)% TOTAL EX-ADVOCACY (4.5)% (2.8)% 8 % OF NET REVENUE
G L O B A L N E T W O R K 9 North America Latin America Europe Asia Pacific • Australia • China • Hong Kong • India • Indonesia • Japan • Malaysia • Philippines • Taiwan • Thailand • Singapore • South Korea Middle East & Africa • Austria • Belgium • Bulgaria • Italy • Latvia • Romania • Slovak Republic • Slovenia • Switzerland • Turkey • Ukraine • France • Germany • Netherlands • Poland • Spain • Sweden • United Kingdom • Argentina • Aruba • Bolivia • Brazil • Curacao • Colombia • Costa Rica • Dominican • Ecuador • El Salvador • Guatemala • Honduras • Jamaica • Nicaragua • Panama • Peru • Republic • Uruguay • Venezuela • Algeria • Bahrain • Egypt • Jordan • Kuwait • Lebanon • Libya • Morocco • Nigeria • Oman • Saudi Arabia • South Africa • Tunisia • United Arab Emirates Stagwell +Affiliates COUNTRIES 34+ 75+ EMPLOYEES 13K+ 21K+ Stagwell’s Affiliate Network Significantly Expands Our Global Footprint • Canada • USA • Mexico Note: As of June 30, 2023.
O U R P R I N C I P A L C A P A B I L I T I E S Creativity & Communications Blue-Chip Customer Base Performance Media & Data Addressable on a Global Scale Consumer Insights & Strategy Tracking Across the Entire Consumer Journey Digital Transformation Building & Designing Digital Platforms & Technology 1 2 3 4 10 56% 2Q23
A D J E B I T D A G R O W T H B Y C A P A B I L I T Y Note: Advocacy includes Targeted Victory, SKDK, and TMA Direct. Figures may not foot due to rounding. *EBITDA includes corporate expenses, notionally allocated ratably across each capability. Principal Capability 2Q23 YTD Digital Transformation (27.3%) (25.5%) Performance Media & Data (44.1%) (47.0%) Consumer Insights & Strategy 3.9% (0.5%) Creativity & Communications (2.6%) (16.9%) TOTAL (18.1%) (23%) TOTAL EX-ADVOCACY (17.7%) (19.1%) % OF ADJ. EBITDA* 11 2Q Adj. EBITDA* Growth Y/Y 34% 11% 11% 44%
N E T R E V E N U E G R O W T H B Y C A P A B I L I T Y Notes: Advocacy includes Targeted Victory, SKDK, and TMA Direct. Figures may not foot due to rounding. EBITDA includes corporate expenses, notionally allocated ratably across each capability. 2Q23 YTD Principal Capability Organic Net Revenue Growth Net Revenue Growth Organic Net Revenue Growth Net Revenue Growth Digital Transformation (13.0%) (13.0%) (11.0%) (10.9%) Performance Media & Data (2.6%) (1.1%) 1.1% 3.6% Consumer Insights & Strategy (3.0%) 15.8% (0.8%) 17.2% Creativity & Communications (1.8%) (1.6%) (2.6%) (2.8%) TOTAL (5.3%) (3.1%) (4.2%) (2.1%) TOTAL EX-ADVOCACY (4.5%) (2.3%) (2.8%) (0.7%) % OF NET REVENUE 12 2Q 26% 19% 11% 44%
Three Months Ended, Six Months Ended, June 30, 2023 June 30, 2022 % Change June 30, 2023 June 30, 2022 % Change Total Net Revenue $539 $556 (3.1%) $1061 $1083 (2.1%) Advocacy Net Revenue 36 41 (13.4%) 63 78 (19.5%) Total Ex Advocacy 503 515 (2.3%) 998 1005 (0.7%) Three Months Ended, Six Months Ended, June 30, 2023 June 30, 2022 % Change June 30, 2023 June 30, 2022 % Change Total Adj. EBITDA $91 $111 (18.1%) $163 $213 (23.2%) Advocacy Adj. EBITDA 10 13 (21.3%) 11 24 (54.7%) Total Ex Advocacy 81 99 (17.7%) 152 189 (19.1%) 2 Q E X - A D V O C A C Y N E T R E V E N U E & A D J U S T E D E B I T D A Note: Advocacy includes Targeted Victory, SKDK, & TMA Direct. Actuals may not foot due to rounding $ in Millions NET REVENUE ADJ. EBITDA 13
N E W B U S I N E S S U P D A T E 14 PER CLIENT AT TOP 25 Notable Business WINS & EXPANSIONSNet New Business 2Q23 $75M LTM $256M Avg. Net Revenue 2Q23 $6.2M
S T A G W E L L M A R K E T I N G C L O U D G R O U P 15 $37M $48M 2Q22 2Q23 Net Revenue1 1. Defined as GAAP Revenue minus Billable Costs – Includes both the Advanced Media Platform and Stagwell Marketing Cloud groups Net Revenue Adj. EBITDA Margin Advanced Media Platforms $35.4 12.7% Stagwell Marketing Cloud $12.8 (9.4%) TOTAL $48.2 6.8% GROWTH (y/y) 28.9%
16 LIQUIDITY Available Liquidity (as of 6/30/2023) Commitment Under Credit Facility $ 640 Drawn 402 Undrawn Letters of Credit 22 Undrawn Commitments Under Facility $ 216 Total Cash & Cash Equivalents 105 Total Available Liquidity $ 321 $ in Millions
17 MAINTAINING DISCIPLINE AROUND Deferred Acquisition Costs REDUCED DAC BY $83M FROM 2Q22 QUARTER-END BALANCE $197M $114M 2Q22 2Q23
A D J U S T E D E A R N I N G S P E R S H A R E Three Months Ended June 30, 2023 Six Months Ended June 30, 2023 Reported (GAAP) Adjustments Non-GAAP Reported (GAAP) Adjustments Non-GAAP Net income attributable to Stagwell Inc. common shareholders (4,693) $ 23,635 $ 18,942 (4,250) $ 41,996 $ 37,746 Net income attributable to Class C Shareholders - 25,529 25,529 - 45,732 45,732 Net income – diluted EPS $ (4,693) $ 49,164 $ 44,471 $ (4,250) $ 87,728 $ 83,478 Weighted average number of common shares outstanding (diluted) 115,400 9,135 124,535 120,272 9,356 129,628 Weighted average number of common class C shares outstanding (diluted) - 155,821 155,821 - 158,351 158,351 Weighted average number of shares outstanding 115,400 164,956 280,356 120,272 167,707 287,979 Adjusted earnings per share (diluted) $ (0.04) $ 0.16 $ (0.04) $ 0.29 Adjustments to net income (loss) Pre-Tax Tax Net Pre-Tax Tax Net Amortization $ 28,690 $ (7,401) $ 21,289 $ 55,422 $ (12,747) $ 42,675 Impairment and other losses 10,562 (1,237) 9,325 10,562 (1,237) 9,325 Stock-based compensation 10,546 (2,786) 7,760 22,550 (5,187) 17,363 Deferred acquisition consideration 392 (212) 180 4,480 (1,030) 3,450 Other items, net 12,918 (3,165) 9,753 19,338 (4,448) 14,890 Tax adjustments - 5,409 5,409 - 7,742 7,742 Total add-backs $ 63,108 $ (14,692) $ 53,716 $ 112,352 $ (16,907) $ 95,445 Net loss attributable to Class C shareholders (4,552) (7,717) $ 49,164 $ 87,728 18 $ and Shares in Thousands Note: Numbers may not foot due to rounding.
G A A P C O N S O L I D A T E D O P E R A T I N G P E R F O R M A N C E Revenue Cost of services Office & general expenses Depreciation & amortization Impairment & other losses Total operating expenses Operating income (Loss) Interest expense, net Foreign exchange, net Other, net Other income (expenses) Income tax expense (benefit) Income (loss) before equity in earnings of non-consolidated affiliates Equity in income (loss) of non-consolidated affiliates Net income (loss) Net income (loss) attributable to non-controlling & redeemable non-controlling interests Net income (loss) attributable to Stagwell Inc. common shareholders Earnings Per Share Basic Diluted Weighted Average Number of Shares Outstanding Basic Diluted Note: Numbers may not foot due to rounding. 19 $ and Shares in Thousands Three Months Ended June 30, 2023 2022 $ 632,265 $ 672,913 402,431 424,661 162,522 165,423 35,488 32,231 10,562 2,266 $ 611,003 $ 624,581 $21,262 $ 48,332 (23,680) (18,151) (1,478) 70 (416) (121) $ (25,574) $ (18,202) 5,717 5,421 $ (10,029) $ 24,709 (216) (190) $ (10,245) $ 24,519 5,552 (14,056) $ (4,693) $ 10,463 $ (0.04) $ 0.08 $ 0.16 $ 0.23 115,400 296,414 280,356 296,414 Six Months Ended June 30, 2023 2022 $ 1,254,709 $ 1,315,816 816,329 836,631 321,358 309,935 68,965 63,435 10,562 2,823 $ 1,217,214 $ 1,212,824 $37,495 $ 102,992 (41,869) (36,880) (2,148) (236) (196) 35 $ (44,213) $ (37,081) 8,101 8,610 $ (14,819) $ 57,301 (443) 840 $ (15,262) $ 58,141 11,012 (35,003) $ (4,250) $ 23,138 $ (0.04) $ 0.18 $ 0.29 $ 0.46 120,272 298,843 287,979 298,843
P R O F O R M A C A P I T A L S T R U C T U R E Note: Pro Forma share count assumes full conversion of Class C shares to Class A on a one-to-one basis. Numbers may not foot due to rounding 1. Excludes non-controlling interest of Stagwell Class C shareholders to reflect NCI balance pro forma for full conversion of Class C shares to Class A. 2. Includes redeemable non-controlling interest and obligations in connection with profit interests held by employees. 3. Non-consolidated investments 4. Pro Forma Share Count is as of August 4, 2023. Net Debt & Debt-Like ($M, as of 6/30/2023) Revolving Credit Facility $ 402 Bonds 1,100 NCI1 29 DAC 114 RNCI2 47 Less: Investments3 19 Less: Cash 105 TOTAL NET DEBT & DEBT-LIKE $ 1,568 Pro Forma Share Count4 (Thousands, as of 8/4/2023) Class A 116,451 Class C (equal voting & economic rights to Class A) 151,649 Share-based awards 7,632 Class A To settle deferred acquisition obligations 4,620 PRO FORMA DILUTED 280,352 20
21 STAGWELL MARKETING CLOUD GROUP SaaS & DaaS tools for the in-house marketer SMC Real-Time Research SMC Comms Tech SMC Advanced Media Platforms SMC Media Studio SMC Data & AI Marketplace QR Code
22 APPLYING A PROVEN PLAYBOOK to scale Stagwell Marketing Cloud Group Building complementary software solutions leveraging the domain expertise and distribution channels already in place at Stagwell SMC Advanced Media Platforms Proprietary & Premium Owned Media Channels SMC Media Studio Platform for In-House Media Planners and Buyers SMC Real-Time Research Suite of Solutions for Market Researchers SMC Comms Tech AI-Driven Platform for Modern Communicators Digital Services Technology Digital Transformation Building Digital Platforms & Consumer Experiences Performance Media & Data Integrated Omnichannel Media, Data & E-Commerce Consumer Insights & Strategy Tracking Across the Consumer Journey Creativity & Communications Blue-Chip Customer Base 1 2 3 4
23 We've developed a proven strategy to develop and incubate new technologies, making informed product roadmap decisions based off agency clients while leveraging our world-class tech team STAGWELL MARKETING CLOUD GROUP Product Incubation Playbook WE BUILD ADVANCED PRODUCTS MORE EFFICIENTLY than the rest Faster Shared infrastructure + tech expertise DEVELOP & ITERATE FAST Cheaper World's most ambitious clients + upselling opportunities LOWER GO-TO-MARKET COSTS Better Proprietary data + the best marketers in the world INTERNAL TESTING & INSIGHTS THAT DELIVER BETTER PRODUCTS
24 REAL-TIME INSIGHTS Product Spotlight Customer Benefit Unlocking continuous brand tracking on an affordable, global, modern basis for research professionals
25 ARTIFICAL INTELLIGENCE Product Spotlight Customer Benefit Revolutionizing the PR process through AI, saving PR professionals from millions of tedious working hours
26 AUGMENTED REALITY Product Spotlight Customer Benefit Bringing a whole new level of stadium entertainment and fan engagement to sports and entertainment through shared AR
27 STAGWELL MARKETING CLOUD GROUP Pricing Model Modern, flexible pricing models that fit the needs and budgets for the modern, in-house marketer Subscription Pricing Annual SaaS contract Consumption Fee Data and media spend Advertising-Based Sponsorship fees
