STGW 8-K
Stagwell Inc (STGW)
8-K
2023-11-02
For: 2023-11-02
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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) — November 2, 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 November 2, 2023, Stagwell Inc. (the “Company”) issued an earnings release reporting its financial results for the three and nine months ended September 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 nine months ended September 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: November 2, 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 NINE MONTHS ENDED SEPTEMBER 30, 2023
Stagwell Sees Strong Growth in Stagwell Marketing Cloud Group and Performance Media Capabilities; International Revenue Growth of 24% in Q3
Posted $81 million of net new business in Q3; LTM net new business exceeds $250 million
Completed sale of non-core ConcentricLife for $245 million
Revenue of $618 million; Net revenue of $535 million
Net Income of $3 million; Adjusted EBITDA of $102 million
Expects 2023 Adjusted EBITDA of $390 to $410 million
New York, NY, November 2, 2023 (NASDAQ: STGW) – Stagwell Inc. (“Stagwell”) today announced financial results for the three and nine months ended September 30, 2023.
THIRD QUARTER AND NINE MONTHS HIGHLIGHTS:
•Q3 revenue of $618 million, a decrease of 7% versus the prior year period; YTD revenue of $1,872 million, a decrease of 5% versus the prior year period
•Q3 net revenue of $535 million, a decrease of 4% versus the prior period; YTD net revenue of $1,596 million, a decrease of 3% versus the prior year period
•Q3 organic net revenue declined 7% versus the prior year period and 5% ex-Advocacy; YTD organic net revenue declined 6% versus the prior year period and 4% ex-Advocacy.
•Q3 net revenue from international increased 25%, led by increases of 30% in EMEA, 18% in LATAM and 12% in APAC
•Q3 revenue from the Stagwell Marketing Cloud Group capability increased 7%, and net revenue increased 20%
•Q3 net income of $3 million versus net income of $35 million in the prior year period; YTD net loss of $12 million versus net income of $93 million in the prior year period
•Q3 net income attributable to Stagwell Inc. common shareholders of $653 thousand versus net income of $11 million in the prior year period; YTD net loss attributable to Stagwell Inc. common shareholders of $4 million versus net income of $34 million in the prior year period
•Q3 Adjusted EBITDA of $102 million, a decrease of 12% versus the prior year period; YTD Adjusted EBITDA of $265 million, a decrease of 19% versus the prior year period
•Q3 Adjusted EBITDA Margin of 19% on net revenue, an increase of 210 basis points sequentially; YTD Adjusted EBITDA Margin of 17% on net revenue
•Q3 earnings per share attributable to Stagwell Inc. common shareholders of $0.003
•Q3 Adjusted earnings per share attributable to Stagwell Inc. common shareholders of $0.18; YTD Adjusted earnings per share of $0.45
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•Q3 net new business of $81 million; YTD net new business of $209 million
“Stagwell achieved over $100 million of EBITDA in Q3 and is on course to return to growth over the next two quarters as new business continues to flow in and the tech industry pauses and auto and entertainment strikes which have impacted this sector are ebbing,” said Mark Penn, Chairman and CEO, Stagwell. “We are already growing in key areas like media and international and made adjustments to again achieve a 19% margin on net revenue.”
“We have trimmed our costs, implemented new systems, reordered our portfolio, and are ready for a strong 2024 as the political cycle kicks in again and as we introduce our cutting-edge AI products within the Stagwell Marketing Cloud. Our disposition of a single non-core asset for $245 million, which has now closed, both improves our balance sheet and readies the company for further growth and expansion through prudent investment.”
Frank Lanuto, Chief Financial Officer, commented: “In the face of continued sector-wide headwinds, we took decisive measures to reduce costs to align with our revenue which resulted in a third quarter adjusted EBITDA margin of 19 percent, in line with our targeted operating range. Continued progress with our initiatives to standardize and centralize our cost structure to the shared services platform will be accretive to margins over the next several quarters. The sale of ConcentricLife will serve to reduce net debt and will support our goal of strengthening the balance sheet and reducing financial leverage.
Financial Outlook
2023 financial guidance is as follows:
•Organic Net Revenue decline of about 4%
•Organic Net Revenue excluding Advocacy decline of about 2.5%
•Adjusted EBITDA of $390 million – $410 million
•Free Cash Flow Conversion of 40% - 50%
•Adjusted EPS of $0.73 - $0.78
•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. | |||||
On October 2, 2023, the Company acquired 100% of the membership interest of Left Field Labs, LLC, a digital experience design and strategy company, for approximately $9.4 million in cash, and 825 thousand shares of Class A Common Stock, par value $.001 per share (the “Class A Common Stock”), subject to post-closing adjustments. In connection with the agreement, the previous owners are entitled to contingent consideration up to a maximum value of $51.0 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.
On October 31, 2023, the Company completed the sale of its integrated healthcare marketing agency and pharmaceutical commercialization platform, ConcentricLife, for $245 million in cash.
On November 1, 2023, the Company acquired Movers and Shakers LLC, a business that provides social media marketing solutions, for approximately $15 million, to be paid in cash or up to 30% in shares of Class A Common stock, subject to post-closing adjustments. In connection with the agreement, the previous owners are entitled to contingent consideration up to a maximum value of $35 million, subject to meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion.
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Video Webcast
Management will host a video webcast on Thursday, November 2, 2023, at 8:30 a.m. (ET) to discuss results for Stagwell Inc. for the three and nine months ended September 30, 2023. The video webcast will be accessible at https://stgw.io/Q3Earnings. 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
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 revenue results, respectively, of subtracting the impact of foreign exchange and acquisition (disposition) from total revenue growth. The impact of foreign currency represents the period-over-period change in revenue driven by the fluctuation of foreign exchange rates between such periods and is calculated as the difference between prior period revenue reported and prior period revenue converted utilizing the current period foreign exchange rates. The impact of acquisitions is calculated as follows (a) for entities purchased in the current year, prior year revenue of the acquired entity beginning on the acquisition date, as if we acquired the entity in the prior year, through the end of the reported period and (b) for entities purchased in the prior year, prior year revenue of the acquired entity as if we acquired the entity at the beginning of the reported period through the date of acquisition (prior year revenue for the period we did not own the acquired entity). The impact of divestitures is calculated as the prior year revenue of the disposed entity from the date of disposition, as if the entity was disposed of in the prior year, to the end of the reporting period. “Net Organic revenue growth” and “Net Organic revenue decline” also excludes the impact of Billable costs in analyzing Organic revenue growth (decline) as these costs and their fluctuations are not indicative of the operating performance of our underlying business.
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(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, 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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenue | $ | 617,573 | $ | 663,791 | $ | 1,872,282 | $ | 1,979,607 | |||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Cost of services | 384,980 | 417,134 | 1,201,309 | 1,253,765 | |||||||||||||||||||
| Office and general expenses | 160,021 | 119,186 | 481,379 | 429,121 | |||||||||||||||||||
| Depreciation and amortization | 38,830 | 32,207 | 107,795 | 95,642 | |||||||||||||||||||
| Impairment and other losses | — | 25,211 | 10,562 | 28,034 | |||||||||||||||||||
| 583,831 | 593,738 | 1,801,045 | 1,806,562 | ||||||||||||||||||||
| Operating Income | 33,742 | 70,053 | 71,237 | 173,045 | |||||||||||||||||||
| Other income (expenses): | |||||||||||||||||||||||
| Interest expense, net | (25,886) | (19,672) | (67,755) | (56,552) | |||||||||||||||||||
| Foreign exchange, net | (140) | (3,927) | (2,288) | (4,163) | |||||||||||||||||||
| Other, net | (271) | 147 | (467) | 182 | |||||||||||||||||||
| (26,297) | (23,452) | (70,510) | (60,533) | ||||||||||||||||||||
| Income before income taxes and equity in earnings of non-consolidated affiliates | 7,445 | 46,601 | 727 | 112,512 | |||||||||||||||||||
| Income tax expense | 4,324 | 11,540 | 12,425 | 20,150 | |||||||||||||||||||
| Income (loss) before equity in earnings of non-consolidated affiliates | 3,121 | 35,061 | (11,698) | 92,362 | |||||||||||||||||||
| Equity in income (loss) of non-consolidated affiliates | (4) | 213 | (447) | 1,053 | |||||||||||||||||||
| Net income (loss) | 3,117 | 35,274 | (12,145) | 93,415 | |||||||||||||||||||
| Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests | (2,464) | (24,665) | 8,548 | (59,668) | |||||||||||||||||||
| Net income (loss) attributable to Stagwell Inc. common shareholders | $ | 653 | $ | 10,609 | $ | (3,597) | $ | 33,747 | |||||||||||||||
| Earnings (Loss) Per Common Share: | |||||||||||||||||||||||
| Basic | $ | 0.01 | $ | 0.08 | $ | (0.03) | $ | 0.27 | |||||||||||||||
| Diluted | $ | 0.01 | $ | 0.08 | $ | (0.03) | $ | 0.26 | |||||||||||||||
| Weighted Average Number of Common Shares Outstanding: | |||||||||||||||||||||||
| Basic | 110,787 | 125,384 | 118,772 | 124,710 | |||||||||||||||||||
| Diluted | 265,006 | 130,498 | 118,772 | 131,550 | |||||||||||||||||||
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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 September 30, 2022 | Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Three Months Ended September 30, 2023 | Organic | Total | ||||||||||||||||||||||||||||||||||||||||
| Integrated Agencies Network | $ | 311,926 | $ | 664 | $ | 2,117 | $ | (17,639) | $ | (14,858) | $ | 297,068 | (5.7) | % | (4.8) | % | |||||||||||||||||||||||||||||||
| Brand Performance Network | 160,473 | 2,666 | 1,573 | (2,284) | 1,955 | 162,428 | (1.4) | % | 1.2 | % | |||||||||||||||||||||||||||||||||||||
| Communications Network | 79,919 | 70 | — | (17,573) | (17,503) | 62,416 | (22.0) | % | (21.9) | % | |||||||||||||||||||||||||||||||||||||
| All Other | 3,436 | (32) | 9,738 | (190) | 9,516 | 12,952 | (5.5) | % | 276.9 | % | |||||||||||||||||||||||||||||||||||||
| $ | 555,754 | $ | 3,368 | $ | 13,428 | $ | (37,686) | $ | (20,890) | $ | 534,864 | (6.8) | % | (3.8) | % | ||||||||||||||||||||||||||||||||
| Net Revenue - Components of Change | Change | ||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | Foreign Currency | Net Acquisitions (Divestitures) | Organic | Total Change | Nine Months Ended September 30, 2023 | Organic | Total | ||||||||||||||||||||||||||||||||||||||||
| Integrated Agencies Network | $ | 929,033 | $ | (3,173) | $ | 6,271 | $ | (39,004) | $ | (35,906) | $ | 893,127 | (4.2) | % | (3.9) | % | |||||||||||||||||||||||||||||||
| Brand Performance Network | 487,829 | (2,466) | 11,296 | (5,636) | 3,194 | 491,023 | (1.2) | % | 0.7 | % | |||||||||||||||||||||||||||||||||||||
| Communications Network | 212,620 | (282) | 1,918 | $ | (37,224) | (35,588) | 177,032 | (17.5) | % | (16.7) | % | ||||||||||||||||||||||||||||||||||||
| All Other | 9,225 | (170) | 35,135 | (9,786) | 25,179 | 34,404 | (106.1) | % | 272.9 | % | |||||||||||||||||||||||||||||||||||||
| $ | 1,638,707 | $ | (6,091) | $ | 54,620 | $ | (91,650) | $ | (43,121) | $ | 1,595,586 | (5.6) | % | (2.6) | % | ||||||||||||||||||||||||||||||||
(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 SEGMENT OPERATING RESULTS
(amounts in thousands)
For the Three Months Ended September 30, 2023
| Integrated Agencies Network | Brand Performance Network | Communications Network | All Other | Corporate | Total | ||||||||||||||||||||||||||||||
| Net Revenue | $ | 297,068 | $ | 162,428 | $ | 62,416 | $ | 12,952 | $ | — | $ | 534,864 | |||||||||||||||||||||||
| Billable costs | 51,713 | 10,933 | 20,089 | (26) | — | 82,709 | |||||||||||||||||||||||||||||
| Revenue | 348,781 | 173,361 | 82,505 | 12,926 | — | 617,573 | |||||||||||||||||||||||||||||
| Billable costs | 51,713 | 10,933 | 20,089 | (26) | — | 82,709 | |||||||||||||||||||||||||||||
| Staff costs | 177,173 | 103,349 | 37,412 | 10,391 | 10,589 | 338,914 | |||||||||||||||||||||||||||||
| Administrative costs | 28,610 | 22,953 | 7,626 | 1,849 | 1,301 | 62,339 | |||||||||||||||||||||||||||||
| Unbillable and other costs, net | 14,108 | 12,933 | 84 | 4,717 | — | 31,842 | |||||||||||||||||||||||||||||
Adjusted EBITDA (1) | 77,177 | 23,193 | 17,294 | (4,005) | (11,890) | 101,769 | |||||||||||||||||||||||||||||
| Stock-based compensation | 6,706 | 1,744 | 1,252 | 268 | 2,095 | 12,065 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 22,559 | 9,229 | 2,784 | 2,138 | 2,120 | 38,830 | |||||||||||||||||||||||||||||
| Deferred acquisition consideration | 1,018 | 2,130 | 3,757 | (504) | — | 6,401 | |||||||||||||||||||||||||||||
Other items, net (1) | 5,428 | 3,956 | 244 | 292 | 811 | 10,731 | |||||||||||||||||||||||||||||
| Operating income (loss) | $ | 41,466 | $ | 6,134 | $ | 9,257 | $ | (6,199) | $ | (16,916) | $ | 33,742 | |||||||||||||||||||||||
(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 Nine Months Ended September 30, 2023
| Integrated Agencies Network | Brand Performance Network | Communications Network | All Other | Corporate | Total | ||||||||||||||||||||||||||||||
| Net Revenue | $ | 893,127 | $ | 491,023 | $ | 177,032 | $ | 34,404 | $ | — | $ | 1,595,586 | |||||||||||||||||||||||
| Billable costs | 139,787 | 83,706 | 53,229 | (26) | — | 276,696 | |||||||||||||||||||||||||||||
| Revenue | 1,032,914 | 574,729 | 230,261 | 34,378 | — | 1,872,282 | |||||||||||||||||||||||||||||
| Billable costs | 139,787 | 83,706 | 53,229 | (26) | — | 276,696 | |||||||||||||||||||||||||||||
| Staff costs | 548,012 | 313,813 | 115,846 | 31,124 | 25,850 | 1,034,645 | |||||||||||||||||||||||||||||
| Administrative costs | 86,200 | 70,963 | 25,096 | 1,244 | 13,343 | 196,846 | |||||||||||||||||||||||||||||
| Unbillable and other costs, net | 47,538 | 38,860 | 336 | 12,202 | — | 98,936 | |||||||||||||||||||||||||||||
Adjusted EBITDA (1) | 211,377 | 67,387 | 35,754 | (10,166) | (39,193) | 265,159 | |||||||||||||||||||||||||||||
| Stock-based compensation | 15,945 | 3,365 | 2,177 | 427 | 12,701 | 34,615 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 61,416 | 26,021 | 8,216 | 6,152 | 5,990 | 107,795 | |||||||||||||||||||||||||||||
| Deferred acquisition consideration | 8,118 | 1,112 | 3,403 | (1,752) | — | 10,881 | |||||||||||||||||||||||||||||
| Impairment and other losses | 9,175 | 1,387 | — | — | — | 10,562 | |||||||||||||||||||||||||||||
Other items, net (1) | 13,078 | 9,237 | 1,337 | 1,079 | 5,338 | 30,069 | |||||||||||||||||||||||||||||
| Operating income (loss) | $ | 103,645 | $ | 26,265 | $ | 20,621 | $ | (16,072) | $ | (63,222) | $ | 71,237 | |||||||||||||||||||||||
(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 SEGMENT OPERATING RESULTS
(amounts in thousands)
For the Three Months Ended September 30, 2022
| Integrated Agencies Network | Brand Performance Network | Communications Network | All Other | Corporate | Total | ||||||||||||||||||||||||||||||
| Net Revenue | $ | 311,926 | $ | 160,473 | $ | 79,919 | $ | 3,436 | $ | — | $ | 555,754 | |||||||||||||||||||||||
| Billable costs | 54,511 | 10,990 | 42,536 | — | — | 108,037 | |||||||||||||||||||||||||||||
| Revenue | 366,437 | 171,463 | 122,455 | 3,436 | — | 663,791 | |||||||||||||||||||||||||||||
| Billable costs | 54,511 | 10,990 | 42,536 | — | — | 108,037 | |||||||||||||||||||||||||||||
| Staff costs | 190,975 | 100,062 | 45,030 | 2,735 | 10,325 | 349,127 | |||||||||||||||||||||||||||||
| Administrative costs | 27,343 | 23,661 | 9,332 | 1,045 | 219 | 61,600 | |||||||||||||||||||||||||||||
| Unbillable and other costs, net | 17,410 | 12,438 | 68 | 19 | — | 29,935 | |||||||||||||||||||||||||||||
Adjusted EBITDA (1) | 76,198 | 24,312 | 25,489 | (363) | (10,544) | 115,092 | |||||||||||||||||||||||||||||
| Stock-based compensation | 5,308 | 2,923 | 671 | 7 | 3,349 | 12,258 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 18,286 | 8,205 | 2,683 | 1,207 | 1,826 | 32,207 | |||||||||||||||||||||||||||||
| Deferred acquisition consideration | 841 | 1,444 | (32,074) | — | — | (29,789) | |||||||||||||||||||||||||||||
| Impairment and other losses | 1,735 | 7,494 | — | 15,982 | — | 25,211 | |||||||||||||||||||||||||||||
Other items, net (1) | 1,081 | 1,166 | 420 | (1) | 2,486 | 5,152 | |||||||||||||||||||||||||||||
| Operating income (loss) | $ | 48,947 | $ | 3,080 | $ | 53,789 | $ | (17,558) | $ | (18,205) | $ | 70,053 | |||||||||||||||||||||||
(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 Nine Months Ended September 30, 2022
| Integrated Agencies Network | Brand Performance Network | Communications Network | All Other | Corporate | Total | ||||||||||||||||||||||||||||||
| Net Revenue | $ | 929,033 | $ | 487,829 | $ | 212,620 | $ | 9,225 | $ | — | $ | 1,638,707 | |||||||||||||||||||||||
| Billable costs | 163,331 | 75,717 | 101,852 | — | — | 340,900 | |||||||||||||||||||||||||||||
| Revenue | 1,092,364 | 563,546 | 314,472 | 9,225 | — | 1,979,607 | |||||||||||||||||||||||||||||
| Billable costs | 163,331 | 75,717 | 101,852 | — | — | 340,900 | |||||||||||||||||||||||||||||
| Staff costs | 575,959 | 297,243 | 128,784 | 7,919 | 30,212 | 1,040,117 | |||||||||||||||||||||||||||||
| Administrative costs | 86,002 | 65,830 | 24,475 | 2,249 | 4,803 | 183,359 | |||||||||||||||||||||||||||||
| Unbillable and other costs, net | 51,610 | 35,497 | 272 | 29 | — | 87,408 | |||||||||||||||||||||||||||||
Adjusted EBITDA (1) | 215,462 | 89,259 | 59,089 | (972) | (35,015) | 327,823 | |||||||||||||||||||||||||||||
| Stock-based compensation | 15,044 | 9,152 | 1,077 | 15 | 8,122 | 33,410 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 55,136 | 25,044 | 7,787 | 2,458 | 5,217 | 95,642 | |||||||||||||||||||||||||||||
| Deferred acquisition consideration | 5,697 | 7,349 | (27,466) | — | — | (14,420) | |||||||||||||||||||||||||||||
| Impairment and other losses | 2,519 | 8,051 | — | 17,464 | — | 28,034 | |||||||||||||||||||||||||||||
Other items, net (1) | 2,575 | 3,676 | 557 | 21 | 5,283 | 12,112 | |||||||||||||||||||||||||||||
| Operating income (loss) | $ | 134,491 | $ | 35,987 | $ | 77,134 | $ | (20,930) | $ | (53,637) | $ | 173,045 | |||||||||||||||||||||||
(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 September 30, 2023
| GAAP | Adjustments | Non-GAAP | ||||||||||||||||||
| Net income attributable to Stagwell Inc. common shareholders | $ | 653 | $ | 20,844 | $ | 21,497 | ||||||||||||||
| Net income attributable to Class C shareholders | 33 | 26,530 | 26,563 | |||||||||||||||||
| Net income attributable to Stagwell Inc. and Class C and adjusted net income | $ | 686 | $ | 47,374 | $ | 48,060 | ||||||||||||||
| Weighted average number of common shares outstanding | 113,357 | 5,663 | 119,020 | |||||||||||||||||
| Weighted average number of common Class C shares outstanding | 151,649 | — | 151,649 | |||||||||||||||||
| Weighted average number of shares outstanding | 265,006 | 5,663 | 270,669 | |||||||||||||||||
Dilutive EPS and Adjusted Diluted EPS | $ | 0.00 | $ | 0.18 | ||||||||||||||||
Adjustments to Net income(1) | ||||||||||||||||||||
Amortization | $ | 31,182 | ||||||||||||||||||
| Impairment and other losses | — | |||||||||||||||||||
| Stock-based compensation | 12,065 | |||||||||||||||||||
| Deferred acquisition consideration | 6,401 | |||||||||||||||||||
| Other items, net | 10,731 | |||||||||||||||||||
| $ | 60,379 | |||||||||||||||||||
Adjusted tax expense | (13,005) | |||||||||||||||||||
| $ | 47,374 | |||||||||||||||||||
(1) Adjusted Diluted EPS is defined 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 Nine Months Ended September 30, 2023
| GAAP | Adjustments | Non-GAAP | ||||||||||||||||||
| Net income (loss) attributable to Stagwell Inc. common shareholders | $ | (3,597) | $ | 61,195 | $ | 57,598 | ||||||||||||||
| Net income attributable to Class C shareholders | — | 70,200 | 70,200 | |||||||||||||||||
| Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income | (3,597) | 131,395 | 127,798 | |||||||||||||||||
| Weighted average number of common shares outstanding | 118,772 | 10,736 | 129,508 | |||||||||||||||||
| Weighted average number of common Class C shares outstanding | — | 156,092 | 156,092 | |||||||||||||||||
| Weighted average number of shares outstanding | 118,772 | 166,828 | 285,600 | |||||||||||||||||
Diluted EPS and Adjusted Diluted EPS | $ | (0.03) | $ | 0.45 | ||||||||||||||||
Adjustments to Net Income (loss)(1) | ||||||||||||||||||||
Amortization | $ | 86,605 | ||||||||||||||||||
| Impairment and other losses | 10,562 | |||||||||||||||||||
| Stock-based compensation | 34,615 | |||||||||||||||||||
| Deferred acquisition consideration | 10,881 | |||||||||||||||||||
| Other items, net | 30,069 | |||||||||||||||||||
| 172,732 | ||||||||||||||||||||
| Adjusted tax expense | (33,653) | |||||||||||||||||||
| 139,079 | ||||||||||||||||||||
| Net loss attributable to Class C shareholders | (7,684) | |||||||||||||||||||
| $ | 131,395 | |||||||||||||||||||
| Allocation of adjustments to net income (loss) | ||||||||||||||||||||
| Net income attributable to Stagwell Inc. common shareholders | $ | 61,195 | ||||||||||||||||||
| Net income attributable to Class C shareholders | 77,884 | |||||||||||||||||||
| Net loss attributable to Class C shareholders | (7,684) | |||||||||||||||||||
| 70,200 | ||||||||||||||||||||
| $ | 131,395 | |||||||||||||||||||
(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 September 30, 2022
| GAAP | Adjustments | Non-GAAP | ||||||||||||||||||
| Net income attributable to Stagwell Inc. common shareholders | $ | 10,609 | $ | 16,863 | $ | 27,472 | ||||||||||||||
| Weighted average number of common shares outstanding | 130,498 | — | 130,498 | |||||||||||||||||
| Diluted EPS and Adjusted Diluted EPS | $ | 0.08 | $ | 0.21 | ||||||||||||||||
Adjustments to Net income (1) | ||||||||||||||||||||
Amortization | $ | 25,808 | ||||||||||||||||||
| Impairment and other losses | 25,211 | |||||||||||||||||||
| Stock-based compensation | 12,258 | |||||||||||||||||||
| Deferred acquisition consideration | (29,789) | |||||||||||||||||||
| Other items, net | 5,152 | |||||||||||||||||||
| 38,640 | ||||||||||||||||||||
Adjusted tax expense | (420) | |||||||||||||||||||
| $ | 38,220 | |||||||||||||||||||
| Less: Net income attributable to Class C shareholders | (21,357) | |||||||||||||||||||
| Net income attributable to Stagwell Inc. common shareholders | $ | 16,863 | ||||||||||||||||||
(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 Nine Months Ended September 30, 2022
| GAAP | Adjustments | Non-GAAP | ||||||||||||||||||
| Net income attributable to Stagwell Inc. common shareholders | $ | 33,747 | $ | 52,699 | $ | 86,446 | ||||||||||||||
| Weighted average number of common shares outstanding | 131,550 | — | 131,550 | |||||||||||||||||
| Diluted EPS and Adjusted Diluted EPS | $ | 0.26 | $ | 0.66 | ||||||||||||||||
Adjustments to Net income(1) | ||||||||||||||||||||
Amortization | $ | 75,877 | ||||||||||||||||||
| Impairment and other losses | 28,034 | |||||||||||||||||||
| Stock-based compensation | 33,410 | |||||||||||||||||||
| Deferred acquisition consideration | (14,420) | |||||||||||||||||||
| Other items, net | 12,112 | |||||||||||||||||||
| 135,013 | ||||||||||||||||||||
| Adjusted tax expense | (15,569) | |||||||||||||||||||
| $ | 119,444 | |||||||||||||||||||
| Less: Net income to attributable to Class C shareholders | (66,745) | |||||||||||||||||||
| Net income attributable to Stagwell Inc. common shareholders | $ | 52,699 | ||||||||||||||||||
(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)
| September 30, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 98,705 | $ | 220,589 | |||||||
| Accounts receivable, net | 670,090 | 645,846 | |||||||||
| Expenditures billable to clients | 128,903 | 93,077 | |||||||||
| Other current assets | 104,082 | 71,443 | |||||||||
| Total Current Assets | 1,001,780 | 1,030,955 | |||||||||
| Fixed assets, net | 81,373 | 98,878 | |||||||||
| Right-of-use assets - operating leases | 245,187 | 273,567 | |||||||||
| Goodwill | 1,572,489 | 1,566,956 | |||||||||
| Other intangible assets, net | 844,004 | 907,529 | |||||||||
| Other assets | 125,376 | 115,447 | |||||||||
| Total Assets | $ | 3,870,209 | $ | 3,993,332 | |||||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND SHAREHOLDERS’ EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable | $ | 306,956 | $ | 357,253 | |||||||
| Accrued media | 183,510 | 240,506 | |||||||||
| Accruals and other liabilities | 205,861 | 248,477 | |||||||||
| Advance billings | 335,600 | 337,034 | |||||||||
| Current portion of lease liabilities - operating leases | 67,976 | 76,349 | |||||||||
| Current portion of deferred acquisition consideration | 104,294 | 90,183 | |||||||||
| Total Current Liabilities | 1,204,197 | 1,349,802 | |||||||||
| Long-term debt | 1,498,129 | 1,184,707 | |||||||||
| Long-term portion of deferred acquisition consideration | 29,443 | 71,140 | |||||||||
| Long-term lease liabilities - operating leases | 271,285 | 294,049 | |||||||||
| Deferred tax liabilities, net | 47,717 | 40,109 | |||||||||
| Other liabilities | 55,099 | 69,780 | |||||||||
| Total Liabilities | 3,105,870 | 3,009,587 | |||||||||
| Redeemable Noncontrolling Interests | 10,085 | 39,111 | |||||||||
| Commitments, Contingencies and Guarantees | |||||||||||
| Shareholders' Equity | |||||||||||
| Common shares - Class A & B | 116 | 132 | |||||||||
| Common shares - Class C | 2 | 2 | |||||||||
| Paid-in capital | 324,926 | 491,899 | |||||||||
| Retained earnings | 24,586 | 29,445 | |||||||||
| Accumulated other comprehensive loss | (18,813) | (38,941) | |||||||||
| Stagwell Inc. Shareholders' Equity | 330,817 | 482,537 | |||||||||
| Noncontrolling interests | 423,437 | 462,097 | |||||||||
| Total Shareholders' Equity | 754,254 | 944,634 | |||||||||
| Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity | $ | 3,870,209 | $ | 3,993,332 | |||||||
Page 16
SCHEDULE 12
STAGWELL INC.
UNAUDITED SUMMARY CASH FLOW DATA
(amounts in thousands)
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | (12,145) | $ | 93,415 | |||||||
Adjustments to reconcile net income to cash (used in) provided by operating activities: | |||||||||||
| Stock-based compensation | 34,615 | 33,410 | |||||||||
| Depreciation and amortization | 107,795 | 95,642 | |||||||||
| Impairment and other losses | 10,562 | 28,034 | |||||||||
| Deferred income taxes | (1,112) | (1,557) | |||||||||
| Adjustment to deferred acquisition consideration | 10,881 | (14,420) | |||||||||
| Other, net | (4,292) | 1,679 | |||||||||
| Changes in working capital: | |||||||||||
| Accounts receivable | (25,405) | (34,637) | |||||||||
| Expenditures billable to clients | (36,217) | 5,525 | |||||||||
| Other assets | 6,539 | 4,100 | |||||||||
| Accounts payable | (58,716) | 34,630 | |||||||||
| Accrued expenses and other liabilities | (149,267) | (138,947) | |||||||||
| Advance billings | (1,759) | (23,017) | |||||||||
| Deferred acquisition related payments | (9,021) | (10,776) | |||||||||
Net cash (used in) provided by operating activities | (127,542) | 73,081 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | (12,205) | (16,103) | |||||||||
| Acquisitions, net of cash acquired | (6,678) | (37,461) | |||||||||
| Capitalized software | (19,026) | (9,392) | |||||||||
| Other | (6,939) | (1,328) | |||||||||
Net cash used in investing activities | (44,848) | (64,284) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Repayment of borrowings under revolving credit facility | (1,250,500) | (855,000) | |||||||||
| Proceeds from borrowings under revolving credit facility | 1,562,500 | 989,500 | |||||||||
| Shares repurchased and cancelled | (203,958) | (43,637) | |||||||||
| Distributions to noncontrolling interests | (24,538) | (38,486) | |||||||||
| Payment of deferred consideration | (31,666) | (61,089) | |||||||||
| Purchase of noncontrolling interest | — | (3,600) | |||||||||
| Debt issuance costs | (150) | — | |||||||||
| Repurchase of Common Stock | — | ||||||||||
Net cash provided by (used in) financing activities | 51,688 | (12,312) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (1,182) | (15,243) | |||||||||
| Net decrease in cash and cash equivalents | (121,884) | (18,758) | |||||||||
| Cash and cash equivalents at beginning of period | 220,589 | 184,009 | |||||||||
| Cash and cash equivalents at end of period | $ | 98,705 | $ | 165,251 | |||||||
Page 17
Third Quarter 2023 EARNINGS PRESENTATION NOVEMBER 2 | 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 state ments 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 proje ct 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 reco nciliation 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, respective ly, 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 reve nue 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 ~(4%) Organic Net Revenue Growth ~(2.5%) Organic Net Revenue Growth ex. Advocacy $390M - $410M In Adjusted EBITDA 40% - 50% EBITDA Conversion on Free Cash Flow $0.73 - $0.78 In Adjusted Earnings Per Share Note: Guidance as of 11/02/2023. 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/investo rs 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.
T H I R D Q U A R T E R H I G H L I G H T S NET REVENUE: $535M | NET LEVERAGE RATIO: 3.64x | ADJ. EBITDA: $102M Executing GLOBAL STRATEGY Winning RECORD NEW BUSINESS Optimizing BUSINESS PORTFOLIO Managing COSTS International net revenue grew 25% in Q3 2023. Performance led by strong growth in EMEA of 30%, 18% in LATAM and 12% in APAC Stagwell Europe regional headquarters to launch in 2024 Global affiliate program has grown to over 70+ partners worldwide, with new affiliate partnerships with Markus Agency in Vietnam and Clarita in Brazil Proactive management of staffing levels & costs $82M of annualized staff cost savings actioned and realized year-to-date On track to realize $30M of operational efficiencies announced at merger by YE 23 $81 million in net new business secured in Q3 Outstanding LTM net new business of $251 million $1 billion of pitches participated in, on track to exceed $1.2 billion in FY23. Completed divestment of ConcentricLife to Accenture for $245M Portion of proceeds to be invested into key growth areas including emerging media, geographic expansion, digital transformation & Artificial Intelligence Completed acquisition of Left Field Labs, a cutting-edge transformation agency revolutionizing digital customer experiences Continuing to evaluate options for both acquisition and divestments Note: Net Leverage Ratio defined as Net Debt divided by LTM Adjusted EBITDA.
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 Sept 30, Nine Months Ended Sept 30, 2023 2022 2023 2022 Net Revenue $ 534,864 $ 555,754 $ 1,595,586 $ 1,638,707 Billable Costs 82,709 108,037 276,696 340,900 Revenue $ 617,573 $ 663,791 $ 1,872,282 $ 1,979,607 Billable Costs 82,709 108,037 276,696 340,900 Staff costs 338,914 349,127 1,034,645 1,040,117 Administrative costs 62,339 61,600 196,846 183,359 Unbillable and other costs, net 31,842 29,935 98,936 87,408 Adjusted EBITDA $ 101,769 $ 115,092 $ 265,159 $ 327,823 Stock-based compensation 12,065 12,258 34,615 33,410 Depreciation and amortization 38,830 32,207 107,795 95,642 Deferred acquisition consideration 6,401 (29,789) 10,881 (14,420) Impairment and other losses - 25,211 10,562 28,034 Other items, net 10,731 5,152 30,069 12,112 Operating income (loss) $ 33,742 $ 70,053 $ 71,237 $ 173,045 Adjusted EBITDA margin (on net revenue) 19.0% 20.7% 16.6% 20.0% 6 $ in Thousands
3 Q 2 3 N E T R E V E N U E Note: Figures may not foot due to rounding. Three Months Ended Sept 30, 2023 Nine Months Ended Sept 30, 2023 Net Revenue Change Net Revenue Change Sept 30, 2022 $ 555,754 $ 1,638,707 Organic revenue (37,686) (6.8%) (91,650) (5.6%) Acquisitions (divestitures), net 13,429 2.4% 54,619 3.3% Foreign currency 3,367 0.6% (6,090) (0.4%) Total Change $ (20,890) (3.8%) $ (43,121) (2.6%) Sept 30, 2023 $ 534,864 $ 1,595,586 7 $ in Thousands
79.3% 7.9% 12.8% 3 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. 3Q Organic Growth Y/Y 8 % OF NET REVENUE Geography 3Q23 YTD United States (9.9)% (8.0)% United Kingdom 12.2% 10.9% Other 6.6% 3.0% TOTAL (6.8)% (5.6)% TOTAL EX-ADVOCACY (4.6)% (4.0)%
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 September 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 2 3 4 5 10 54% 3Q23Stagwell Marketing Cloud Group SaaS and DaaS Tools for the In-House Marketer 1
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 3Q23 YTD Stagwell Marketing Cloud Group (52.7%) (44.5%) Digital Transformation (30.0%) (40.2%) Performance Media & Data 65.4% 5.7% Consumer Insights & Strategy 23.5% (9.3%) Creativity & Communications (4.7%) (1.6%) TOTAL (11.6%) (19.1%) TOTAL EX-ADVOCACY (5.2%) (14.5%) % OF ADJ. EBITDA* 3Q Adj. EBITDA* Growth Y/Y 4% 30% 10% 10% 46%
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. 3Q23 YTD Principal Capability Organic Net Revenue Growth Net Revenue Growth Organic Net Revenue Growth Net Revenue Growth Stagwell Marketing Cloud Group (7.1%) 20.4% (1.5%) 31.0% Digital Transformation (20.2%) (20.5%) (13.9%) (14.0%) Performance Media & Data 7.8% 10.5% 1.6% 5.9% Consumer Insights & Strategy (9.0%) (8.8%) (4.6%) (4.6%) Creativity & Communications (1.4%) 0.5% (3.1%) (2.4%) TOTAL (6.8%) (3.8%) (5.6%) (2.6%) TOTAL EX-ADVOCACY (4.6%) (1.3%) (4.0%) (0.9%) % OF NET REVENUE 3Q 9% 24% 14% 9% 46%
Three Months Ended, Nine Months Ended, Sept 30, 2023 Sept 30, 2022 % Change Sept 30, 2023 Sept 30, 2022 % Change Total Net Revenue $535 $556 (3.8%) $1,596 $1,639 (2.6%) Advocacy Net Revenue 38 52 (27.4%) 97 129 (24.5%) Total Ex Advocacy 497 504 (1.3%) 1,479 1,501 (1.5%) Three Months Ended, Nine Months Ended, Sept 30, 2023 Sept 30, 2022 % Change Sept 30, 2023 Sept 30, 2022 % Change Total Adj. EBITDA $102 $115 (11.6%) $265 $328 (23.2%) Advocacy Adj. EBITDA 12 21 (40.8%) 31 43 (50.6%) Total Ex Advocacy 90 94 (5.2%) 244 286 (14.6%) 3 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 & EXPANSIONS Net New Business 3Q23 $81M LTM $251M Avg. Net Revenue 3Q23 $5.9M
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 $39M $47M 3Q22 3Q23 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 $36.3 22.4% Stagwell Marketing Cloud $11.0 (41.1)% TOTAL $47.3 7.6% GROWTH (y/y) 20.4%
16 LIQUIDITY Available Liquidity (as of 9/30/2023) Commitment Under Credit Facility $ 640 Drawn 412 Letters of Credit 25 Undrawn Commitments Under Facility $ 203 Total Cash & Cash Equivalents 99 Total Available Liquidity $ 302 $ in Millions
17 MAINTAINING DISCIPLINE AROUND Deferred Acquisition Costs REDUCED DAC BY $26M FROM 3Q22 QUARTER-END BALANCE $160M $134M 3Q22 3Q23
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 Sept 30, 2023 Nine Months Ended Sept 30, 2023 Reported (GAAP) Adjustments Non-GAAP Reported (GAAP) Adjustments Non-GAAP Net income attributable to Stagwell Inc. common shareholders 653 $ 20,844 $ 21,497 (3,597) $ 61,195 $ 57,598 Net income attributable to Class C Shareholders 33 26,530 26,563 - 70,200 70,200 Net income – diluted EPS $ 686 $ 47,374 $ 48,060 $ (3,597) $ 131,395 $ 127,798 Weighted average number of common shares outstanding (diluted) 113,357 5,663 119,020 118,772 10,736 129,508 Weighted average number of common class C shares outstanding (diluted) 151,649 - 151,649 - 156,092 156,092 Weighted average number of shares outstanding 265,006 5,663 270,669 118,772 166,828 285,600 Adjusted earnings per share (diluted) $ 0.00 $ 0.18 $ (0.03) $ 0.45 Adjustments to net income (loss) Amortization expense $ 31,182 $ 86,605 Impairment and other losses - 10,562 Stock-based compensation 12,065 34,615 Deferred acquisition consideration 6,401 10,881 Other items, net 10,731 30,069 Total add-backs 60,379 172,732 Adjusted tax expense (13,005) (33,653) $47,374 139,079 Net loss attributable to Class C shareholders (7,684) $ 131,395 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 Sept 30, 2023 2022 $ 617,573 $ 663,791 384,980 417,134 160,021 119,186 38,830 32,207 - 25,211 $ 583,831 $ 593,738 $33,742 $ 70,053 (25,886) (19,672) (140) (3,927) (271) 147 $ (26,297) $ (23,452) 4,324 11,540 $ 3,121 $ 35,061 (4) 213 $ 3,117 $ 35,274 (2,464) (24,665) $ 653 $ 10,609 $ 0.01 $ 0.08 $ 0.00 $ 0.08 110,787 125,384 265,006 130,498 Nine Months Ended Sept 30, 2023 2022 $ 1,872,282 $ 1,979,607 1,201,309 1,253,765 481,379 429,121 107,795 95,642 10,562 28,034 $ 1,801,045 $ 1,806,562 $71,237 $ 173,045 (67,755) (56,552) (2,288) (4,163) (467) 182 $ (70,510) $ (60,533) 12,425 20,150 $ (11,698) $ 92,362 (447) 1,053 $ (12,145) $ 93,415 8,548 (59,668) $ (3,597) $ 33,747 $ (0.03) $ 0.27 $ (0.03) $ 0.26 118,772 124,710 118,772 131,550
C A P I T A L S T R U C T U R E Note: 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. A portion of the DAC will be paid with approximately 6.8m shares assuming conversion as of 9/30/23. 3. Includes redeemable non-controlling interest and obligations in connection with profit interests held by employees. 4. Non-consolidated investments 5. Share Count does not include unvested stock grants, unsettled SARs or portion of DAC to be settled in stock. Pro Forma total share count as of 11/1/2023 would be 120.6m Class A shares, 151.6 Class C shares, 6.8m shares to settle DAC and 7.7m share-based awards, for a total of 286.7m shares outstanding. 6. Estimated shares to be issued upon the exercise of settled SAR awards using treasury method. Net Debt & Debt-Like ($M, as of 9/30/2023) Revolving Credit Facility $ 412 Bonds 1,100 NCI1 30 DAC2 134 RNCI3 27 Less: Investments4 19 Less: Cash 99 TOTAL NET DEBT & DEBT-LIKE $ 1,585 Share Count5 (Thousands, as of 11/1/2023) Class A 120,634 Class C (equal voting & economic rights to Class A) 151,649 Share-based awards6 449 DILUTED 272,732 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
