Stagwell Inc

Previous wording

On July 19, 2024, the Company acquired L.D.R.S. Group Ltd. (“Leaders”), for $3.8 million, of which $2.9 million was paid in cash and $0.9 million in 135,010 shares of the Company’s Class A Common stock, par value $0.001 per share (“Class A Common Stock”) subject to post-closing adjustments. In connection with the acquisition, the sellers are entitled to contingent consideration up to a maximum value of $6.6 million, partially subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company’s discretion.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

For the three months ended June 30, 2024, organic net revenue increased $6.6 million, or 1.2%. The increase was primarily attributable to new wins in the consumer products sector and increased revenue in the communications and public affairs sectors as a result of the current political campaign year. This increase was partially offset by a decrease in client spending due to budget cuts in healthcare and financial sectors. The increase in net acquisitions (divestitures) was impacted by acquisitions and dispositions, including the acquisitions of Team Epiphany, LLC (“Epiphany”), Movers and Shakers LLC (“Movers and Shakers”) and Left Field Labs LLC (“Left Field Labs”), partially offset by the sale of ConcentricLife (“Concentric”) in the fourth quarter of 2023.

Current wording

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

Previous wording

Operating Income for the three months ended June 30, 2024 was $21.9 million, compared to Operating Income of $21.3 million for the three months ended June 30, 2023, representing an increase of $0.6 million. The change in Operating Income was primarily attributable to an increase in Revenue and a decrease in Impairment and other losses, partially offset by an increase in Cost of services, Office and general expenses and Depreciation and amortization.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Depreciation and amortization increased $3.5 million, primarily attributable to the acceleration of amortization of certain tradenames. As a result, amortization expense of $4.3 million was recorded in the three and six months ended June 30, 2024, representing the remaining amortization expense associated with these tradenames.

Current wording

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

Previous wording

Other, net, for the three months ended June 30, 2024 was income of $0.2 million, compared to an expense of $0.4 million for the three months ended June 30, 2023, a change of $0.6 million.

Current wording

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

Previous wording

The Company had an income tax expense for the three months ended June 30, 2024 of $1.2 million (on a pre-tax loss of $2.8 million resulting in an effective tax rate of(41.8)%), compared to income tax expense of $0.4 million (on pre-tax loss of $4.3 million resulting in an effective tax rate of(10.1)%) for the three months ended June 30, 2023.

Current wording

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

Previous wording

The difference in the effective tax rate of (41.8)% in the three months ended June 30, 2024 as compared to (10.1)% in the three months ended June 30, 2023, is due to an increase in current losses subject to valuation allowance, a reduction in tax benefit from the disregarded entity structure and tax benefits recognized in 2023 with respect to lease impairments.

Current wording

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

Previous wording

The effect of noncontrolling and redeemable noncontrolling interests for the three months ended June 30, 2024 was loss of $1.0 million compared to loss of $1.8 million for the three months ended June 30, 2023. The amounts are driven by the mix of income and losses derived from entities not entirely owned by the Company.

Current wording

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

Previous wording

As a result of the foregoing, net loss attributable to Stagwell Inc. common shareholders for the three months ended June 30, 2024 was $3.0 million, compared to net loss of $3.2 million for the three months ended June 30, 2023.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Adjusted EBITDA decreased $0.8 million, primarily driven by a decrease in Revenue, Staff costs and Unbillable costs, as discussed above.

Current wording

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

Previous wording

The increase in Office and general expenses was primarily attributable to higher deferred acquisition consideration expense, partially offset by a decrease in stock-based compensation.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Operating Income for the three months ended June 30, 2024 was $14.4 million, compared to $11.7 million for the three months ended June 30, 2023, representing an increase of $2.7 million. The change in Operating Income was primarily attributable to an increase in Revenue, partially offset by an increase in Costs of services and Office and general expenses.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Deferred acquisition consideration increased $4.3 million, primarily as a result of an increase in the fair value of a certain obligation during 2024.

Current wording

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

Previous wording

Staff costs increased $3.7 million primarily as a result of higher employee compensation and health insurance costs.

Current wording

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

Previous wording

Deferred acquisition consideration increased $1.1 million, primarily attributable to the increase in the fair value of certain obligations.

Current wording

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

Previous wording

For the six months ended June 30, 2024, organic net revenue increased $15.8 million, or 1.5%. The increase was primarily attributable to new wins in the consumer products sector and increased revenue in the communications and public affairs sectors as a result of the current political campaign year. This increase was partially offset by a decrease in client spending due to budget cuts in healthcare and financial sectors. The increase in net acquisitions (divestitures) was impacted by acquisitions and dispositions, including the acquisitions of Epiphany, Movers and Shakers and Left Field Labs, partially offset by the sale of Concentric in the fourth quarter of 2023.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Operating Income for the six months ended June 30, 2024 was $47.8 million, compared to $37.5 million for the six months ended June 30, 2023, representing an increase of $10.3 million. The change in Operating Income was primarily attributable to an increase in Revenue and a decrease in Impairment and other losses, partially offset by an increase in Cost of services, Office and general expenses, and Depreciation and amortization.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Interest expense, net for the six months ended June 30, 2024 was $44.5 million compared to $41.9 million for the six months ended June 30, 2023, an increase of $2.6 million, primarily attributable to higher levels of debt outstanding under the Credit Agreement (as discussed in Note 8 of the Notes to the Unaudited Consolidated Financial Statements included herein), and a higher interest rate on amounts outstanding under the Credit Agreement.

Current wording

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

Previous wording

The foreign exchange loss for the three months ended June 30, 2024 was $1.4 million compared to a loss of $1.5 million for the three months ended June 30, 2023, primarily attributable to a loan funding originating in British Pounds and payable in United States Dollars.

Current wording

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

Previous wording

Other, net for the six months ended June 30, 2024 was an expense of $1.1 million, compared to an expense of $0.2 million for the six months ended June 30, 2023. The increase in expense was primarily driven by a loss on investments.

Current wording

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

Previous wording

The Company had an income tax expense for the six months ended June 30, 2024 of $3.8 million (on a pre-tax loss of $1.4 million resulting in an effective tax rate of(263.3)%) compared to income tax expense of $0.7 million (on pre-tax loss of $6.7 million resulting in an effective tax rate of(10.0)%) for the six months ended June 30, 2023.

Current wording

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

Previous wording

The difference in the effective tax rate of(263.3)% in the six months ended June 30, 2024 as compared to(10.0)% in the six months ended June 30, 2023 is primarily due to an increase in current losses subject to valuation allowance, a reduction in tax benefits for share based compensation and tax benefits recognized in 2023 with respect to lease impairments, offset by additions to uncertain tax positions in 2023.

Current wording

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

Previous wording

The effect of noncontrolling and redeemable noncontrolling interests for the six months ended June 30, 2024 was loss of $0.4 million compared to a loss of $6.0 million for the six months ended June 30, 2023. The amounts are driven by the mix of income and losses derived from entities not entirely owned by the Company.

Current wording

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

Previous wording

As a result of the foregoing, net loss attributable to Stagwell Inc. common shareholders for the six months ended June 30, 2024 was $4.2 million compared to net loss of $1.8 million for the six months ended June 30, 2023.

Current wording

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

Previous wording

Adjusted EBITDA for the six months ended June 30, 2024 was $176.4 million, compared to $163.4 million for the six months ended June 30, 2023, representing an increase of $13.0 million, primarily driven by an increase in Operating Income, as discussed above.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

The decrease in organic net revenue was primarily attributable to lower spending due to budget cuts by large clients in the healthcare and financial services sectors, partially offset by the new client wins and higher spend in the consumer products, technology and communications sectors. The increase in net acquisitions (divestitures) was primarily driven by the acquisitions of Epiphany, Movers and Shakers and Left Field Labs, partially offset by the sale of Concentric in the fourth quarter of 2023.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Deferred acquisition consideration decreased $2.5 million, primarily attributable to acquisitions occurring in the third and fourth quarter of 2023 and first quarter of 2024, partially offset by a reduction in the fair value of certain obligations in the second quarter of 2024.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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