EX-99.1 2 stgw20220930pr.htm EX-99.1

    

FOR IMMEDIATE ISSUE

CONTACTS:

For Investors:

For Media:

Michaela Pewarski

Beth Sidhu

(646) 429-1812

(202) 423-4414

michaela.pewarski@stagwellglobal.com

beth.sidhu@stagwellglobal.com

STAGWELL INC. (NASDAQ: STGW) REPORTS RESULTS FOR THE

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022

Delivers Double-Digit 3Q 2022 Revenue Growth and Record Net New Business; Shares Roadmap for Stagwell Marketing Cloud

•3Q GAAP revenue grew 42.3% and 16.8% on a Pro Forma basis; YTD Pro Forma growth of 22.8%

•3Q Pro Forma organic net revenue growth of 11.3% and 16.7% YTD

•3Q net income of $35.3M; 3Q EPS of $0.08 and adjusted EPS of $0.21 per share

•YTD net income of $93.4M; YTD EPS of $0.27 and adjusted EPS of $0.68 per share

•Adjusted EBITDA of $115.1M in 3Q representing a 20.7% margin on net revenue

•Reduced net debt by $125M with net leverage ratio of 2.7x

•Record net new business wins of $86M during the third quarter

New York, NY, November 3, 2022 (NASDAQ: STGW) – Stagwell Inc. (“Stagwell”) today announced financial results for the three and nine months ended September 30, 2022.

THIRD QUARTER AND YTD HIGHLIGHTS:

•3Q revenue of $663.8 million, an increase of 42.3% versus the prior year period; YTD revenue of $1,979.6 million, an increase of 130.9% versus the prior year period

•Pro Forma 3Q revenue growth of 16.8% versus the prior year period and 10.1% ex-Advocacy; Pro Forma YTD revenue growth of 22.8% versus the prior year period and 19.3% ex-Advocacy

•3Q net revenue of $555.8 million, an increase of 35.8% versus the prior period; YTD net revenue of $1,638.7 million, an increase of 118.7% versus the prior year period

•Pro Forma 3Q net revenue growth of 11.6% versus the prior year period and 7.3% ex-Advocacy; Pro Forma YTD net revenue growth of 16.5% versus the prior year period and 14.4% ex-Advocacy

•Pro Forma 3Q organic net revenue growth of 11.3% versus the prior year period and 7.3% ex-Advocacy; Pro Forma YTD organic net revenue growth of 16.7% versus the prior year period and 14.7% ex-Advocacy

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•3Q net income of $35.3 million versus $7.9 million in the prior year period; YTD net income of $93.4 million versus $31.2 million in the prior year period

•3Q net income attributable to Stagwell Inc. common shareholders of $10.6 million versus net loss of $2.1 million in the prior year period; YTD net income attributable to Stagwell Inc. common shareholders of $33.7 million versus $20.2 million in the prior year period

•3Q adjusted EBITDA of $115.1 million, an increase of 31.5% versus the prior year period; YTD adjusted EBITDA of $327.8 million, an increase of 118.4% versus the prior year period

•Pro Forma 3Q adjusted EBITDA growth of 14.9% versus the prior period and 0.2% ex-Advocacy; Pro Forma YTD adjusted EBITDA growth of 19.4% versus the prior period and 12.9% ex-Advocacy

•3Q Adjusted EBITDA Margin of 20.7% of net revenue; YTD Adjusted EBITDA Margin of 20.0% of net revenue

•Net New Business wins totaled $86 million in the quarter

“Stagwell delivered another strong quarter of double-digit revenue growth and record net new business. Our Pro Forma organic net revenue increased 11.3% and was once again ahead of legacy global marketing services groups and most major technology companies. High-growth digital services continue to lead our strong performance, increasing net revenue 21% year-over-year, including 17% organic growth. We won a record $86 million of net new business during the quarter as our agencies expanded client relationships and won new mandates based on digital, creative and strategic excellence. Innovation, which is the foundation of our Brand Performance Network and the Stagwell Marketing Cloud, is opening up opportunities that we believe will allow us to outgrow the market for the long-term,” said Mark Penn, Chairman and Chief Executive Officer of Stagwell. “Importantly, Stagwell continues to be fiscally disciplined, managing expenses and investments prudently to produce EBITDA margins of 20.7%. Stagwell generated strong free cash flow, reduced net debt by $125 million and returned capital to shareholders through stock buybacks.”

Frank Lanuto, Chief Financial Officer, commented: “The Company reported strong third quarter results with GAAP revenue of $664 million, net revenue of $556 million and Adjusted EBITDA of $115 million. Adjusted EBITDA margins expanded 60 basis points year-over-year to 20.7% of net revenue as we continued our track record of cost discipline. We generated strong cash flow during the quarter allowing us to reduce net leverage to 2.7x.”

Financial Outlook

2022 financial guidance is as follows:

•Pro Forma Organic Net Revenue growth of 16% – 20%, reflecting a more modest contribution from advocacy fundraising relative to the 2020 Presidential cycle due to a decline in closely contested races, persisting inflation, and hurricane impact in large markets.

•Re-iterating Pro Forma Organic Net Revenue growth ex-Advocacy of 13% – 17%

•Re-iterating Adjusted EBITDA of $450 million – $480 million

•Adjusted EPS of $0.86 – $0.94

•Re-iterating Pro Forma Free Cash Flow growth of approximately 30%

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•Guidance assumes no impact from foreign exchange, acquisitions or dispositions.

* The Company has excluded a quantitative reconciliation with respect to the Company’s 2022 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.

Conference Call

Management will host a video webcast and conference call on Thursday, November 3, 2022, at 8:30 a.m. (ET) to discuss results for Stagwell Inc. for the three and nine months ended September 30, 2022. The video webcast will be accessible at https://bit.ly/stgwq3earnings. An investor presentation has been posted on our website at www.stagwellglobal.com and may be referred to during the conference call.

A recording of the conference call will be accessible one hour after the call 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.

Basis of Presentation

The acquisition of MDC Partners (MDC) by Stagwell Marketing Group (SMG) was completed on August 2, 2021. The results of MDC are included within the Statements of Operations for the period beginning on the date of the acquisition through the end of the respective period presented and the results of SMG are included for the entirety of all periods presented.

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:

Pro Forma Results: The Pro Forma amounts presented for each period were prepared by combining the historical standalone statements of operations for each of legacy MDC and SMG. The unaudited pro forma results are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or consolidated financial condition would have been had the combination actually occurred on the date indicated, nor do they purport to project the future consolidated results of operations or consolidated financial condition for any future period or as of any future date. The Company has excluded a quantitative reconciliation of adjusted Pro Forma EBITDA to net income under the “unreasonable efforts” exception in Item 10(e)(1)(i)(B) of Regulation S-K.

(1) Organic Revenue: “Organic revenue growth” and “organic revenue decline” refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in

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revenue of the partner firms that the Company has held throughout each of the comparable periods presented, and (b) “non-GAAP acquisitions (dispositions), net”. Non-GAAP acquisitions (dispositions), net consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or same period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year.

(2) Net New Business: Estimate of annualized revenue for new wins less annualized revenue for losses incurred in the period.

(3) Adjusted EBITDA: defined as Net income excluding non-operating income or expense to achieve operating income, plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items.

(4) Adjusted EPS is defined as 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, per weighted average shares outstanding. 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 press release contains forward-looking statements. Statements in this press release that are not historical facts, including without limitation the information under the heading "Financial Outlook" and statements about the Company’s beliefs and expectations, earnings (loss) guidance, recent business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Words such as “estimates”, “expects”, “contemplates”, “will”, “anticipates”, “projects”, “plans”, “intends”, “believes”, “forecasts”, “may”, “should”, and variations of such words or similar expressions are intended to identify forward-looking statements. These 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. 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.

Some of the factors that could materially and adversely affect our business, financial condition, results of operations and cash flows 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;

•an inability to realize expected benefits of the combination of the Company’s business with the business of MDC (the “Business Combination” and, together with the related transactions, the “Transactions”);

•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 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 which complement and expand the Company’s business capabilities;

•the Company’s 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 2021 Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2022, 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)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2022						2021						2022						2021
Revenue			$	663,791					$	466,634					$	1,979,607					$	857,436
Operating Expenses
Cost of services			417,134						324,782						1,253,765						558,856
Office and general expenses			119,186						121,770						429,121						226,720
Depreciation and amortization			32,207						24,790						95,642						46,122
Impairment and other losses			25,211						14,926						28,034						14,926
			593,738						486,268						1,806,562						846,624
Operating Income (Loss)			70,053						(19,634)						173,045						10,812
Other income (expenses):
Interest expense, net			(19,672)						(11,912)						(56,552)						(15,197)
Foreign exchange, net			(3,927)						(893)						(4,163)						(1,955)
Other, net			147						45,621						182						46,806
			(23,452)						32,816						(60,533)						29,654
Income before income taxes and equity in earnings of non-consolidated affiliates			46,601						13,182						112,512						40,466
Income tax expense			11,540						5,183						20,150						9,205
Income before equity in earnings of non-consolidated affiliates			35,061						7,999						92,362						31,261
Equity in income (loss) of non-consolidated affiliates			213						(76)						1,053						(75)
Net income			35,274						7,923						93,415						31,186
Net income attributable to noncontrolling and redeemable noncontrolling interests			(24,665)						(9,994)						(59,668)						(10,987)
Net income (loss) attributable to Stagwell Inc. common shareholders			$	10,609					$	(2,071)					$	33,747					$	20,199
Income Per Common Share:
Basic
Net income (loss) attributable to Stagwell Inc. common shareholders			$	0.08					$	(0.06)					$	0.27					$	(0.06)
Diluted
Net income (loss) attributable to Stagwell Inc. common shareholders			$	0.08					$	(0.06)					$	0.27					$	(0.06)
Weighted Average Number of Common Shares Outstanding:
Basic			125,384						76,106						124,710						76,106
Diluted			125,384						76,106						124,710						76,106

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SCHEDULE 2

STAGWELL INC.

UNAUDITED PRO FORMA COMPONENTS OF NET REVENUE CHANGE

(amounts in thousands)

									Net Revenue - Components of Change																														Change
			Three Months Ended September 30, 2021						Foreign Currency						Net Acquisitions (Divestitures)						Organic						Total Change						Three Months Ended September 30, 2022						Organic						Total
Integrated Agencies Network			$	299,964					$	(2,407)					$	135					$	15,590					$	13,318					$	313,282					5.2		%				4.4		%
Brand Performance Network			136,455						(3,426)						10,491						16,952						24,017						160,472						12.4		%				17.6		%
Communications Network			54,192						(298)						1,076						23,595						24,373						78,565						43.5		%				45.0		%
All Other			7,519						(63)						(4,061)						40						(4,084)						3,435						0.5		%				(54.3)		%
			$	498,130					$	(6,194)					$	7,641					$	56,177					$	57,624					$	555,754					11.3		%				11.6		%

									Net Revenue - Components of Change																														Change
			Nine Months Ended September 30, 2021						Foreign Currency						Net Acquisitions (Divestitures)						Organic						Total Change						Nine Months Ended September 30, 2022						Organic						Total
Integrated Agencies Network			$	843,335					$	(6,125)					$	663					$	95,845					$	90,383					$	933,718					11.4		%				10.7		%
Brand Performance Network			386,732						(8,306)						24,974						84,428						101,096						487,828						21.8		%				26.1		%
Communications Network			154,051						(686)						1,751						52,821						53,886						207,937						34.3		%				35.0		%
All Other			23,004						(163)						(15,018)						1,401						(13,780)						9,224						6.1		%				(59.9)		%
			$	1,407,122					$	(15,280)					$	12,370					$	234,495					$	231,585					$	1,638,707					16.7		%				16.5		%

Note: Due to changes in the Company’s internal management and reporting structure in the second quarter of 2022, reportable segment results for periods presented prior to the second quarter of 2022 have been recast to reflect the reclassification of certain reporting units (brands) between operating segments.

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SCHEDULE 3

STAGWELL INC.

UNAUDITED PRO FORMA SEGMENT OPERATING RESULTS

(amounts in thousands)

For the Three Months Ended September 30, 2022

			Integrated Agencies Network						Brand Performance Network						Communications Network						All Other						Corporate						Total
Net Revenue			$	313,282					$	160,472					$	78,565					$	3,435					$	—					$	555,754
Billable costs			53,840						10,991						43,205						1						—						108,037
Revenue			367,122						171,463						121,770						3,436						—						663,791
Billable costs			53,840						10,991						43,205						1						—						108,037
Staff costs			194,057						102,925						44,197						2,750						7,835						351,764
Administrative costs			25,592						20,798						8,836						1,029						2,708						58,963
Unbillable and other costs, net			17,409						12,437						70						19						—						29,935
Adjusted EBITDA (1)			76,224						24,312						25,462						(363)						(10,543)						115,092
Stock-based compensation			5,308						2,923						671						7						3,349						12,258
Depreciation and amortization			18,316						8,205						2,654						1,206						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)			1,186						1,166						313						—						2,487						5,152
Operating income (loss)			$	48,838					$	3,080					$	53,898					$	(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: Due to changes in the Company’s internal management and reporting structure in the second quarter of 2022, reportable segment results for periods presented prior to the second quarter of 2022 have been recast to reflect the reclassification of certain reporting units (brands) between operating segments.

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SCHEDULE 4

STAGWELL INC.

UNAUDITED PRO FORMA 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			$	933,718					$	487,828					$	207,937					$	9,224					$	—					$	1,638,707
Billable costs			162,043						75,718						103,138						1						—						340,900
Revenue			1,095,761						563,546						311,075						9,225						—						1,979,607
Billable costs			162,043						75,718						103,138						1						—						340,900
Staff costs			583,299						301,233						125,834						7,950						23,554						1,041,870
Administrative costs			82,889						61,840						23,200						2,217						11,460						181,606
Unbillable and other costs, net			51,610						35,496						273						29						—						87,408
Adjusted EBITDA (1)			215,920						89,259						58,630						(972)						(35,014)						327,823
Stock-based compensation			15,044						9,152						1,077						15						8,122						33,410
Depreciation and amortization			55,206						25,044						7,718						2,457						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)			2,701						3,676						429						22						5,284						12,112
Operating income (loss)			$	134,753					$	35,987					$	76,872					$	(20,930)					$	(53,637)					$	173,045

(1) See Non-GAAP Financial Measures section above for the definition of Adjusted EBITDA, Other items, net and Pro Forma adjusted EBITDA.

Note: Due to changes in the Company’s internal management and reporting structure in the second quarter of 2022, reportable segment results for periods presented prior to the second quarter of 2022 have been recast to reflect the reclassification of certain reporting units (brands) between operating segments.

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SCHEDULE 5

STAGWELL INC.

UNAUDITED PRO FORMA SEGMENT OPERATING RESULTS

(amounts in thousands)

For the Three Months Ended September 30, 2021

			Integrated Agencies Network						Brand Performance Network						Communications Network						All Other						Corporate						Total
Net Revenue			$	299,964					$	136,455					$	54,192					$	7,519					$	—					$	498,130
Billable costs			41,464						6,990						21,847						(7)						—						70,294
Revenue			341,428						143,445						76,039						7,512						—						568,424
Billable costs			41,464						6,990						21,847						(7)						—						70,294
Staff costs			176,981						86,992						35,134						5,043						9,200						313,350
Administrative costs			26,970						20,672						6,198						2,474						(402)						55,912
Unbillable and other costs, net			17,727						10,023						804						147						11						28,712
Adjusted EBITDA (1)			78,286						18,768						12,056						(145)						(8,809)						100,156
Stock-based compensation			32,693						2,644						15,446						15						3,184						53,982
Depreciation and amortization			14,937						8,083						2,174						492						1,556						27,242
Deferred acquisition consideration			3,422						—						136						—						—						3,558
Impairment and other losses			80						14,846						—						—						—						14,926
Other items, net (1)			1,372						858						(239)						—						20,896						22,887
Operating income (loss)			$	25,782					$	(7,663)					$	(5,461)					$	(652)					$	(34,445)					$	(22,439)

(1) See Non-GAAP Financial Measures section above for the definition of Adjusted EBITDA, Other items, net and Pro Forma adjusted EBITDA.

Note: Due to changes in the Company’s internal management and reporting structure in the second quarter of 2022, reportable segment results for periods presented prior to the second quarter of 2022 have been recast to reflect the reclassification of certain reporting units (brands) between operating segments.

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SCHEDULE 6

STAGWELL INC.

UNAUDITED PRO FORMA SEGMENT OPERATING RESULTS

(amounts in thousands)

For the Nine Months Ended September 30, 2021

			Integrated Agencies Network						Brand Performance Network						Communications Network						All Other						Corporate						Total
Net Revenue			$	843,335					$	386,732					$	154,051					$	23,004					$	—					$	1,407,122
Billable costs			114,721						30,962						59,611						—						—						205,294
Revenue			958,056						417,694						213,662						23,004						—						1,612,416
Billable costs			114,721						30,962						59,611						—						—						205,294
Staff costs			510,382						253,969						101,323						15,389						26,021						907,084
Administrative costs			77,093						57,321						15,891						9,220						2,008						161,533
Unbillable and other costs, net			40,231						23,111						148						533						24						64,047
Adjusted EBITDA (1)			215,629						52,331						36,689						(2,138)						(28,053)						274,458
Stock-based compensation			36,147						2,739						15,688						15						4,368						58,957
Depreciation and amortization			29,266						22,961						5,587						2,013						4,927						64,754
Deferred acquisition consideration			26,839						102						(52)						—						—						26,889
Impairment and other losses			955						14,846						—						—						—						15,801
Other items, net (1)			5,429						4,222						78						—						30,011						39,740
Operating income (loss)			$	116,993					$	7,461					$	15,388					$	(4,166)					$	(67,359)					$	68,317

(1) See Non-GAAP Financial Measures section above for the definition of Adjusted EBITDA, Other items, net and Pro Forma adjusted EBITDA.

Note: Due to changes in the Company’s internal management and reporting structure in the second quarter of 2022, reportable segment results for periods presented prior to the second quarter of 2022 have been recast to reflect the reclassification of certain reporting units (brands) between operating segments.

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SCHEDULE 7

STAGWELL INC.

UNAUDITED RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP MEASURE)

(amounts in thousands)

For the Three Months Ended September 30, 2022

						Reported (GAAP)						Adjustments						Reported (Non-GAAP)
Net income attributable to Stagwell Inc. common shareholders						$	10,609					$	16,159					$	26,768
Weighted average number of common shares outstanding						125,384						125,384						125,384
Adjusted Diluted EPS						$	0.08					$	0.13					$	0.21
Adjustments to Net Income (loss) attributable to Stagwell Inc. Common shareholders
						Pre-Tax						Tax						Net
Amortization						$	23,814					$	(4,763)					$	19,051
Impairment and other losses						25,211						(414)						24,797
Stock-based compensation						12,258						(2,452)						9,806
Deferred acquisition consideration						(29,789)						5,958						(23,831)
Other items, net (1)						5,152						(1,030)						4,122
Discrete tax items						—						2,680						2,680
						$	36,646					$	(21)					$	36,625
Less: Net income attributable to Class C shareholders																		(20,466)
Net income attributable to Stagwell Inc. common shareholders																		$	16,159

(1) See Non-GAAP Financial Measures section above for the definition of Adjusted EBITDA, Other items, net and Pro Forma adjusted EBITDA.

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SCHEDULE 8

STAGWELL INC.

UNAUDITED RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP MEASURE)

(amounts in thousands)

thousands)

For the Nine Months Ended September 30, 2022

						Reported (GAAP)						Adjustments						Reported (Non-GAAP)
Net income attributable to Stagwell Inc. common shareholders						$	33,747					$	50,815					$	84,562
Weighted average number of common shares outstanding						124,710						124,710						124,710
Adjusted Diluted EPS						$	0.27					$	0.41					$	0.68
Adjustments to Net Income (loss) attributable to Stagwell Inc. Common shareholders
						Pre-Tax						Tax						Net
Amortization						$	70,541					$	(14,108)					$	56,433
Impairment and other losses						28,034						(979)						27,055
Stock-based compensation						33,410						(6,682)						26,728
Deferred acquisition consideration						(14,420)						2,884						(11,536)
Other items, net (1)						12,112						(2,422)						9,690
Discrete tax items						—						6,805						6,805
						$	129,677					$	(14,502)					$	115,175
Less: Net income attributable to Class C shareholders																		(64,360)
Net income attributable to Stagwell Inc. common shareholders																		$	50,815

(1) See Non-GAAP Financial Measures section above for the definition of Adjusted EBITDA, Other items, net and Pro Forma adjusted EBITDA.

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SCHEDULE 9

STAGWELL INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)

			September 30, 2022						December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents			$	165,251					$	184,009
Accounts receivable, net			725,346						696,937
Expenditures billable to clients			57,873						63,065
Other current assets			71,249						61,830
Total Current Assets			1,019,719						1,005,841
Fixed assets, net			123,128						118,603
Right-of-use lease assets - operating leases			283,974						311,654
Goodwill			1,615,694						1,652,723
Other intangible assets, net			879,049						937,695
Other assets			47,784						29,064
Total Assets			$	3,969,348					$	4,055,580
LIABILITIES, RNCI, AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable			$	294,402					$	271,769
Accrued media			188,344						237,794
Accruals and other liabilities			211,263						272,533
Advance billings			340,675						361,885
Current portion of lease liabilities - operating leases			73,659						72,255
Current portion of deferred acquisition consideration			74,426						77,946
Total Current Liabilities			1,182,769						1,294,182
Long-term debt			1,329,134						1,191,601
Long-term portion of deferred acquisition consideration			85,163						144,423
Long-term lease liabilities - operating leases			308,162						342,730
Deferred tax liabilities, net			103,243						103,093
Other liabilities			70,167						57,147
Total Liabilities			3,078,638						3,133,176
Redeemable Noncontrolling Interests			65,817						43,364
Commitments, Contingencies and Guarantees
Shareholders' Equity:
Common shares - Class A & B			135						118
Common shares - Class C			2						2
Paid-in capital			348,663						382,893
Retained earnings (loss)			6,573						(6,982)
Accumulated other comprehensive loss			(64,956)						(5,278)
Stagwell Inc. Shareholders' Equity			290,417						370,753
Noncontrolling interests			534,476						508,287
Total Shareholders' Equity			824,893						879,040
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity			$	3,969,348					$	4,055,580

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SCHEDULE 10

STAGWELL INC.

UNAUDITED SUMMARY CASH FLOW DATA

(amounts in thousands)

			Nine Months Ended September 30,
			2022						2021
Cash flows from operating activities:
Net income			$	93,415					$	31,186
Adjustments to reconcile net income to cash provided by operating activities:
Stock-based compensation			33,410						53,465
Depreciation and amortization			95,642						46,122
Impairment and other losses			28,034						14,926
Provision for bad debt expense			2,681						1,893
Deferred income taxes			(1,557)						2,710
Adjustment to deferred acquisition consideration			(14,420)						9,456
Gain on sale of asset			—						(43,440)
Other			(8,716)						6,998
Changes in working capital:
Accounts receivable			(34,637)						(26,095)
Expenditures billable to clients			5,525						(9,230)
Other assets			4,100						(14,568)
Accounts payable			34,630						(37,435)
Accrued expenses and other liabilities			(138,947)						(26,668)
Advance billings			(23,017)						16,598
Deferred acquisition related payments			(10,776)						(5,772)
Net cash provided by operating activities			65,367						20,146
Cash flows from investing activities:
Capital expenditures			(25,495)						(13,666)
Current period acquisitions, net of cash acquired			(37,461)						130,155
Proceeds from sale of business, net			—						37,232
Other			(1,328)						—
Net cash (used in) provided by investing activities			(64,284)						153,721
Cash flows from financing activities:
Repayment of borrowings under revolving credit facility			(855,000)						(535,472)
Proceeds from borrowings under revolving credit facility			989,500						408,369
Shares acquired and cancelled			(14,970)						(820)
Distributions to noncontrolling interests and other			(38,486)						(19,245)
Payment of deferred consideration			(61,089)						—
Purchase of noncontrolling interest			(3,600)						—
Proceeds from issuance of the 5.625% Notes			—						1,100,000
Debt issuance costs			—						(15,365)
Distributions			—						(204,929)
Repurchase of 7.50% Senior Notes			—						(884,398)
Repurchase of Common Stock			(28,667)						—
Net cash used in financing activities			(12,312)						(151,860)
Effect of exchange rate changes on cash and cash equivalents			(7,529)						1,025
Net decrease in cash and cash equivalents			(18,758)						23,032
Cash and cash equivalents at beginning of period			184,009						92,457
Cash and cash equivalents at end of period			$	165,251					$	115,489

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