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Stagwell Inc.
STAGWELL INC. (NASDAQ: STGW) REPORTS RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022
Nov 3 2022
3 min read

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, Nov. 3, 2022 /PRNewswire/ -- (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
  • 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 diligence. 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%
  • 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 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.

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.

CONTACTS:

   For Investors:

For Media:

   Michaela Pewarski

Beth Sidhu

   (646) 429-1812

(202) 423-4414

   michaela.pewarski@stagwellglobal.com

beth.sidhu@stagwellglobal.com

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

SCHEDULE 2

STAGWELL INC.

UNAUDITED PRO FORMA COMPONENTS OF NET REVENUE CHANGE

(amounts in thousands)

Net Revenue - Components of Change

Change

Three MonthsEndedSeptember 30,2021

ForeignCurrency

NetAcquisitions(Divestitures)

Organic

Total Change

Three MonthsEndedSeptember 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 MonthsEndedSeptember 30,2021

ForeignCurrency

NetAcquisitions(Divestitures)

Organic

Total Change

Nine MonthsEndedSeptember 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.

SCHEDULE 3

STAGWELL INC.

UNAUDITED PRO FORMA SEGMENT OPERATING RESULTS

(amounts in thousands)

For the Three Months Ended September 30, 2022

IntegratedAgenciesNetwork

BrandPerformanceNetwork

CommunicationsNetwork

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.

SCHEDULE 4

STAGWELL INC.

UNAUDITED PRO FORMA SEGMENT OPERATING RESULTS

(amounts in thousands)

For the Nine Months Ended September 30, 2022

IntegratedAgenciesNetwork

BrandPerformanceNetwork

CommunicationsNetwork

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.

SCHEDULE 5

STAGWELL INC.

UNAUDITED PRO FORMA SEGMENT OPERATING RESULTS

(amounts in thousands)

For the Three Months Ended September 30, 2021

IntegratedAgenciesNetwork

BrandPerformanceNetwork

CommunicationsNetwork

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.

SCHEDULE 6

STAGWELL INC.

UNAUDITED PRO FORMA SEGMENT OPERATING RESULTS

(amounts in thousands)

For the Nine Months Ended September 30, 2021

IntegratedAgenciesNetwork

BrandPerformanceNetwork

CommunicationsNetwork

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.

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.

SCHEDULE 8

STAGWELL INC.

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

(amounts in 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.

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

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

 

Stagwell is the challenger network built to transform marketing. (PRNewsfoto/Stagwell Inc.)

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SOURCE Stagwell Inc.