10q10k10q10k.net

What changed in Stagwell Inc's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Stagwell Inc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+437 added−424 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in Stagwell Inc's 2023 10-K

437 paragraphs added · 424 removed · 338 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

80 edited+13 added−6 removed47 unchanged
Biggest changeWe also expect more modest capital allocation towards minimizing shareholder dilution, reducing leverage in order to provide increased financial flexibility, and funding development of proprietary technology and products for the Stagwell Marketing Cloud. 11 Table of Contents Our Clients As of December 31, 2022 Stagwell served over 4,000 clients across a wide range of sectors, representing some of the world’s most recognized brands including: Google, Amazon, Diageo, Nike, Apple, P&G, Novo Nordisk, United Airlines, Salesforce and more.
Biggest changeOur Clients As of December 31, 2023, Stagwell served over 4,000 clients across a wide range of sectors, representing some of the world’s most recognized brands including: Google, Amazon, Diageo, Nike, Apple, P&G, United Airlines, Salesforce and more. In many cases, we serve the same clients in various geographic locations, across multiple disciplines, and through multiple Stagwell Brands.
At the corporate level, centralized human capital management processes include development of human resources governance and policy, executive compensation for senior leaders, benefits programs, and succession planning focusing on the performance, development and retention of key senior executives.
At the corporate level, centralized human capital management processes include the development of human resources governance and policy, executive compensation for senior leaders, benefits programs, and succession planning focusing on the performance, development and retention of key senior executives.
The information found on, or otherwise accessible through, the Company’s website is not incorporated into, and does not form a part of, this Form 10-K, and the inclusion of the Company’s website address and social media channels are inactive textual references only.
The information found on, or otherwise accessible through, the Company’s website and social media channels is not incorporated into, and does not form a part of, this Form 10-K, and the inclusion of the Company’s website address and social media channels are inactive textual references only.
The team has a successful track record of investing, acquisition execution and integration as well as recruiting and retaining the key talent that drives our operating businesses. Efficient Capital Allocation We are focused on delivering continued strong organic growth and free cash flow to support efficient capital allocation that generates value for our shareholders.
The team has a successful track record of investing, acquisition execution and integration as well as recruiting and retaining the key talent that drives our operating businesses. Efficient Capital Allocation We are focused on delivering strong organic growth and free cash flow to support efficient capital allocation that generates value for our shareholders.
Both technologies have evolved past initial niche or enterprise use cases and are now reaching lay consumers, and businesses now are investing in making them widely accessible to consumer audiences, as seen with generative AI tools like ChatGPT and Stagwell Marketing Cloud’s ARound.
Both technologies have evolved past initial niche or enterprise use cases and are now reaching lay consumers, and businesses now are investing in making them widely accessible to consumer audiences, as seen with generative AI tools like ChatGPT and AR tools like Stagwell Marketing Cloud’s ARound.
Consumer Insights & Strategy. We perform large-scale online surveys, specialized research, and data analytics across the consumer journey to provide strategic insights and guidance that informs business content, product, communications and media strategies for many of the world’s largest companies, including numerous Fortune 100 clients.
We perform large-scale online surveys, specialized research, and data analytics across the consumer journey to provide strategic insights and guidance that informs business content, product, communications and media strategies for many of the world’s largest companies, including numerous Fortune 100 clients.
New business wins and client losses occur due to a variety of factors. We believe the two most significant factors are (i) our clients’ desire to change marketing communication firms and (ii) the digital and data-driven products that our Brands offer.
New business wins and client losses occur due to a variety of factors. We believe the two most significant factors are (i) our clients’ desire to change marketing communication firms and (ii) the digital and data-driven products and services that our Brands offer.
New sources of online data include web, mobile, email, social, and connected TV – in addition to emerging products, apps and wearables that enhance day-to-day experiences. The emergence of vast amounts of data spans behavioral, transactional, demographic, psychographic and geographic categories.
Sources of online data include web, mobile, email, social, and connected TV – in addition to emerging products, apps and wearables that enhance day-to-day experiences. The emergence of vast amounts of data spans behavioral, transactional, demographic, psychographic and geographic categories.
Stagwell has historically been largely focused in North America where the Company was founded, as well as the United Kingdom, but has expanded its global footprint to support clients globally and has a presence in more than 34 countries, and an additional more than 30 countries through our Global Affiliate Network, in each case as of December 31, 2022.
Stagwell has historically been largely focused in North America where the Company was founded, as well as the United Kingdom, but has expanded its global footprint to support clients globally and has a presence in more than 34 countries, and an additional more than 30 countries through our Global Affiliate Network, in each case as of December 31, 2023.
Additionally, a centralized corporate innovation team develops and invests in proprietary digital marketing products that are distributed by Brands across the network, further enhancing the value proposition Stagwell Brands are able to offer clients. Our Strategy The key components of the Stagwell strategy are Digital, Integrated, Global, and Strategic (“DIGS”).
Additionally, a centralized corporate innovation team develops and invests in proprietary digital marketing products that are distributed by Brands across the network, further enhancing the value proposition Stagwell’s Brands offer to clients. Our Strategy The key components of the Stagwell strategy are Digital, Integrated, Global, and Strategic (“DIGS”).
We have also made strategic acquisitions for the Stagwell Marketing Cloud, including Epicenter Experience, an enterprise software company that leverages mobile and location data to map and sequence complex consumer behavior patterns, and Maru Group, a leading software experience and insights data platform.
We have also made strategic acquisitions for the Stagwell Marketing Cloud, including The People Platform (formerly Epicenter Experience), an enterprise software company that leverages mobile and location data to map and sequence complex consumer behavior patterns, and Maru Group, a leading software experience and insights data platform.
Diversity & Inclusion We believe the cultures of Stagwell’s individual Brands are what sets working at Stagwell apart; however, the connective tissue that unites us is our vision for our Brands and people to work collaboratively across disciplines in an inclusive environment.
Diversity & Inclusion We believe the cultures of Stagwell’s individual Brands contribute to what sets working at Stagwell apart; however, the connective tissue that we believe unites us is our vision for our Brands and people to work collaboratively across disciplines in an inclusive environment.
Our global CEO sends out regular emails to all staff with key updates ranging from new business wins to client work. In addition, the Hive intranet serves as a resource portal for all Stagwell employees. We additionally maintain several global communities organized around discrete disciplines (“Technology,” “Growth,” “Communications,” etc.) to foster collaboration and engagement with the center of the company.
Our global CEO sends out regular emails to all staff with key updates ranging from new business wins to client work. In addition, the Hive intranet serves as a resource portal for all Stagwell employees. We additionally maintain several global communities organized around discrete disciplines (“Technology,” “Growth,” “Communications,” etc.) to foster collaboration and engagement.
Significant Factors Affecting our Business and Results of Operations The most significant factors affecting our business and results of operations include national, regional, and local economic conditions, our clients’ profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees.
Significant Factors Affecting our Business and Results of Operations The most significant factors affecting our business and results of operations include national, regional, and local economic conditions, our clients’ profitability and marketing budgets, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees.
Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category. Go-To-Market Strategy Our global go-to-market strategy is key to our objective of providing our clients with a balanced combination of leading-edge technology and creative talent.
Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category. 6 Table of Contents Go-To-Market Strategy Our global go-to-market strategy is key to our objective of providing our clients with a balanced combination of leading-edge technology and creative talent.
Clients also change firms as a result of the firm’s failure to meet marketing performance targets or other expectations in client service delivery. 13 Table of Contents Regulatory Environment The marketing and communications services that our Brands provide are subject to laws and regulations in all of the jurisdictions in which we operate.
Clients also change firms as a result of the firm’s failure to meet marketing performance targets or other expectations in client service delivery. Regulatory Environment The marketing and communications services that our Brands provide are subject to laws and regulations in all of the jurisdictions in which we operate.
We are led by a management team with deep industry expertise and a track record of growing and managing marketing services businesses. The Stagwell platform provides a foundation to support efficient, accretive scaling of our global network and our high-growth digital transformation and digital media capabilities.
We are led by a management team with deep industry expertise and a track record of growing and managing marketing services businesses. The Stagwell platform provides a foundation to support efficient, accretive scaling of our global network and our high-growth digital transformation and digital 8 Table of Contents media capabilities.
Over the last 15 years, digital innovation has created new, personalized ways to reach targeted consumers and spurred a fundamental shift in the marketing services landscape. Growth now comes primarily from digital marketing, helping brands meet customers across the entire online ecosystem. We believe every company today at its core is a digital marketing company.
Over the last two decades, digital innovation has created new, personalized ways to reach targeted consumers and spurred a fundamental shift in the marketing services landscape. Growth now comes primarily from digital marketing, helping brands meet customers across the entire online ecosystem. We believe every company today at its core is a digital marketing company.
Our Shared Services layer provides unified back-office systems via Stagwell CORE (“CORE”), the Company’s newly formed platform that focuses on transitioning away from disparate teams, processes and systems and establishing a standardized platform. CORE provides centralized services across back office operational functions, including information technology (“IT”), accounts payable and receivable, real estate, enterprise-level contract administration, and accounting services.
Our Shared Services layer provides unified back-office systems via Stagwell CORE (“CORE”), a platform that focuses on transitioning away from disparate teams, processes and systems and establishing a standardized platform. CORE provides centralized services across back office operational functions, including information technology (“IT”), accounts payable and receivable, real estate, enterprise-level contract administration, and accounting services.
As of December 31, 2022, we had over 75 Global Affiliate partners in our network. • Emerging Marketing Technologies: In addition to the advertising and marketing services market, we believe our investments in the Stagwell Marketing Cloud will position us to address new, rapidly expanding market opportunities, including marketing data, campaign martech, the metaverse, and AR and VR applications.
As of December 31, 2023, we had over 80 Global Affiliate partners in our network. • Emerging Marketing Technologies: In addition to the advertising and marketing services market, we believe our investments in the Stagwell Marketing Cloud will position us to address new, rapidly expanding market opportunities, including marketing data, campaign martech, the metaverse, and AR and VR applications.
At the network level, the Stagwell Brand Performance Network provides a corporate structure to cost-effectively coordinate our global media placement capabilities, while our Global Affiliate Network positions our Brands to pitch for and win opportunities requiring capabilities in specific local markets.
At the network level, the Stagwell BPN provides a corporate structure to cost-effectively coordinate our global media placement capabilities, while our Global Affiliate Network positions our Brands to pitch for and win opportunities requiring capabilities in specific local markets.
We also classify Digital Transformation, Performance Media & Data, and Consumer Insights & Strategy as “Digital” though Brands categorized as Creativity & Communications generate a significant portion of revenue from creativity and content delivered on digital channels and some, such as 72andSunny and Anomaly, do meaningful amounts of digital work that fluctuates as a percentage of revenue.
We also classify Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Stagwell Marketing Cloud Group as “Digital” though Brands categorized as Creativity & Communications generate a significant portion of revenue from creativity and content delivered on digital channels and some, such as 72andSunny and Anomaly, do meaningful amounts of digital work that fluctuates as a percentage of revenue.
These services include strategy development, advertising creation, live events, immersive digital experiences, cross platform engagement, and social media content. We also provide strategic communications, public relations and public affairs services including media relations, thought leadership, investor and financial relations, social media, executive positioning and visibility.
These services include strategy development, advertising creation, live events, immersive digital experiences, cross platform engagement, and social media content. We also provide strategic communications, public relations and public affairs services including media relations, thought leadership, investor and financial relations, social media, executive positioning and visibility. Stagwell Marketing Cloud Group.
As connectivity grows, the value of raw data declines – but we believe the ability to derive actionable insights from the data, as Stagwell businesses do, increases. Fourth, frontier technology such as AI and AR are gaining critical foothold among mass consumers, reshaping how businesses connect.
As connectivity grows, the value of raw data declines – but we believe the ability to derive actionable insights from the data, as Stagwell businesses do, increases. 3 Table of Contents Fourth, frontier technologies such as AI and AR are gaining critical foothold among mass consumers, reshaping how businesses connect.
BPN’s Brands provide media solutions such as audience analysis, media planning, and buying across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast, among others) and includes multichannel Brands Assembly, Brand New Galaxy, Crispin Porter Bogusky, Forsman & Bodenfors, Bruce Mau Design, Goodstuff, MMI Agency, digital creative & transformation consultancy Gale, B2B specialist Multiview, Observatory, Vitro, CX specialists Kenna, and travel media experts Ink. • The Communications Network reportable segment is comprised of a single operating segment, our specialist network that provides advocacy, strategic corporate communications, investor relations, public relations, online fundraising and other services to both corporations and political and advocacy organizations and consists of our Allison & Partners SKDK (including Sloane & Company), and Targeted Victory brands. • All Other consists of the Company’s digital innovation group and Stagwell Marketing Cloud, including Maru and Epicenter, and products such as PRophet, ARound and Reputation Defender (which was sold in September 2021). • Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments.
BPN’s Brands provide media solutions such as audience analysis, media planning, and buying across a range of digital and traditional platforms (out-of-home, paid search, social media, lead generation, programmatic, television, broadcast, among others) and includes multichannel Brands Assembly, Brand New Galaxy, Crispin Porter Bogusky, Forsman & Bodenfors, Goodstuff, Bruce Mau, digital creative & transformation consultancy Gale, B2B specialist Multiview, CX specialists Kenna, and travel media experts Ink. • The Communications Network reportable segment is comprised of a single operating segment, our specialist network that provides advocacy, strategic corporate communications, investor relations, public relations, online fundraising and other services to both corporations and political and advocacy organizations and consists of our Allison brands, SKDK brands, and Targeted Victory brands. • All Other consists of the Company’s digital innovation group and Stagwell Marketing Cloud Group, including Maru and Epicenter, and products such as ARound, PRophet and SmartAssets. • Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments.
The Company’s Annual Reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to the Exchange Act, will be made available free of charge through the Company’s website as soon as reasonably practical after those reports are electronically filed with, or furnished to, the SEC.
The Company’s Annual Reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to the Exchange Act, will be made available free of charge through the Company’s investor relations website (www.stagwellglobal.com/investors) as soon as reasonably practical after those reports are electronically filed with, or furnished to, the SEC.
In 2022, net revenue from our top 100 clients’ increased by over 15% year-over-year as we saw record new business and increasing interest in both specific Brand capabilities as well as cross-Brand, integrated solutions that address multi-discipline client needs. Stagwell’s Brands have written contracts with many of their clients.
In 2023, net revenue from our top 100 clients’ increased by over 7% year-over-year as we saw record last twelve months new business and increasing interest in both specific Brand capabilities as well as cross-Brand, integrated solutions that address multi-discipline client needs. Stagwell’s Brands have written contracts with many of their clients.
We offer flexible paid time off as well as accommodation for civic duties, 12 Table of Contents bereavement, and leaves of absence. Stagwell participates in industry-wide salary surveys and utilizes AI-powered compensation software to obtain real-time compensation survey data and analytics and ensure all compensation decisions are data-driven. In addition, we have various stock ownership programs for eligible Stagwell employees.
We offer flexible paid time off as well as accommodation for civic duties, bereavement, and leaves of absence. Stagwell participates in industry-wide salary surveys and utilizes AI-powered compensation software to obtain real-time compensation survey data and analytics and support data-driven compensation decisions. In addition, we have various stock ownership programs for eligible Stagwell employees.
We plan to invest in our core digital platforms, continue developing our suite of digital products in the Stagwell Marketing Cloud, increase our technology leadership through investment and innovation, and further expand our international footprint both organically and via our Global Affiliate Network to deliver value for our clients, employees, and shareholders.
We plan to continue investing in our core digital platforms, developing our suite of digital products in the Stagwell Marketing Cloud, increasing our technology leadership through investment and innovation, and further expanding our international footprint both organically and via our Global Affiliate Network to deliver value for our clients, employees, and shareholders.
We design and build digital platforms and experiences that support the delivery of content, commerce, services and sales. We create websites, mobile applications, back-end systems, content and data management systems, and other digital environments enabling clients to engage with consumers across the digital ecosystem. We design and implement technology and data strategies to support digital services needed for our clients.
We design and build digital platforms and experiences that support the delivery of content, commerce, services and sales. We create websites, mobile applications, back-end systems, content and data management systems, and other digital environments enabling clients to engage with consumers across the digital ecosystem.
Benefits & Compensation Stagwell provides a full range of competitive benefits including medical, dental, vision, employer-funded HSAs, commuter assistance, 401k, employee stock programs and more. Health benefits are offered to full-time employees and their dependents, inclusive of domestic and/or same-sex partners.
Benefits & Compensation Stagwell provides a full range of competitive benefits including medical, dental, vision, employer-funded health savings accounts, commuter assistance, 401 (k) plans, employee stock programs and more. Health benefits are offered to full-time employees and their dependents, inclusive of domestic and/or same-sex partners.
Stagwell provides a suite of marketing services that serve marketers’ needs as well as tech-driven solutions for in-house marketers. Through the Stagwell Marketing Cloud, Stagwell is investing in the frontiers of marketing, with technology products that fuel augmented reality (“AR”) experiences for stadium goers and live events, and artificial intelligence (“AI”) for content creation and for communications professionals.
Stagwell provides a suite of marketing services that serve marketers’ needs as well as self-service technology-driven solutions for in-house marketers. Through the Stagwell Marketing Cloud, Stagwell is investing in the frontiers of marketing, with technology products that fuel artificial intelligence (“AI”) for content creation, “instant” market research, and for communications professionals and AR experiences for stadium goers and live events.
Stagwell supports its Brands through access to high-quality education, resources and technology, which they can use to bring inclusion to life based on their organization’s needs.
Stagwell supports its Brands through access to high-quality education, resources and technology, which they can use to bring an approach to inclusive organizational design to life based on their organization’s needs.
We believe the DIGS model gives us a sustainable, long-term path to significant growth and supports our primary objectives which are sustaining strong levels of organic growth, increasing our digital revenue mix, increasing international scale, expanding the average client relationship size, and maintaining strong margins and free cash flow.
We believe the DIGS model gives us a sustainable, long-term path to significant growth and supports our primary objectives which are achieving strong levels of organic growth, increasing our digital revenue mix, increasing international scale, expanding the average client relationship size, and improving strong margins and free cash flow. We believe pursuing these objectives will increase value for our shareholders.
In 2019, Stagwell Media made a $100 million investment into MDC, the parent company of creative powerhouses including 72andSunny, Anomaly, Crispin, Porter & Bogusky, Doner and Forsman & Bodenfors. Recognizing the potential of those companies, Stagwell’s 5 Table of Contents reorganization and careful management of the portfolio turned MDC around.
In 2019, Stagwell Media made a $100 million investment into MDC, the parent company of creative powerhouses including 72andSunny, Anomaly, Crispin, Porter & Bogusky, Doner and Forsman & Bodenfors. Recognizing the potential of those companies, Stagwell’s reorganization and careful management of the portfolio turned MDC around. In August 2021, Stagwell Media completed the Transactions with MDC to become Stagwell Inc.
These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks.
ConcentricLife, which was part of Anomaly Alliance was sold on October 31, 2023. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks.
Led by entrepreneurs, as of December 31, 2022 we employed more than 12,000 people in more than 34 countries across the globe who drive effectiveness and improve business results for our more than 4,000 blue-chip customers. In addition, our affiliate network adds coverage in over 30 additional countries.
Led by entrepreneurs, we employ approximately 13,000 people, including contractors, in over 34 countries across the globe who drive effectiveness and improve business results for our more than 4,000 blue-chip customers as of December 31, 2023. In addition, as of December 31, 2023, our Global Affiliate Network added coverage in over 30 additional countries.
We believe our Global Affiliates will be a valuable source for acquisitions, allowing Stagwell to vet companies before formal investment. Brand New Galaxy was our first affiliate and affiliate acquisition.
Our affiliates provide local talent and insights for regional engagements without requiring investment capital. We believe our Global Affiliates will be a valuable source for acquisitions, allowing Stagwell to vet companies before formal investment. Brand New Galaxy was our first affiliate and affiliate acquisition.
Our principal capabilities fall into four categories: 1) Digital Transformation, 2) Performance Media & Data, 3) Consumer Insights & Strategy, and 4) Creativity & Communications. Taken together, these capabilities provide an integrated suite of marketing services for our blue-chip customer base. Digital Transformation.
Our principal capabilities fall into five categories: 1) Stagwell Marketing Cloud Group 2) Digital Transformation 3) Performance Media & Data 4) Consumer Insights & Strategy and 5) Creativity & Communications. Taken together, these capabilities provide an integrated suite of marketing services for our blue-chip customer base. 4 Table of Contents Digital Transformation. We build digital services and products for clients.
We have built a successful track record of “bolt-on” acquisitions such as TrueLogic Software, LLC, Ramenu S.A. and Polar Bear Development S.R.L., a Latin America engineering shop, and Kettle Solutions, LLC (“Kettle”), a content and digital design firm. • Third, we are investing in the Stagwell Marketing Cloud, a suite of technology products in development or early-stage commercialization spanning influencer marketing, audience segmentation, public relations, immersive experiences and brand insights.
We have built a successful track record of “bolt-on” acquisitions such as TrueLogic Software, LLC, Ramenu S.A., Polar Bear Development S.R.L., a Latin America engineering shop, and Kettle Solutions, LLC (“Kettle”), a content and digital design firm. • Third, we intend to continue to invest in the Stagwell Marketing Cloud, a suite of technology products in development or early-stage commercialization.
Lastly, we develop proprietary, in-house software and related technology products, including AI-based communications technology, cookie-less data platforms for advanced audience 7 Table of Contents targeting and activation, software tools for e-commerce applications, specialty media solutions in the fast-growing augmented reality space, and innovative applications of text messaging for consumer engagement, which we license to clients using subscription-based SaaS and DaaS models.
We develop proprietary, in-house software and related technology products, including AI-enabled communications, research, and media technology, cookie-less data platforms for advanced targeting and activation, software tools for e-commerce applications, specialty media solutions in the fast-growing augmented reality space, and innovative applications of text-messaging for consumer engagement, which we license to clients using subscription-based SaaS and DaaS models. 5 Table of Contents We group our Brands into these principal capability categories based on the source of most of their revenue.
The Brands included in the operating segments that comprise the Integrated Agencies Network reportable segment are as follows: Anomaly Alliance (Anomaly, Concentric, Hunter, Mono, YML and Scout (Brands), Constellation (72andSunny, Colle McVoy, Instrument, Redscout, Hello Design, Team Enterprises, and Harris Insights), the Doner Partner Network (Doner, KWT Global, Harris X, Veritas, Doner North, Northstar, which is currently sunsetting, and Yamamoto (Brands)), Code and Theory and National Research Group.
The Brands included in the operating segments that comprise the Integrated Agencies Network reportable segment are as follows: Anomaly Alliance (Anomaly), Constellation (72andSunny, Colle McVoy, Hunter, Instrument, Redscout, Team Enterprises, Harris Insights, Left Field Labs, and Movers and Shakers), the Doner Partner Network (Doner, KWT Global, Harris X, Veritas, Doner North, and Yamamoto (Brands)), Code and Theory, and National Research Group.
Risk Factors. Available Information Stagwell Inc.’s Internet website address is www.stagwellglobal.com.
Risk Factors. 11 Table of Contents Available Information Stagwell Inc.’s website address is www.stagwellglobal.com.
We believe doubling down on creating an inclusive environment, from building internal and external partnerships, fostering the collaboration amongst our Brands, to trying out ideas and programs from our teams and Brands, will attract and retain a diverse workforce and that the diversity of thought creates impact for our clients globally. Employee Engagement Regular communication is a commitment at Stagwell.
We believe promoting an inclusive environment, from building internal and external partnerships, fostering the collaboration amongst our Brands, to trying out ideas and programs from our teams and Brands, will support our ability to attract and retain a diverse workforce and that the diversity of thought creates impact for our clients globally.
These partners, which we refer to as Global Affiliates, enable us to increase our local-market reach and qualify for business opportunities that require enhanced capabilities in specific local markets without taking on additional costs. Launched in early 2021, by December 2022 the Global Affiliate Network had achieved its goal of growing to include more than 75 affiliates.
These partners, which we refer to as Global Affiliates, enable us to increase our local-market reach and qualify for business opportunities that require enhanced capabilities in specific local markets without taking on additional costs. As of December 31, 2023, the Global Affiliate Network included more than 80 affiliates.
We believe we already have a substantial engineering presence globally – more than 1,500 engineers total as of December 31, 2022 – and have developed the necessary skills to support hiring, training and managing large teams outside the United States.
We believe we already have a substantial engineering presence globally – approximately 1 in 10 Stagwell employees are engineers as of December 31, 2023 – and have developed the necessary skills to support hiring, training and managing large teams outside the United States.
The following table provides a breakdown of the approximate number of full-time employees and contractors across Stagwell’s three reportable segments, the All Other category, and Corporate: Segment Total Integrated Agencies Network 5,800 Brand Performance Network 4,650 Communications Network 1,100 All Other 300 Corporate 300 Total 12,150 Because of the personal service nature of the marketing and communications business, our talent is of critical importance to our success.
The following table provides a breakdown of the approximate number of full-time employees across Stagwell’s three reportable segments, the All Other category, and Corporate: Segment Total Integrated Agencies Network 4,440 Brand Performance Network 4,260 Communications Network 930 All Other 260 Corporate 360 Total 10,250 Because of the personal service nature of the marketing and communications business, our talent is of significance to our success.
In August 2021, Stagwell Media completed the Transactions with MDC to become Stagwell Inc. Stagwell’s unified corporate team is the foundation of a powerful value creation platform focused on scaling our portfolio of marketing services firms, which we refer to as Brands, and driving continual network evolution.
Stagwell’s unified corporate team is the foundation of a powerful value creation platform focused on scaling our portfolio of marketing services firms, which we refer to as “Brands,” and driving continual network evolution.
For example, in April 2022, we acquired Brand New Galaxy, a scaled provider of end-to-end e-commerce services such as DTC strategy, digital content production, automation, and complex technology implementations.
For example, in April 2022, we acquired Brand New Galaxy, a scaled provider of end-to-end e-commerce services such as DTC strategy, digital content production, automation, and complex technology implementations. The acquisition bolsters Stagwell’s broad e-commerce capabilities to service more global clients and provides significant scale in Europe.
Effective Integration at Scale We expect to derive significant long-term operating efficiencies from the Transactions through initiatives that have been and continue to be rolled out over the 36 months following the completion of the Transactions.
We expect to expand app integrations for ARound further in 2024. Effective Integration at Scale We continue to drive significant long-term operating efficiencies from the Transactions through initiatives that have been and continue to be rolled out following the completion of the Transactions.
The primary source of revenue is from agency arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses. Stagwell’s Brands have written contracts with many of their clients. As is customary in the industry, these contracts generally provide for termination by either party on relatively short notice.
The primary source of revenue is from agency arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses. Stagwell’s Brands have written contracts with many of their clients.
We believe pursuing these objectives will position us to increase value for our shareholders. 9 Table of Contents Our strategy is focused around six specific initiatives: 1) Investing in Digital Capabilities, 2) Expanding Addressable Markets, 3) Effective Integration at Scale, 4) Strategic Value Creation Platform, 5) Maintaining a Highly Variable Cost Structure, and 6) Efficient Capital Allocation.
Our strategy is focused on six specific initiatives: 1) Investing in Digital Capabilities, 2) Expanding Addressable Markets, 3) Effective Integration at Scale, 4) Strategic Value Creation Platform, 5) Maintaining a Highly Variable Cost Structure, and 6) Efficient Capital Allocation.
Stagwell’s internal transfer policy and career portal on our intranet, The Hive, also enables employees to explore new positions with other Brands at the Company to support retention of talent within the broader network. We have regular learning and talent events so employees across our network can feel connected to the broader portfolio of Stagwell companies and enhance collaboration.
Stagwell’s internal transfer policy and career portal on our intranet, The Hive, also enables employees to explore new positions with other Brands at the Company to support retention of talent within the broader network.
Five key trends describe the industry today: First, online advertising now accounts for more than half of global advertising spend with the shift further accelerating as new media channels like connected television and platforms like Snap diversify the digital channels dominating content and commerce. Online now means virtually everywhere: website, mobile, social media, television, out-of-home, and immersive in-person experiences.
We believe five key trends describe the industry today: First, online advertising now accounts for more than half of global advertising spend, and two-thirds of spend in the United States alone, with the shift further accelerating as new media channels like connected television and platforms diversify the digital channels dominating content and commerce.
Stagwell is at the forefront of this technology, implementing these innovations across our client work, and incubating original and proprietary technology that drives business results and sits on the next frontier of marketing. Finally, marketing technology is transforming the industry.
Stagwell is at the forefront of innovating with this technology, implementing these innovations across our client work, and incubating original and proprietary technology to drive business results and sits on what we refer to as the next frontier of marketing.
We have quarterly global Town Halls to ensure staff are engaged with and organizational goals are shared.
Employee Engagement Regular communication is a focus at Stagwell. We have quarterly global Town Halls to ensure staff are engaged with and organizational goals are shared.
We are focused on scaling our development capabilities in lower cost 10 Table of Contents markets, specifically Latin America, India, and Southeast Asia. Our engineering talent is primarily focused on building and designing digital platforms, applications, tools, and experiences for our clients and are typically more highly concentrated in our Brands categorized within our Digital Transformation primary capability.
Our engineering talent is primarily focused on building and designing digital platforms, applications, tools, and experiences for our clients and are typically more highly concentrated in our Brands categorized within our Digital Transformation primary capability.
The Brands’ work is supported by a centralized marketing and new business team that fosters collaboration, sources new business opportunities and communicates across industries to drive awareness of our offerings.
Our distinct Brand structure enables us to work with multiple clients within the same business sector, and many of our largest clients are served by multiple Brands within our portfolio. The Brands’ work is supported by a centralized marketing and new business team that fosters collaboration, sources new business opportunities and communicates across industries to drive awareness of our offerings.
For example, Stagwell’s shared AR product ARound has launched stadium-level experiences with professional sporting teams in Major League Baseball and the National Football League, namely the Minnesota Twins and the Los Angeles Rams.
For example, Stagwell’s AI-enabled instant research tool Harris Quest is now operating in over a dozen countries, and signed its 150th client in 2023, and Stagwell’s shared AR product ARound has launched stadium-level experiences with professional sporting teams in Major League Baseball and the National Football League, namely the Minnesota Twins and the Los Angeles Rams.
In many cases, we serve the same clients in various geographic locations, across multiple disciplines, and through multiple Stagwell Brands. Representation of a client rarely means that Stagwell handles marketing communications for all brands or product lines of the client in every geographical location.
Representation of a client rarely means that Stagwell handles marketing communications for all brands or product lines of the client in every geographical location.
While legacy models still accounted for a significant share of the market in 2021, we believe they are largely underexposed to the digital areas of the market experiencing the highest levels of client demand growth.
The rapid rise of digital channels, convergence of advertising and commerce, explosion in addressable data and marketing technology created a paradigm shift in the industry. While legacy models still accounted for a significant share of the market in 2022, we believe they are largely underexposed to the digital areas of the market experiencing the highest levels of client demand growth.
Digital platforms also allow advocacy groups and political campaigns to reach constituents to mobilize support or raise funds online. Retail media networks add complexity and opportunity to brands’ consumer engagement approaches. Third, data is everywhere.
Brands can sell their products directly on their sites, via digital platforms such as Amazon or through interactive experiences enabled by social media. Digital platforms also allow advocacy groups and political campaigns to reach constituents to mobilize support or raise funds online. Retail media networks add complexity and opportunity to brands’ consumer engagement strategies. Third, data is everywhere.
In addition, these operating segments may occasionally compete with each other for new business or have business move between them. • The Brand Performance Network (“BPN”), previously referred to as the “Media Network” reportable segment, is comprised of a single operating segment.
In addition, these operating segments may occasionally compete with each other for new business or have business move between them. • The Brand Performance Network (“BPN”) is comprised of a single operating segment. BPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities.
Stagwell was born digital and now has a global network of entrepreneurial companies that deliver the right combination of creativity and technology for the modern, digital marketer through a model that emphasizes flexibility and integration. Our Offering Principal Capabilities Stagwell’s Brands provide differentiated, digital-first marketing and related services to a diverse client base across many industries.
Stagwell was born digital and now has a global network of entrepreneurial companies that deliver the right combination of creativity and technology for the modern, digital marketer through a model that emphasizes flexibility and integration.
BPN includes a unified media and data management structure with omnichannel media placement, creative media consulting, influencer and business-to-business marketing capabilities. Our Brands in this segment aim to provide scaled creative performance through developing and executing 8 Table of Contents sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data.
Our Brands in this segment aim to provide scaled creative performance through developing and executing sophisticated omnichannel campaign strategies leveraging significant amounts of consumer data.
These products are licensed to our clients using subscription-based SaaS and DaaS models and distributed by Brands across our network. We believe the Stagwell Marketing Cloud positions us to serve in-house marketing departments and create recurring, high-value revenue streams in the future.
We believe the Stagwell Marketing Cloud positions us to serve in-house marketing departments and create recurring, high-value revenue streams in the future.
Furthermore, Stagwell provides eligible employees with an annual, flexible professional development budget to utilize if they want to explore more opportunities within their field, acquire new skills, and enhance their contributions to their department and the organization. In addition, each Brand maintains its own policies and development programs suitable to its workforce and leadership goals.
The program is designed to align individual growth with organizational strategy to help achieve success across both. Furthermore, Stagwell provides eligible employees with an annual, flexible professional development budget to utilize if they want to explore more opportunities within their field, acquire new skills, and enhance their contributions to their department and the organization.
Individual products within the Stagwell Marketing Cloud also typically compete with offerings that may be provided within broader service offerings at large global holding companies or provided on a standalone basis by technology startups or other industry participants such as Infosys, Wipro and Cognizant. 6 Table of Contents During the decades when marketing was dominated by television, the marketing services industry experienced significant consolidation as legacy advertising holding companies built substantial portfolios of often overlapping creative, communications, PR, and media businesses to achieve financial efficiencies by centralizing administrative operations.
Individual products within the Stagwell Marketing Cloud also typically compete with offerings that may be provided within broader service offerings at large global holding companies or provided on a standalone basis by technology startups or other industry participants such as Infosys, Wipro and Cognizant.
Second, advertising is commerce. Digital platforms provide ways for brands to reach consumers directly through e-commerce. Platforms as diverse as TikTok and LinkedIn have created new ways for brands to interact with their customers. Brands can sell their products directly on their sites, via digital platforms such as Amazon or through interactive experiences enabled by social media.
Online now means virtually everywhere: website, mobile, social media, television, out-of-home, and immersive in-person experiences. Second, advertising is commerce. Digital platforms provide ways for brands to reach consumers directly through e-commerce. Platforms as diverse as TikTok, Instacart, and LinkedIn have created new ways for brands to interact with their customers.
As is customary in the industry, these contracts generally provide for termination by either party on relatively short notice. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Overview” for a further discussion of Stagwell’s arrangements with its clients.
As is customary in the industry, these contracts generally provide for termination by either party on relatively short notice.
Unlike legacy holding companies that own large amounts of television inventory and therefore must sell it, we take a media-agnostic approach leveraging digital technologies and media in addition to analog advertising. Our media services include media solutions such as audience analysis, and media buying and planning, ranging across the platforms a modern marketer needs to engage consumers.
We develop omnichannel media strategies and provide coordinated execution for the placement of advertisements across the media funnel including digital channels, performance marketing and analog placements globally. Unlike legacy holding companies that own large amounts of television inventory and therefore must sell it, we take a media-agnostic approach leveraging digital technologies and media in addition to analog advertising.
We aim to expand our digital capabilities in three main ways: • First, we intend to continue to invest in our leading digital Brands like Code and Theory, Instrument and YML.
We aim to expand our digital capabilities in three main ways: • First, we intend to continue to invest in our leading digital Brands like Code and Theory, Instrument and Left Field Labs. This planned investment includes funding new capabilities and supporting cross-selling via our Integrated Agencies Network, which has already created additional opportunities.
Stagwell offers the capabilities marketers need in the digital age: Digital Transformation, Performance Media & Data, Consumer Insights & Strategy, and Creativity & Communications. Our global scale allows us to compete for many of the largest marketing contracts available, including multi-regional contracts with annual fees of more than $10 million.
Our global scale allows us to compete for many of the largest marketing contracts available, including multi-regional contracts with annual fees of more than $10 million. Stagwell operates in a highly competitive and fragmented industry, but we believe we have a distinct advantage given our digital composition and its alignment with the broader marketplace.
Sources of Revenue Stagwell provides a broad range of services to a large base of clients across a wide spectrum of verticals globally.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary” for a further discussion of Stagwell’s arrangements with its clients. 9 Table of Contents Sources of Revenue Stagwell provides a broad range of services to a large base of clients across a wide spectrum of verticals globally.
Learning & Development At the corporate level, Stagwell invests in both our senior leadership and up-and-coming leaders through a professional development partnership with a globally recognized leadership development organization. The program is designed to align individual growth with organizational strategy to help achieve success across both.
We have regular learning and talent events so employees across our network can feel connected to the broader portfolio of Stagwell companies and enhance collaboration. 10 Table of Contents Learning & Development At the corporate level, Stagwell invests in both our senior leadership and up-and-coming leaders through a professional development partnership with a globally recognized leadership development organization.
We expect the synergies will come from implementation of shared services across the Company, elimination of redundancies in the Stagwell Brand Performance Network, scaling operational resources in lower cost markets, and third-party spend recapture, among other cost-saving initiatives. Within our client-facing integrated and specialist networks we see further opportunity to achieve operating efficiencies by increasing our non-U.S. based engineering footprint.
The synergies came from real estate consolidation, implementation of shared services across the Company that were enabled by our global enterprise resource planning and human resource information system deployments, elimination of redundancies in the Stagwell Brand Performance Network, scaling operational resources in lower cost markets, and third-party spend recapture, among other cost-saving initiatives.
In addition, we have typically seen an increase in revenue in the third and fourth quarters during even years because our advocacy business has higher revenue during the biannual U.S. election cycle. Human Capital As of December 31, 2022, we employed approximately 11,100 full-time employees and approximately 1,050 contractors.
Seasonality Historically, we have typically generated the highest quarterly revenue during the fourth quarter in each year due to consumer marketing increases from the back-to-school and holiday seasons. In addition, we have typically seen an increase in revenue in the third and fourth quarters during even years because our advocacy business has higher revenue during the biannual U.S. election cycle.
We have made progress against our plan and anticipate the initial expected synergies will be realized over a period of 36 months from the time of the Transactions.
We have made progress against our plan with realization, on a run-rate basis, of the initial expected synergies of $30 million committed to after the Transactions.
This planned investment includes funding new capabilities and supporting cross-selling via our Integrated Agencies Network, which has already created additional opportunities. • Second, we intend to pursue complementary acquisition opportunities to bolster our existing assets in areas such as digital transformation and digital media buying.
We intend to invest in these Brands’ emerging technologies, including AI solutions, to remain at the forefront of the transformation of marketing services. • Second, we intend to pursue complementary acquisition opportunities to bolster our existing assets in areas such as digital transformation and digital media buying.
The acquisition bolsters Stagwell's broad e-commerce capabilities to service more global clients and provides significant scale in Europe. • We maintain a Global Affiliate network that enables us to deliver creative, performance, media and technology capabilities at the scale required to serve the world’s largest marketers. Our affiliates provide local talent and insights for regional engagements without requiring investment capital.
Further, in April 2023, we acquired In the Company of Huskies, a Dublin-based creative shop with services such as creative and brand marketing, strategy, and insights, which functionally expanded Stagwell’s footprint to Ireland under the Forsman & Bodenfors brand. • We maintain a Global Affiliate network that enables us to deliver creative, performance, media and technology capabilities at the scale required to serve the world’s largest marketers.

… 19 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

150 edited+27 added−21 removed275 unchanged
Biggest changeThese new ventures are inherently risky, and we may never realize any expected benefits from them; • as a global business, we are substantially dependent on operations outside the United States, and any failure to manage the risks presented by our international operations could have a material adverse effect on our business, results of operations, financial condition and prospects; • we are exposed to the risk of client defaults, and in an economic downturn, the risk of a material loss related to such client defaults could significantly increase; • if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges; • natural disasters, terrorist attacks, war, civil disturbances and infrastructure breakdowns could disrupt our business and harm our results of operations; • we are consolidating our real estate footprint and may incur significant costs in doing so; • seasonal fluctuations in marketing, research, communications and advertising activity could have a negative impact on our revenue, cash flow and operating results; • we may not realize the benefits we expect from past acquisitions, including the Transactions; • we have allocated significant management time and resources to, and expect to incur non-recurring costs for, our ongoing integration efforts in connection with the Transactions; • in the future, we may acquire other companies in pursuit of growth, which may divert our management’s attention, result in dilution to our shareholders and consume resources that are necessary to sustain our business; • our business is highly dependent on the services of Mark Penn, our CEO and Chairman; • if we are unable to keep our supply of skills and resources in balance with client demand around the world and attract and retain professionals with strong leadership skills, our business, the utilization rate of our professionals and our results of operations may be materially adversely affected; • some of our Brands rely upon signatory service companies to employ union performers in commercials, and any inability to produce advertisements with union performers could impair our ability to serve our advertising clients and compete; • we face legal, reputational and financial risks from any failure to protect client data from security incidents or cyberattacks; • we are subject to extensive data privacy laws and regulations; • litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business; • we are subject to industry regulations and other legal or reputational risks that could restrict our activities or negatively impact our performance or financial condition; • we are subject to laws and regulations in the United States and other countries in which we operate, including export restrictions, economic sanctions, the FCPA, and similar anti-corruption laws.
Biggest changeThese new ventures are inherently risky, and we may never realize any expected benefits from them; • we are subject to risks related to our use of AI, including generative AI; • as a global business, we are substantially dependent on operations outside the United States, and any failure to manage the risks presented by our international operations could have a material adverse effect on our business, results of operations, financial condition and prospects; • we are exposed to the risk of client defaults, and in an economic downturn, the risk of a material loss related to such client defaults could significantly increase; • if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of customer service, or adequately address competitive challenges; • natural disasters, terrorist attacks, war, civil disturbances and infrastructure breakdowns could disrupt our business and harm our results of operations; • seasonal fluctuations in marketing, research, communications and advertising activity could have a negative impact on our revenue, cash flow and operating results; • we may not realize the benefits we expect from past and future acquisitions and other strategic transactions, including the Transactions; 12 Table of Contents • in the future, we may acquire other companies in pursuit of growth, which may divert our management’s attention, result in dilution to our stockholders and consume resources that are necessary to sustain our business; • our business is highly dependent on the services of Mark Penn, our CEO and Chairman; • if we are unable to keep our supply of skills and resources in balance with client demand around the world and attract and retain professionals with strong leadership skills, our business, the utilization rate of our professionals and our results of operations may be materially adversely affected; • some of our Brands rely upon signatory service companies to employ union performers in commercials, and any inability to produce advertisements with union performers could impair our ability to serve our advertising clients and compete; • we face legal, reputational and financial risks from any failure to protect client data from security incidents or cyberattacks; • we are subject to extensive data privacy laws and regulations; • litigation, investigations, or other legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business; • we are subject to industry regulations and other legal or reputational risks that could restrict our activities or negatively impact our performance or financial condition; • we are subject to laws and regulations in the United States and other countries in which we operate, including export restrictions, economic sanctions, the FCPA, and similar anti-corruption laws.
To the extent that we are unable generate sufficient and profitable new business from new and existing clients, our ability to grow our business, increase our revenues and achieve favorable margins will be limited, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
To the extent that we are unable to generate sufficient and profitable new business from new and existing clients, our ability to grow our business, increase our revenues and achieve favorable margins will be limited, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Similarly, our or our Brands’ reputation could be damaged by actions or statements of current or former clients, employees, competitors, vendors, as well as members of the investment community and the media.
Similarly, our or our Brands’ reputation could be damaged by actions or statements of current or former clients, employees, competitors or vendors, as well as members of the investment community and the media.
Because we do not control our Global Affiliates, they may take actions with which we or our clients disagree, which could expose us to reputational damage or impair our ability to attract and retain clients and generate demand for our services and solutions.
Because we do not control our Global Affiliates, they may take actions with which we or our clients disagree, which could expose us to reputational damage or which could impair our ability to attract and retain clients and generate demand for our services and solutions.
Political advertising and related activity have also historically caused our revenue to increase during election cycles, which is most pronounced in even years, in particular during the third and fourth quarters of such years, and decrease during other periods.
Political advertising and related activity have also historically caused our revenue to increase during election cycles, which is most pronounced in even years, in particular during the third and fourth quarters of such years, and to decrease during other periods.
If the owner of the copyright in the relevant open source software were to allege that we had not complied with the conditions of one or more open source licenses, we could be required to incur significant expenses defending against such allegations, may be subject to the payment of damages, enjoined from further use of the software, required to comply with conditions of the license (which may include releasing the source code of our proprietary software to third parties without charge), or forced to devote additional resources to re-engineer all or a portion of our solutions to avoid using the open source software.
If the owner of the copyright in the relevant open source software were to allege that we had not complied with the conditions of one or more open source licenses, we could be required to incur significant expenses defending against such allegations and could be subject to the payment of damages, enjoined from further use of the software, required to comply with conditions of the license (which may include releasing the source code of our proprietary software to third parties without charge), or forced to devote additional resources to re-engineer all or a portion of our solutions to avoid using the open source software.
In addition, laws and regulations related to consumer privacy, use of personal data and digital tracking technologies have been proposed or enacted in the United States and certain international markets (including the European Union’s General Data Protection Regulation, or “GDPR,” the proposed updated European Union “ePrivacy Regulation” and the California Consumer Privacy Act, as amended by the California Privacy Rights Act, or “CCPA”).
In addition, laws and regulations related to consumer privacy, processing of personal data and use of digital tracking technologies have been proposed or enacted in the United States and certain international markets (including the European Union’s General Data Protection Regulation, or “GDPR,” the proposed updated European Union “ePrivacy Regulation” and the California Consumer Privacy Act, as amended by the California Privacy Rights Act, or “CCPA”).
Our high degree of leverage could have important consequences for us, including: • requiring us to utilize a substantial portion of our cash flows from operations to make payments on our indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, development activity, and other general corporate purposes; • increasing our vulnerability to adverse economic, industry, or competitive developments; • exposing us to the risk of increased interest rates because substantially all of our borrowings, other than the $1,100,000 aggregate principal amount of 5.625% senior notes due 2029 (the “5.625% Notes”), are at variable rates of interest; • making it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; • limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and • limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting.
Our high degree of leverage could have important consequences for us, including: • requiring us to utilize a substantial portion of our cash flows from operations to make payments on our indebtedness, reducing the availability of our cash flows to fund working capital, capital expenditures, development activity, and other general corporate purposes; • increasing our vulnerability to adverse economic, industry, or competitive developments; • exposing us to the risk of increased interest rates because substantially all of our borrowings, other than the $1,100,000 aggregate principal amount of 5.625% senior notes due 2029 (the “5.625% Notes”), are at variable rates of interest; 27 Table of Contents • making it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness; • restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; • limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and • limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting.
Laws of foreign jurisdictions, such as Canada’s Anti-Spam Law and Personal Information Protection and Electronic Documents Act, and the GDPR similarly apply to our collection, processing, storage, use, and transmission of protected data. The European Union, for example, has recently tightened its rules on the transferability of data to the United States.
Laws of foreign jurisdictions, such as Canada’s Anti-Spam Law and Personal Information Protection and Electronic Documents Act, and the GDPR similarly apply to our collection, processing, storage, use, and transmission of protected data. The European Union, for example, has tightened its rules on the transferability of data to the United States.
Risks Related to Accounting and Tax Issues Our results of operations are subject to currency fluctuation risks. Although our financial results are reported in U.S. dollars, a portion of our revenues and operating costs is denominated in currencies other than the U.S. dollar, and the functional currency of our foreign operations is generally their respective local currency.
Risks Related to Accounting and Tax Issues Our results of operations are subject to foreign currency exchange fluctuation risks. Although our financial results are reported in U.S. dollars, a portion of our revenues and operating costs is denominated in currencies other than the U.S. dollar, and the functional currency of our foreign operations is generally their respective local currency.
Significant judgments, estimates, and assumptions used in preparing our consolidated financial statements include, or may in the future include, those related to revenue recognition, business combinations, deferred acquisition consideration, noncontrolling and redeemable noncontrolling interests, goodwill and intangible assets, right-of-use lease assets, and income taxes.
Significant judgments, estimates, and assumptions used in preparing our Audited Consolidated Financial Statements include, or may in the future include, those related to revenue recognition, business combinations, deferred acquisition consideration, noncontrolling and redeemable noncontrolling interests, goodwill and intangible assets, right-of-use lease assets, and income taxes.
Moreover, U.S. tax laws significantly limit our ability to redomicile outside of the United States. In addition, as a result of the Redomiciliation, we incurred a significant Canadian corporate tax liability and recorded a tax receivable of $12 million included in Other Assets in our consolidated financial statements.
Moreover, U.S. tax laws significantly limit our ability to redomicile outside of the United States. In addition, as a result of the Redomiciliation, we incurred a significant Canadian corporate tax liability and recorded a tax receivable of $12 million included in Other Assets in our Audited Consolidated Financial Statements.
Item 1A. Risk Factors You should carefully consider the risk factors set forth below, as well as the other information contained in this Form 10-K, including our consolidated financial statements and related notes. This Form 10-K contains forward-looking statements that involve risks and uncertainties.
Item 1A. Risk Factors You should carefully consider the risk factors set forth below, as well as the other information contained in this Form 10-K, including our Audited Consolidated Financial Statements and related notes. This Form 10-K contains forward-looking statements that involve risks and uncertainties.
Our failure to address these risks or other problems encountered in connection with the Transactions and any past or future acquisitions and other strategic transactions could cause us to fail to realize their anticipated benefits, incur unanticipated liabilities and harm our business generally.
Our failure to address these risks or other problems encountered in connection with any past or future acquisitions and other strategic transactions could cause us to fail to realize their anticipated benefits, incur unanticipated liabilities and harm our business generally.
Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period.
Because our Audited Consolidated Financial Statements are presented in U.S. dollars, we must translate revenues and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period.
We also have recorded a significant amount of right-of-use lease assets in our consolidated financial statements and we have in the past recorded, and may in the future record charges for impairment of these assets. We test, at least annually, the carrying value of goodwill for impairment.
We also have recorded a significant amount of right-of-use lease assets in our Audited Consolidated Financial Statements and we have in the past recorded, and may in the future record charges for impairment of these assets. We test, at least annually, the carrying value of goodwill for impairment.
If in the future our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our Class A Common Stock may decline.
If in the future our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our Class A Common Stock may decline significantly.
The market price of shares of our Class A Common Stock may never appreciate and may decrease. We may issue additional shares of our Class A Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.
The market price of shares of our Class A Common Stock may never appreciate and may decrease. We may issue additional shares of our Class A Common Stock or other equity securities without stockholder approval, which would dilute your ownership interests and may depress the market price of your shares.
In connection with the closing of the Transactions, we entered into the Tax Receivables Agreement with OpCo and Stagwell Media, pursuant to which we are required to make cash payments to Stagwell Media equal to 85% of certain U.S. federal, state and local income tax or franchise tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (i) increases in the tax basis of OpCo’s assets resulting from redemptions or exchanges by the other holders of OpCo’s common units, together with a corresponding number of shares of our Class C Common Stock, par value $0.00001 per share (the “Class C Common Stock”), for shares of our Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to us making payments under the Tax Receivables Agreement.
In connection with the closing of the Transactions, we entered into the Tax Receivables Agreement with OpCo and Stagwell Media, pursuant to which we are required to make cash payments to Stagwell Media equal to 85% of certain U.S. 29 Table of Contents federal, state and local income tax or franchise tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (i) increases in the tax basis of OpCo’s assets resulting from redemptions or exchanges by the other holders of OpCo’s common units, together with a corresponding number of shares of our Class C common stock, par value $0.00001 per share (the “Class C Common Stock”), for shares of our Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to us making payments under the Tax Receivables Agreement.
We believe that the Redomiciliation qualifies as a “reorganization” under section 368(a) of the Internal Revenue Code (the “Code”) and treated, for U.S. federal income tax purposes, as if MDC (i) transferred all of its assets and liabilities to a new U.S. corporation (“New MDC”) in exchange for all of such new corporation’s outstanding stock and (ii) then distributed the stock of New MDC that it received in the transaction to its shareholders in liquidation of MDC.
We believe that the Redomiciliation qualifies as a “reorganization” under section 368(a) of the Internal Revenue Code (the “Code”) and treated, for U.S. federal income tax purposes, as if MDC (i) transferred all of its assets and liabilities to a new U.S. corporation (“New MDC”) in exchange for all of such new corporation’s outstanding stock and (ii) then distributed the stock of New MDC that it received in the transaction to its stockholders in liquidation of MDC.
The preparation of our financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
The preparation of our financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that affect the amounts reported in the Audited Consolidated Financial Statements and accompanying notes.
As a global business, we are substantially dependent on operations outside the United States, and any failure to manage the risks presented by our international operations could have a material adverse effect on our business, results of operations, financial condition and prospects. We are a global business, with Brands operating in more than 34 countries as of December 31, 2022.
As a global business, we are substantially dependent on operations outside the United States, and any failure to manage the risks presented by our international operations could have a material adverse effect on our business, results of operations, financial condition and prospects. We are a global business, with Brands operating in more than 34 countries as of December 31, 2023.
The quantum of Canadian federal income tax payable by MDC as a result of the Redomiciliation depends upon a number of considerations including the fair market value of its properties, the amount of its liabilities, the Canada-U.S. dollar exchange rate, MDC’s shareholder composition, as well as certain Canadian tax attributes, accounts and balances of the Company, each as of the effective time of the Redomiciliation.
The quantum of Canadian federal income tax payable by MDC as a result of the Redomiciliation depends upon a number of considerations including the fair market value of its properties, the amount of its liabilities, the Canada-U.S. dollar exchange rate, MDC’s stockholder composition, as well as certain Canadian tax attributes, accounts and balances of the Company, each as of the effective time of the Redomiciliation.
While we take precautions against default on payment for these services (such as credit analysis, advance billing of clients, and in some cases acting as an agent for a disclosed principal), such precautions may fail to mitigate our exposure to clients’ credit risk, and we may experience significant uncollectible receivables from our clients.
While we take precautions against default on payment for these services (such as credit analysis, advance billing of clients, purchasing credit insurance and in some cases acting as an agent for a disclosed principal), such precautions may fail to mitigate our exposure to clients’ credit risk, and we may experience significant uncollectible receivables from our clients.
Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders and designates the United States federal district courts as the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, which could limit the ability of our stockholders to obtain a favorable judicial forum for disputes with us or with our directors, officers or employees and may discourage stockholders from bringing such claims.
Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by stockholders and designates the United States federal district courts as the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities 36 Table of Contents Act, which could limit the ability of our stockholders to obtain a favorable judicial forum for disputes with us or with our directors, officers or employees and may discourage stockholders from bringing such claims.
We compete on the basis of many factors, including the quality (and clients’ perceptions of the quality) of our work, our ability to protect the confidentiality of clients’ and their customers’ data, our relationships with key client personnel, our expertise in particular niche areas or disciplines and our ability to provide integrated services at the scale clients require.
We compete on the basis of many factors, including the quality (and clients’ perceptions of the quality) of our work, our ability to protect the confidentiality of clients’ and their customers’ data, our relationships with key client personnel, our expertise in particular niche areas or disciplines, the differentiation of our offerings and our ability to provide integrated services at the scale clients require.
The trading prices and valuations of these stocks, and of our Class A Common Stock, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to ours could depress our stock price regardless of our business, prospects, financial condition or results of operations.
The trading prices and valuations of these stocks, and of our Class A Common Stock, may not be predictable. A loss of investor confidence in the market for the stocks of other companies that investors perceive to be similar to ours could depress our stock price regardless of our business, prospects, financial condition or results of operations.
The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal controls over financial reporting. Maintaining our disclosure controls and procedures and internal controls over financial reporting in accordance with this standard requires significant resources and management oversight.
The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal controls over financial reporting. Strengthening our disclosure controls and procedures and internal controls over financial reporting in accordance with this standard requires significant resources and management oversight.
If we cannot make scheduled payments on our debt, we will be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable; the lenders under our outstanding credit agreement could terminate their commitments to 29 Table of Contents loan us money and foreclose against the assets securing our borrowings; and we could be forced into bankruptcy or liquidation, which could adversely affect our business, results of operations, financial condition and prospects.
If we cannot make scheduled payments on our debt, we will be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable; the lenders under our outstanding credit agreement could terminate their commitments to loan us money and foreclose against the assets securing our borrowings; and we could be forced into bankruptcy or liquidation, which could adversely affect our business, results of operations, financial condition and prospects.
In addition, our current and planned operations, personnel, systems and procedures might be inadequate to support our future growth and may require us to make additional unanticipated investment in our infrastructure, including additional costs for the expansion of our employee base and our global operations and partnerships as well as marketing and branding costs.
In addition, our current and planned operations, personnel, systems and procedures might be inadequate to support our future growth and may require us to make additional unanticipated investments in our infrastructure, including additional costs for the expansion of our employee base and our global operations and partnerships as well as marketing and branding costs.
Our success and ability to further scale our business will depend, in part, on our ability to manage these changes in a cost-effective and efficient manner. If we cannot manage our growth, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures.
Our success and ability to scale our business will depend, in part, on our ability to manage these changes in a cost-effective and efficient manner. If we cannot manage our planned growth, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures.
In such circumstances, the trading price of our securities may not recover and may experience a further decline. 35 Table of Contents Factors affecting the trading price of our securities may include (but are not limited to): • market conditions in the broader stock market in general or in our industry in particular; • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • the public’s reaction to our press releases, other public announcements and filings with the Securities and Exchange Commission; • rumors and speculation in the press or investment community or on social media about us, our clients or companies perceived to be similar to us; • actual or anticipated developments in our business, competitors’ businesses or the competitive landscape generally; • the operating results failing to meet the expectation of securities analysts or investors in a particular period; • our operating results failing to meet the guidance we may issue from time to time; • changes in financial estimates and recommendations by securities analysts concerning us or the market in general; • the timing of the achievement of objectives under our business plan and the timing and amount of costs we incur in connection therewith; • short selling of our Class A Common Stock or related derivative securities; • actions by hedge funds, short term investors, activist stockholders or stockholder representative organizations; • operating and stock price performance of other companies that investors deem comparable to ours; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation or investigations involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of our Class A Common Stock available for public sale; • any major change in our Board or management; • sales of substantial amounts of our Class A Common Stock by our directors, officers or significant stockholders or the perception that such sales could occur; • the extent to which retail and other individual investors (as distinguished from institutional investors), invest in our Class A Common Stock; • sudden increases in the demand for our Class A Common Stock, including as a result of any “short squeezes”; • speculative trading that is not primarily motivated by our announcements or the condition of our business; • general economic and political conditions such as recessions or other economic downturns, inflation, interest rate increase, “trade wars,” pandemics and acts of war or terrorism and geopolitical tensions; and • other risk factors described in this “Risk Factors” section.
Factors affecting the trading price of our securities include (but are not limited to): • market conditions in the broader stock market in general or in our industry in particular; • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; 33 Table of Contents • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and speculation in the press or investment community or on social media about us, our clients or companies perceived to be similar to us; • actual or anticipated developments in our business, competitors’ businesses or the competitive landscape generally; • the operating results failing to meet the expectation of securities analysts or investors in a particular period; • our operating results failing to meet the guidance we may issue from time to time; • changes in financial estimates and recommendations by securities analysts concerning us or the market in general; • the timing of the achievement of objectives under our business plan and the timing and amount of costs we incur in connection therewith; • short selling of our Class A Common Stock or related derivative securities; • actions by hedge funds, short term investors, activist stockholders or stockholder representative organizations; • operating and stock price performance of other companies that investors deem comparable to ours; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation or investigations involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of our Class A Common Stock available for public sale; • any major change in our Board or management; • sales of substantial amounts of our Class A Common Stock by our directors, officers or significant stockholders or the perception that such sales could occur; • the extent to which retail and other individual investors (as distinguished from institutional investors), invest in our Class A Common Stock; • sudden increases in the demand for our Class A Common Stock, including as a result of any “short squeezes”; • speculative trading that is not primarily motivated by our announcements or the condition of our business; • general economic and political conditions such as recessions or other economic downturns, inflation, interest rate increase, “trade wars,” pandemics and acts of war or terrorism and geopolitical tensions; and • other risk factors described in this “Risk Factors” section.
If we are not successful in defending such claims, we could be required to rebrand, redesign or stop offering these products or services, pay monetary damages or fines, enter into royalty or licensing arrangements, satisfy indemnification obligations that we have with some of our clients or make changes to our business practices, any of which could have an adverse effect on our business, reputation, results of operations, financial condition and prospects.
If we are not successful in defending or resolving such matters, we could be required to rebrand, redesign or stop offering these products or services, pay monetary damages or fines, enter into royalty or licensing arrangements, satisfy indemnification obligations that we have with some of our clients or make changes to our business practices, any of which could have an adverse effect on our business, reputation, results of operations, financial condition and prospects.
Our CEO and Chairman, Mark Penn, beneficially owns or controls approximately 64% of the voting power of our Common Stock. As a result, we are a “controlled company” within the meaning of the Nasdaq rules, and as a result, we qualify for exemptions from certain corporate governance requirements.
Our CEO and Chairman, Mark Penn, beneficially owns or controls approximately 57% of the voting power of our Common Stock. As a result, we are a “controlled company” within the meaning of the Nasdaq rules, and as a result, we qualify for exemptions from certain corporate governance requirements.
Technological developments such as these may materially affect the cost and use of technology by our clients and demand for our services, and if we do not sufficiently invest in new technology and industry developments, or if we do not make the right strategic investments to respond to these developments and successfully drive innovation, our services and solutions, our ability to generate demand for our services, attract and retain clients, and our ability to develop and achieve a competitive advantage and continue to grow could be negatively affected.
Technological developments such as these may materially affect the cost and use of technology by our clients and demand for our services, and if we do not sufficiently invest in new technology and industry developments, or if we do not make the right strategic investments to respond to these developments and successfully drive innovation, our services and solutions, our ability to generate demand for our services, and to attract and retain clients, and our ability to develop and achieve a competitive advantage and growth could be negatively affected.
We have made investments to develop new marketing services products and technologies, including the Stagwell Marketing Cloud and other marketing data, campaign martech, AR and VR applications, and we intend to continue investing significant resources in developing and/or acquiring new technologies, tools, features, services, products and offerings.
We have made investments to develop new marketing services products and technologies, including the Stagwell Marketing Cloud and other marketing data, campaign martech, AR and VR applications, and AI and generative AI offerings, and we intend to continue investing significant resources in developing and/or acquiring new technologies, tools, features, services, products and offerings.
These risks are not exclusive and additional risks to which we are subject include the factors listed under “Note About Forward-Looking Statements” and the risks described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K.
These risks are not exclusive and additional risks to which we are subject include the factors listed under “Note About Forward-Looking Statements” and the risks discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K.
In addition, a noncontrolling equityholder in an acquired business often has the right to require the us to purchase all or part of such holder’s interest, either at specified dates or upon the termination of such holder’s employment with the subsidiary or death (put rights).
In addition, a noncontrolling equityholder in an acquired business sometimes has the right to require the us to purchase all or part of such holder’s interest, either at specified dates or upon the termination of such holder’s employment with the subsidiary or death (put rights).
There can be no assurance that client demand for new products, including the Stagwell Marketing Cloud and other marketing data, campaign martech, AR and VR martech applications, will exist or be sustained at the levels that we anticipate, or that any of these initiatives will gain sufficient traction or market acceptance to generate sufficient revenue to offset any new expenses or liabilities associated with these new investments.
There can be no assurance that client demand for new products, including the Stagwell Marketing Cloud and other marketing data, campaign martech, AR and VR martech applications, and AI and generative AI offerings, will exist or be sustained at the levels that we anticipate, or that any of these initiatives will gain sufficient traction or market acceptance to generate sufficient revenue to offset any new expenses or liabilities associated with these new investments.
If the U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, as well as OpCo’s obligations to make tax distributions, and our business, financial condition or results of operations may be adversely impacted. We may face material adverse tax consequences resulting from the Transactions in Canada, the United States or other jurisdictions.
If the U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, as well as OpCo’s obligations to make tax distributions, and our business, financial condition or results of operations may be adversely impacted. 32 Table of Contents We may face material adverse tax consequences resulting from the Transactions in Canada, the United States or other jurisdictions.
Although the shares held by Stagwell Media are subject to securities law restrictions on sales by affiliates, we, Stagwell Media and certain other parties are party to a registration rights agreement pursuant to which, among other things and subject to certain restrictions, we are required to file with the Securities and Exchange Commission a registration statement registering for resale the shares of our Class A Common Stock that are held by, or are issuable upon exchange of units of OpCo (in combination with corresponding shares of our Class C Common Stock) held by, such parties, and to conduct certain underwritten offerings upon the request of holders of registrable securities, including direct and indirect transferees of such holders.
Although the shares held by Stagwell Media are subject to securities law restrictions on sales by affiliates, we, Stagwell Media and certain other parties are party to a registration rights agreement pursuant to which, among other things and subject to certain restrictions, we are required to file (and have filed) with the SEC a registration statement registering for resale the shares of our Class A Common Stock that are held by, or are issuable upon exchange of units of OpCo (in combination with corresponding shares of our Class C Common Stock) held by, such parties, and to conduct certain underwritten offerings upon the request of holders of registrable securities, including direct and indirect transferees of such holders.
In addition, we are party to a securities purchase agreement pursuant to which we are required to register for resale the shares of Class A Common Stock issued upon the conversion of our previously outstanding Series 8 convertible preferred stock.
In addition, we are party to a securities purchase agreement pursuant to which we are required to register for resale the shares of Class A Common Stock issued to certain of our stockholders upon the conversion of our previously outstanding Series 8 convertible preferred stock.
Adverse developments such as inflation or heightened economic uncertainty could reduce the demand for our services and pose a risk that clients may reduce, postpone or cancel spending on advertising, marketing and corporate communications projects.
Adverse developments such as inflation or heightened economic uncertainty can reduce the demand for our services and pose a risk that clients may reduce, postpone or cancel spending on advertising, marketing and corporate communications projects..
Existing and proposed laws and regulations, in particular in the European Union and the United States, concerning user privacy, use of personal information and online tracking technologies could also affect the efficacy and profitability of internet-based, digital and targeted marketing.
Existing and proposed laws and regulations, in particular in the European Union and the United States, concerning user privacy, use of personal data and online tracking technologies could also affect the efficacy and profitability of internet-based, digital and targeted marketing.
As a services business, our ability to attract and retain clients is an important aspect of our competitiveness, and client loss, including due to competitors, as a consequence of client consolidation, insolvency or a reduction in marketing budgets due to recessionary economic conditions, or a shift in client spending could have a material adverse effect on our business, results of operations, financial condition and prospects.
As a services business, our ability to attract and retain clients is an important aspect of our competitiveness, and client loss, including due to competitors, as a consequence of client consolidation, insolvency or a reduction in marketing budgets due to recessionary economic conditions, 14 Table of Contents or a shift in client spending could have a material adverse effect on our business, results of operations, financial condition and prospects.
Advertising, marketing and communications expenditures are sensitive to global, national and regional macroeconomic conditions, including inflationary pressures, currency fluctuations, geopolitical uncertainty, increased interest rates, as well as specific budgeting levels and buying patterns.
Advertising, marketing and communications expenditures are sensitive to global, national and regional macroeconomic conditions, including inflationary pressures, currency fluctuations, geopolitical uncertainty and elevated interest rates, as well as specific budgeting levels and buying patterns.
Furthermore, even if we successfully maintain the confidentiality of our trade secrets and 28 Table of Contents other proprietary information, competitors may independently develop products or technologies that are substantially equivalent or superior to our own. As we expand our service offerings and the geographic scope of our sales and marketing, we may face additional intellectual property challenges.
Furthermore, even if we successfully maintain the confidentiality of our trade secrets and other proprietary information, competitors may independently develop products or technologies that are substantially equivalent or superior to our own. As we expand our service offerings and the geographic scope of our sales and marketing, we may face additional intellectual property challenges.
Our corporate headquarters is located in New York City, which has experienced terrorist attacks, civil disturbance, natural disasters and extreme weather events including hurricanes, floods and fires, and critical resources shortages and infrastructure 21 Table of Contents disruptions, such as localized extended outages of critical utilities or transportation systems.
Our corporate headquarters is located in New York City, which has experienced terrorist attacks, civil disturbance, natural disasters and extreme weather events including hurricanes, floods and fires, and critical resources shortages and infrastructure disruptions, such as localized extended outages of critical utilities or transportation systems.
We operate in many parts of the world that have experienced government corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices, although adherence to local customs and practices is generally not a defense under U.S. and other anti-bribery laws.
We operate in many parts 25 Table of Contents of the world that have experienced government corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices, although adherence to local customs and practices is generally not a defense under U.S. and other anti-bribery laws.
Our clients and vendors may also consider our credit profile when considering whether to contract with us or negotiating contract terms, and if they were to change the terms on which they deal with us, it could have a further adverse effect on our business, prospects, results of operations and financial condition.
Our clients and vendors may also 28 Table of Contents consider our credit profile when considering whether to contract with us or negotiating contract terms, and if they were to change the terms on which they deal with us, it could have a further adverse effect on our business, prospects, results of operations and financial condition.
No adjustments to the redemption or exchange ratio of common units of OpCo, together with shares of our Class C Common Stock, for shares of our Class A Common Stock or cash, as applicable, will be made as a result of either any cash distribution we receive from OpCo or 32 Table of Contents any cash that we retain and do not distribute to our stockholders.
No adjustments to the redemption or exchange ratio of common units of OpCo, together with shares of our Class C Common Stock, for shares of our Class A Common Stock or cash, as applicable, will be made as a result of either any cash distribution we receive from OpCo or any cash that we retain and do not distribute to our stockholders.
Although as of the date of this prospectus, we do not utilize any of these exemptions, we may elect to utilize one or more of these exemptions for so long as we remain a “controlled company.” As a result, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.
Although we do not utilize any of these exemptions, we may elect to utilize one or more of these exemptions for so long as we remain a “controlled company.” As a result, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.
Any such guidance is based upon a number of assumptions with respect to future business decisions (some of which may change) and estimates that, while presented with 36 Table of Contents numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies (many of which are beyond our control).
Any such guidance is based upon a number of assumptions with respect to future business decisions (some of which may change) and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies (many of which are beyond our control).
Our issuance of additional shares of our Class A Common Stock or other equity securities of equal or senior rank could have the following effects: • your proportionate ownership interest in us will decrease; • the relative voting strength of each previously outstanding share of Class A Common Stock may be diminished; or • the market price of our stock may decline.
Our issuance of additional shares of our Class A Common Stock or other equity securities could have the following effects: • your proportionate ownership interest in us will decrease; • the relative voting strength of each previously outstanding share of Class A Common Stock may be diminished; or • the market price of our Class A Common Stock may decline.
These changes may make it more cumbersome and expensive for advertising agencies which have not 24 Table of Contents entered into the SAG-AFTRA Commercials Contract to produce advertisements using SAG-AFTRA members, and in some cases may preclude the use of SAG-AFTRA members in the production of commercials by certain of our Brands.
These changes may make it more cumbersome and expensive for advertising agencies which have not entered into the SAG-AFTRA Commercials Contract to produce advertisements using SAG-AFTRA members, and in some cases may preclude the use of SAG-AFTRA members in the production of commercials by certain of our Brands.
A significant reduction in spending on our services by our largest clients, or the loss of several of our largest clients, could have a material and adverse effect on our business, results of operations and financial condition. 17 Table of Contents We face significant competition, and a failure to compete successfully in the markets we serve could harm our business.
A significant reduction in spending on our services by our largest clients, or the loss of several of our largest clients, could have a material and adverse effect on our business, results of operations and financial condition. We face significant competition, and a failure to compete successfully in the markets we serve could harm our business.
If we raise additional funds through further issuances of equity or convertible debt 30 Table of Contents securities, our existing stockholders could suffer dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our Class A Common Stock.
If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our Class A Common Stock.
Any such developments may subject us to material fines and other monetary penalties and damages, divert management’s time and attention, and lead to enhanced regulatory oversight, all of which could have a material adverse effect on our business and results of operations.
Any such developments 23 Table of Contents may subject us to material fines and other monetary penalties and damages, divert management’s time and attention, and lead to enhanced regulatory oversight, all of which could have a material adverse effect on our business and results of operations.
We may issue additional shares of our Class A Common Stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or under our equity incentive plans, without stockholder approval, in a number of circumstances.
We may issue additional shares of our Class A Common Stock or other equity securities in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or under our equity incentive plans, without stockholder approval, in a number of circumstances.
We are highly leveraged. As of December 31, 2022, we had $1.2 billion of total consolidated indebtedness outstanding. Our outstanding credit agreement and notes are guaranteed by substantially all of our material domestic subsidiaries, and our outstanding credit agreement is secured by substantially all of the assets and stock of such subsidiaries.
We are highly leveraged. As of December 31, 2023, we had $1.1 billion of total consolidated indebtedness outstanding. Our outstanding credit agreement and notes are guaranteed by substantially all of our material domestic subsidiaries, and our outstanding credit agreement is secured by substantially all of the assets and stock of such subsidiaries.
Operations outside the United States represent a significant portion of our revenues and represented approximately 17% of our revenues in 2022. The operational and financial performance of our international businesses are affected by global and regional economic conditions, competition for new business and staff, political conditions, differing regulatory environments and other issues associated with extensive international operations.
Operations outside the United States represent a significant portion of our revenues and represented approximately 19% of our revenues in 2023. The operational and financial performance of our international businesses are affected by global and regional economic conditions, competition for new business and staff, political conditions, differing regulatory environments and other issues associated with extensive international operations.
We have experienced, and may again experience, data security incidents resulting from unauthorized access to our and our service providers’ systems and unauthorized acquisition of our data and our clients’ data, including inadvertent disclosure, misconfiguration of systems, phishing ransomware or malware attacks.
We have experienced, and may again experience, data security 22 Table of Contents incidents resulting from unauthorized access to our and our service providers’ systems and unauthorized acquisition of our data and our clients’ data, including inadvertent disclosure, misconfiguration of systems, phishing ransomware or malware attacks.
If we are unable to manage management succession at the Brand level, our ability to innovate, generate new business opportunities and effectively lead large and complex client relationships and marketing services projects could be jeopardized. We depend on identifying, developing and retaining top talent to innovate and lead our businesses.
If we are unable to manage management succession at the Brand level, our ability to innovate, generate new business opportunities and 21 Table of Contents effectively lead large and complex client relationships and marketing services projects could be jeopardized. We depend on identifying, developing and retaining top talent to innovate and lead our businesses.
The raising of any additional capital may dilute holders’ ownership percentage in our stock; • if our available liquidity is insufficient, our financial condition could be adversely affected and we may be unable to fund contingent deferred acquisition liabilities, and any put options if exercised; • our Up-C structure places significant limitations on our cash flow because our principal asset is our interest in OpCo, and, accordingly, we depend on distributions from OpCo to pay our taxes and expenses, including payments under the Tax Receivables Agreement; • our Tax Receivables Agreement with Stagwell Media requires us to make cash payments to Stagwell Media in respect of certain tax benefits to which we may become entitled, and we expect the payments we are required to make to be substantial, may be required to be made prior to the time that we recognize any associated tax benefits and may make our company a less attractive target to potential acquirers; 15 Table of Contents • our results of operations are subject to currency fluctuation risks; • our goodwill, intangible assets and right-of-use assets may become impaired; • material weaknesses in our internal control over financial reporting were identified as of December 31 2021, and remain unremediated at December 31, 2022.
The raising of any additional capital may dilute holders’ ownership percentage in our stock; • if our available liquidity is insufficient, our financial condition could be adversely affected and we may be unable to fund contingent deferred acquisition liabilities, and any put options if exercised; • our Up-C structure places significant limitations on our cash flow because our principal asset is our interest in OpCo, and, accordingly, we depend on distributions from OpCo to pay our taxes and expenses, including payments under the Tax Receivables Agreement; • our Tax Receivables Agreement with Stagwell Media requires us to make cash payments to Stagwell Media in respect of certain tax benefits to which we may become entitled, and we expect the payments we are required to make to be substantial, may be required to be made prior to the time that we recognize any associated tax benefits and may make our company a less attractive target to potential acquirers; • our results of operations are subject to foreign currency exchange fluctuation risks; • our goodwill, intangible assets and right-of-use lease assets may become impaired; • material weaknesses in our internal control over financial reporting were identified as of December 31, 2023.
Further in the United States, both Congress and 25 Table of Contents state legislatures, along with federal regulatory authorities, have continued to increase their attention on advertising and the collection and use of data, including personal data.
Further in the United States, both Congress and state legislatures, along with federal regulatory authorities, have continued to increase their attention on advertising and the collection and use of data, including personal data.
The United States has also enacted the Inflation Reduction Act of 2022 (“IRA”) in August 2022, which, among other changes, introduced a new 1% exercise tax on certain net share repurchases and equivalent redemptions.
The United States also enacted the Inflation Reduction Act of 2022 in August 2022, which, among other changes, introduced a 1% exercise tax on certain net share repurchases and equivalent redemptions.
Actual results may vary from such guidance, and the variations may be material. Investors should also recognize that the reliability of any forecasted financial data diminishes the farther in the future that the data is forecast.
Actual results have in the past varied, and may in the future vary from such guidance, and the variations may be material. Investors should also recognize that the reliability of any forecasted financial data diminishes the farther in the future that the data is forecast.
Even in 38 Table of Contents the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our Class A Common Stock if they are viewed as discouraging future takeover attempts.
Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our Class A Common Stock if they are viewed as discouraging future takeover attempts.
If we do not have sufficient funds to pay tax or other liabilities or to fund our operations, we may have to borrow 31 Table of Contents funds, which could materially and adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such indebtedness.
If we do not have sufficient funds to pay tax or other liabilities or to fund our operations, we may have to borrow funds, which could materially and adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such indebtedness.
For example, in February 2022, following Russia’s invasion of Ukraine and the imposition of economic sanctions 27 Table of Contents targeting Russia by the United States and other countries, we exited our operations in Russia.
For example, in February 2022, following Russia’s invasion of Ukraine and the imposition of economic sanctions targeting Russia by the United States and other countries, we exited our operations in Russia.
Risks Related to Litigation and Regulation Litigation or legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business. From time to time, we have been and may in the future be party to various claims and litigation proceedings.
Risks Related to Litigation and Regulation Litigation, investigations or other legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business. From time to time, we have been and may in the future be party to various claims, litigation proceedings and regulatory inquiries.
Broad market and industry factors and any other global pandemics, as well as general economic, political and market conditions such as recessions or interest rate changes, may seriously affect the market price of our Class A Common Stock, regardless of our actual operating performance.
Broad market and industry factors and any other global pandemics, as well as general economic, political and market conditions such as recessions or interest rate changes, may significantly depress the market price of our Class A Common Stock, regardless of our actual operating performance.
Moreover, there has recently been an expansion of specific rules, prohibitions, media restrictions, labeling disclosures, and warning requirements with respect to advertising for certain products.
Moreover, there has recently been an expansion of 24 Table of Contents specific rules, prohibitions, media restrictions, labeling disclosures, and warning requirements with respect to advertising for certain products.
These risks include, among others: • operational and compliance challenges caused by distance, language, and cultural differences, including, in some markets, longer billing collection cycles; • the resources required to adapt our operations to local practices, laws, and regulations and any changes in such practices, laws, and regulations; • laws and regulations that may be more restrictive than those in the United States, including commercial laws that can be undeveloped, vague, inconsistently enforced, retroactively applied or frequently changed, laws governing competition, pricing, payment methods, Internet activities, real estate tenancy laws, tax and social security laws, employment and labor laws, email messaging, privacy, location services, collection, use, processing, or sharing of personal information, ownership of intellectual property, and other activities important to our business; • competition with companies or other services that understand local markets better than we do or that have pre-existing relationships with potential clients in those markets; • differing levels of social acceptance of our brand, products, and offerings; • differing levels of local demand for our digital marketing services or the prevalence of e-commerce; • exposure to business cultures in which improper business practices may be prevalent; • difficulties in managing, growing, and staffing international operations, including in countries in which foreign employees may become part of labor unions, employee representative bodies, or collective bargaining agreements, and challenges relating to work stoppages or slowdowns; • fluctuations in currency exchange rates; • inflation and actions taken by central banks to counter inflation; • adverse tax consequences, including the complexities of foreign value added tax systems, and restrictions on the repatriation of earnings; • increased financial accounting and reporting burdens, and complexities associated with implementing and maintaining adequate internal controls; 20 Table of Contents • difficulties in implementing and maintaining the financial systems and processes needed to enable compliance across multiple jurisdictions; • import and export restrictions, changes in trade regulation and economic sanctions compliance; • public health concerns or emergencies, such as pandemics or other outbreaks of communicable disease, which have occurred in parts of the world in which we operate; • war, geopolitical tensions and other political, social, and economic instability abroad, terrorist attacks and security concerns; and • reduced or varied protection for intellectual property rights in some markets.
These risks include, among others: • operational and compliance challenges caused by distance, language, and cultural differences, including, in some markets, longer billing collection cycles; • the resources required to adapt our operations to local practices, laws, and regulations and any changes in such practices, laws, and regulations; • laws and regulations that may be more restrictive than those in the United States, including commercial laws that can be undeveloped, vague, inconsistently enforced, retroactively applied or frequently changed, laws governing competition, pricing, payment methods, Internet activities, real estate tenancy laws, tax and social security laws, employment and labor laws, email messaging, privacy, location services, collection, use, processing, or sharing of personal data, ownership of intellectual property, and other activities important to our business; • competition with companies or other services that understand local markets better than we do or that have pre-existing relationships with potential clients in those markets; • differing levels of social acceptance of our brand, products, and offerings; • differing levels of local demand for our digital marketing services or the prevalence of e-commerce; • exposure to business cultures in which improper business practices may be prevalent; • difficulties in managing, growing, and staffing international operations, including in countries in which foreign employees may become part of labor unions, employee representative bodies, or collective bargaining agreements, and challenges relating to work stoppages or slowdowns; • fluctuations in currency exchange rates; • inflation and actions taken by central banks to counter inflation; • adverse tax consequences, including the complexities of foreign value added tax systems, and restrictions on the repatriation of earnings; • increased financial accounting and reporting burdens, and complexities associated with implementing and maintaining adequate internal controls; • difficulties in implementing and maintaining the financial systems and processes needed to enable compliance across multiple jurisdictions; • import and export restrictions, changes in trade regulation and economic sanctions compliance; • public health concerns or emergencies, such as the COVID-19 pandemic or other outbreaks of communicable disease, which have occurred in parts of the world in which we operate; • war, geopolitical tensions and other political, social, and economic instability abroad, terrorist attacks and security concerns, such as escalating tensions in the Taiwan Strait and the ongoing conflicts between Russia and Ukraine and in Israel and Gaza; and • reduced or varied protection for intellectual property rights in some markets. 18 Table of Contents These risks could adversely affect our international operations, which could in turn adversely affect our business, financial condition, results of operations and prospects.
Our products and services, including products and services that we may develop in the future, may infringe, or third parties may claim that they infringe, intellectual property rights covered by patents or patent applications under which we do not hold licenses or other rights.
We may in the future be the subject of patent or other litigation. Our products and services, including products and services that we may develop in the future, may infringe, or third parties may claim that they infringe, intellectual property rights covered by patents or patent applications under which we do not hold licenses or other rights.
If our remediation of these material weaknesses is not effective, or if we fail to maintain effective internal control over financial reporting in the future, we may not be able to accurately or timely report our financial results, which could adversely affect investor confidence in our company, our results of operation and our stock price; • our disclosure controls and procedures and internal controls may not prevent or detect all errors or acts of fraud; • if our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in our stock price; • we may be subject to adverse tax consequences, such as those related to changes in tax laws or tax rates or their interpretations, and the related application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax; • we may face material adverse tax consequences resulting from the Transactions in Canada, the United States or other jurisdictions; • our stock price may be volatile; • if our operating and financial performance in any given period does not meet any guidance that we provide to the public, the market price for our Class A common stock, par value $0.001 per share (the “Class A Common Stock”), may decline; • a significant portion of our Class A Common Stock is restricted from immediate resale but may be sold into the market in the future, which could negatively affect the market price of our Class A Common Stock; • we are a “controlled company” within the meaning of the applicable rules of Nasdaq and, as a result, qualify for exemptions from certain corporate governance requirements.
If our remediation of these material weaknesses is not effective, or if we fail to maintain effective internal control over financial reporting in the future, we may not be able to accurately or timely report our financial results, which could adversely affect investor confidence in our company, our results of operation and our stock price; • our disclosure controls and procedures and internal controls may not prevent or detect all errors or acts of fraud; • if our judgments or estimates relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in our stock price; • we may be subject to adverse tax consequences, such as those related to changes in tax laws or tax rates or their interpretations, and the related application of judgment in determining our global provision for income taxes, deferred tax assets or liabilities or other tax; • we may face material adverse tax consequences resulting from the Transactions in Canada, the United States or other jurisdictions; • our stock price may be volatile; 13 Table of Contents • if our operating and financial performance in any given period does not meet any guidance that we provide to the public, the market price for our Class A common stock, par value $0.001 per share (the “Class A Common Stock”), may decline; and • a significant portion of our Class A Common Stock is restricted from immediate resale but may be sold into the market in the future, which could negatively affect the market price of our Class A Common Stock.
Globally, other countries have enacted anti-bribery and anti-corruption laws similar to the FCPA, such as the Anti-Graft and Corrupt Practices Act in the Philippines and the U.K. Bribery Act 2010, all of which prohibit companies and their intermediaries from bribing government officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment.
Globally, other countries have enacted anti-bribery and anti-corruption laws similar to the FCPA, such as the U.K. Bribery Act 2010, all of which prohibit companies and their intermediaries from bribing government officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment.
If our growth rate declines or seasonal spending becomes more pronounced, seasonality could have a more significant impact on our revenue, cash flow and operating results from period to period. Risks Related to Strategic Transactions We may not realize the benefits we expect from past acquisitions, including the Transactions.
Seasonality could have a more significant impact on our revenue, cash flow and operating results from period to period as a result of declines in our growth rate or if seasonal spending becomes more pronounced. Risks Related to Strategic Transactions We may not realize the benefits we expect from past and future acquisitions and other strategic transactions, including the Transactions.
As a result, fluctuations in the exchange rate between the U.S. dollar and other currencies, particularly the Canadian dollar, the Euro and the British Pound, may affect our financial results and competitive position.
As a result, fluctuations in the exchange rate between the U.S. dollar and other currencies, particularly the Canadian 30 Table of Contents dollar, the British Pound and the Euro, may affect our financial results and competitive position.
Risk Factor Summary 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: • as a marketing services company, our revenues are highly susceptible to declines as a result of unfavorable economic conditions and future economic conditions could adversely impact our financial condition and results; • our business depends on generating and maintaining ongoing, profitable client demand for our services and solutions, and a significant reduction in such demand could materially affect our results of operations; • our business could be adversely affected if we fail to retain our existing clients; • we face significant competition, and a failure to compete successfully in the markets we serve could harm our business; • maintaining and enhancing our and our Brands’ brands and reputation is critical to our business prospects, and harm to our or our Brands’ brands and reputations may limit our ability to acquire new clients, retain existing clients and attract and retain qualified personnel; • our existing client relationships could impair our ability to generate new business or attract and retain qualified personnel; • if we are unable to adapt and expand our services and solutions in response to ongoing changes in technology and offerings by new entrants, our results of operations and ability to grow could be impaired; • if we do not successfully manage and develop our relationships with our Global Affiliate partners or if we fail to anticipate and establish new alliances in new technologies, our results of operations could be adversely affected; 14 Table of Contents • we are making investments in new product offerings and technologies and may increase such investments in the future.
Risk Factor Summary 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: • as a marketing services company, our revenues are highly susceptible to declines as a result of unfavorable economic conditions and future economic conditions could adversely impact our financial condition and results; • our business depends on generating and maintaining ongoing, profitable client demand for our services and solutions, and a significant reduction in such demand could materially affect our results of operations; • our business could be adversely affected if we fail to retain our existing clients; • we face significant competition, and a failure to compete successfully in the markets we serve could harm our business; • maintaining and enhancing our and our Brands’ brands and reputations is critical to our business prospects, and harm to our or our Brands’ brands and reputations may limit our ability to acquire new clients, retain existing clients and attract and retain qualified personnel; • if we do not successfully manage and develop our relationships with our Global Affiliate partners or if we fail to anticipate and establish new alliances in new technologies, our results of operations could be adversely affected; • we are making investments in new product offerings and technologies and may increase such investments in the future.

… 118 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed3 unchanged
Biggest changeReportable Segment Office Locations Integrated Agencies Network Argentina, Australia, California, Canada, China, Connecticut, Florida, Georgia, Germany, Illinois, India, Indiana, Michigan, Minnesota, New York, Netherlands, Oregon, Pennsylvania, Philippines, United Kingdom, and Virginia Brand Performance Network Brazil, California, Canada, China, Colorado, Egypt, France, Japan, Florida, Germany, Hong Kong, India, Italy, Korea, Maryland, Mexico, Netherlands, New York, Poland, Singapore, South Carolina, Spain, Sweden, Taiwan, Texas, United Kingdom, United Arab Emirates, Utah, and Virginia Communications Network California, China, Georgia, Germany, Japan, Massachusetts, North Carolina, Oregon, Singapore, Thailand, and Virginia, Washington, and Washington D.C.
Biggest changeReportable Segment Office Locations Integrated Agencies Network Argentina, Australia, California, Canada, China, Florida, Georgia, Germany, Illinois, India, Michigan, Minnesota, Netherlands, New York, Oregon, Pennsylvania, Philippines, and United Kingdom Brand Performance Network Australia, Brazil, California, Canada, China, Colorado, Denmark, Egypt, Florida, France, Hong Kong, India, Ireland, Japan, Korea, Maryland, Mexico, New York, Poland, Singapore, Spain, Sweden, Taiwan, Texas, United Kingdom, Utah, and Virginia Communications Network Arizona, California, China, Georgia, Germany, Japan, Minnesota, North Carolina, New York, Singapore, Thailand, Virginia, Washington, and Washington D.C.
All Other Argentina, Canada, Illinois, and United Kingdom Corporate California, Florida, New York, Washington, and Washington D.C.
All Other Argentina, Canada, and United Kingdom Corporate California, Canada, Florida, New York, United Kingdom, Washington, and Washington D.C.
Item 2. Properties See Note 10 of the Notes to the Audited Consolidated Financial Statements (the “Notes”) included herein included in this Annual Report for a discussion of the Company’s lease commitments. The Company maintains office space in North America, Africa, Europe, Asia, South America, and Australia.
Item 2. Properties See Note 10 of the Notes to the Audited Consolidated Financial Statements (the “Notes”) included herein included in this Form 10-K for a discussion of the Company’s lease commitments. The Company maintains office space in North America, Europe, Asia, South America, Africa, and Australia.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−3 removed4 unchanged
Biggest changeAny future determination to declare cash dividends will be made at the discretion of our Board, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that the Board may deem relevant.
Biggest changeAny future determination to declare cash dividends will be made at the discretion of our Board, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that the Board may deem relevant. 39 Table of Contents Unregistered Sales of Equity Securities In the three months ended December 31, 2023, the Company granted 62,704 restricted stock units underlying shares of Class A Common Stock as inducement for employment and issued 4,677,614 shares of Class A Common Stock as purchase consideration in connection with acquisitions and for additional interests in subsidiaries, in transactions exempt from registration under Section 4(a)(2) of the Securities Act.
The Company received no cash proceeds and no commissions were paid to any person in connection with the issuance of these shares. Purchase of Equity Securities by the Issuer and Affiliated Purchasers On March 1, 2023, the Board authorized an extension and a $125,000,000 increase in the size of our previously approved stock repurchase program (the “Repurchase Program”).
The Company received no cash proceeds and no commissions were paid to any person in connection with the sale of these shares. Purchase of Equity Securities by the Issuer and Affiliated Purchasers On March 1, 2023, the Board authorized an extension and a $125,000,000 increase in the size of our previously approved stock repurchase program (the “Repurchase Program”).
Pursuant to its Combined Credit Agreement (as defined and discussed in Note 11 of the Notes included herein) and the indenture governing the 5.625% Notes, the Company is currently limited as to the dollar value of shares it may repurchase in the open market.
Our Board will review the Repurchase Program periodically and may authorize adjustments of its terms. Pursuant to its Credit Agreement (as defined and discussed in Note 11 of the Notes included herein) and the indenture governing the 5.625% Notes, the Company is currently limited as to the dollar value of shares it may repurchase in the open market.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Our Class A Common Stock is traded on the Nasdaq Global Select Market, under the symbol “STGW.” There is no established public trading market for our Class B common stock, par value $0.001 per share (the “Class B Common Stock”), or Class C Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Our Class A Common Stock is traded on the Nasdaq Global Select Market, under the symbol “STGW.” There is no established public trading market for our Class C Common Stock.
As of February 28, 2023, the approximate number of registered holders of our Class A Common Stock, Class B Common Stock, and Class C Common Stock, including those whose shares are held in a nominee name, was 525, 60, and 1, respectively. 40 Table of Contents Dividends We have never declared or paid any cash dividends on our capital stock.
As of March 1, 2024, the approximate number of holders of record of our Class A Common Stock and Class C Common Stock, was 650 and 1, respectively. Dividends We have never declared or paid any cash dividends on our capital stock.
The following table details our monthly shares repurchased during the fourth quarter of 2022 and the approximate dollar value of shares that may yet be purchased pursuant to the Repurchase Program: Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program 10/1/2022 - 10/31/2022 993,829 $ 7.37 967,718 $ 89,111,111 11/1/2022 - 11/30/2022 1,040,262 7.54 1,040,262 81,337,610 12/1/2022 - 12/31/2022 1,680,539 6.42 1,180,353 73,309,347 Total 3,714,630 $ 7.11 3,188,333 $ 73,309,347 (1) Includes 526,297 shares repurchased to settle employee tax withholding obligations related to the vesting of restricted stock awards and restricted stock units.
The following table details our monthly shares repurchased during the fourth quarter of 2023 and the approximate dollar value of shares that may yet be purchased pursuant to the Repurchase Program: Period Total Number of Shares Purchased (1) Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Program (2) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (2) 10/1/2023 - 10/31/2023 44,082 $ 4.73 — $ 155,660,866 11/1/2023 - 11/30/2023 1,894,048 4.83 1,888,809 146,505,476 12/1/2023 - 12/31/2023 2,008,873 6.03 1,367,410 138,622,130 Total 3,947,003 $ 5.44 3,256,219 $ 138,622,130 (1) Includes information for all shares repurchased by the Company, including shares repurchased as part of the Company’s publicly announced Repurchase Program, and 690,784 shares to settle employee tax withholding obligations related to the vesting of restricted stock awards and restricted stock units.
Removed
Unregistered Sales of Equity Securities In the three months ended December 31, 2022, the Company granted 751,784 shares of Class A Common Stock in transactions exempt from registration under Section 4(a)(2) of the Securities Act.
Added
(2) Only includes information for shares repurchased as part of the Company’s publicly announced Repurchase Program. Item 6. [Reserved]
Removed
Of these, 68,452 shares were granted to employees as inducement for employment, 100,000 shares were issued to a member of management of a subsidiary for payment in the acquisition of the remaining interest in the majority-owned subsidiary, 174,999 shares were issued as purchase consideration in connection with the acquisition of a company and 408,333 shares were issued to the previous owners of this company with vesting conditions based upon continued employment.
Removed
Our board of directors will review the Repurchase Program periodically and may authorize adjustments of its terms.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

91 edited+57 added−53 removed28 unchanged
Biggest changeCommon Shareholders As a result of the foregoing, net income attributable to Stagwell Inc. common shareholders for the year ended December 31, 2022 was $27.3 million compared to net income attributable to Stagwell Inc. common shareholders of $21.0 million for the year ended December 31, 2021. 48 Table of Contents Earnings Per Share Diluted EPS and Adjusted Diluted EPS for the year ended December 31, 2022 was as follows: Reported (GAAP) Adjustments (1) (Non-GAAP) (dollars in thousands, except per share amounts) Net income attributable to Stagwell Inc. common shareholders $ 27,269 $ 95,147 $ 122,416 Net income attributable to Class C shareholders 24,452 120,655 145,107 Net income attributable to Stagwell Inc. and Class C and adjusted net income $ 51,721 $ 215,802 $ 267,523 Weighted average number of common shares outstanding 130,625 — 130,625 Weighted average number of common Class C shares outstanding 165,971 — 165,971 Weighted average number of shares outstanding 296,596 — 296,596 Diluted EPS and Adjusted Diluted EPS $ 0.17 $ 0.90 Adjustments to Net Income (1) Pre-Tax Tax Net (dollars in thousands) Amortization $ 104,763 $ (20,953) $ 83,810 Impairment and other losses 122,179 (1,093) 121,086 Stock-based compensation 33,152 (6,630) 26,522 Deferred acquisition consideration (13,405) 2,681 (10,724) Other items, net 18,691 (3,738) 14,953 Tax adjustments 7,482 (27,327) (19,845) $ 272,862 $ (57,060) $ 215,802 Adjusted EBITDA Adjusted EBITDA for the year ended December 31, 2022 was $451.1 million, compared to $253.7 million for the year ended December 31, 2021, representing an increase of $197.5 million, primarily driven by the increase in revenue from existing operations and the acquisitions of MDC and Goodstuff, partially offset by higher operating expenses.
Biggest changeEarnings (Loss) Per Share Diluted EPS and Adjusted Diluted EPS for the year ended December 31, 2023 were as follows: GAAP Adjustments (1) Non-GAAP (amounts in thousands, except per share amounts) Net income attributable to Stagwell Inc. common shareholders $ 134 $ 52,712 $ 52,846 Net income attributable to Class C shareholders — 106,153 106,153 Net income attributable to Stagwell Inc. and Class C and adjusted net income $ 134 $ 158,865 $ 158,999 Weighted average number of common shares outstanding 122,170 3,628 125,798 Weighted average number of common Class C shares outstanding — 154,972 154,972 Weighted average number of shares outstanding 122,170 158,600 280,770 Diluted EPS and Adjusted Diluted EPS $ 0.00 $ 0.57 Adjustments to Net Income (loss) (1) Amortization $ 113,835 Impairment and other losses 11,395 Stock-based compensation 57,179 Deferred acquisition consideration 13,060 Gain on sale of business (94,505) Other items, net 45,147 146,111 Adjusted tax expense (26,312) 119,799 Net loss attributable to Class C shareholders 39,066 $ 158,865 Allocation of adjustments to net income Net income attributable to Stagwell Inc. common shareholders $ 52,712 Net income attributable to Class C shareholders 67,087 Net income attributable to Class C shareholders 39,066 106,153 $ 158,865 (1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary. 48 Table of Contents Diluted EPS and Adjusted Diluted EPS for the year ended December 31, 2022 were as follows: GAAP Adjustments (1) Non-GAAP (amounts in thousands, except per share amounts) Net income attributable to Stagwell Inc. common shareholders $ 19,919 $ 102,123 $ 122,042 Net income attributable to Class C shareholders 16,004 129,500 145,504 Net income attributable to Stagwell Inc. and Class C and adjusted net income $ 35,923 $ 231,623 $ 267,546 Weighted average number of common shares outstanding 130,625 — 130,625 Weighted average number of common Class C shares outstanding 165,971 — 165,971 Weighted average number of shares outstanding 296,596 — 296,596 Diluted EPS and Adjusted Diluted EPS $ 0.12 $ 0.90 Adjustments to Net income (loss) (1) Amortization $ 104,763 Impairment and other losses 122,179 Stock-based compensation 33,152 Deferred acquisition consideration (13,405) Other items, net 18,691 265,380 Adjusted tax expense (33,757) $ 231,623 (1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
The amount and timing of payments are contingent on the Company achieving certain tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize as a result of (i) increases in the tax basis of OpCo’s assets resulting from exchanges of Paired Units (each as defined in Note 15 of 56 the Notes included herein) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to the Company making payments under the TRA.
The amount and timing of payments are contingent on the Company achieving certain tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize as a result of (i) increases in the tax basis of OpCo’s assets resulting from exchanges of Paired Units (each as defined in Note 15 of the Notes included herein) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to the Company making payments under the TRA.
Other items includes restructuring costs, acquisition-related expenses, and non-recurring items. The diluted weighted average shares outstanding include shares of Class C Common Stock as if converted to shares of Class A Common Stock to calculate Adjusted Diluted EPS. All amounts are in dollars unless otherwise stated. Amounts reported in millions herein are computed based on the amounts in thousands.
Other items include restructuring costs, acquisition-related expenses, and non-recurring items. The diluted weighted average shares outstanding include shares of Class C Common Stock as if converted to shares of Class A Common Stock to calculate Adjusted Diluted EPS. All amounts are in dollars unless otherwise stated. Amounts reported in millions herein are computed based on the amounts in thousands.
The Company expects to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months and subsequent periods. The Company has historically maintained and expanded its business using cash generated from operating activities, funds available under its revolving credit agreement, and other initiatives, such as obtaining additional debt and equity financing.
The Company expects to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months and subsequent periods. The Company has historically maintained and expanded its business using cash generated from operating activities, funds available under the Credit Agreement, and other initiatives, such as obtaining additional debt and equity financing.
The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition consideration payments, purchases of noncontrolling interests, subsidiary awards, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company’s 5.625% Notes and Combined Credit Agreement.
The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition consideration payments, purchases of noncontrolling interests, subsidiary awards, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company’s 5.625% Notes and Credit Agreement.
The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the Combined Credit Agreement (or any refinancings thereof), and, if necessary, through the incurrence of additional debt and/or issuance of additional equity.
The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the Credit Agreement (or any refinancings thereof), and, if necessary, through the incurrence of additional debt and/or issuance of additional equity.
The liability is adjusted quarterly based on changes in current information affecting each subsidiary’s current operating results and the impact this information will have on future results included in the calculation of the estimated liability. These adjustments are recorded in the Consolidated Statements of Operations.
The liability is adjusted quarterly based on changes in current information affecting each subsidiary’s current operating results and the impact this information will have on future results included in the calculation of the estimated liability. These adjustments are recorded in the Consolidated Statements of Operations. Goodwill .
However, if the fair value of the reporting unit is lower than the carrying amount of the net assets assigned to the reporting unit, an impairment charge is recognized equal to the excess of the carrying amount over the fair value. Determining the fair value of a reporting unit involves the use of significant estimates and assumptions.
However, if the fair value of the reporting unit is lower than the carrying amount of the net assets assigned to the reporting unit, an impairment charge is recognized equal to the excess of the carrying amount over the fair value. 60 Determining the fair value of a reporting unit involves the use of significant estimates and assumptions.
The Company is currently in compliance with all of the terms and conditions of the Combined Credit Agreement, and management believes, based on its current financial projections, that the Company will be in compliance with its covenants over the next twelve months.
The Company is currently in compliance with all of the terms and conditions of the Credit Agreement, and management believes, based on its current financial projections, that the Company will be in compliance with its covenants over the next twelve months.
If the Company loses all or a substantial portion of its lines of credit under the Combined Credit Agreement, or if the Company uses the maximum available amount under the agreement, it will be required to seek other sources of liquidity.
If the Company loses all or a substantial portion of its lines of credit under the Credit Agreement, or if the Company uses the maximum available amount under the agreement, it will be required to seek other sources of liquidity.
Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one-time charges, and other items, as defined in the Combined Credit Agreement. They are presented here to demonstrate compliance with the covenants in the Combined Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.
Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one-time charges, and other items, as defined in the Credit Agreement. They are presented here to demonstrate compliance with the 58 covenants in the Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.
Based on the current outlook, the Company believes future cash flows from operations, together with the Company’s existing cash balance and availability of funds under the Combined Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the next twelve months and subsequent periods.
Based on the current outlook, the Company believes future cash flows from operations, together with the Company’s existing cash balance and availability of funds under 57 the Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the next twelve months and subsequent periods.
Adjusted Diluted EPS is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income attributable to Class C shareholders, excluding the impact of amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, based on total consolidated amounts, then allocated to Stagwell Inc. common shareholders and Class C shareholders, based on their respective income allocation percentage using a normalized effective income tax rate divided by (ii) (a) the weighted average number of common shares outstanding plus (b) the weighted average number of shares of Class C Common Stock outstanding.
“Adjusted Diluted EPS” is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income (loss) attributable to Class C shareholders, excluding the impact of amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, based on total consolidated amounts, then allocated to Stagwell Inc. common shareholders and Class C shareholders, based on their respective income allocation percentage using a normalized effective income tax rate divided by (ii) (a) the weighted average number of common shares outstanding plus (b) the weighted average number of shares of Class C Common Stock outstanding.
The risk of a material loss could significantly increase in periods of severe economic downturn. The following table summarizes current and long-term requirements as of December 31, 2022.
The risk of a material loss could significantly increase in periods of severe economic downturn. The following table summarizes current and long-term requirements as of December 31, 2023.
The Company uses a combination of the income approach, which incorporates the use of the discounted cash flow (“DCF”) method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. The Company generally applies an equal weighting to the income and market approaches for the impairment test.
The Company generally uses a combination of the income approach, which incorporates the use of the discounted cash flow (“DCF”) method, and the market approach, which incorporates the use of earnings multiples based on market data and comparable companies. The Company applies an equal weighting to the income and market approaches for the impairment test.
These commitments are included in Accounts payable and Accrued media when the media services are delivered by the media providers. Stagwell takes precautions against default on payment for these services and has historically had a very low incidence of default. Stagwell is still exposed to the risk of significant uncollectible receivables from our clients.
These commitments are included in Accounts payable and Accrued media when the media services are delivered by the media providers. Stagwell takes precautions against default on payment for these services including the procurement of credit insurance and has historically had a very low incidence of default. Stagwell is still exposed to the risk of significant uncollectible receivables from our clients.
A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain a Brand that it may have previously worked with. In addition, if 42 Table of Contents the client is merged or acquired by another company, the marketing communication firm is often changed.
A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain a Brand that it may have previously worked with. In addition, if the client is merged or acquired by another company, the marketing communication firm is often changed.
On March 1, 2023, the Board authorized an extension and a $125.0 million increase in the size of the Repurchase Program to an aggregate of $250.0 million, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program, as amended, will expire on March 1, 2026.
On March 1, 2023, the Board authorized an extension and a $125.0 million increase in the size of our stock repurchase program ( the “Repurchase Program”) to an aggregate of $250.0 million, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program, as amended, will expire on March 1, 2026.
The expected cash flows are developed from the Company’s long-range planning process using projections of operating results and related cash flows based on assumed long-term growth rates, demand trends and appropriate discount rates based on a reporting unit’s weighted average cost of capital (“WACC”) as determined by considering the observable WACC of comparable companies and factors specific to the reporting unit.
The expected cash flows are developed from the Company’s long-range planning process using projections of operating results and related cash flows based on assumed revenue growth rates, EBITDA margin, long-term growth rates, and appropriate discount rates based on a reporting unit’s weighted average cost of capital (“WACC”) as determined by considering the observable WACC of comparable companies and factors specific to the reporting unit.
Adjusted EBITDA is defined as Net income (loss) attributable to Stagwell Inc. common shareholders excluding non-operating income or expense to achieve operating income (loss), 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.
“Adjusted EBITDA” is defined as Net income (loss) attributable to Stagwell Inc. common shareholders excluding non-operating income or expense to achieve operating income (loss), 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.
Pursuant to the Combined Credit Agreement, the Company must maintain a Total Leverage Ratio (as defined in the Combined Credit Agreement) below a threshold established in the Combined Credit Agreement.
Pursuant to the Credit Agreement, the Company must maintain a Total Leverage Ratio (as defined in the Credit Agreement) below an established threshold.
Our critical accounting estimates include our accounting for revenue recognition, business combinations, deferred acquisition consideration, redeemable noncontrolling interests, goodwill and intangible assets, income taxes and stock-based compensation. The financial statements are evaluated on an ongoing basis and estimates are based on historical experience, current conditions and various other assumptions believed to be reasonable under the circumstances.
Our critical accounting estimates include our accounting for revenue recognition, business combinations, deferred acquisition consideration, goodwill and intangible assets, and income taxes. The financial statements are evaluated on an ongoing basis and estimates are based on historical experience, current conditions and various other assumptions believed to be reasonable under the circumstances.
If the Company were unable to find these sources of liquidity, for example through an equity offering or access to the capital markets, the Company’s ability to fund its working capital needs and any contingent obligations with respect to acquisitions and redeemable noncontrolling interests would be adversely affected. On April 28, 2022, the Company amended the Combined Credit Agreement.
If the Company were unable to find these sources of liquidity, for example through an equity offering or access to the capital markets, the Company’s ability to fund its working capital needs and any contingent obligations with respect to acquisitions and redeemable noncontrolling interests would be adversely affected.
Cash Flows Operating Activities Cash flows provided by operating activities for the year ended December 31, 2022 were $347.6 million, primarily driven by earnings as well as favorable working capital requirements. Cash flows provided by operating activities for the year ended December 31, 2021 were $200.9 million, primarily driven by earnings and favorable working capital requirements.
Cash flows provided by operating activities for the year ended December 31, 2022, were $347.6 million, primarily driven by earnings and favorable working capital requirements.
For the period ended December 31, 2022, the Company’s calculation of each of this ratio, and the maximum permitted under the Combined Credit Agreement, respectively, were calculated based on the trailing twelve months as follows: December 31, 2022 Total Leverage Ratio 2.42 Maximum per covenant 4.50 These ratios and measures are not based on GAAP and are not presented as alternative measures of operating performance or liquidity.
For the period ended December 31, 2023, the Company’s calculation of this ratio, and the maximum permitted under the Credit Agreement, respectively, were calculated based on the trailing twelve months as follows: December 31, 2023 Total Leverage Ratio 3.10 Maximum per covenant 4.25 These ratios and measures are not based on GAAP and are not presented as alternative measures of operating performance or liquidity.
The percentage changes included in the tables in Item 7 herein that are not considered meaningful are presented as “NM.” Segments The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance.
As a result, the sum of the components, and related calculations, reported in millions may not equal the total amounts due to rounding. 42 Table of Contents The percentage changes included in the tables in Item 7 herein that are not considered meaningful are presented as “NM.” Segments The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance.
The Company expects to make estimated cash payments in the future to satisfy obligations under the Tax Receivables Agreement (“TRA”) (see Note 17 of the Notes included herein for additional details).
The Company expects to make estimated cash payments in the future to satisfy obligations under our Tax Receivables Agreement with Stagwell Media LP and OpCo (“TRA”) (see Note 17 of the Notes included herein for additional details).
New business wins and client losses occur due to a variety of factors. The two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the digital and data-driven products that our Brands offer.
New business wins and client losses occur due to a variety of factors. The two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the digital and data-driven products that our portfolio of marketing services firms, which we refer to as “Brands,” offer.
Investing Activities Cash flows used in investing activities were $116.3 million for the year ended December 31, 2022, primarily driven by $74.2 million in acquisitions and $22.7 million in capital expenditures.
Cash flows used in investing activities were $116.3 million for the year ended December 31, 2022, primarily driven by $12.8 million in capital capitalized software spend, $22.7 million in capital expenditures, and $74.2 million in acquisitions, net of cash acquired.
Total Debt Debt, net of debt issuance costs, as of December 31, 2022 was $1,184.7 million as compared to $1,191.6 million outstanding at December 31, 2021.
Total Debt Debt, net of debt issuance costs, as of December 31, 2023, was $1,145.8 million as compared to $1,184.7 million outstanding at December 31, 2022.
At each reporting period, the Company assesses whether it is more likely than not that the carrying amount of its reporting units exceed their fair value. As of October 1, 2022 (the annual impairment test date) and December 31, 2022, the Company performed this assessment and determined that certain reporting units’ carrying values exceeded their fair value.
At each reporting period, the Company assesses whether it is more likely than not that the carrying amount of its reporting units exceed their fair value. As of October 1, 2023 (the annual impairment test date), the Company performed this assessment and determined that all reporting units (11) did not have an impairment.
Clients also change firms as a result of the firm’s failure to meet marketing performance targets or other expectations in client service delivery. Seasonality Historically, we typically generate the highest quarterly revenue during the fourth quarter in each year. In addition, client concentration increases during election years due to the cyclical nature of our advocacy Brands.
Clients also change firms as a result of the firm’s failure to meet marketing performance targets or other expectations in client service delivery. 41 Table of Contents Seasonality Historically, we typically generate the highest quarterly revenue during the fourth quarter in each year.
See Note 2 of the Notes included herein for the Company’s significant accounting policies. In addition, Stagwell reports its corporate office expenses incurred in connection with the strategic resources provided to the networks, as well as certain other centrally managed expenses that are not fully allocated to the operating segments as Corporate.
In addition, Stagwell reports its corporate office expenses incurred in connection with the strategic resources provided to the networks, as well as certain other centrally managed expenses that are not fully allocated to the operating segments as Corporate.
See Note 11 to the Audited Consolidated Financial Statements included herein for information regarding the Company’s 5.625% Notes, and the Combined Credit Agreement, which provides for a $500.0 million senior secured revolving credit facility with a five-year maturity.
See Note 11 to the Audited Consolidated Financial Statements included herein for information regarding the Company’s 5.625% Notes, and the Credit Agreement, which provides for a $640.0 million senior secured revolving credit facility maturing on August 3, 2026.
As a result, to the extent that, among other factors, (i) there is underperformance in one or more reporting units, (ii) a potential recession further disrupts the economic environment or (iii) interest rates continue to rise in response to persistent inflation, the fair value of one or more of these reporting units could fall below their carrying value, resulting in a goodwill impairment charge.
As a result, to the extent that, among other factors, (i) there is underperformance in one or more reporting units, or (ii) disruptions in the macroeconomic environment, the fair value of one or more of these reporting units could fall below their carrying value, resulting in a goodwill impairment charge.
The Company’s ability to make scheduled deferred acquisition consideration payments, to make principal and interest payments, to refinance indebtedness or to fund planned capital expenditures or other obligations will depend on future performance, which is subject to general economic conditions, the competitive environment and other factors, including those described in this Form 10-K and in the Company’s other SEC filings.
The Company’s ability to make payments will depend on future performance, which is subject to general economic conditions, the competitive environment and other factors, including those described in this Form 10-K and in the Company’s other SEC filings.
A description of the non-GAAP financial measures discussed in this section and reconciliations to the comparable GAAP measures are below. 41 Table of Contents In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” refer (i) with respect to events occurring or periods ending before August 2, 2021, to Stagwell Marketing Group LLC and its direct and indirect subsidiaries and (ii) with respect to events occurring or periods ending on or after August 2, 2021, to Stagwell Inc. and its direct and indirect subsidiaries.
In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” refer (i) with respect to events occurring or periods ending before August 2, 2021, to Stagwell Marketing Group LLC (“Stagwell Marketing” or ”SMG”) and its direct and indirect subsidiaries and (ii) with respect to events occurring or periods ending on or after August 2, 2021, to Stagwell Inc. and its direct and indirect subsidiaries.
Financing Activities During the year ended December 31, 2022, cash flows used in financing activities were $186.7 million, primarily driven by $63.2 million of deferred acquisition consideration payments, $39.2 million of distributions to noncontrolling interests, $51.5 million in stock repurchases under the Repurchase Program, and $18.7 million related to shares acquired and cancelled in connection with the vesting of stock awards.
During the year ended December 31, 2022, cash flows used in financing activities were $186.7 million, primarily driven by $63.2 million of deferred acquisition consideration payments, $39.2 million of distributions to noncontrolling interests, $70.3 million in shares repurchased and cancelled.
The Company has three reportable segments as follows: “Integrated Agencies Network,” “Brand Performance Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies.
The Company has three reportable segments as follows: “Integrated Agencies Network,” “Brand Performance Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria, and includes the elimination of certain intercompany services, as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Audited Consolidated Financial Statements included herein and in Note 2 of the Notes to the Company’s Audited Consolidated Financial Statements included in this Form 10-K.
The Company recognized a charge of $116.7 million of goodwill impairment to write-down the carrying value in excess of the fair value of eight reporting units, two within the Integrated Agencies Network, five within the Brand Performance Network and one within the All Other category. The expense was recorded within Impairment and other losses on the Consolidated Statements of Operations.
The goodwill impairment was to write-down the carrying value in excess of the fair value of eight reporting units, two within the Integrated Agencies Network, five within the Brand Performance Network, and one within the All Other Network.
The periodic assessment of the net carrying value of the Company’s deferred tax assets under the applicable accounting rules requires significant management judgment. A change to any of these factors could impact the estimated valuation allowance and income tax expense. Stock-Based Compensation .
The periodic assessment of the net carrying value of the Company’s deferred tax assets under the applicable accounting rules requires significant management judgment. A change to any of these factors could impact the estimated valuation allowance and income tax expense. New Accounting Pronouncements See Note 2 of the Company’s Audited Consolidated Financial Statements included in this Form 10-K.
The awards generally provide the employee the right, but not the 58 obligation, to sell its interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution.
Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”). The awards generally provide the employee the right, but not the obligation, to sell its interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution.
No amounts were collected and due to third parties during the years ended December 31, 2021 and 2020. Fees for the arrangements were recorded in Office and general expenses in the Consolidated Statements of Operations and totaled $1.8 million, $0.1 million, and $0.2 million for the years ended December 31, 2022, 2021 and 2020.
Fees for these arrangements were recorded in Office and general expenses in the Consolidated Statements of Operations and totaled $5.4 million, $1.8 million, and $0.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.
Income Tax Expense The Company had an income tax expense for the year ended December 31, 2022 of $7.6 million (on a pre-tax income of $73.5 million resulting in an effective tax rate of 10.3%) compared to income tax expense of $23.4 million (on pre-tax income of $59.6 million resulting in an effective tax rate of 39.3%) for the year ended December 31, 2021.
Income Tax Expense The Company had an income tax expense for the year ended December 31, 2023 of $40.6 million (on a pre-tax income of $91.1 million resulting in an effective tax rate of 44.5%) compared to income tax expense of $25.5 million (on pre-tax income of $75.6 million resulting in an effective tax rate of 33.7%) for the year ended December 31, 2022.
The Company believes the estimates and assumptions used in the calculations are reasonable. However, if there were an adverse change in the facts and circumstances, then an impairment charge may be necessary in the future.
The Company utilized a long-term average growth rate ranging from 1% to 4% and a WACC ranging from 11.50% to 20.00%. The Company believes the estimates and assumptions used in the calculations are reasonable. However, if there were an adverse change in the facts and circumstances, then an impairment charge may be necessary in the future.
Corporate provides client and business development support to the networks as well as certain strategic resources, including accounting, administrative, financial, real estate, human resource and legal functions. The following discussion focuses on the operating performance of the Company for the years ended December 31, 2022 and 2021 and the financial condition of the Company as of December 31, 2022.
Corporate provides client and business development support to the networks as well as certain strategic resources, including accounting, administrative, financial, real estate, human resource and legal functions.
The Company’s work is designed to challenge the industry status quo, realize outsized returns on investment, and drive transformative growth and business performance for its clients and stakeholders. Stagwell manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenue, operating expenses, capital expenditures and the non-GAAP financial measures described below.
Stagwell manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenue, operating expenses, capital expenditures and the non-GAAP financial measures described below.
The amount transferred to the third parties under these arrangements was $176.5 million, $42.1 million and $44.2 million during the years ended December 31, 2022, 2021 and 2020, respectively. The amount collected and due to the third parties under the arrangements was $5.7 million as of December 31, 2022.
The amount collected and due to the third parties under these arrangements was $1.8 million as of December 31, 2023 and $5.7 million as of December 31, 2022. No amounts were collected and due to third parties as of December 31, 2021.
Other items, net decreased primarily due to professional fees associated with the acquisition of MDC in 2021. 55 Liquidity and Capital Resources: The following table provides summary information about the Company’s liquidity position: Year Ended December 31, 2022 2021 (dollars in thousands) Net cash provided by operating activities $ 347,586 $ 200,856 Net cash (used in) provided by investing activities (116,275) 163,952 Net cash used in financing activities (186,736) (273,414) The Company had cash and cash equivalents of $220.6 million and $184.0 million as of December 31, 2022 and December 31, 2021, respectively.
Liquidity and Capital Resources: The following table provides summary information about the Company’s liquidity position: Year Ended December 31, 2023 2022 (dollars in thousands) Net cash provided by operating activities $ 81,007 $ 347,586 Net cash provided by (used in) investing activities 155,951 (116,275) Net cash used in financing activities (339,864) (186,736) The Company had cash and cash equivalents of $119.7 million and $220.6 million as of December 31, 2023 and December 31, 2022, respectively.
Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments. See Note 9 of the Notes included herein for additional information regarding contingent deferred acquisition consideration. As of December 31, 2022, approximately, $51.0 million of the deferred acquisition consideration is expected to be settled in shares of Class A Common Stock.
(2) Does not include amounts expected to be paid in shares of Class A Common Stock. As of December 31, 2023, $29.3 million of the deferred acquisition consideration is expected to be settled in shares of Class A Common Stock. Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments.
References to a “fiscal year” mean the Company’s year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal 2022 means the period beginning January 1, 2022, and ending December 31, 2022).
References to a “fiscal year” mean the Company’s year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal 2023 means the period beginning January 1, 2023, and ending December 31, 2023). 40 Table of Contents For similar operating and financial data and discussion of the Company’s year ended December 31, 2021, refer to Part II Item 7.
As of December 31, 2022, there were 7.2 million shares of Class A Common Stock repurchased under the Repurchase Program at an aggregate value, excluding fees, of $51.5 million. These were purchased at an average share price of $7.17 per share.
During the year ended December 31, 2023, 9.9 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an aggregate value, excluding fees, of $59.5 million. These shares were repurchased at an average price of $6.00 per share.
Contingent purchase price obligations for these transactions are recorded as deferred acquisition consideration liabilities on the balance sheet, at the acquisition date fair value and are remeasured at each reporting period. These liabilities are derived from the projected performance of the acquired entity.
Contingent purchase price obligations for these transactions are recorded as deferred acquisition consideration liabilities on the balance sheet. Arrangements that are not contingent upon future employment are initially measured at the acquisition date fair value and are remeasured at each reporting period. Arrangements that are contingent upon future employment are expensed as earned over the respective vesting (employment) period.
The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season. Non-GAAP Financial Measures The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”).
Non-GAAP Financial Measures The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”).
Management anticipates that the obligations outstanding at December 31, 2022 will be repaid with new financing, equity offerings, asset sales and/or cash flow from operations: Payments Due by Period Material Cash Requirements Total Less than 1 Year 1 – 3 Years 3 – 5 Years After 5 Years (dollars in thousands) Indebtedness (1) $ 1,100,000 $ — $ — $ — $ 1,100,000 Operating lease obligations 432,241 91,084 137,286 84,752 119,119 Interest on debt 433,125 61,875 123,750 123,750 123,750 Deferred acquisition consideration 161,323 90,183 66,937 4,203 — Total $ 2,126,689 $ 243,142 $ 327,973 $ 212,705 $ 1,342,869 (1) Includes the principal amount of the 5.625% Notes which are due in 2029 and does not include borrowings under the Combined Credit Agreement.
Management anticipates that the obligations outstanding at December 31, 2023 will be repaid with new financing, equity offerings, asset sales and/or cash flow from operations: Payments Due by Period Material Cash Requirements Total Less than 1 Year 1 – 3 Years 3 – 5 Years After 5 Years (dollars in thousands) Indebtedness (1) $ 1,100,000 $ — $ — $ — $ 1,100,000 Operating lease obligations 417,463 78,733 125,614 101,014 112,102 Interest on debt 371,250 61,875 123,750 123,750 61,875 Deferred acquisition consideration (2) 71,787 48,375 21,757 1,167 488 Total $ 1,960,500 $ 188,983 $ 271,121 $ 225,931 $ 1,274,465 (1) Includes the principal amount of the 5.625% Notes which are due in 2029 and does not include borrowings under the Credit Agreement.
Critical Accounting Estimates Stagwell has prepared the Audited Consolidated Financial Statements in accordance with GAAP and pursuant to the rules and regulations of the SEC for reporting financial information on Form 10-K.
The ultimate amount payable in the future relating to these transactions will vary because it is dependent on the future results of operations of the subject businesses and the timing of when these rights are exercised. 59 Critical Accounting Estimates Stagwell has prepared the Audited Consolidated Financial Statements in accordance with GAAP and pursuant to the rules and regulations of the SEC for reporting financial information on Form 10-K.
These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP.
These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP. The non-GAAP financial measures included are “net revenue,” “organic net revenue growth (decline),” “Adjusted EBITDA,” and “Adjusted Diluted EPS.” “Net revenue” refers to revenue excluding billable costs.
The Company recognized a charge of $2.6 million to reduce the carrying value of three of its right-of-use lease assets and related leasehold improvements. These right-of-use lease assets related to agencies within the Integrated Agencies Network and the Brand Performance Network. This impairment charge is included in Impairment and other losses within the Consolidated Statements of Operations.
This was primarily attributable to a charge of $10.0 million to reduce the carrying value of four of its right-of-use lease assets and related leasehold improvements. The right-of-use lease assets and related leasehold improvements related to three agencies within the Integrated Agencies Network and one agency within the Brand Performance Network.
The CODM uses Adjusted EBITDA as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions. 43 Table of Contents 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.
The CODM uses Adjusted EBITDA as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions. The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks).
The geographic mix in net revenues for the years ended December 31, 2022 and 2021 was as follows: Year Ended December 31, 2022 2021 (dollars in thousands) United States $ 1,790,776 $ 1,039,934 United Kingdom 175,422 101,900 Other 255,955 127,103 Total $ 2,222,153 $ 1,268,937 Impairment and Other Losses The Company recognized an impairment and other losses charge of $122.2 million for the year ended December 31, 2022, primarily related to the impairment of goodwill, right-of-use leases assets and intangible assets.
The geographic mix in net revenues for the years ended December 31, 2023 and 2022 was as follows: Year Ended December 31, 2023 2022 (dollars in thousands) United States $ 1,710,966 $ 1,790,776 United Kingdom 161,629 175,422 Other 274,057 255,955 Total $ 2,146,652 $ 2,222,153 Impairment and Other Losses Impairment and Other Losses for the year ended December 31, 2023 was $11.4 million.
When acquiring less than 100% ownership of an entity, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity.
See Note 9 of the Notes included herein for additional information regarding contingent deferred acquisition consideration. When acquiring less than 100% ownership of an entity, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances.
Cash flows provided by investing activities were $164.0 million for the year ended December 31, 2021, primarily driven by the addition of $150.3 million of cash in connection with the acquisition of MDC, and $37.2 million from the sale of Reputation Defender, partially offset by capital expenditures of $8.8 million.
Investing Activities Cash flows provided by investing activities were $156.0 million for the year ended December 31, 2023, primarily driven by $229.5 million in proceeds from the sale of ConcentricLife, partially offset by $28.2 million in capitalized software spend, $14.2 million in capital expenditures, and $23.3 million for acquisitions, net of cash acquired.
Executive Summary Overview Stagwell conducts its business through its networks, which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment.
Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment. Stagwell’s differentiation lies in its creative roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients.
Depreciation and amortization increased primarily due to the recognition of depreciable fixed assets and amortizable intangible assets in connection with the acquisitions of MDC and GoodStuff Holdings Limited (“Goodstuff”). Impairment and other losses increased primarily due to the impairment of goodwill, intangible assets and right-of-use lease assets in 2022.
The increase in Depreciation and amortization was primarily attributable to the recognition of intangible assets in connection with the acquisition of Maru. Impairment and other losses decreased primarily due to the impairment of goodwill in 2022.
Foreign Exchange Transaction Gain (Loss) The foreign exchange loss for the year ended December 31, 2022 was $2.6 million compared to a loss of $3.3 million for the year ended December 31, 2021.
Operating Income Operating Income for the year ended December 31, 2023 was $121.6 million, compared to $138.2 million for the year ended December 31, 2022, representing a decrease of $16.6 million.
These arrangements may be dependent on future events, such as the growth rate of the earnings of the relevant subsidiary during the contractual period. At each reporting date, the Company models each business’ future performance, including revenue growth and free cash flows, to estimate the value of each deferred acquisition consideration liability.
At each reporting date, the Company models each business’ future performance, including revenue and EBITDA growth, net liquid assets and working capital, to estimate the value of each deferred acquisition consideration liability.
Deferred acquisition consideration increased primarily due to the acquisition of Goodstuff in the fourth quarter of 2021, partially offset by a decrease in the fair value of deferred acquisition consideration for the year ended 2022. Operating income and Adjusted EBITDA were driven by an increase in revenues, partially offset by higher expenses as detailed above.
Adjusted EBITDA decreased $35.2 million, primarily driven by a decrease in Operating Income, partially offset by an increase in expenses added-back to EBITDA, primarily Deferred acquisition consideration as discussed above.
The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $73.3 million as of December 31, 2022.
The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $138.6 million as of December 31, 2023. The Board will review the Repurchase Program periodically and may authorize adjustments of its terms. The Repurchase Program may be suspended, modified or discontinued at any time without prior notice.
The decrease related to net acquisitions (divestitures) was primarily attributable to the sale of Reputation Defender in 2021. Operating Loss The increase in operating loss was primarily driven by a decrease in revenues and an increase in impairment and other losses due to the impairment of goodwill. The decrease in Adjusted EBITDA was primarily driven by a decrease in revenue.
The change in Operating Loss was primarily attributable to an increase in Revenue, Cost of services, Office and general expenses and Depreciation and amortization, partially offset by a decrease in Impairment and other losses.
Corporate The components of operating results for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows: Year Ended December 31, 2022 2021 Change (dollars in thousands) $ % Staff costs $ 25,109 $ 19,827 $ 5,282 26.6 % Administrative costs 18,002 817 17,185 NM Adjusted EBITDA (43,111) (20,644) (22,467) NM Stock-based compensation 11,710 6,624 5,086 76.8 % Depreciation and amortization 6,925 3,775 3,150 83.4 % Other items, net 5,312 15,125 (9,813) (64.9) % Operating Loss $ (67,058) $ (46,168) $ (20,890) 45.2 % Operating expenses increased primarily in connection with the acquisition of MDC.
Corporate The components of operating results for the year ended December 31, 2023 compared to the year ended December 31, 2022 were as follows: Year Ended December 31, 2023 2022 Change (dollars in thousands) $ % Staff costs $ 36,938 $ 36,456 $ 482 1.3 % Administrative costs 11,472 6,655 4,817 72.4 % Adjusted EBITDA (48,410) (43,111) (5,299) 12.3 % Stock-based compensation 19,638 11,710 7,928 67.7 % Depreciation and amortization 8,218 6,925 1,293 18.7 % Other items, net 10,007 5,312 4,695 88.4 % Operating Loss $ (86,273) $ (67,058) $ (19,215) 28.7 % Operating Loss for the year ended December 31, 2023 was $86.3 million compared to $67.1 million for the year ended December 31, 2022, representing an increase of $19.2 million.
Operating income for the year ended December 31, 2022 was impacted primarily by an increase in revenue and expenses from existing operations and due to the acquisition of MDC.
The increase in net acquisitions (divestitures) was primarily driven by a $12.5 million increase in revenue from the acquisitions of BNG and Huskies. Operating Income Operating Income for the year ended December 31, 2023 was $38.2 million, compared to $15.7 million for the year ended December 31, 2022, representing an increase of $22.6 million.
Brand Performance Network The components of operating results for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows: Year Ended December 31, 2022 2021 Change (dollars in thousands) $ % Revenue $ 757,208 $ 424,632 $ 332,576 78.3 % Operating Expenses Cost of services 439,814 219,492 220,322 NM Office and general expenses 217,254 148,761 68,493 46.0 % Depreciation and amortization 33,674 26,031 7,643 29.4 % Impairment and other losses 50,778 14,846 35,932 NM $ 741,520 $ 409,130 $ 332,390 81.2 % Operating income $ 15,688 $ 15,502 $ 186 1.2 % Year Ended December 31, 2022 2021 Change (dollars in thousands) $ % Net Revenue $ 667,882 $ 393,481 $ 274,401 69.7 % Billable costs 89,326 31,151 58,175 NM Revenue 757,208 424,632 332,576 78.3 % Billable costs 89,326 31,151 58,175 NM Staff costs 412,982 244,078 168,904 69.2 % Administrative costs 90,853 58,411 32,442 55.5 % Unbillable and other costs, net 48,212 25,050 23,162 92.5 % Adjusted EBITDA 115,835 65,942 49,893 75.7 % Stock-based compensation 5,830 5,251 579 11.0 % Depreciation and amortization 33,674 26,031 7,643 29.4 % Deferred acquisition consideration 1,736 184 1,552 NM Impairment and other losses 50,778 14,846 35,932 NM Other items, net 8,129 4,128 4,001 96.9 % Operating Income $ 15,688 $ 15,502 $ 186 1.2 % Revenue Revenue for the year ended December 31, 2022 was $757.2 million compared to $424.6 million for the year ended December 31, 2021, an increase of $332.6 million. 51 Table of Contents Net Revenue The components of the fluctuations in net revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows: Net Revenue - Components of Change Change Year Ended December 31, 2021 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Year Ended December 31, 2022 Organic Total (dollars in thousands) Brand Performance Network $ 393,481 $ (9,542) $ 188,168 $ 95,775 $ 274,401 $ 667,882 24.3 % 69.7 % Component % change (2.4)% 47.8% 24.3% 69.7% The increase in organic net revenue was primarily attributable to new clients and increased spending by existing clients.
Brand Performance Network The components of operating results for the year ended December 31, 2023 compared to the year ended December 31, 2022 were as follows: Year Ended December 31, 2023 2022 Change (dollars in thousands) $ % Revenue $ 768,776 $ 757,208 $ 11,568 1.5 % Operating Expenses Cost of services 469,203 439,814 29,389 6.7 % Office and general expenses 225,498 217,254 8,244 3.8 % Depreciation and amortization 34,343 33,674 669 2.0 % Impairment and other losses 1,483 50,778 (49,295) (97.1) % $ 730,527 $ 741,520 $ (10,993) (1.5) % Operating Income $ 38,249 $ 15,688 $ 22,561 NM 51 Table of Contents Year Ended December 31, 2023 2022 Change (dollars in thousands) $ % Net Revenue $ 668,101 $ 667,882 $ 219 — % Billable costs 100,675 89,326 11,349 12.7 % Revenue 768,776 757,208 11,568 1.5 % Billable costs 100,675 89,326 11,349 12.7 % Staff costs 419,651 408,968 10,683 2.6 % Administrative costs 95,837 94,867 970 1.0 % Unbillable and other costs, net 56,598 48,212 8,386 17.4 % Adjusted EBITDA 96,015 115,835 (19,820) (17.1) % Stock-based compensation 5,883 5,830 53 0.9 % Depreciation and amortization 34,343 33,674 669 2.0 % Deferred acquisition consideration 2,851 1,736 1,115 64.2 % Impairment and other losses 1,483 50,778 (49,295) (97.1) % Other items, net 13,206 8,129 5,077 62.5 % Operating Income $ 38,249 $ 15,688 $ 22,561 NM Revenue Revenue for the year ended December 31, 2023 was $768.8 million, compared to $757.2 million for the year ended December 31, 2022, an increase of $11.6 million.
Impairment and other losses for the year ended December 31, 2022 of $52.4 million relates to the impairment of goodwill, an intangible asset, and right-of-use lease assets in 2022. 50 Table of Contents Operating income and Adjusted EBITDA were higher driven by the increase in revenues, partially offset by higher expenses as detailed above.
Impairment and other losses decreased $42.4 million primarily due to the impairment of goodwill, right-of-use lease assets and the related leasehold improvements in 2022. Adjusted EBITDA decreased $21.0 million, primarily driven by a decrease in Operating Income, as discussed above.
Noncontrolling and Redeemable Noncontrolling Interests The effect of noncontrolling and redeemable noncontrolling interests for the year ended December 31, 2022 was $38.6 million compared to $14.9 million for the year ended December 31, 2021. The increase is primarily related to noncontrolling interest income associated with holders of Class C Common Stock. Net Income (Loss) Attributable to Stagwell Inc.
The change was attributable to an increase in net income allocated to the holders of Class C Common Stock, partially offset by a decrease in net income associated with other redeemable noncontrolling interest holders. Net Income (Loss) Attributable to Stagwell Inc.
Net Revenue The components of the fluctuations in net revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows: Net Revenue - Components of Change Change Year Ended December 31, 2021 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Year Ended December 31, 2022 Organic Total (dollars in thousands) Integrated Agencies Network $ 683,563 $ (4,467) $ 458,712 $ 109,560 $ 563,805 $ 1,247,368 16.0 % 82.5 % Component % change (0.7)% 67.1% 16.0% 82.5% The growth in organic net revenue was primarily attributable to increased spending by existing and new clients, primarily driven by creative, digital transformation and consumer insights services.
Net Revenue The components of the fluctuations in net revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 were as follows: Net Revenue - Components of Change Change Year Ended December 31, 2022 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Year Ended December 31, 2023 Organic Total (dollars in thousands) Integrated Agencies Network $1,240,465 $(2,266) $6,677 $(58,172) $(53,761) $1,186,704 (4.7)% (4.3)% Component % change (0.2)% 0.5% (4.7)% (4.3)% The decrease in organic net revenue was primarily attributable to the retail, financial, and communications sector due to the loss of clients, clients who withheld spending due to uncertain macroeconomic factors, turmoil from the collapse of regional banks, and the writer and actor strikes.
On December 31, 2022, the Company had $100.0 million of borrowings outstanding, $25.3 million of outstanding and undrawn letters of credit resulting in $374.7 million available under its $500.0 million Combined Credit Agreement (as defined and discussed in Note 11 of the Notes to the Audited Consolidated Financial Statements included herein).
Interest Expense, Net Interest expense, net for the year ended December 31, 2023 was $90.6 million compared to $76.1 million for the year ended December 31, 2022, an increase of $14.6 million, primarily attributable to higher levels of debt outstanding under the Credit Agreement (as defined and discussed in Note 11 of the Notes to the Audited Consolidated Financial Statements included herein), and a higher interest rate of borrowings on amounts outstanding under the Credit Agreement.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K that was filed with the SEC on March 17, 2022, including the sections entitled “Result of Operations — Twelve Months Ended December 31, 2021 Compared to Twelve Months Ended December 31, 2020” and “Liquidity — Cash Flows”. 44 Table of Contents Results of Operations: Year Ended December 31, 2022 2021 2020 (dollars in thousands) Revenue: Integrated Agencies Network $ 1,479,802 $ 770,056 $ 221,595 Brand Performance Network 757,208 424,632 262,362 Communications Network 430,820 248,832 382,815 All Other 19,962 25,843 21,260 Total Revenue $ 2,687,792 $ 1,469,363 $ 888,032 Operating Income $ 159,228 $ 44,726 $ 83,740 Other Income (Expenses): Interest expense, net (76,062) (31,894) (6,223) Foreign exchange, net (2,606) (3,332) (721) Other, net (7,059) 50,058 544 Income before income taxes and equity in earnings of non-consolidated affiliates 73,501 59,558 77,340 Income tax expense 7,580 23,398 5,937 Income before equity in earnings of non-consolidated affiliates 65,921 36,160 71,403 Equity in income (loss) of non-consolidated affiliates (79) (240) 58 Net income 65,842 35,920 71,461 Net income attributable to noncontrolling and redeemable noncontrolling interests (38,573) (14,884) (15,105) Net income attributable to Stagwell Inc. common shareholders $ 27,269 $ 21,036 $ 56,356 Reconciliation to Adjusted EBITDA: Net income attributable to Stagwell Inc. common shareholders $ 27,269 $ 21,036 $ 56,356 Non-operating items (1) 131,959 23,690 27,384 Operating income 159,228 44,726 83,740 Depreciation and amortization 131,273 77,503 41,025 Impairment and other losses 122,179 16,240 — Stock-based compensation 33,152 75,032 — Deferred acquisition consideration (13,405) 18,721 4,497 Other items, net 18,691 21,430 13,906 Adjusted EBITDA $ 451,118 $ 253,652 $ 143,168 (1) Non-operating items includes items within the Statements of Operations, below Operating Income, and above Net income attributable to Stagwell Inc. common shareholders. 45 Table of Contents YEAR ENDED DECEMBER 31, 2022 COMPARED TO YEAR ENDED DECEMBER 31, 2021 Consolidated Results of Operations The components of operating results for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows: Year Ended December 31, 2022 2021 Change (dollars in thousands) $ % Revenue $ 2,687,792 $ 1,469,363 $ 1,218,429 82.9 % Operating Expenses Cost of services 1,673,576 906,856 766,720 84.5 % Office and general expenses 601,536 424,038 177,498 41.9 % Depreciation and amortization 131,273 77,503 53,770 69.4 % Impairment and other losses 122,179 16,240 105,939 NM $ 2,528,564 $ 1,424,637 $ 1,103,927 77.5 % Operating income $ 159,228 $ 44,726 $ 114,502 NM Year Ended December 31, 2022 2021 Change (dollars in thousands) $ % Net Revenue $ 2,222,153 $ 1,268,937 $ 953,216 75.1 % Billable costs 465,639 200,426 265,213 NM Revenue 2,687,792 1,469,363 1,218,429 82.9 % Billable costs 465,639 200,426 265,213 NM Staff costs 1,392,535 790,121 602,414 76.2 % Administrative costs 256,755 144,294 112,461 77.9 % Unbillable and other costs, net 121,745 80,870 40,875 50.5 % Adjusted EBITDA 451,118 253,652 197,466 77.8 % Stock-based compensation 33,152 75,032 (41,880) (55.8) % Depreciation and amortization 131,273 77,503 53,770 69.4 % Deferred acquisition consideration (13,405) 18,721 (32,126) NM Impairment and other losses 122,179 16,240 105,939 NM Other items, net 18,691 21,430 (2,739) (12.8) % Operating Income (1) $ 159,228 $ 44,726 $ 114,502 NM (1) See the Results of Operations section above for a reconciliation of Operating Income to Net Income attributable to Stagwell Inc. common shareholders.
The following discussion focuses on the operating performance of the Company for the years ended December 31, 2023 and 2022 and the financial condition of the Company as of December 31, 2023. 43 Table of Contents Results of Operations: Year Ended December 31, 2023 2022 (dollars in thousands) Revenue: Integrated Agencies Network $ 1,378,109 $ 1,474,970 Brand Performance Network 768,776 757,208 Communications Network 333,707 435,652 All Other 46,585 19,962 Total Revenue $ 2,527,177 $ 2,687,792 Operating Income $ 90,527 $ 159,228 Other Income (Expenses): Interest expense, net $ (90,644) $ (76,062) Foreign exchange, net (2,960) (2,606) Gain on sale of business 94,505 — Other, net (359) (4,975) Income before income taxes and equity in earnings of non-consolidated affiliates 91,069 75,585 Income tax expense 40,557 25,462 Income before equity in earnings of non-consolidated affiliates 50,512 50,123 Equity in (loss) of non-consolidated affiliates (8,870) (79) Net income 41,642 50,044 Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests (41,508) (30,125) Net income attributable to Stagwell Inc. common shareholders $ 134 $ 19,919 Reconciliation to Adjusted EBITDA: Net income attributable to Stagwell Inc. common shareholders $ 134 $ 19,919 Non-operating items (1) 90,393 139,309 Operating income 90,527 159,228 Depreciation and amortization 142,831 131,273 Impairment and other losses 11,395 122,179 Stock-based compensation 57,179 33,152 Deferred acquisition consideration 13,060 (13,405) Other items, net 45,147 18,691 Adjusted EBITDA $ 360,139 $ 451,118 (1) Non-operating items includes items within the Statements of Operations, below Operating Income, and above Net income (loss) attributable to Stagwell Inc. common shareholders. 44 Table of Contents YEAR ENDED DECEMBER 31, 2023 COMPARED TO YEAR ENDED DECEMBER 31, 2022 Consolidated Results of Operations The components of operating results for the year ended December 31, 2023 compared to the year ended December 31, 2022 were as follows: Year Ended December 31, 2023 2022 Change (dollars in thousands) $ % Revenue $ 2,527,177 $ 2,687,792 $ (160,615) (6.0) % Operating Expenses Cost of services 1,621,174 1,673,576 (52,402) (3.1) % Office and general expenses 661,250 601,536 59,714 9.9 % Depreciation and amortization 142,831 131,273 11,558 8.8 % Impairment and other losses 11,395 122,179 (110,784) (90.7) % $ 2,436,650 $ 2,528,564 $ (91,914) (3.6) % Operating Income $ 90,527 $ 159,228 $ (68,701) (43.1) % Year Ended December 31, 2023 2022 Change (dollars in thousands) $ % Net Revenue $ 2,146,652 $ 2,222,153 $ (75,501) (3.4) % Billable costs 380,525 465,639 (85,114) (18.3) % Revenue 2,527,177 2,687,792 (160,615) (6.0) % Billable costs 380,525 465,639 (85,114) (18.3) % Staff costs 1,389,168 1,394,317 (5,149) (0.4) % Administrative costs 259,780 254,973 4,807 1.9 % Unbillable and other costs, net 137,565 121,745 15,820 13.0 % Adjusted EBITDA 360,139 451,118 (90,979) (20.2) % Stock-based compensation 57,179 33,152 24,027 72.5 % Depreciation and amortization 142,831 131,273 11,558 8.8 % Deferred acquisition consideration 13,060 (13,405) 26,465 NM Impairment and other losses 11,395 122,179 (110,784) (90.7) % Other items, net 45,147 18,691 26,456 NM Operating Income (1) $ 90,527 $ 159,228 $ (68,701) (43.1) % (1) See the Results of Operations section above for a reconciliation of Operating Income to Net income (loss) attributable to Stagwell Inc. common shareholders.
All Other The components of operating results for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows: Year Ended December 31, 2022 2021 Change (dollars in thousands) $ % Revenue $ 19,962 $ 25,843 $ (5,881) (22.8) % Operating Expenses Cost of services 10,007 13,866 (3,859) (27.8) % Office and general expenses 10,951 12,785 (1,834) (14.3) % Depreciation and amortization 5,234 2,498 2,736 NM Impairment and other losses 19,041 — 19,041 100.0 % $ 45,233 $ 29,149 $ 16,084 55.2 % Operating loss $ (25,271) $ (3,306) $ (21,965) NM Year Ended December 31, 2022 2021 Change (dollars in thousands) $ % Net Revenue $ 19,962 $ 25,843 $ (5,881) (22.8) % Revenue 19,962 25,843 (5,881) (22.8) % Staff costs 14,011 16,454 (2,443) (14.8) % Administrative costs 3,894 9,481 (5,587) (58.9) % Unbillable and other costs, net 2,990 677 2,313 NM Adjusted EBITDA (933) (769) (164) 21.3 % Stock-based compensation 41 39 2 5.1 % Depreciation and amortization 5,234 2,498 2,736 NM Impairment and other losses 19,041 — 19,041 100.0 % Other items, net 22 — 22 100.0 % Operating Loss $ (25,271) $ (3,306) $ (21,965) NM Revenue Revenue for the year ended December 31, 2022 was $20.0 million compared to $25.8 million for the year ended December 31, 2021, a decrease of $5.9 million. 54 Net Revenue The components of the fluctuations in net revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 were as follows: Net Revenue - Components of Change Change Year Ended December 31, 2021 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Year Ended December 31, 2022 Organic Total (dollars in thousands) All Other $ 25,843 $ (835) $ (4,616) $ (430) $ (5,881) $ 19,962 (1.7) % (22.8) % Component % change (3.2)% (17.9)% (1.7)% (22.8)% Organic net revenue remained relatively flat.
All Other The components of operating results for the year ended December 31, 2023 compared to the year ended December 31, 2022 were as follows: Year Ended December 31, 2023 2022 Change (dollars in thousands) $ % Revenue $ 46,585 $ 19,962 $ 26,623 NM Operating Expenses Cost of services 32,484 10,006 22,478 NM Office and general expenses 24,648 10,950 13,698 NM Depreciation and amortization 8,390 5,234 3,156 60.3 % Impairment and other losses — 19,041 (19,041) (100.0) % $ 65,522 $ 45,231 $ 20,291 44.9 % Operating Loss $ (18,937) $ (25,269) $ 6,332 (25.1) % 54 Year Ended December 31, 2023 2022 Change (dollars in thousands) $ % Net Revenue $ 46,585 $ 19,962 $ 26,623 NM Revenue (1) 46,585 19,962 26,623 NM Staff costs 37,416 13,963 23,453 NM Administrative costs (1) 4,689 3,940 749 19.0 % Unbillable and other costs, net 15,087 2,990 12,097 NM Adjusted EBITDA (10,607) (931) (9,676) NM Stock-based compensation 518 41 477 NM Depreciation and amortization 8,390 5,234 3,156 60.3 % Deferred acquisition consideration (1,752) — (1,752) (100.0) % Impairment and other losses — 19,041 (19,041) (100.0) % Other items, net 1,174 22 1,152 NM Operating Loss $ (18,937) $ (25,269) $ 6,332 (25.1) % (1) All Other Revenue and Administrative costs include approximately $6.0 million of eliminations of intercompany services.
The difference in the effective tax rate of 10.3% in the year ended December 31, 2022 as compared to 39.3% in the year ended December 31, 2021 was primarily related to share-based compensation, revaluation of the TRA step up, and return to provision adjustments in the year ended December 31, 2022 and a change in ownership of OpCo, offset in part by the impact of non-deductible goodwill impairments in the year ended December 31, 2022.
The difference in the effective tax rate of 44.5% in the year ended December 31, 2023 as compared to 33.7% in the year ended December 31, 2022 was primarily due to the change in pre-tax income, tax expense on gain on sale of business in 2023, tax benefit of impairments in 2022, increase in valuation allowance in 2023, lower share-based compensation windfalls, and unfavorable return to provision adjustments in 2023 offset by an increase in tax benefit from disregarded entity structure in 2023, and out-of-period adjustments in 2022.
See Note 13 of the Notes included herein for additional information regarding noncontrolling interests and redeemable noncontrolling interests. Certain of the Company’s subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the “profits interests awards”).
Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity. See Note 13 of the Notes included herein for additional information regarding noncontrolling interests and redeemable noncontrolling interests.

… 121 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+1 added−3 removed2 unchanged
Biggest changeIn addition, the Company recorded an impairment charge of $1.4 million to reduce the carrying value of intangible assets and $2.6 million to reduce the carrying value of four right-of-use lease assets and related leasehold improvements.
Biggest changeImpairment Risk: For the year ended December 31, 2023, the Company recorded an impairment charge of $11.4 million to reduce the carrying value of four of its right-of-use lease assets and related leasehold improvements and a long-lived asset, specifically a trade name.
The 5.625% Notes bear a fixed 5.625% interest rate. The revolving credit agreement bears interest at variable rates based upon SOFR, EURIBOR, and SONIA depending on the duration of the borrowing product. The Company’s ability to obtain the required bank syndication commitments depends in part on conditions in the bank market at the time of syndication.
The 5.625% Notes bear a fixed 5.625% interest rate. The Credit Agreement bears interest at variable rates based upon SOFR, EURIBOR, and SONIA depending on the duration of the borrowing product. The Company’s ability to obtain the required bank syndication commitments depends in part on conditions in the bank market at the time of syndication.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk In the normal course of business, the Company is exposed to market risk related to interest rates, foreign currencies and impairment risk. Debt Instruments: At December 31, 2022, the Company’s debt obligations consisted of amounts outstanding under its Combined Credit Agreement and the 5.625% Notes.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk In the normal course of business, the Company is exposed to market risk related to interest rates, foreign currencies and impairment risk. Debt Instruments: At December 31, 2023, the Company’s debt obligations consisted of amounts outstanding under its Credit Agreement and the 5.625% Notes.
See the Critical Accounting Estimates section in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information related to impairment testing and the risk of potential impairment charges in future periods. 62
See the Critical Accounting Estimates section in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information related to the risk of potential impairment charges in future periods.
With regard to our variable rate debt, a 10% increase or decrease in interest rates would change our annual interest expense by $0.9 million. 61 Foreign Exchange: While the Company primarily conducts business in markets that use the U.S. dollar, the Canadian dollar, the Euro and the British Pound, its non-U.S. operations transact business in numerous different currencies.
With regard to our variable rate debt, a 10% increase or decrease in interest rates would change our annual interest expense by $2.5 million. 61 Foreign Exchange: While the Company primarily conducts business in markets that use the U.S. dollar, the Canadian dollar, the Euro and the British Pound, its non-U.S. operations transact business in numerous different currencies.
The effects of currency exchange rate fluctuations on the translation of the Company’s results of operations are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 2 of the Company’s Audited Consolidated Financial Statements included in this 2022 Form 10-K.
The effects of currency exchange rate fluctuations on the translation of the Company’s results of operations are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 2 of the Company’s Audited Consolidated Financial Statements included in the 2023 Form 10-K.
On April 28, 2022, the Company amended the Combined Credit Agreement. This amendment replaced references to LIBOR with references to SOFR.
On April 28, 2022, the Company amended its Credit Agreement. This amendment replaced references to LIBOR with references to SOFR.
Translation of current intercompany balances are included in net income (loss). The Company generally does not enter into foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.
Translation of current intercompany balances are included in net income (loss). From time to time, the Company may enter into foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.
Removed
Impairment Risk: For the year ended December 31, 2022, the Company recognized an impairment and other losses charge of $122.2 million, primarily related to the impairment of goodwill, right-of-use leases assets and intangible assets. The Company recognized an impairment charge of $116.7 million to write-down the carrying value of goodwill in excess of the fair value.
Added
See the Significant Accounting Policies section in the “Notes to Audited Consolidated Financial Statements” of the Company’s 2023 Form 10-K for information related to impairment testing for Goodwill, Right-of-use lease assets and long-lived assets and the risk of potential impairment charges in future periods.
Removed
The Company reviews goodwill for impairment annually as of October 1st of each year or more frequently if indicators of potential impairment exist.
Removed
To the extent that, among other factors, (i) there is underperformance in one or more reporting units (ii) a potential recession further disrupts the economic environment or (iii) interest rates continue to rise in response to persistent inflation, the fair value of one or more of the reporting units could fall below their carrying value, resulting in a goodwill impairment charge.

Other STGW 10-K year-over-year comparisons