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STAGWELL INC. (NASDAQ: STGW) REPORTS RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023

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Revenue of $632 million

Net revenue of $539 million

Q2 net new business of $75 million, bringing LTM net new business to record $256 million

International revenue grew 9% led by particularly strong growth in Asia-Pacific of 17%

Adjusts full-year outlook 

NEW YORK, Aug. 8, 2023 /PRNewswire/ -- (NASDAQ: STGW) – Stagwell Inc. ("Stagwell") today announced financial results for the three and six months ended June 30, 2023.

New business wins across Stagwell hit a record quarter billion dollars in the last 12 months.

SECOND QUARTER AND SIX MONTHS HIGHLIGHTS:

  • Q2 revenue of $632 million, a decrease of 6% versus the prior year period; YTD revenue of $1,255 million, a decrease of 5% versus the prior year period
  • Q2 net revenue of $539 million, a decrease of 3% versus the prior period; YTD net revenue of $1,061 million, a decrease of 2% versus the prior year period
  • Q2 organic net revenue declined 5% versus the prior year period and 4% ex-Advocacy; YTD organic net revenue declined 4% versus the prior year period and 3% ex-Advocacy. This follows 16% organic net revenue growth in 2022
  • Q2 net loss of $10 million versus net income of $25 million in the prior year period; YTD net loss of $15 million versus net income of $58 million in the prior year period
  • Q2 net loss attributable to Stagwell Inc. common shareholders of $5 million versus net income of $10 million in the prior year period; YTD net loss attributable to Stagwell Inc. common shareholders of $4 million versus net income of $23 million in the prior year period
  • Q2 Adjusted EBITDA of $91 million, a decrease of 18% versus the prior year period; YTD Adjusted EBITDA of $163 million, a decrease of 23% versus the prior year period
  • Q2 Adjusted EBITDA Margin of 17% on net revenue; YTD Adjusted EBITDA Margin of 15% on net revenue
  • Q2 loss per share attribute to Stagwell Inc. common shareholders of $0.04
  • Q2 Adjusted earnings per share attributable to Stagwell Inc. common shareholders of $0.16; YTD Adjusted earnings per share of $0.29
  • Q2 net new business of $75 million; YTD net new business of $128 million

"Stagwell posted sequential quarter-over-quarter improvements in revenue, EBITDA and margin, and our new business wins hit a quarter billion dollars in the last 12 months as they accelerated to record levels," said Mark Penn, Chairman and CEO of Stagwell. "We remain bullish about H2 2023 and 2024 and we expect to see significant growth across all metrics throughout the rest of the year," he added. "It is clear, however, that our industry is facing headwinds caused by economic uncertainty and especially tech client reorganizations, the effects of which we believe are temporary."

"We are beginning to see a return to a more normal business environment, and the emergence of Generative AI is providing a runway for future work that we believe will explode in the next 12 to 18 months," Penn said. "We are already in the market with Generative AI products, and our Stagwell Marketing Cloud Group revenue was nearly $50 million this quarter as we push the frontiers of technology in marketing AI and AR."

Frank Lanuto, Chief Financial Officer, commented: "Management responded appropriately, adjusting costs to align with our revenue structure as we continue to strengthen our balance sheet, cash flow generation, and initiatives to centralize our shared service platform, all of which will result in stronger margins over the next couple of quarters. We believe we are coming off the bottom of an economic and political cycle."

Financial Outlook

2023 financial guidance is as follows:

  • Organic Net Revenue growth of 0%2%
  • Adjusted EBITDA of $410 million$440 million
  • Free Cash Flow Conversion of 50%60%
  • Adjusted EPS of $0.76 - $0.85
  • Guidance assumes no impact from foreign exchange, acquisitions or dispositions.

* The Company has excluded a quantitative reconciliation with respect to the Company's 2023 guidance under the "unreasonable efforts" exception in Item 10(e)(1)(i)(B) of Regulation S-K. See "Non-GAAP Financial Measures" below for additional information.

Video Webcast 

Management will host a video webcast on Tuesday, August 8, 2023, at 8:30 a.m. (ET) to discuss results for Stagwell Inc. for the three and six months ended June 30, 2023. The video webcast will be accessible at https://stgw.io/Q2Earnings. An investor presentation has been posted on our website at www.stagwellglobal.com and may be referred to during the webcast.

A recording of the webcast will be accessible one hour after the webcast and available for ninety days at www.stagwellglobal.com.

Stagwell Inc.

Stagwell is the challenger network built to transform marketing. We deliver scaled creative performance for the world's most ambitious brands, connecting culture-moving creativity with leading-edge technology to harmonize the art and science of marketing.  Led by entrepreneurs, our 13,000+ specialists in 34+ countries are unified under a single purpose: to drive effectiveness and improve business results for their clients. Join us at www.stagwellglobal.com.

Contacts

For Investors: 
Ben Allanson
Ir@stagwellglobal.com

For Press:
Beth Sidhu
Pr@stagwellglobal.com

Non-GAAP Financial Measures

In addition to its reported results, Stagwell Inc. has included in this earnings release certain financial results that the Securities and Exchange Commission (SEC) defines as "non-GAAP Financial Measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. Such non-GAAP financial measures include the following:

(1) Organic Revenue: "Organic revenue growth" and "organic revenue decline" refer to the positive or negative results, respectively, of subtracting both the foreign exchange and acquisition (disposition) components from total revenue growth. The acquisition (disposition) component is calculated by aggregating prior period revenue for any acquired businesses, less the prior period revenue of any businesses that were disposed of during the current period. The organic revenue growth (decline) component reflects the constant currency impact of (a) the change in revenue of the partner firms that the Company has held throughout each of the comparable periods presented, and (b) "non-GAAP acquisitions (dispositions), net". Non-GAAP acquisitions (dispositions), net consists of (i) for acquisitions during the current year, the revenue effect from such acquisition as if the acquisition had been owned during the equivalent period in the prior year and (ii) for acquisitions during the previous year, the revenue effect from such acquisitions as if they had been owned during that entire year (or same period as the current reportable period), taking into account their respective pre-acquisition revenues for the applicable periods, and (iii) for dispositions, the revenue effect from such disposition as if they had been disposed of during the equivalent period in the prior year.

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

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

(4) Adjusted Diluted EPS is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income attributable to Class C shareholders, excluding amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, divided by (ii) (a) the per weighted average number of common shares outstanding plus (b) the weighted average number of Class C shares outstanding, (if dilutive). Other items includes restructuring costs, acquisition-related expenses, and non-recurring items, and subject to the anti-dilution rules.

(5) Free Cash Flow: defined as Adjusted EBITDA less capital expenditures, change in net working capital, cash taxes, interest, and distributions to minority interests, but excludes contingent M&A payments.

(6) Financial Guidance: The Company provides guidance on a non-GAAP basis as it cannot predict certain elements which are included in reported GAAP results.

Included in this earnings release are tables reconciling reported Stagwell Inc. results to arrive at certain of these non-GAAP financial measures.

This document contains forward-looking statements. within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company's representatives may also make forward-looking statements orally or in writing from time to time. Statements in this document that are not historical facts, including, statements about the Company's beliefs and expectations, future financial performance and future prospects, business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Forward-looking statements, which are generally denoted by words such as "anticipate," "assume," "believe," "continue," "could," "create," "estimate," "expect," "focus," "forecast," "foresee," "future," "guidance," "intend," "look," "may," "opportunity," "outlook," "plan," "possible," "potential," "predict," "project," "should," "target," "will," "would" or the negative of such terms or other variations thereof and terms of similar substance used in connection with any discussion of current plans, estimates and projections are subject to change based on a number of factors, including those outlined in this section.

Forward-looking statements in this document are based on certain key expectations and assumptions made by the Company. Although the management of the Company believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. The material assumptions upon which such forward-looking statements are based include, among others, assumptions with respect to general business, economic and market conditions, the competitive environment, anticipated and unanticipated tax consequences and anticipated and unanticipated costs. These forward-looking statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company's control. Therefore, you should not place undue reliance on such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any.

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following:

  • risks associated with international, national and regional unfavorable economic conditions that could affect the Company or its clients;
  • the continued impact of the coronavirus pandemic ("COVID-19"), and evolving strains of COVID-19 on the economy and demand for the Company's services, which may precipitate or exacerbate other risks and uncertainties;
  • inflation and actions taken by central banks to counter inflation;
  • the Company's ability to attract new clients and retain existing clients;
  • the impact of a reduction in client spending and changes in client advertising, marketing and corporate communications requirements;
  • financial failure of the Company's clients;
  • the Company's ability to retain and attract key employees;
  • the Company's ability to compete in the markets in which it operates;
  • the Company's ability to achieve its cost saving initiatives;
  • the Company's implementation of strategic initiatives;
  • the Company's ability to remain in compliance with its debt agreements and the Company's ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to redeemable noncontrolling interests and deferred acquisition consideration;
  • the Company's ability to manage its growth effectively, including the successful completion and integration of acquisitions that complement and expand the Company's business capabilities;
  • the Company's ability to develop products incorporating new technologies, including augmented reality, artificial intelligence, and virtual reality, and realize benefits from such products;
  • an inability to realize expected benefits of the combination of the Company's business with the business of MDC Partners Inc. (the "Transactions") and other completed, pending, or contemplated acquisitions;
  • adverse tax consequences in connection with the Transactions for the Company, its operations and its shareholders, that may differ from the expectations of the Company, including that future changes in tax law, potential increases to corporate tax rates in the United States and disagreements with the tax authorities on the Company's determination of value and computations of its attributes may result in increased tax costs;
  • the occurrence of material Canadian federal income tax (including material "emigration tax") as a result of the Transactions;
  • the Company's unremediated material weaknesses in internal control over financial reporting and its ability to establish and maintain an effective system of internal control over financial reporting;
  • the Company's ability to protect client data from security incidents or cyberattacks;
  • economic disruptions resulting from war and other geopolitical tensions (such as the ongoing military conflict between Russia and Ukraine), terrorist activities and natural disasters;
  • stock price volatility; and
  • foreign currency fluctuations.

Investors should carefully consider these risk factors, other risk factors described herein, and the additional risk factors outlined in more detail in our 2022 Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on March 6, 2023, and accessible on the SEC's website at www.sec.gov, under the caption "Risk Factors," and in the Company's other SEC filings.

 

SCHEDULE 1

STAGWELL INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share amounts)



Three Months Ended
June 30,


Six Months Ended
June 30,


2023


2022


2023


2022

Revenue

$        632,265


$        672,913


$     1,254,709


$     1,315,816

Operating Expenses








Cost of services

402,431


424,661


816,329


836,631

Office and general expenses

162,522


165,423


321,358


309,935

Depreciation and amortization

35,488


32,231


68,965


63,435

Impairment and other losses

10,562


2,266


10,562


2,823


611,003


624,581


1,217,214


1,212,824

Operating Income

21,262


48,332


37,495


102,992

Other income (expenses):








Interest expense, net

(23,680)


(18,151)


(41,869)


(36,880)

Foreign exchange, net

(1,478)


70


(2,148)


(236)

Other, net

(416)


(121)


(196)


35


(25,574)


(18,202)


(44,213)


(37,081)

Income (loss) before income taxes and equity in earnings of non-consolidated affiliates

(4,312)


30,130


(6,718)


65,911

Income tax expense

5,717


5,421


8,101


8,610

Income (loss) before equity in earnings of non-consolidated affiliates

(10,029)


24,709


(14,819)


57,301

Equity in income (loss) of non-consolidated affiliates

(216)


(190)


(443)


840

Net income (loss)

(10,245)


24,519


(15,262)


58,141

Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests

5,552


(14,056)


11,012


(35,003)

Net income (loss) attributable to Stagwell Inc. common shareholders

$           (4,693)


$           10,463


$           (4,250)


$           23,138

Earnings (Loss) Per Common Share:








   Basic

$             (0.04)


$               0.08


$             (0.04)


$               0.19

   Diluted

$             (0.04)


$               0.08


$             (0.04)


$               0.18

Weighted Average Number of Common Shares Outstanding:








   Basic

115,400


126,425


120,272


124,367

   Diluted

115,400


296,414


120,272


298,843

 

SCHEDULE 2

STAGWELL INC.

UNAUDITED COMPONENTS OF NET REVENUE CHANGE

(amounts in thousands)





Net Revenue - Components of Change






Change


Three Months Ended
June 30, 2022


Foreign
Currency


Net Acquisitions
(
Divestitures)


Organic


Total Change


Three Months Ended
June 30, 2023


Organic


Total







Integrated Agencies Network

$        313,441


$         (1,687)


$           1,682


$       (10,281)


$       (10,286)


$       303,155


(3.3) %


(3.3) %

Brand Performance Network

171,874


(2,444)


3,812


(7,581)


(6,213)


165,661


(4.4) %


(3.6) %

Communications Network

68,322


(94)


849


(7,433)


(6,678)


61,644


(10.9) %


(9.8) %

All Other

2,679



9,931


(4,010)


5,921


8,600


(149.7) %


221.0 %


$        556,316


$         (4,225)


$         16,274


$       (29,305)


$       (17,256)


$       539,060


(5.3) %


(3.1) %

 




Net Revenue - Components of Change






Change


Six Months Ended
June 30, 2022


Foreign
Currency


Net Acquisitions
(Divestitures)


Organic


Total Change


Six Months Ended
June 30, 2023


Organic


Total







Integrated Agencies Network

$        617,107


$         (4,481)


$           4,163


$       (20,730)


$       (21,048)


$       596,059


(3.4) %


(3.4) %

Brand Performance Network

327,356


(6,563)


9,727


(1,925)


1,239


328,595


(0.6) %


0.4 %

Communications Network

132,701


(374)


1,918


$       (19,629)


(18,085)


114,616


(14.8) %


(13.6) %

All Other

5,789


(157)


18,969


(3,149)


15,663


21,452


(54.4) %


270.6 %


$     1,082,953


$       (11,575)


$         34,777


$       (45,433)


$       (22,231)


$    1,060,722


(4.2) %


(2.1) %


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

Note: The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

 

SCHEDULE 3

STAGWELL INC.

UNAUDITED PRO FORMA SEGMENT OPERATING RESULTS

(amounts in thousands)


For the Three Months Ended June 30, 2023



Integrated
Agencies
Network


Brand
Performance
Network


Communications
Network


All Other


Corporate


Total

Net Revenue

$     303,155


$        165,661


$                   61,644


$      8,600


$              —


$     539,060

Billable costs

51,186


22,367


19,652




93,205

Revenue

354,341


188,028


81,296


8,600



632,265













Billable costs

51,186


22,367


19,652




93,205

Staff costs

183,285


105,868


38,357


10,246


8,437


346,193

Administrative costs

28,285


24,928


8,714


(3,800)


8,065


66,192

Unbillable and other costs, net

16,770


14,092


126


4,510


9


35,507

Adjusted EBITDA (1)

74,815


20,773


14,447


(2,356)


(16,511)


91,168













Stock-based compensation

1,041


964


418


127


7,996


10,546

Depreciation and amortization

20,214


8,548


2,719


2,066


1,941


35,488

Deferred acquisition consideration

1,109


161


(893)


15



392

Impairment and other losses

9,175


1,387





10,562

Other items, net (1)

4,625


3,289


488


787


3,729


12,918

Operating income (loss)

$       38,651


$            6,424


$                   11,715


$    (5,351)


$    (30,177)


$       21,262


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

Note: The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

 

SCHEDULE 4

STAGWELL INC.

UNAUDITED SEGMENT OPERATING RESULTS

(amounts in thousands)


For the Six Months Ended June 30, 2023



Integrated
Agencies
Network


Brand
Performance
Network


Communications
Network


All Other


Corporate


Total

Net Revenue

$    596,059


$        328,595


$               114,616


$    21,452


$              —


$ 1,060,722

Billable costs

88,074


72,773


33,140




193,987

Revenue

684,133


401,368


147,756


21,452



1,254,709













Billable costs

88,074


72,773


33,140




193,987

Staff costs

370,978


210,464


78,434


20,733


15,261


695,870

Administrative costs

57,451


48,010


17,470


(605)


12,042


134,368

Unbillable and other costs, net

33,430


25,927


252


7,485



67,094

Adjusted EBITDA (1)

134,200


44,194


18,460


(6,161)


(27,303)


163,390













Stock-based compensation

9,239


1,621


925


159


10,606


22,550

Depreciation and amortization

38,857


16,792


5,432


4,014


3,870


68,965

Deferred acquisition consideration

7,100


(1,018)


(354)


(1,248)



4,480

Impairment and other losses

9,175


1,387





10,562

Other items, net (1)

7,650


5,281


1,093


787


4,527


19,338

Operating income (loss)

$      62,179


$          20,131


$                 11,364


$    (9,873)


$    (46,306)


$       37,495


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

Note: The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

 

SCHEDULE 5

STAGWELL INC.

UNAUDITED PRO FORMA SEGMENT OPERATING RESULTS

(amounts in thousands)


For the Three Months Ended June 30, 2022



Integrated
Agencies
Network


Brand
Performance
Network


Communications
Network


All Other


Corporate


Total

Net Revenue

$    313,441


$         171,874


$                   68,322


$      2,679


$              —


$    556,316

Billable costs

63,735


22,422


30,440




116,597

Revenue

377,176


194,296


98,762


2,679



672,913













Billable costs

63,735


22,422


30,440




116,597

Staff costs

194,688


102,284


43,269


2,664


6,563


349,468

Administrative costs

31,250


24,002


7,734


493


2,870


66,349

Unbillable and other costs, net

17,127


11,889


157


7



29,180

Adjusted EBITDA (1)

70,376


33,699


17,162


(485)


(9,433)


111,319













Stock-based compensation

4,663


4,969


649



2,850


13,131

Depreciation and amortization

17,990


8,643


2,544


750


2,304


32,231

Deferred acquisition consideration

6,181


3,773


3,518




13,472

Impairment and other losses

784




1,482



2,266

Other items, net (1)

730


1,449


65


22


(379)


1,887

Operating income (loss)

$      40,028


$           14,865


$                   10,386


$    (2,739)


$    (14,208)


$      48,332


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

Note: The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

 

SCHEDULE 6

STAGWELL INC.

UNAUDITED SEGMENT OPERATING RESULTS

(amounts in thousands)


For the Six Months Ended June 30, 2022



Integrated
Agencies
Network


Brand
Performance
Network


Communications
Network


All Other


Corporate


Total

Net Revenue

$    617,107


$        327,356


$                132,701


$      5,789


$              —


$ 1,082,953

Billable costs

108,820


64,727


59,316




232,863

Revenue

725,927


392,083


192,017


5,789



1,315,816













Billable costs

108,820


64,727


59,316




232,863

Staff costs

386,784


198,308


84,095


5,200


15,719


690,106

Administrative costs

56,859


41,042


14,802


1,188


8,752


122,643

Unbillable and other costs, net

34,200


23,059


204


10



57,473

Adjusted EBITDA (1)

139,264


64,947


33,600


(609)


(24,471)


212,731













Stock-based compensation

9,736


6,229


406


8


4,773


21,152

Depreciation and amortization

36,850


16,839


5,104


1,251


3,391


63,435

Deferred acquisition consideration

4,856


5,905


4,608




15,369

Impairment and other losses

784


557



1,482



2,823

Other items, net (1)

1,494


2,510


137


22


2,797


6,960

Operating income (loss)

$      85,544


$          32,907


$                  23,345


$    (3,372)


$    (35,432)


$     102,992


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

Note: The Company made changes to its internal management and reporting structure in the first quarter of 2023, resulting in an update to our reportable segments (Networks). The change in reportable segments was that Mono, previously in the Integrated Agencies Network, is now within Allison & Partners in the Communications Network, and Storyline (a Brand specializing in research and survey generation), previously in the Communications Network, is now within Constellation in the Integrated Agencies Network. Periods presented prior to the first quarter of 2023 have been recast to reflect the reclassification of certain reporting units (Brands) between operating segments.

 

SCHEDULE 7

STAGWELL INC.

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

(amounts in thousands, except per share amounts)


For the Three Months Ended June 30, 2023




GAAP


Adjustments


Non-GAAP

Net income (loss) attributable to Stagwell Inc. common shareholders


$            (4,693)


$            23,635


$            18,942

Net income attributable to Class C shareholders



25,529


25,529

Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income


$            (4,693)


$            49,164


$            44,471








Weighted average number of common shares outstanding


115,400


9,135


124,535

Weighted average number of common Class C shares outstanding



155,821


155,821

Weighted average number of shares outstanding


115,400


164,956


280,356








EPS and Adjusted Diluted EPS


$              (0.04)




$                0.16















Adjustments to Net income (loss) (1)



Pre-Tax


Tax


Net

Amortization


$            28,690


$            (7,401)


$            21,289

Impairment and other losses


10,562


(1,237)


9,325

Stock-based compensation


10,546


(2,786)


7,760

Deferred acquisition consideration


392


(212)


180

Other items, net


12,918


(3,165)


9,753

Tax adjustments



5,409


5,409

Total add-backs


$            63,108


$            (9,392)


$            53,716

Net loss attributable to Class C shareholders






(4,552)







$            49,164








Allocation of adjustments to Net income (loss)

Net income attributable to Stagwell Inc. common shareholders






$            23,635








Net income attributable to Class C shareholders






30,081

Net loss attributable to Class C shareholders






(4,552)







25,529







$            49,164


(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

 

SCHEDULE 8

STAGWELL INC.

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

(amounts in thousands, except per share amounts)


For the Six Months Ended June 30, 2023




GAAP


Adjustments


Non-GAAP

Net income (loss) attributable to Stagwell Inc. common shareholders


$            (4,250)


$            41,996


$            37,746

Net income attributable to Class C shareholders



45,732


45,732

Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income 


(4,250)


87,728


83,478








Weighted average number of common shares outstanding


120,272


9,356


129,628

Weighted average number of common Class C shares outstanding



158,351


158,351

Weighted average number of shares outstanding


120,272


167,707


287,979








EPS and Adjusted Diluted EPS


$              (0.04)




$                0.29















Adjustments to Net Income (loss)(1)



Pre-Tax


Tax


Net

Amortization


$            55,422


$          (12,747)


$            42,675

Impairment and other losses


10,562


(1,237)


9,325

Stock-based compensation


22,550


(5,187)


17,363

Deferred acquisition consideration


4,480


(1,030)


3,450

Other items, net


19,338


(4,448)


14,890

Tax adjustments



7,742


7,742

Total add-backs


$          112,352


$          (16,907)


$            95,445

Net loss attributable to Class C shareholders






(7,717)







$            87,728








Allocation of adjustments to net income (loss)

Net income attributable to Stagwell Inc. common shareholders






$            41,996








Net income attributable to Class C shareholders






53,449

Net loss attributable to Class C shareholders






(7,717)







45,732







$            87,728


(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

 

SCHEDULE 9

STAGWELL INC.

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

(amounts in thousands, except per share amounts)


For the Three Months Ended June 30, 2022




GAAP


Adjustments


Non-GAAP

Net income attributable to Stagwell Inc. common shareholders


$            10,463


$            19,964


$            30,427

Net income attributable to Class C shareholders


14,020


25,297


39,317

Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income


24,483


45,261


69,744








Weighted average number of common shares outstanding


131,603



131,603

Weighted average number of common Class C shares outstanding


164,811



164,811

Weighted average number of shares outstanding


296,414



296,414















Diluted EPS and Adjusted Diluted EPS


$                0.08




$                0.24















Adjustments to Net income (1)



Pre-Tax


Tax


Net

Amortization


$            25,166


$            (5,033)


$            20,133

Impairment and other losses


2,266


(453)


1,813

Stock-based compensation


13,131


(2,626)


10,505

Deferred acquisition consideration


13,472


(2,694)


10,778

Other items, net


1,887


(407)


1,480

Tax adjustments



552


552



$            55,922


$          (10,661)


$            45,261


(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

 

SCHEDULE 10

STAGWELL INC.

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

(amounts in thousands, except per share amounts)


For the Six Months Ended June 30, 2022




GAAP


Adjustments


Non-GAAP

Net income attributable to Stagwell Inc. common shareholders


$            23,138


$            35,828


$            58,966

Net income attributable to Class C shareholders


31,741


45,397


77,138

Net income attributable to Stagwell Inc. and Class C and adjusted net income 


54,879


81,225


136,104








Weighted average number of common shares outstanding


131,267



131,267

Weighted average number of common Class C shares outstanding


167,576



167,576

Weighted average number of shares outstanding


298,843



298,843















Diluted EPS and Adjusted Diluted EPS


$                0.18




$                0.46















Adjustments to Net income(1)



Pre-Tax


Tax


Net

Amortization


$            50,070


$          (10,014)


$            40,056

Impairment and other losses


2,823


(565)


2,258

Stock-based compensation


21,152


(4,230)


16,922

Deferred acquisition consideration


15,369


(3,074)


12,295

Other items, net


6,960


(1,392)


5,568

Tax adjustments



4,126


4,126



$            96,374


$          (15,149)


$            81,225


(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.

 

SCHEDULE 11

STAGWELL INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)



June 30, 2023


December 31, 2022





ASSETS




Current Assets




Cash and cash equivalents

$                  105,284


$                  220,589

Accounts receivable, net

646,310


645,846

Expenditures billable to clients

106,871


93,077

Other current assets

97,083


71,443

Total Current Assets

955,548


1,030,955

Fixed assets, net

86,929


98,878

Right-of-use assets - operating leases

242,733


273,567

Goodwill

1,578,832


1,566,956

Other intangible assets, net

868,928


907,529

Other assets

120,064


115,447

Total Assets

$               3,853,034


$               3,993,332

LIABILITIES, RNCI, AND SHAREHOLDERS' EQUITY




Current Liabilities




Accounts payable

$                  338,613


$                  357,253

Accrued media

162,219


240,506

Accruals and other liabilities

205,751


248,477

Advance billings

306,470


337,034

Current portion of lease liabilities - operating leases

76,494


76,349

Current portion of deferred acquisition consideration

96,781


90,183

Total Current Liabilities

1,186,328


1,349,802

Long-term debt

1,487,430


1,184,707

Long-term portion of deferred acquisition consideration

17,688


71,140

Long-term lease liabilities - operating leases

263,888


294,049

Deferred tax liabilities, net

46,783


40,109

Other liabilities

60,598


69,780

Total Liabilities

3,062,715


3,009,587

Redeemable Noncontrolling Interests

28,129


39,111

Commitments, Contingencies and Guarantees




Shareholders' Equity




Common shares - Class A & B

116


132

Common shares - Class C

2


2

Paid-in capital

309,521


491,899

Retained earnings

27,496


29,445

Accumulated other comprehensive loss

(13,244)


(38,941)

Stagwell Inc. Shareholders' Equity

323,891


482,537

Noncontrolling interests

438,299


462,097

Total Shareholders' Equity

762,190


944,634

Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity

$               3,853,034


$               3,993,332

 

SCHEDULE 12

STAGWELL INC.

UNAUDITED SUMMARY CASH FLOW DATA

(amounts in thousands)



Six Months Ended June 30,


2023


2022

Cash flows from operating activities:




Net income

$                 (15,262)


$                   58,141

Adjustments to reconcile net income to cash used in operating activities:




Stock-based compensation

22,550


21,152

Depreciation and amortization

68,965


63,435

Impairment and other losses

10,562


2,823

Deferred income taxes

3,884


(1,325)

Adjustment to deferred acquisition consideration

4,480


15,390

Other, net

(3,328)


(4,418)

Changes in working capital:




Accounts receivable

4,255


(78,342)

Expenditures billable to clients

(13,180)


20,386

Other assets

4,117


(8,555)

Accounts payable

(25,972)


(33,228)

Accrued expenses and other liabilities

(169,210)


(109,232)

Advance billings

(32,795)


(46,391)

Deferred acquisition related payments

(3,212)


(7,107)

Net cash used in operating activities

(144,146)


(107,271)

Cash flows from investing activities:




Capital expenditures

(7,953)


(12,539)

Acquisitions, net of cash acquired

(4,965)


(38,326)

Capitalized software

(10,356)


(1,928)

Other

(6,844)


(2,144)

Net cash used in investing activities

(30,118)


(54,937)

Cash flows from financing activities:




Repayment of borrowings under revolving credit facility

(800,500)


(473,000)

Proceeds from borrowings under revolving credit facility

1,102,500


660,500

Shares repurchased and cancelled

(199,363)


(29,765)

Distributions to noncontrolling interests

(15,408)


(36,498)

Payment of deferred consideration

(28,558)


(52,431)

Purchase of noncontrolling interest


(3,600)

Debt issuance costs

(150)


Net cash provided by financing activities

58,521


65,206

Effect of exchange rate changes on cash and cash equivalents

438


6,395

Net decrease in cash and cash equivalents

(115,305)


(90,607)

Cash and cash equivalents at beginning of period

220,589


184,009

Cash and cash equivalents at end of period

$                 105,284


$                   93,402

 

 

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