STAGWELL INC. (NASDAQ: STGW) REPORTS RESULTS FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2023
Expects 2024 Organic Net Revenue Growth of 5% to 7%; Adjusted EBITDA of $400 million to $450 million; Free Cash Flow Conversion of ~50%
Net Revenue Growth of 31% from Stagwell Marketing Cloud Group in FY23
Growth of 13% in International Net Revenue in FY23, Led by 17% Growth in EMEA
$65 million of net new business in Q4; LTM net new business exceeds $270 million
FY Revenue of $2,527 million; FY Net revenue of $2,147 million
FY Net Income of $42 million; FY Adjusted EBITDA of $360 million
NEW YORK, Feb. 27, 2024 /PRNewswire/ -- (NASDAQ: STGW) – Stagwell Inc. ("Stagwell") today announced financial results for the year ended December 31, 2023.
Mark Penn, Chairman and CEO, said, "Despite a challenging year for marketing services and digital transformation—accentuated by our client mix—Stagwell grew share with some of our largest customers in 2023, took prudent steps to manage our costs, and invested in digital innovation to stay ahead of the future of marketing. In Q4 we returned to sequential net revenue growth, sold a non-core asset for significantly above our initial investment, and saw our tech company clients begin to re-engage."
"2024 promises to be a year of growth and expanded margin as we go into the political season and our AI and AR products come to market – including inclusion of ARound into Major League Baseball's native Ballpark app. We will be helping our clients transform with the three E's of AI – enabling stronger operations, adding efficiency to marketing and helping revolutionize their engagement with consumers."
Frank Lanuto, Chief Financial Officer, commented: "Management faced ongoing macroeconomic headwinds during the fourth quarter and responded with decisive actions to align costs with revenues, resulting in an adjusted EBITDA margin of 17 percent. Through the end of fiscal 2023, we have delivered – ahead of schedule – the $30 million in synergies that we promised at the time of our merger in 2021 and are now well underway with our goal of achieving the incremental $35 million of cost savings we announced earlier this year. Our sale of ConcentricLife during the quarter resulted in a significant gain which drove net income, reduced our debt and lowered leverage at year end."
Financial Outlook
2024 financial guidance is as follows:
- Organic Net Revenue growth of 5% to 7%
- Organic Net Revenue excluding Advocacy growth of 4% to 5%
- Adjusted EBITDA of $400 million to $450 million
- Free Cash Flow Conversion of approximately 50%
- Adjusted EPS of $0.75 - $0.88
- Guidance assumes no impact from foreign exchange, acquisitions or dispositions.
* The Company has excluded a quantitative reconciliation with respect to the Company's 2024 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. |
FOURTH QUARTER AND FULL YEAR HIGHLIGHTS:
- Completed the sale of ConcentricLife to Accenture in Q4 for gross proceeds of $245 million, resulting in a taxable gain of $175 million
- Q4 net new business of $65 million; FY23 net new business of more than $270 million
- Q4 revenue of $655 million; FY23 revenue of $2,527 million, a decrease of 6% versus the prior year period
- Q4 net revenue of $551 million; FY23 net revenue of $2,147 million, a decrease of 3% versus the prior year period
- Q4 organic net revenue declined 7% versus the prior year period and 5% ex-Advocacy; FY23 organic net revenue declined 6% versus the prior year period and 4% ex-Advocacy
- Q4 net revenue from international increased 3%, led by an increase of 19% in the United Kingdom; FY23 net revenue from international increased 13%, led by increases of 17% in EMEA, and 5% in APAC
- Q4 net income of $46 million versus net loss of $43 million in the prior year period; FY23 net income of $42 million versus net income of $50 million in the prior year period
- Q4 Adjusted EBITDA of $95 million; FY23 Adjusted EBITDA of $360 million, a decrease of 20% versus the prior year period
- Q4 Adjusted EBITDA Margin of 17% on net revenue; FY23 Adjusted EBITDA Margin of 17% on net revenue
- Q4 earnings per share attributable to Stagwell Inc. common shareholders of $0.00; FY23 earnings per share attributable to Stagwell Inc. common shareholders of $0.00
- Q4 Adjusted earnings per share attributable to Stagwell Inc. common shareholders of $0.12; FY23 Adjusted earnings per share of $0.57
2022 Revised Consolidated Financial Statements
In connection with the preparation of the consolidated financial statements during 2023, the Company identified errors in the areas of income taxes as well as accumulated other comprehensive loss in its previously filed 2022 annual consolidated financial statements. As a result, the 2022 financial statements included herein have been revised to reflect the correction of the errors. The primary change to the 2022 income statement was an increase in tax expense of approximately $18 million compared to the previously filed 2022 financial statements. The Company's 2023 Form 10-K will include disclosure providing further details of the revision.
Video Webcast
Management will host a video webcast on Tuesday, February 27, 2024, at 8:30 a.m. (ET) to discuss results for Stagwell Inc. for the year ended December 31, 2023. The video webcast will be accessible at https://stgw.io/Earnings. 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 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
[email protected]
For Press:
Beth Sidhu
[email protected]
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" reflects the year-over-year change in the Company's reported net revenue attributable to the Company's management of the entities it owns. We calculate organic net revenue growth (decline) by subtracting the net impact of acquisitions (divestitures) and the impact of foreign currency exchange fluctuations from the aggregate year-over-year increase or decrease in the Company's reported net revenue. The net impact of acquisitions (divestitures) reflects the year-over-year change in the Company's reported net revenue attributable to the impact of all individual entities that were acquired or divested in the current and prior year. We calculate impact of an acquisition as follows: (a) for an entity acquired during the current year, we present the entity's prior year net revenue for the same period during which we owned it in the current year as impact of the acquisition in the current year; and (b) for an entity acquired in the prior year, we present the entity's prior year net revenue for the period during which we did not own the entity in the prior year as impact of the acquisition in the current year. We calculate impact of a divestiture as follows: (a) for a divestiture in the current year, we present the entity's prior year net revenue for the same period during which we no longer owned it in the current year as impact of the divestiture in the current year; and (b) for a divestiture in the prior year, we present the entity's prior year net revenue for the period during which we owned it in the prior year as impact of the divestiture in the current year. We calculate the impact of any acquisition or divestiture without adjusting for foreign currency exchange fluctuations. The impact of foreign currency exchange fluctuations reflects the year-over-year change in the Company's reported net revenue attributable to changes in foreign currency exchange rates. We calculate the impact of foreign currency exchange fluctuations for the portion of the reporting period in which we recognized revenue from a foreign entity in both the current year and the prior year. The impact is calculated as the difference between (1) reported prior period net revenue (converted to U.S. dollars at historical foreign currency exchange rates) and (2) prior period net revenue converted to U.S. dollars at current period foreign exchange rates.
(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;
- 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;
- adverse tax consequences for the Company, its operations and its stockholders, that may differ from the expectations of the Company, including that future changes in tax laws, potential increases to corporate tax rates in the United States and disagreements with tax authorities on the Company's determinations may result in increased tax costs;
- adverse tax consequences in connection with the Transactions, including the incurrence of material Canadian federal income tax (including material "emigration tax");
- 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 conflicts between Russia and Ukraine and in Israel and Gaza), 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 | |||||||
Three Months Ended | Year Ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Revenue | $ 654,895 | $ 708,185 | $ 2,527,177 | $ 2,687,792 | |||
Operating Expenses | |||||||
Cost of services | 419,865 | 419,811 | 1,621,174 | 1,673,576 | |||
Office and general expenses | 179,871 | 172,415 | 661,250 | 601,536 | |||
Depreciation and amortization | 35,036 | 35,631 | 142,831 | 131,273 | |||
Impairment and other losses | 833 | 94,145 | 11,395 | 122,179 | |||
635,605 | 722,002 | 2,436,650 | 2,528,564 | ||||
Operating Income (Loss) | 19,290 | (13,817) | 90,527 | 159,228 | |||
Other income (expenses): | |||||||
Interest expense, net | (22,889) | (19,510) | (90,644) | (76,062) | |||
Foreign exchange, net | (672) | 1,557 | (2,960) | (2,606) | |||
Gain on sale of business | 94,505 | — | 94,505 | — | |||
Other, net | 108 | (5,157) | (359) | (4,975) | |||
71,052 | (23,110) | 542 | (83,643) | ||||
Income (loss) before income taxes and equity in earnings of non-consolidated affiliates | 90,342 | (36,927) | 91,069 | 75,585 | |||
Income tax expense | 35,560 | 5,312 | 40,557 | 25,462 | |||
Income (loss) before equity in earnings of non-consolidated affiliates | 54,782 | (42,239) | 50,512 | 50,123 | |||
Equity in (loss) of non-consolidated affiliates | (8,423) | (1,132) | (8,870) | (79) | |||
Net income (loss) | 46,359 | (43,371) | 41,642 | 50,044 | |||
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests | (45,073) | 29,543 | (41,508) | (30,125) | |||
Net income (loss) attributable to Stagwell Inc. common shareholders | $ 1,286 | $ (13,828) | $ 134 | $ 19,919 | |||
Earnings (Loss) Per Common Share: | |||||||
Basic | $ 0.01 | $ (0.11) | $ — | $ 0.16 | |||
Diluted | $ — | $ (0.11) | $ — | $ 0.12 | |||
Weighted Average Number of Common Shares Outstanding: | |||||||
Basic | 112,769 | 122,927 | 117,259 | 124,262 | |||
Diluted | 117,205 | 122,927 | 117,259 | 296,596 | |||
SCHEDULE 2 | |||||||||||||||
Net Revenue - Components of Change | Change | ||||||||||||||
Three Months | Foreign | Net | Organic | Total Change | Three Months | Organic | Total | ||||||||
Integrated Agencies Network | $ 311,432 | $ 907 | $ 368 | $ (19,129) | $ (17,854) | $ 293,578 | (6.1) % | (5.7) % | |||||||
Brand Performance Network | 180,053 | 3,313 | 2,078 | (8,367) | (2,976) | 177,077 | (4.6) % | (1.7) % | |||||||
Communications Network | 81,224 | 113 | — | (13,109) | (12,996) | 68,228 | (16.1) % | (16.0) % | |||||||
All Other | 10,737 | (184) | — | 1,628 | 1,444 | 12,181 | 15.2 % | 13.4 % | |||||||
$ 583,446 | $ 4,149 | $ 2,446 | $ (38,977) | $ (32,382) | $ 551,064 | (6.7) % | (5.6) % | ||||||||
Net Revenue - Components of Change | Change | ||||||||||||||
Year Ended | Foreign | Net | Organic | Total Change | Year Ended | Organic | Total | ||||||||
Integrated Agencies Network | $ 1,240,465 | $ (2,266) | $ 6,677 | $ (58,172) | $ (53,761) | $ 1,186,704 | (4.7) % | (4.3) % | |||||||
Brand Performance Network | 667,882 | 848 | 13,377 | (14,005) | 220 | 668,102 | (2.1) % | — % | |||||||
Communications Network | 293,844 | (169) | 1,918 | $ (50,333) | (48,584) | 245,260 | (17.1) % | (16.5) % | |||||||
All Other | 19,962 | (354) | 35,135 | (8,157) | 26,624 | 46,586 | (40.9) % | 133.4 % | |||||||
$ 2,222,153 | $ (1,941) | $ 57,107 | $ (130,667) | $ (75,501) | $ 2,146,652 | (5.9) % | (3.4) % | ||||||||
(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 3 | |||||||||||
For the Three Months Ended December 31, 2023 | |||||||||||
Integrated | Brand | Communications | All Other | Corporate | Total | ||||||
Net Revenue | $ 293,578 | $ 177,078 | $ 68,229 | $ 12,181 | $ — | $ 551,066 | |||||
Billable costs | 51,617 | 16,969 | 35,217 | 26 | — | 103,829 | |||||
Revenue | 345,195 | 194,047 | 103,446 | 12,207 | — | 654,895 | |||||
Billable costs | 51,617 | 16,969 | 35,217 | 26 | — | 103,829 | |||||
Staff costs | 187,986 | 105,838 | 43,319 | 6,292 | 11,088 | 354,523 | |||||
Administrative costs | 27,918 | 24,874 | 8,568 | 3,445 | (1,871) | 62,934 | |||||
Unbillable and other costs, net | 17,729 | 17,738 | 277 | 2,885 | — | 38,629 | |||||
Adjusted EBITDA (1) | 59,945 | 28,628 | 16,065 | (441) | (9,217) | 94,980 | |||||
Stock-based compensation | 11,861 | 2,518 | 1,157 | 91 | 6,937 | 22,564 | |||||
Depreciation and amortization | 19,448 | 8,322 | 2,800 | 2,238 | 2,228 | 35,036 | |||||
Deferred acquisition consideration | 3,813 | 1,739 | (3,373) | — | — | 2,179 | |||||
Impairment and other losses | 737 | 96 | — | — | — | 833 | |||||
Other items, net (1) | 6,147 | 3,969 | 198 | 95 | 4,669 | 15,078 | |||||
Operating income (loss) | $ 17,939 | $ 11,984 | $ 15,283 | $ (2,865) | $ (23,051) | $ 19,290 | |||||
(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 4 | |||||||||||
For the Year Ended December 31, 2023 | |||||||||||
Integrated | Brand | Communications | All Other | Corporate | Total | ||||||
Net Revenue | $ 1,186,705 | $ 668,101 | $ 245,261 | $ 46,585 | $ — | $ 2,146,652 | |||||
Billable costs | 191,404 | 100,675 | 88,446 | — | — | 380,525 | |||||
Revenue | 1,378,109 | 768,776 | 333,707 | 46,585 | — | 2,527,177 | |||||
Billable costs | 191,404 | 100,675 | 88,446 | — | — | 380,525 | |||||
Staff costs | 735,998 | 419,651 | 159,165 | 37,416 | 36,938 | 1,389,168 | |||||
Administrative costs | 114,118 | 95,837 | 33,664 | 4,689 | 11,472 | 259,780 | |||||
Unbillable and other costs, net | 65,267 | 56,598 | 613 | 15,087 | — | 137,565 | |||||
Adjusted EBITDA (1) | 271,322 | 96,015 | 51,819 | (10,607) | (48,410) | 360,139 | |||||
Stock-based compensation | 27,806 | 5,883 | 3,334 | 518 | 19,638 | 57,179 | |||||
Depreciation and amortization | 80,864 | 34,343 | 11,016 | 8,390 | 8,218 | 142,831 | |||||
Deferred acquisition consideration | 11,931 | 2,851 | 30 | (1,752) | — | 13,060 | |||||
Impairment and other losses | 9,912 | 1,483 | — | — | — | 11,395 | |||||
Other items, net (1) | 19,225 | 13,206 | 1,535 | 1,174 | 10,007 | 45,147 | |||||
Operating income (loss) | $ 121,584 | $ 38,249 | $ 35,904 | $ (18,937) | $ (86,273) | $ 90,527 | |||||
(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 | |||||||||||
For the Three Months Ended December 31, 2022 | |||||||||||
Integrated | Brand | Communications | All Other | Corporate | Total | ||||||
Net Revenue | $ 311,432 | $ 180,053 | $ 81,224 | $ 10,737 | $ — | $ 583,446 | |||||
Billable costs | 71,174 | 13,609 | 39,956 | — | — | 124,739 | |||||
Revenue | 382,606 | 193,662 | 121,180 | 10,737 | — | 708,185 | |||||
Billable costs | 71,174 | 13,609 | 39,956 | — | — | 124,739 | |||||
Staff costs | 186,373 | 111,725 | 43,814 | 6,044 | 6,244 | 354,200 | |||||
Administrative costs | 29,722 | 29,037 | 9,312 | 1,691 | 1,852 | 71,614 | |||||
Unbillable and other costs, net | 18,506 | 12,715 | 155 | 2,961 | — | 34,337 | |||||
Adjusted EBITDA (1) | 76,831 | 26,576 | 27,943 | 41 | (8,096) | 123,295 | |||||
Stock-based compensation | (1,270) | (3,322) | 720 | 26 | 3,588 | (258) | |||||
Depreciation and amortization | 19,356 | 8,630 | 3,161 | 2,776 | 1,708 | 35,631 | |||||
Deferred acquisition consideration | 3,460 | (5,613) | 3,168 | — | — | 1,015 | |||||
Impairment and other losses | 49,841 | 42,727 | — | 1,577 | — | 94,145 | |||||
Other items, net (1) | 1,770 | 4,453 | 326 | 1 | 29 | 6,579 | |||||
Operating income (loss) | $ 3,674 | $ (20,299) | $ 20,568 | $ (4,339) | $ (13,421) | $ (13,817) | |||||
(1) See Non-GAAP Financial Measures section above for the definition of Adjusted EBITDA and Other items. |
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 | |||||||||||
For the Year Ended December 31, 2022 | |||||||||||
Integrated | Brand | Communications | All Other | Corporate | Total | ||||||
Net Revenue | $ 1,240,465 | $ 667,882 | $ 293,844 | $ 19,962 | $ — | $ 2,222,153 | |||||
Billable costs | 234,505 | 89,326 | 141,808 | — | — | 465,639 | |||||
Revenue | 1,474,970 | 757,208 | 435,652 | 19,962 | — | 2,687,792 | |||||
Billable costs | 234,505 | 89,326 | 141,808 | — | — | 465,639 | |||||
Staff costs | 762,332 | 408,968 | 172,598 | 13,963 | 36,456 | 1,394,317 | |||||
Administrative costs | 115,724 | 94,867 | 33,787 | 3,940 | 6,655 | 254,973 | |||||
Unbillable and other costs, net | 70,116 | 48,212 | 427 | 2,990 | — | 121,745 | |||||
Adjusted EBITDA (1) | 292,293 | 115,835 | 87,032 | (931) | (43,111) | 451,118 | |||||
Stock-based compensation | 13,774 | 5,830 | 1,797 | 41 | 11,710 | 33,152 | |||||
Depreciation and amortization | 74,492 | 33,674 | 10,948 | 5,234 | 6,925 | 131,273 | |||||
Deferred acquisition consideration | 9,157 | 1,736 | (24,298) | — | — | (13,405) | |||||
Impairment and other losses | 52,360 | 50,778 | — | 19,041 | — | 122,179 | |||||
Other items, net (1) | 4,345 | 8,129 | 883 | 22 | 5,312 | 18,691 | |||||
Operating income (loss) | $ 138,165 | $ 15,688 | $ 97,702 | $ (25,269) | $ (67,058) | $ 159,228 | |||||
(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 | ||||||
For the Three Months Ended December 31, 2023 | ||||||
GAAP | Adjustments | Non-GAAP | ||||
Net income (loss) attributable to Stagwell Inc. common shareholders | $ 127 | $ (4,705) | $ (4,578) | |||
Net income attributable to Class C shareholders | — | 35,780 | 35,780 | |||
Net income attributable to Stagwell Inc. and Class C and adjusted net income | $ 127 | $ 31,075 | $ 31,202 | |||
Weighted average number of common shares outstanding | 117,205 | 2,416 | 119,621 | |||
Weighted average number of common Class C shares outstanding | — | 151,649 | 151,649 | |||
Weighted average number of shares outstanding | 117,205 | 154,065 | 271,270 | |||
Dilutive EPS and Adjusted Diluted EPS | $ 0.00 | $ 0.12 | ||||
Adjustments to Net income (loss) (1) | ||||||
Amortization | $ 27,231 | |||||
Impairment and other losses | 833 | |||||
Stock-based compensation | 22,564 | |||||
Deferred acquisition consideration | 3,338 | |||||
Gain on sale of business | (94,505) | |||||
Other items, net | 15,078 | |||||
$ (25,461) | ||||||
Adjusted tax expense | 14,768 | |||||
$ (10,693) | ||||||
Net loss attributable to Class C shareholders | 41,768 | |||||
$ 31,075 | ||||||
Allocation of adjustments to Net income (loss) | ||||||
Net loss attributable to Stagwell Inc. common shareholders - add-backs | $ (4,705) | |||||
Net loss attributable to Class C shareholders - add-backs | (5,988) | |||||
Net income attributable to Class C shareholders | 41,768 | |||||
35,780 | ||||||
$ 31,075 | ||||||
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary. |
SCHEDULE 8 | ||||||
For the Year Ended December 31, 2023 | ||||||
GAAP | Adjustments | Non-GAAP | ||||
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 | 117,259 | 8,539 | 125,798 | |||
Weighted average number of common Class C shares outstanding | — | 154,972 | 154,972 | |||
Weighted average number of shares outstanding | 117,259 | 163,511 | 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 - add-backs | $ 52,712 | |||||
Net income attributable to Class C shareholders - add-backs | 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. |
SCHEDULE 9 | ||||||
For the Three Months Ended December 31, 2022 | ||||||
GAAP | Adjustments | Non-GAAP | ||||
Net income (loss) attributable to Stagwell Inc. common shareholders | $ (13,828) | $ 49,461 | $ 35,633 | |||
Net income attributable to Class C shareholders | — | 27,696 | 27,696 | |||
Net income (loss) attributable to Stagwell Inc. and Class C and adjusted net income | (13,828) | 77,157 | 63,329 | |||
Weighted average number of common shares outstanding | 122,927 | 5,666 | 128,593 | |||
Weighted average number of common Class C shares outstanding | — | 164,376 | 164,376 | |||
Weighted average number of shares outstanding | 122,927 | 170,042 | 292,969 | |||
Diluted EPS and Adjusted Diluted EPS | $ (0.11) | $ 0.22 | ||||
Adjustments to Net income (loss) (1) | ||||||
Amortization | $ 28,886 | |||||
Impairment and other losses | 94,145 | |||||
Stock-based compensation | (258) | |||||
Deferred acquisition consideration | 1,015 | |||||
Other items, net | 6,579 | |||||
130,367 | ||||||
Adjusted tax expense | (18,186) | |||||
$ 112,181 | ||||||
Less: Net income attributable to Class C shareholders | (35,024) | |||||
Net income attributable to Stagwell Inc. common shareholders | $ 77,157 | |||||
Allocation of add-backs | ||||||
Net income attributable to Stagwell Inc. common shareholders - add-backs | $ 49,461 | |||||
Net income attributable to Class C shareholders - add-backs | 62,720 | |||||
Net income attributable to Class C shareholders | (35,024) | |||||
27,696 | ||||||
$ 77,157 | ||||||
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary. |
SCHEDULE 10 | ||||||
For the Year Ended December 31, 2022 | ||||||
GAAP | Adjustments | Non-GAAP | ||||
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) | ||||||
Pre-Tax | Tax | Net | ||||
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. |
SCHEDULE 11 | |||
December 31, 2023 | December 31, 2022 | ||
ASSETS | |||
Current Assets | |||
Cash and cash equivalents | $ 119,737 | $ 220,589 | |
Accounts receivable, net | 697,178 | 645,846 | |
Expenditures billable to clients | 120,088 | 93,077 | |
Other current assets | 94,054 | 71,443 | |
Total Current Assets | 1,031,057 | 1,030,955 | |
Fixed assets, net | 77,825 | 98,878 | |
Right-of-use assets - operating leases | 254,278 | 273,567 | |
Goodwill | 1,498,815 | 1,566,956 | |
Other intangible assets, net | 818,220 | 907,529 | |
Other assets | 97,830 | 118,706 | |
Total Assets | $ 3,778,025 | $ 3,996,591 | |
LIABILITIES, RNCI, AND SHAREHOLDERS' EQUITY | |||
Current Liabilities | |||
Accounts payable | $ 414,980 | $ 357,253 | |
Accrued media | 291,777 | 240,506 | |
Accruals and other liabilities | 233,046 | 268,871 | |
Advance billings | 307,665 | 337,034 | |
Current portion of lease liabilities - operating leases | 65,899 | 76,349 | |
Current portion of deferred acquisition consideration | 66,953 | 90,183 | |
Total Current Liabilities | 1,380,320 | 1,370,196 | |
Long-term debt | 1,145,828 | 1,184,707 | |
Long-term portion of deferred acquisition consideration | 34,105 | 71,140 | |
Long-term lease liabilities - operating leases | 281,307 | 294,049 | |
Deferred tax liabilities, net | 45,495 | 40,879 | |
Other liabilities | 54,906 | 67,695 | |
Total Liabilities | 2,941,961 | 3,028,666 | |
Redeemable Noncontrolling Interests | 10,792 | 39,111 | |
Commitments, Contingencies and Guarantees | |||
Shareholders' Equity | |||
Common shares - Class A & B | 118 | 132 | |
Common shares - Class C | 2 | 2 | |
Paid-in capital | 348,494 | 491,899 | |
Retained earnings | 21,148 | 22,095 | |
Accumulated other comprehensive loss | (13,067) | (15,478) | |
Stagwell Inc. Shareholders' Equity | 356,695 | 498,650 | |
Noncontrolling interests | 468,577 | 430,164 | |
Total Shareholders' Equity | 825,272 | 928,814 | |
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity | $ 3,778,025 | $ 3,996,591 | |
SCHEDULE 12 | |||
Year Ended December 31, | |||
2023 | 2022 | ||
Cash flows from operating activities: | |||
Net income | $ 41,642 | $ 50,044 | |
Adjustments to reconcile net income to cash provided by operating activities: | |||
Stock-based compensation | 57,179 | 33,152 | |
Depreciation and amortization | 142,831 | 131,273 | |
Amortization of right-of-use lease assets | 76,728 | 77,368 | |
Impairment and other losses | 11,395 | 122,179 | |
Deferred income taxes | 19,443 | (18,241) | |
Adjustment to deferred acquisition consideration | 13,060 | (13,405) | |
Gain on sale of business | (94,505) | — | |
Other, net | 10,882 | (2,848) | |
Changes in working capital: | |||
Accounts receivable | (58,704) | 37,780 | |
Expenditures billable to clients | (27,468) | (32,366) | |
Other assets | (1,415) | 1,179 | |
Accounts payable | 52,837 | 108,028 | |
Accrued expenses and other liabilities | (24,723) | (22,177) | |
Advance billings | (35,146) | (27,062) | |
Current portion of lease liabilities - operating leases | (87,629) | (86,525) | |
Deferred acquisition related payments | (15,400) | (10,793) | |
Net cash provided by operating activities | 81,007 | 347,586 | |
Cash flows from investing activities: | |||
Capital expenditures | (14,238) | (22,663) | |
Acquisitions, net of cash acquired | (23,339) | (74,234) | |
Capitalized software | (28,175) | (12,774) | |
Proceeds from sale of business, net | 229,484 | — | |
Other | (7,781) | (6,604) | |
Net cash provided by (used in) investing activities | 155,951 | (116,275) | |
Cash flows from financing activities: | |||
Repayment of borrowings under revolving credit facility | 1,945,500 | (1,266,000) | |
Proceeds from borrowings under revolving credit facility | (1,986,500) | 1,255,500 | |
Shares repurchased and cancelled | (223,835) | (70,269) | |
Distributions to noncontrolling interests | (24,964) | (39,197) | |
Payment of deferred consideration | (49,221) | (63,170) | |
Purchase of noncontrolling interest | — | (3,600) | |
Debt issuance costs | (844) | — | |
Net cash used in financing activities | (339,864) | (186,736) | |
Effect of exchange rate changes on cash and cash equivalents | 2,054 | (7,995) | |
Net decrease in cash and cash equivalents | (100,852) | 36,580 | |
Cash and cash equivalents at beginning of period | 220,589 | 184,009 | |
Cash and cash equivalents at end of period | $ 119,737 | $ 220,589 | |
SOURCE Stagwell Inc.
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