Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Th e following discussion and analysis are based on and should be read in conjunction with our Audited Consolidated Financial Statements and the notes thereto included elsewhere in this Form 10-K. The following discussion and analysis contain forward-looking statements and should be read in conjunction with the disclosures and information contained and referenced under the captions “Forward-Looking Statements” and “Risk Factors” in this Form 10-K. The following discussion and analysis also include a discussion of certain non-GAAP financial measures. A description of the non-GAAP financial measures discussed in this section and reconciliations to the comparable GAAP measures are below.
In this section, the terms “Stagwell,” “we,” “us,” “our” and the “Company” refer to Stagwell Inc. and its direct and indirect subsidiaries. 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 2025 means the period beginning January 1, 2025, and ending December 31, 2025).
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Executive Summary
Overview
Stagwell conducts its business through its segments, 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. We believe Stagwell’s differentiation lies in its digital-first and technology-based roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients. Stagwell leverages its range of services in an integrated manner, offering strategic, creative and innovative solutions that are technologically forward and media-agnostic. The Company’s strategy is intended to challenge the industry status quo, realize 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, staff cost ratio, capital expenditures, net income (loss), net income (loss) attributable to Stagwell Inc. common shareholders, net income (loss) per share and the non-GAAP financial measures including Adjusted EBITDA, Free cash flow and Adjusted EPS, described below. Revenue growth is analyzed by reviewing a mix of measurements, including (i) growth by major geographic location, (ii) growth from existing clients and the addition of new clients, (iii) growth by principal capability, (iv) growth from currency changes, and (v) growth from acquisitions. In addition to monitoring the foregoing financial indicators, the Company assesses and monitors several non-financial performance indicators relating to the business performance of our networks. These indicators may include a network’s recent new client win/loss record; the depth and scope of a pipeline of potential new client account activity; the overall quality of the services provided to clients; and the relative strength of the network’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.
Recent Developments
On January 30, 2026, the Company acquired Wavelength, a digital advocacy and communications company, for an estimated purchase price of $10.2 million, of which approximately $4.6 million was paid in cash and approximately $5.6 million was paid in 863,624 shares of the Company’s Class A Common Stock subject to post-closing adjustments. In connection with the acquisition, the sellers are eligible to earn contingent consideration up to a maximum value of $24.8 million, subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock, at the Company’s discretion.
On March 4, 2026, the Board authorized an extension and a $350.0 million increase in the size of our previously approved stock repurchase program (the “Repurchase Program”). Under the Repurchase Program, as amended, we may repurchase up to an aggregate of $725.0 million of shares of our outstanding Class A Common Stock, with any previous purchases under the Repurchase Program continuing to count against that limit. The Repurchase Program will expire on March 4, 2029.
On March 11, 2026, pursuant to a resolution approved by the Board, the Company repurchased 6,198,425 shares of Class A Common Stock at a price of $6.1677 per share, for a total of $38.2 million. The shares were purchased from executive officers and other employees to satisfy their tax obligations resulting from the Class C Exchange as described in Note 12 included in Item 8 of this Form 10-K.
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. 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 portfolio of marketing services firms, which we refer to as “Brands,” offer. 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. 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 of each year. The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season. In addition, within our Communications segment, client concentration increases during election years due to the cyclical nature of our advocacy Brands.
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Non-GAAP Financial Measures
The Company reports its financial results in accordance with GAAP. In addition, the Company has included non-GAAP financial measures and ratios, which management uses to operate the business, which it believes provide useful supplemental information to both management and readers of this report in making period-to-period comparisons in measuring the financial performance and financial condition of the Company. 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 believes billable costs and their fluctuations are not indicative of the operating performance of its underlying business.
“Organic net revenue growth (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. Beginning with the quarter ended September 30, 2025, we calculate the impact of an acquisition as follows: (a) for an entity acquired during the current year, we present the entity’s current period reported revenue as the impact of the acquisition in the current year; and (b) for an entity acquired in the prior year, we present an amount equal to the entity’s current year net revenue for the same period during which we didn’t own the entity in the prior year as the impact of the acquisition in the current year. Previously, we calculated the impact of an acquisition as follows: (a) for an entity acquired during the current year, we presented 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 presented 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 believe that this change in the method of calculating the impact of an acquisition results in a measurement of organic net revenue growth (decline) that reflects the effect of our management of an acquired entity by including the revenue of the acquired entity in such measurement after we have owned it for 12 months. We calculate impact of a as follows: (a) for a 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 in the current year; and (b) for a 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 in the current year. We calculate the impact of any acquisition or 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.
“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, impairment and other losses, and other items. Other items primarily includes restructuring, certain system implementation, working capital administrative fees and acquisition-related expenses. Adjusted EBITDA for our reportable segments is reconciled to Operating income (loss), as Net income (loss) is not a relevant reportable segment financial metric.
“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 (as defined above), 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) the diluted weighted average shares outstanding. The diluted weighted average shares outstanding is calculated as (a) the diluted weighted average number of common shares outstanding plus (b) the shares of Class C common stock, par value $0.00001 per share (the “Class C Common Stock”) as if converted to shares of Class A Common Stock if not included because they were anti-dilutive.
All amounts are in U.S. dollars unless otherwise stated. Amounts reported in millions herein are computed based on the amounts in thousands. As a result, the sum of the components, and related calculations, reported in millions may not equal the total amounts due to rounding.
The percentage changes included in the tables in Item 7 herein that are not considered meaningful are presented as “NM.”
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Segments
The Company’s Chief Operating Decision Maker (“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.
On September 30, 2025, the Company reorganized its organizational structure to better reflect how the Company manages its business and goes to market, to simplify reporting and to provide clearer visibility into performance trends across its service offerings. The reorganization also seeks to enhance consistency in the Company’s portfolio of services and improve the transparency and comparability of financial information provided to investors.
As a result of the reorganization, the Company now has five operating and reportable segments: “Marketing Services,” “Digital Transformation,” “Media & Commerce,” “Communications,” and “The Marketing Cloud.” Prior years presented have been recast to reflect the reclassification of Brands within the reportable segments. Based on the segment analysis, management concluded that the operating segments do not exhibit similar economic characteristics or share other aggregation criteria. As a result, none of our operating segments are aggregated for reporting purposes. Further, as a result of the reorganization, certain reporting units have been redefined, and the composition of others has changed. The new structure fairly reflects the allocation of the Company’s resources, thereby improving comparability for investors and supporting the Company’s long-term strategic objectives. The composition of these segments is as follows:
• The Marketing Services segment delivers a broad range of services across four closely related client needs: creative, research, experiential, and social media solutions designed to build and elevate brands. Capabilities include developing breakthrough brand campaigns, providing consumer insights through advanced research methodologies, creating immersive experiential marketing programs and social engagement strategies that connect brands with audiences across digital platforms. By combining creative excellence, data-driven insights, and innovative experiences, Marketing Services empowers organizations to differentiate themselves in the marketplace, drive audience engagement, and achieve measurable business results. These services employ a wide variety of AI-powered services in the delivery, such as AI-powered creative production and data analysis. Brands in this segment include, but are not limited to, creative agencies 72 and Sunny and Anomaly, research agencies NRG and Harris Insights, experiential agency TEAM, and social agency Movers & Shakers.
• The Digital Transformation segment designs, implements and activates modern digital ecosystems that enable brand and customer experiences through the integration of strategy, design, and technology. This segment helps clients modernize their digital infrastructure, enhance customer engagement, and accelerate enterprise transformation. Its capabilities span the delivery of digital products and experiences that connect brand storytelling with technology, including website and content development, digital campaigns, product and platform design, AI-native strategies and integration, and implementation of marketing technology (“MarTech”) products and solutions for customers. It also provides managed services, staff augmentation, and engineering expertise across various delivery models, offering system integration, full-stack development, and ongoing platform management. Additionally, Digital Transformation connects digital ecosystems to physical experiences through innovative, technology-driven customer engagements, such as business-to-business (“B2B”) platforms and multimodal activations that blend physical and digital environments using augmented reality (“AR”), virtual reality (“VR”), and emerging technologies. Together, these capabilities empower organizations to transform their digital presence and drive sustained business growth. Brands in this segment include, but are not limited to, strategy and design agencies Code and Theory and Instrument, development and implementation agency TrueLogic, and digital activation agency Left Field Labs.
• The Media & Commerce segment delivers integrated AI-based data solutions that drive audience engagement and business growth through media buying, owned media platforms, commerce enablement, and Customer Relationship Management (“CRM”) strategies. Its capabilities include planning and executing media campaigns across global platforms, leveraging data-driven approaches to optimize reach and effectiveness across first-party data, second-party data, and third-party data, and providing commerce and CRM tools that connect brands with consumers throughout the purchase journey. The segment also offers specialized media platforms and translation services to support targeted communication and market expansion. By combining expertise in media strategy, commerce activation, and audience analytics, Media & Commerce empowers organizations to maximize their marketing investments and achieve measurably efficient commercial outcomes. Brands in this segment include, but are not limited to, media buying, owned media platforms Reach TV, and strategy agency Assembly Global, commerce and CRM agency Gale.
• The Communications segment provides a leading edge set of solutions designed to help organizations build, protect, and enhance their reputation across diverse audiences and channels. Its capabilities include strategic communications, public relations, and advocacy services that leverage AI and data-driven insights to craft compelling narratives and influence public perception. The segment also offers expertise in targeted communications, crisis management, and stakeholder engagement, ensuring clients can respond effectively to emerging issues and opportunities. Advocacy services encompass strategic political campaign management, grassroots mobilization, and fundraising expertise that reach across the political spectrum. By combining deep industry knowledge with innovative digital approaches to
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media and advocacy, Communications empowers organizations to connect with key audiences, shape conversations, and achieve their strategic objectives. Brands in this segment include, but are not limited to, strategic communications agencies Allison and Consulum, and advocacy services agencies SKDK and Targeted Victory.
• The Marketing Cloud segment delivers a comprehensive suite of technology solutions for in-house marketers, combining SaaS and DaaS offerings. Its key products cover a range of areas. Advanced research tools that enable real-time customer insights through syndicated and Do It Yourself (“DIY”) generative AI-drafted surveys, AI-driven text analysis, and predictive analytics. Communications technology that aggregates data from millions of sources, including news, social media, print, and TV/radio broadcasts, on a daily basis to monitor, analyze, and respond to market trends. Media studio products that leverage first-party, third-party, and proprietary data to provide actionable audience insights and attribution analytics and advanced media platforms that encompass audience engagement solutions such as AR, quick response (“QR”) codes, and loyalty programs, all designed to collect consumer data and generate actionable insights. Together, these capabilities empower marketers to understand, engage, and influence their audiences with precision and agility. Brands in this segment include, but are not limited to, QUEST, Unicepta and Smart Assets.
“Corporate, eliminations and other” consists of revenue generated by the Other business components, strategic investments in new technologies, elimination of certain intercompany revenue and expenses, and 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. These corporate office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office.
The following discussion focuses on the operating performance of the Company for the years ended December 31, 2025 and 2024 and the financial condition of the Company as of December 31, 2025.
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Results of Operations and Reconciliation of Net Income to Adjusted EBITDA:
Year Ended December 31,
(dollars in thousands)
Revenue:
Marketing Services
Digital Transformation
Media & Commerce
Communications
The Marketing Cloud
Corporate, eliminations and other
Total revenue
Operating income
Other income (expenses):
Interest expense, net
Foreign exchange, net
Loss on sale of business
Bargain purchase gain
Other, net
Income before income taxes and equity in earnings of non-consolidated affiliates
Income tax expense
Income before equity in earnings of non-consolidated affiliates
Equity in income of non-consolidated affiliates
Net income
Net income attributable to noncontrolling and redeemable noncontrolling interests
Net income attributable to Stagwell Inc. common shareholders
Reconciliation to Adjusted EBITDA:
Net income attributable to Stagwell Inc. common shareholders
Non-operating items (1)
Operating income
Depreciation and amortization
Impairment and other losses
Stock-based compensation
Deferred acquisition consideration
Other items, net
Adjusted EBITDA
(1) Non-operating items includes items within the Statements of Operations, below Operating income, and above Net income attributable to Stagwell Inc. common shareholders.
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YEAR ENDED DECEMBER 31, 2025 COMPARED TO YEAR ENDED DECEMBER 31, 2024
Consolidated Results of Operations
The components of operating results for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Year Ended December 31,
Change
(dollars in thousands)
Revenue
Operating expenses
Cost of services
Office and general expenses
Depreciation and amortization
Impairment and other losses
Operating income
Year Ended December 31,
Change
(dollars in thousands)
Net revenue
Billable costs
Revenue
Billable costs
Staff costs
Administrative costs
Unbillable and other costs, net
Adjusted EBITDA
Stock-based compensation
Depreciation and amortization
Deferred acquisition consideration
Impairment and other losses
Other items, net
Operating income (1)
(1) See the Results of Operations section above for a reconciliation of Operating income to Net income attributable to Stagwell Inc. common shareholders.
Revenue
Revenue for the year ended December 31, 2025 was $2,909.0 million, compared to $2,841.2 million for the year ended December 31, 2024, an increase of $67.8 million.
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Net Revenue
The components of the fluctuations in Net revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Net Revenue - Components of Change
Change
Year Ended December 31, 2024
Foreign Currency
Net Acquisitions (Divestitures)
Organic
Total Change
Year Ended December 31, 2025
Organic
Total
(dollars in thousands)
Marketing Services
Digital Transformation
Media & Commerce
Communications
The Marketing Cloud
Corporate, eliminations and other
Component % change
For the year ended December 31, 2025, organic net revenue increased by $2.6 million, or 0.1%. The increase was driven by growth in the Marketing Services and Digital Transformation segments, reflecting new client wins, expanded scope with existing clients, and increased demand for AI enabled offerings across the retail, financial, technology, and communications sectors. Growth was further supported by higher integrated media, technology, and data offerings within the Media Buying service line in Media & Commerce and increased platform utilization and subscription-based services within The Marketing Cloud.
These increases were partially offset by a decrease in the Communications segment, primarily reflecting lower Advocacy revenue due to political seasonality following the 2024 presidential election cycle, as well as more measured client spending and timing of project activity. Organic net revenue in Media & Commerce was relatively flat, as growth in the Media Buying service line was offset by lower revenue in the Commerce & CRM service line during a period of leadership transition and organizational realignment.
The increase in net acquisitions (divestitures) was impacted by the acquisitions of Jetfuel, Create, ADK, Consulum (Cayman) Limited (“Consulum”), L.D.R.S. Group Ltd. (“Leaders”), and Unicepta, which expanded the Company’s capabilities in experiential marketing, digital communications, integrated marketing in APAC, government advisory services in MENA, influencer marketing and social commerce, and media monitoring and analytics.
The geographic mix in Net revenue for the years ended December 31, 2025 and 2024 was as follows:
Year Ended December 31,
(dollars in thousands)
United States
United Kingdom
Other
Total
Expenses
Cost of services increased by $3.0 million. Excluding the decline in Billable costs of $63.2 million and the addition of expenses from acquired entities of $62.2 million, Cost of services increased $4.0 million.
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Office and general expenses increased by $20.5 million. Excluding the addition of expenses of acquired entities of $12.0 million, Office and general expenses increased $10.2 million, primarily attributable to higher software license fees due to investments in automation and AI intended to improve workflow efficiency and support future margin expansion and higher staff costs to support the growth in the business. This was partially offset by a decrease in Deferred acquisition consideration expense as explained below and a decrease in occupancy costs reflecting the Company’s real estate consolidation efforts including a lease termination during the first quarter of 2025 that resulted in a gain on termination of $3.5 million and the expiration of office leases in 2024.
Stock-based compensation increased by $1.9 million, primarily due to a greater proportion of the annual incentive compensation being allocated to stock-based awards compared to last year and a reversal of expense in the second quarter of 2024 associated with stock-based performance awards for which the performance targets were not met.
Deferred acquisition consideration decreased by $30.5 million, primarily attributable to a reduction in the fair value of the deferred acquisition consideration liability associated with certain Brands driven by performance timing, partially offset by the strong performance in certain Brands, causing an increase in the fair value of the deferred acquisition consideration liability of those Brands .
Depreciation and amortization increased by $19.6 million, primarily attributable to higher amortization related to increased investments in AI and automation to expand our offerings and services, improve workflow efficiency, and support future margin expansion of $15.4 million, and the amortization of intangible assets resulting from the acquisition of businesses of $8.4 million.
Operating Income
Operating income for the year ended December 31, 2025, was $159.0 million, compared to $133.1 million for the year ended December 31, 2024, representing an increase of $25.9 million. The increase in Operating income was primarily attributable to an increase in Net revenue partially offset by an increase in expenses, as discussed above. Operating margin for the year ended December 31, 2025 was 5.5%, compared to 4.7% for the year ended December 31, 2024, representing an increase of 0.8%, reflecting improved operational efficiency.
Interest Expense, Net
Interest expense, net for the year ended December 31, 2025 was $96.4 million, compared to $92.3 million for the year ended December 31, 2024, an increase of $4.1 million. This increase was 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) used to support the growth in working capital attributable to the growth of Net revenue of the business, partially offset by a lower average interest rate.
Foreign Exchange, Net
The foreign exchange loss for the year ended December 31, 2025, was $1.6 million, compared to a loss of $1.7 million for the year ended December 31, 2024, nearly flat despite increased volatility in the primary currencies in which we operate.
Loss on Sale of Business
Loss on sale of business for the year ended December 31, 2025 was $2.2 million due to the sale of a Brand that was non-core to our prospective business operations in the Marketing Services segment.
Bargain Purchase Gain
Bargain purchase gain for the year ended December 31, 2025 was $9.9 million due to the acquisition of ADK to assist in expending our global footprint in APAC in the Media & Commerce segment. The Bargain purchase gain resulted primarily from acquiring ADK at a purchase price below the fair value of the identifiable assets acquired due to the sellers’ decision to expedite its exit from the market.
In come Tax Expense
The Company had an Income tax expense for the year ended December 31, 2025 of $38.3 million (on a pre-tax income of $68.8 million resulti ng in an effective tax rate of 55 .6%) compared to Income tax expense of $13.2 million (on pre-tax income of $37.7 million resulting in an effective tax rate of 34.9%) for the year ended December 31, 2024.
The difference in the effective tax rate of 55.6% in the year ended December 31, 2025, as compared to 34.9% in the year ended December 31, 20 24, was primarily due to a decrease in benefits from expired foreign tax credits, an increase in valuation allowance, and a decrease in the benefit of the disregarded entity structure due to the full exchange in April 2025.
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Noncontrolling and Redeemable Noncontrolling Interests
The effect of Noncontrolling and redeemable noncontrolling interests for the year ended December 31, 2025 was an income of $1.5 million, compared to an income of $22.8 million for the year ended December 31, 2024. The amounts were driven by the mix of income and loss derived from entities not entirely owned by the Company. Additionally, the change was driven by the Class C Exchange during the second quarter of 2025, which increased the income allocated to Stagwell Inc.’s common shareholders.
Net Income Attributable to Stagwell Inc. Common Shareholders
As a result of the foregoing, Net income attributable to Stagwell Inc. common shareholders for the year ended December 31, 2025 was $29.1 million, compared to a net income of $2.3 million for the year ended December 31, 2024.
Adjusted EBITDA
Adjusted EBITDA for the year ended December 31, 2025 was $421.9 million, compared to $417.4 million for the year ended December 31, 2024, representing an increase of $4.4 million, primarily driven by an increase in Net revenue, partially offset by an increase in expenses, as discussed above.
Earnings Per Share
Diluted EPS and Adjusted Diluted EPS for the year ended December 31, 2025 were as follows:
GAAP
Adjustments
Non-GAAP
(amounts in thousands, except per share amounts)
Net income attributable to Stagwell Inc. common shareholders
Net loss attributable to Class C shareholders
Net income attributable to Stagwell Inc. and Class C shareholders and adjusted net income
Diluted - Weighted average number of common shares outstanding
Weighted average number of shares of Class C Common Stock outstanding
Diluted - Weighted average number of shares outstanding
Diluted EPS and Adjusted Diluted EPS (1)
Adjustments to Net income
Amortization
Impairment and other losses
Stock-based compensation
Deferred acquisition consideration
Other items, net
Adjusted tax expense
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
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Diluted EPS and Adjusted Diluted EPS for the year ended December 31, 2024 were as follows:
GAAP
Adjustments
Non-GAAP
(amounts in thousands, except per share amounts)
Net income attributable to Stagwell Inc. common shareholders
Net income attributable to Class C shareholders
Net income attributable to Stagwell Inc. and Class C shareholders and adjusted net income
Diluted - Weighted average number of common shares outstanding
Weighted average number of shares of Class C Common Stock outstanding
Diluted - Weighted average number of shares outstanding
Diluted EPS and Adjusted Diluted EPS (1)
Adjustments to Net income
Amortization
Impairment and other losses
Stock-based compensation
Deferred acquisition consideration
Other items, net
Adjusted tax expense
Net income attributable to Class C shareholders
Allocation of adjustments to Net income
Net income attributable to Stagwell Inc. common shareholders
Net income attributable to Class C shareholders - add-backs
Net income attributable to Class C shareholders
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
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Marketing Services
The components of operating results for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Year Ended December 31,
Change
(dollars in thousands)
Revenue
Operating expenses
Cost of services
Office and general expenses
Depreciation and amortization
Impairment and other losses
Operating income
Year Ended December 31,
Change
(dollars in thousands)
Net revenue
Billable costs
Revenue
Billable costs
Staff costs
Administrative costs
Unbillable and other costs, net
Adjusted EBITDA
Stock-based compensation
Depreciation and amortization
Deferred acquisition consideration
Impairment and other losses
Other items, net
Operating income
Revenue
Revenue for the year ended December 31, 2025 was $1,134.8 million, compared to $1,077.6 million for the year ended December 31, 2024, an increase of $57.2 million.
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Net Revenue
The components of the fluctuations in Net revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Net Revenue - Components of Change
Change
Year Ended December 31, 2024
Foreign Currency
Net Acquisitions (Divestitures)
Organic
Total Change
Year Ended December 31, 2025
Organic
Total
(dollars in thousands)
Marketing Services
Component % change
The strong increase in organic net revenue of $41.3 million, or 4.6%, was primarily attributable to increases in the Creative, Research, and Experiential service lines. The Creative and Research service lines increased $39.0 million due to new client wins and expanded client relationships in the retail, financial, and technology sectors driven by the accelerating adoption of AI. The Experiential service line increased $7.9 million due to the Sport Beach event that connects athletes, brands, and creatives through lived experiences. The increase in net acquisitions (divestitures) was primarily driven by the acquisition of Jetfuel, an experiential marketing services agency.
Expenses
Cost of services increased $19.3 million. Excluding the increase in Billable costs of $2.7 million and the addition of expenses from acquired entities of $1.9 million, Cost of services increased $14.8 million, or only 2.7% compared to organic net revenue growth of 4.6%, reflecting strong operating leverage. This increase was primarily attributable to higher staff costs due to the growth in Net revenue, partially offset by a decrease in staff costs due to business optimization efforts through the use of AI and restructuring of agency teams.
The decrease in Office and general expenses of $14.5 million was primarily attributable to cost optimization initiatives related to the consolidation of our real estate footprint and a decrease in Deferred acquisition consideration.
Stock-based compensation expense increased $2.6 million, primarily due to an increase in the fair value of certain profit interest awards driven by strong performance in certain Brands and a greater proportion of the annual incentive compensation being allocated to stock-based awards compared to last year.
Deferred acquisition consideration decreased $10.2 million, primarily attributable to a reduction in the fair value of the deferred acquisition consideration liability associated with certain Brands driven by the performance timing of those Brands.
Other items, net decreased $10.0 million, primarily attributable to a lease termination during the first quarter of 2025 as part of the real estate consolidation initiatives resulting in a gain of $3.5 million and a decrease in severance of $4.5 million.
Operating Income
Operating income for the year ended December 31, 2025, was $132.6 million, compared to $77.9 million for the year ended December 31, 2024, representing an increase of $54.7 million. The increase in Operating income was primarily attributable to an increase in Net revenue, partially offset by an increase in expenses, as discussed above. Operating margin for the year ended December 31, 2025 was 11.7%, compared to 7.2% for the year ended December 31, 2024, representing an increase of 4.5%, reflecting improved operational efficiency.
Adjusted EBITDA
Adjusted EBITDA increased by $34.8 million, primarily driven by an increase in Operating income and an increase in operating margin, as discussed above.
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Digital Transformation
The components of operating results for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Year Ended December 31,
Change
(dollars in thousands)
Revenue
Operating expenses
Cost of services
Office and general expenses
Depreciation and amortization
Operating income
Year Ended December 31,
Change
(dollars in thousands)
Net revenue
Billable costs
Revenue
Billable costs
Staff costs
Administrative costs
Unbillable and other costs, net
Adjusted EBITDA
Stock-based compensation
Depreciation and amortization
Deferred acquisition consideration
Other items, net
Operating income
Revenue
Revenue for the year ended December 31, 2025 was $393.5 million, compared to $335.7 million for the year ended December 31, 2024, an increase of $57.8 million.
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Net Revenue
The components of the fluctuations in Net revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Net Revenue - Components of Change
Change
Year Ended December 31, 2024
Foreign Currency
Net Acquisitions (Divestitures)
Organic
Total Change
Year Ended December 31, 2025
Organic
Total
(dollars in thousands)
Digital Transformation
Component % change
The strong increase in organic net revenue of $29.8 million, or 9.2%, was attributable to increases in technology and communications sectors in the Strategy and Design and Development and Implementation service lines. The Strategy and Design and Development and Implementation service lines grew $28.7 million driven by AI-related services. The increase in net acquisitions (divestitures) was primarily driven by the acquisition of Create, a digital communications group in the Middle East.
Expenses
Cost of services increased $32.8 million. Excluding the increase in Billable costs of $14.9 million and the addition of expenses from acquired entities of $6.8 million, Cost of services increased $11.1 million, or only 5.6% compared to organic net revenue growth of 9.2%, reflecting strong operating leverage. This increase was primarily due to higher staff costs due to the growth in Net revenue, partially offset by the restructuring of agency teams to support business optimization efforts and the impact of competition in the labor market.
Office and general expenses increased $8.5 million. Excluding the addition of costs from acquired entities of $4.4 million, Office and general expenses increased $4.1 million, primarily due to higher Deferred acquisition consideration as explained below.
Stock-based compensation expense decreased $2.5 million, primarily due to a decrease in the fair value of awards granted in 2025 compared to 2024 and a decrease in the expense associated with awards issued in prior years that vested during 2025.
Deferred acquisition consideration increased $4.4 million, primarily attributable to the strong performance of a certain Brand, causing an increase in the fair value of the deferred acquisition consideration liability associated with that Brand.
Operating Income
Operating income for the year ended December 31, 2025 was $49.2 million, compared to $33.4 million for the year ended December 31, 2024, representing an increase of $15.8 million. The increase in Operating income was primarily attributable to an increase in Net revenue of $43.0 million, partially offset by an increase in expenses, as discussed above. Operating margin for the year ended December 31, 2025 was 12.5%, compared to 10.0% for the year ended December 31, 2024, representing an increase of 2.5%, reflecting improved operational efficiency.
Adjusted EBITDA
Adjusted EBITDA increased by $17.2 million, primarily driven by an increase in Operating income and an increase in operating margin, as discussed above.
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Media & Commerce
The components of operating results for the year ended December 31, 2025 compared to the year ended December 31, 2024, were as follows:
Year Ended December 31,
Change
(dollars in thousands)
Revenue
Operating expenses
Cost of services
Office and general expenses
Depreciation and amortization
Operating income
Year Ended December 31,
Change
(dollars in thousands)
Net revenue
Billable costs
Revenue
Billable costs
Staff costs
Administrative costs
Unbillable and other costs, net
Adjusted EBITDA
Stock-based compensation
Depreciation and amortization
Deferred acquisition consideration
Other items, net
Operating income
Revenue
Revenue for the year ended December 31, 2025 was $690.7 million, compared to $695.4 million for the year ended December 31, 2024, a decrease of $4.7 million.
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Net Revenue
The components of the fluctuations in Net revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Net Revenue - Components of Change
Change
Year Ended December 31, 2024
Foreign Currency
Net Acquisitions (Divestitures)
Organic
Total Change
Year Ended December 31, 2025
Organic
Total
(dollars in thousands)
Media & Commerce
Component % change
Organic net revenue decreased by $0.7 million or 0.1%. Organic net revenue in the Media Buying service line increased $22.6 million driven by integrated media, technology, and data offerings that contributed to new wins and expanded scope with existing clients. This was offset by a decrease of $24.8 million in the Commerce & CRM service line that was primarily attributable to leadership transitions and organizational realignment. The increase in net acquisitions (divestitures) was primarily driven by the acquisition of ADK, an integrated marketing company that expands our global footprint in the APAC region.
Expenses
Cost of services decreased by $8.7 million. Excluding the decline in Billable costs of $13.2 million and the addition of expenses from acquired entities of $4.7 million, Cost of services decreased $0.2 million, or less than 0.1%, compared to organic net revenue growth of 0.1%, reflecting consistent operating leverage.
Office and general expenses increased $20.0 million. Excluding the addition of costs from acquired entities of $7.7 million, Office and general expenses increased $12.4 million, primarily due to higher Deferred acquisition consideration as explained below.
Stock-based compensation expense decreased $2.1 million, primarily due to a decrease in the fair value of awards granted in 2025 compared to 2024 and a decrease in the expense associated with awards issued in prior years that vested during 2025.
Deferred acquisition consideration increased $10.8 million, primarily attributable to the strong performance of a certain Brand in 2025, causing an increase in the fair value of the deferred acquisition consideration liability associated with that Brand, and a decrease in the fair value of a certain Brand in 2024.
Operating Income
Operating income for the year ended December 31, 2025 was $34.1 million, compared to $49.0 million for the year ended December 31, 2024, representing a decrease of $14.8 million. The decrease in Operating income was primarily attributable to an increase in expenses partially offset by an increase in Net revenue, as discussed above.
Adjusted EBITDA
Adjusted EBITDA decreased by $6.9 million, primarily due to a decrease in Operating income, as discussed above.
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Communications
The components of operating results for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Year Ended December 31,
Change
(dollars in thousands)
Revenue
Operating expenses
Cost of services
Office and general expenses
Depreciation and amortization
Impairment and other losses
Operating income
Year Ended December 31,
Change
(dollars in thousands)
Net revenue
Billable costs
Revenue
Billable costs
Staff costs
Administrative costs
Unbillable and other costs, net
Adjusted EBITDA
Stock-based compensation
Depreciation and amortization
Deferred acquisition consideration
Impairment and other losses
Other items, net
Operating income
Revenue
Revenue for the year ended December 31, 2025 was $592.6 million compared to $703.1 million for the year ended December 31, 2024, a decrease of $110.5 million.
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Net Revenue
The components of the fluctuations in Net revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Net Revenue - Components of Change
Change
Year Ended December 31, 2024
Foreign Currency
Net Acquisitions (Divestitures)
Organic
Total Change
Year Ended December 31, 2025
Organic
Total
(dollars in thousands)
Communications
Component % change
The decrease in organic net revenue of $71.7 million, or 16.5%, was primarily attributable to a $62.7 million decrease in the Advocacy service line due to political seasonality following the 2024 presidential election cycle. The decrease in organic net revenue for Communications excluding Advocacy was $9.0 million or 4.0%. The decrease in Communications service line was primarily driven by broader industry headwinds, including client budget uncertainty, and delayed spending decisions during the pitch process. The increase in net acquisitions (divestitures) was primarily driven by the acquisition of Consulum, a pan-MENA government advisory consultancy.
Expenses
Cost of services decreased $71.0 million. Excluding the decline in Billable costs of $68.3 million and the addition of costs from acquired entities of $14.6 million, Cost of services decreased $17.3 million, or 8.6%, primarily due to lower Net revenue.
The decrease in Office and general expenses of $25.0 million was primarily attributable to a decrease in Deferred acquisition consideration as explained below and lower Net revenue, partially offset by the addition of costs from acquired entities of $7.7 million.
Stock-based compensation expense decreased $1.4 million, primarily attributable to a decrease in the fair value of a certain profits interest award due to performance timing.
Deferred acquisition consideration decreased by $25.8 million, primarily attributable to a decrease in the fair value of certain Brands due to performance timing, partially offset by the strong performance of certain Brands, causing an increase in the fair value.
Depreciation and amortization increased by $5.6 million, primarily attributable to the amortization of intangible assets resulting from the acquisition of businesses.
Operating Income
Operating income for the year ended December 31, 2025 was $73.7 million, compared to $93.9 million for the year ended December 31, 2024, representing a decrease of $20.3 million. The decrease in Operating income was primarily attributable to a decrease in Net revenue, partially offset by a decrease in expenses, as discussed above.
Adjusted EBITDA
Adjusted EBITDA decreased by $41.4 million, primarily due to a decrease in Operating income, as discussed above.
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The Marketing Cloud
The components of operating results for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Year Ended December 31,
Change
(dollars in thousands)
Revenue
Operating expenses
Cost of services
Office and general expenses
Depreciation and amortization
Impairment and other losses
Operating loss
Year Ended December 31,
Change
(dollars in thousands)
Net revenue
Billable costs
Revenue
Billable costs
Staff costs
Administrative costs
Unbillable and other costs, net
Adjusted EBITDA
Stock-based compensation
Depreciation and amortization
Deferred acquisition consideration
Impairment and other losses
Other items, net
Operating loss
Revenue
Revenue for the year ended December 31, 2025 was $106.5 million compared to $32.3 million for the year ended December 31, 2024, an increase of $74.3 million.
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Net Revenue
The components of the fluctuations in Net revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Net Revenue - Components of Change
Change
Year Ended December 31, 2024
Foreign Currency
Net Acquisitions (Divestitures)
Organic
Total Change
Year Ended December 31, 2025
Organic
Total
(dollars in thousands)
The Marketing Cloud
Component % change
The increase in organic net revenue of $11.1 million, or 34.3%, was primarily attributable to growth in the Research service line due to increased demand from new and existing clients, including a significant new engagement in the financial sector and higher platform utilization including the successful introduction of additional service offerings within a subscription model. The increase in net acquisitions (divestitures) was primarily driven by the acquisitions of Leaders, a digital agency specializing in influencer marketing, and Unicepta, a media monitoring and analytics platform.
Expenses
Cost of services increased $37.2 million. Excluding the addition of costs from acquired entities of $34.2 million, Cost of services increased $2.9 million or only 25.8% compared to organic net revenue of 34.3%, reflecting operating leverage.
Office and general expenses increased $20.5 million, primarily due to higher staff costs due to expansion of the business to support additional revenues and the addition of costs from acquired entities of $16.2 million, partially offset by a decrease in Deferred acquisition consideration expense as explained below.
Deferred acquisition consideration decreased by $9.6 million, primarily attributable to a decrease in the fair value of a certain Brand due to performance timing, partially offset by the strong performance of certain other Brands.
Depreciation and amortization increased by $11.0 million, primarily attributable to higher amortization related to increased investments in AI and automation to expand our offerings and services, improve workflow efficiency, and support future margin expansion, and the amortization of intangible assets from the acquisition of businesses.
Operating Loss
Operating loss for the year ended December 31, 2025 was $19.6 million compared to $24.9 million for the year ended December 31, 2024, as the segment approaches operating scale. The decrease in Operating loss was primarily attributable to an increase in Net revenue, partially offset by an increase in expenses, as discussed above.
Adjusted EBITDA increased by $9.9 million, primarily due to a decrease in Operating loss, as discussed above.
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Corporate
The components of operating results for the year ended December 31, 2025 compared to the year ended December 31, 2024 were as follows:
Year Ended December 31,
Change
(dollars in thousands)
Staff costs
Administrative costs
Adjusted EBITDA
Stock-based compensation
Depreciation and amortization
Impairment and other losses
Other items, net
Operating loss
Expenses
Staff costs increased by $13.3 million, primarily attributable to an increase in headcount to support the implementation of a standardized shared services platform to optimize cost structures and support the future growth and unusually higher healthcare related insurance claims.
Administrative costs decreased $3.0 million, primarily due to our cost savings initiatives. The implementation of the shared services platform optimized cost structures and reduced Brands administrative costs. Due to a higher allocation of Corporate's administrative costs to the Brands, Corporate’s Administrative costs decreased $14.0 million These costs include rent, IT services, accounting services, financial operations services, and business applications. This decrease was partially offset by an increase of $11.1 million in computer software and licensing fees due to investments in automation and AI intended to improve workflow efficiency and support future margin expansion.
Stock-based compensation expense increased by $5.5 million, primarily due to a greater proportion of the annual incentive compensation being allocated to stock-based awards compared to last year and a reversal of expense in the second quarter of 2024 associated with stock-based performance awards for which the performance targets were not met.
Operating Loss
Operating loss for the year ended December 31, 2025 was $111.0 million compared to $95.1 million for the year ended December 31, 2024, representing an increase of $16.0 million, primarily attributable to higher expenses, as discussed above.
Liquidity and Capital Resources:
The following table provides summary information about the Company’s liquidity position and capital resources:
Year Ended December 31,
Change
(dollars in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
The Company had cash and cash equivalents of $104.5 million and $131.3 million as of December 31, 2025, and December 31, 2024, respectively.
Operating Activities
Net cash provided by operating activities for the year ended December 31, 2025 was $291.0 million, an increase of $148.2 million, or 103.7%, compared to the prior year. This improvement was driven by higher operating income of $25.9 million and $150.7 million improvement in working capital primarily attributable to stronger working capital management driven by
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technology automation and improved billing and collection process, which resulted in favorable changes in advance billings of $48.2 million and expenditures billable to clients of $66.4 million. Additionally, there were net favorable changes in accounts payable and accruals of $35.5 million as a result of improved payment terms with significant service providers. This was partially offset by an unfavorable change in other current assets of $45.3 million due to an increase in certain prepaid media assets.
Changes in non-cash items included in operating income consisted primarily of a decrease of $30.5 million in the fair value of deferred acquisition liabilities driven by the performance timing of certain acquisitions and the Bargain purchase gain of $9.9 million from the ADK acquisition, partially offset by an increase of $19.6 million in depreciation and amortization resulting from higher capital investment in AI and automation related technologies as well as an increase in deferred income tax expense of $21.1 million, respectively.
Investing Activities
Net cash used in investing activities for the year ended December 31, 2025 was $113.7 million, a decrease of $48.8 million, or 30.0%, compared to the prior year. This decrease was primarily driven by a $97.1 million reduction in acquisitions and $10.9 million in proceeds from the sale of a non-core asset. These decreases were partially offset by an increase in capital expenditures and capitalized software for investments in AI and process automation technologies of $24.8 million and $32.4 million, respectively. The capital expenditures include a $7.4 million purchase of office space.
Financing Activities
Net cash used in financing activities for the year ended December 31, 2025 was $210.0 million, an increase of $247.0 million compared to the prior year. This increase was primarily driven by an increase of $231.7 million in net payments under the Credit Agreement offset by an increase in share repurchases of $26.0 million. The increase was partially offset by a decrease in distributions to noncontrolling interests of $17.1 million.
Liquidity
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, equity and receivable financing. On April 23, 2025, the Company entered into an amendment to the Credit Agreement, which increased the limit of borrowing to $750 million and extended the maturity date to April 23, 2030, as described in more detail in Note 11 of the Notes included herein. As of December 31, 2025, the Company had $237.3 million of borrowings outstanding and $15.1 million of issued and undrawn letters of credit, resulting in $497.6 million unused borrowing capacity under the Credit Agreement.
The Company transfers certain of its trade receivable assets to third parties under certain agreements. Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer.
The trade receivables transferred to the third parties were $501.3 million and $435.6 million during the years ended December 31, 2025 and 2024, respectively. The trade receivables collected by the Company t hat were not remitted to the third parties under these arrangements were recorded in Accruals and other liabilities on the Audited Consolidated Balance Sheets and total $21.2 million as of December 31, 2025 and $19.5 million as of December 31, 2024. Fees for these arrangements were recorded in Office and general expenses in the Consolidated Statements of Operations and totaled $5.6 million and $5.8 million for the years ended December 31, 2025 and 2024 , respectively.
The Company may purchase shares of outstanding Class A Common Stock under its Repurchase Program. Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices, including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Exchange Act, as amended, in privately negotiated transactions, or through other means. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, and other considerations we deem relevant. The Repurchase Program may be suspended, modified, or discontinued at any time without prior notice. Our Board of Directors will review the Repurchase Program periodically and may authorize adjustments of its terms.
During the year ended December 31, 2025, 23.1 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an average price of $5.12 per share, for an aggregate value, excluding fees, of $118.4 million.
The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $51.1 million as of December 31, 2025. See Recent Developments above for information regarding the Board’s authorization to extend and increase the size of share repurchases under the Repurchase Program.
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The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition consideration payments, purchases of redeemable noncontrolling interests, subsidiary awards, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company’s 5.625% Notes (as defined in Note 11 of the Notes included herein) and Credit Agreement. The Company expects to make estimated cash payments in the future to satisfy obligations under our Tax Receivables Agreement (“TRA”) , which remains in effect after the final exchange of Class C Common Stock (see Note 17 of the Notes included herein for additional details). The amount and timing of any payments under the TRA are contingent on the Company achieving certain tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize. 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 Credit Agreement, will be sufficient to meet the Company’s anticipated cash needs for the next twelve months and subsequent periods. 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.
Total Debt
As of December 31, 2025, Debt, net of debt issuance costs, was $1,326.0 million, compared to $1,353.6 million outstanding as of December 31, 2024. See Note 11 of the Notes included herein for information regarding the Company’s 5.625% Notes and the Credit Agreement.
As of December 31, 2025 , t he Company was 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 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 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.
Pursuant to the Credit Agreement, the Company must maintain a Total Leverage Ratio (as defined in the Credit Agreement) below an established threshold. For the period ended December 31, 2025, 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, 2025
Total Leverage Ratio
Maximum per covenant
These ratios and measures are not based on GAAP and are not presented as alternative measures of operating performance or 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 Credit Agreement. They are presented here to demonstrate compliance with the covenants in the Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.
Material Cash Requirements
To the extent required under a particular client engagement, Stagwell’s Brands enter into contractual commitments with media providers, production companies and other third parties on behalf of their clients at levels that exceed the revenue from the services. In most of these transactions, the Brands act as the clients’ “Agent for a Disclosed Principal” where the Brands’ risk is mitigated by sequential payment liability, i.e., the brands’ obligation to pay a third party is tolled until it receives the underlying payment from the client thereby safeguarding the Brand in the event of a client default. To further protect against client default, Stagwell takes additional precautions, including the procurement of credit insurance. While Stagwell has historically had a very low incidence of default, Stagwell is still exposed to the risk of significant uncollectible receivables from its clients and the risk of a material loss could significantly increase in periods of severe economic .
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The following table and discussion below summarize current and long-term material cash requirements of the Company as of December 31, 2025. Certain of these requirements vary in the ultimate future amount payable because they are dependent on the future results of operations of the subject subsidiaries and/or the timing of when certain rights are exercised. Management anticipates that the obligations outstanding as of December 31, 2025 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)
Operating lease obligations
Interest on debt
Deferred acquisition consideration (2)
Total
(1) Includes the principal amount of the 5.625% Notes which are due in 2029 and does not include borrowings under the Credit Agreement.
(2) Deferred acquisition consideration on the Consolidated Balance Sheets consists of deferred obligations related to contingent purchase price payments. The $26.4 million reflected in the above table is included in the Consolidated Balance Sheet as of December 31, 2025, and does not include $13.6 million expected to be paid in shares of Class A Common Stock. In addition, certain of the Company’s deferred acquisition consideration is tied to continued employment of certain personnel of the acquired subsidiaries. These arrangements are expensed over the respective vesting period (employment) period and therefore the expected, entire amount of payment is not reflected in the Consolidated Balance Sheet as of December 31, 2025. The Company estimates that the total amount to be paid related to such obligations was $30.9 million as of December 31, 2025, of which $16.4 million is expected to be paid in cash and the remaining in Company’s Class A Common Stock. The total amount of cash expected to be paid in the next twelve months related to these arrangements is $3.0 million. See Note 9 of the Notes included in Item 8 of this Form 10-K 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. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity. See Note 12 of the Notes included in Item 8 of this Form 10-K 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”). The awards generally provide the employee with the right, but not the obligation, to sell their profits interest in the subsidiary to the Company based on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are primarily settled in cash, with certain awards having stock-settlement provisions at the Company’s discretion. The corresponding liability associated with these profits interests awards is included as a component of Accruals and other liabilities and Other liabilities on the Consolidated Balance Sheets. See Note 14 of the Notes included in Item 8 of this Form 10-K for additional information regarding these material commitments.
The Company enters into certain long-term non-cancellable contracts for services such as revenue or profit share arrangements, cloud-based services, or software licensing. See Note 13 of the Notes included in Item 8 of this Form 10-K for additional information regarding these material commitments.
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. Preparation of the Audited Consolidated Financial Statements and related disclosures requires us to make judgments, assumptions and estimates that affect the amounts reported and disclosed in the accompanying financial statements and footnotes. Our significant accounting policies are discussed in Note 2 of the Notes included herein. Our critical accounting estimates are those that are considered by management to require significant judgment, use of estimates and that could have a significant impact on our financial statements. An understanding of our critical accounting estimates is necessary to analyze our financial results.
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
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ongoing basis and estimates are based on historical experience, current conditions and various other assumptions believed to be reasonable under the circumstances. Actual results can differ from those estimates, and it is possible that the differences could be material.
Revenue Recognition. The Company’s revenue is recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. See Note 5 of the Notes included herein for further information.
Business Combinations. Business combinations are accounted for using the acquisition method and accordingly, the assets acquired (including identified intangible assets), the liabilities assumed and any noncontrolling interest in the acquired business are recorded at their acquisition date fair values.
For each acquisition, the Company undertakes a detailed review to identify other intangible assets, and a valuation is performed for all such identified assets. The Company uses several market participant measurements to determine the estimated value. This approach includes consideration of similar and recent transactions, as well as utilizing discounted expected cash flow methodologies. A substantial portion of the intangible asset value that the Company acquires is the specialized know-how of the workforce, which is treated as part of goodwill and is not required to be valued separately. The majority of the value of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, trademarks, developed technology and other intangible assets.
Deferred Acquisition Consideration . Certain acquisitions include an initial payment at the time of closing and provide for future additional contingent purchase price payments. 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. These liabilities are derived from the projected performance of the acquired entity. 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, EBITDA growth, to estimate the value of each deferred acquisition consideration liability. 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 . Goodwill (the excess of the acquisition cost over the fair value of the net assets acquired) acquired as a result of a business combination which is not subject to amortization is tested for impairment, at the reporting unit level, annually as of October 1st of each year, or more frequently if indicators of potential impairment exist.
For the annual impairment test, the Company has the option of assessing qualitative factors to determine whether it is more likely than not that the carrying amount of a reporting unit exceeds its fair value or performing a quantitative goodwill impairment test. Qualitative factors considered in the assessment include industry and market considerations, the competitive environment, overall financial performance, changing cost factors such as labor costs, and other factors specific to each reporting unit such as change in management or key personnel.
If the Company elects to perform the qualitative assessment and concludes that it is more likely than not that the fair value of the reporting unit is more than its carrying amount, then goodwill is not considered impaired, and the quantitative impairment test is not necessary. For reporting units for which the qualitative assessment concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or if the Company elects not to perform the qualitative assessment, the Company will perform the quantitative impairment test, which compares the fair value of the reporting unit to its carrying amount. If the fair value of the reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not considered impaired. 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. 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 exercise of significant judgment about 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. The income approach and the market approach both require the exercise of significant judgment, including judgment about the amount and timing of expected future cash flows, assumed terminal value and appropriate discount rates.
The DCF estimates incorporate expected cash flows that represent a spectrum of the amount and timing of possible cash flows of each reporting unit from a market participant perspective. 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 margins, long-term growth rates, and appropriate discount rates based on a reporting unit’s weighted average
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cost of capital (“WACC”) as determined by considering the observable WACC of comparable companies and factors specific to the reporting unit. The terminal value is estimated using a constant growth method which requires an assumption about the expected long-term growth rate. The estimates are based on historical data and experience, industry projections, economic conditions, and the Company’s expectations.
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, 2025 (the annual impairment test date), the Company performed this assessment and determined that all reporting units (10) did not have an impairment. The Company utilized a long-term average growth rate ranging from 1.5% to 3% and a WACC ranging from 14% to 20.5%.
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. 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 monitors its reporting units to determine if there is an indicator of potential impairment.
Income Taxes. We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized based on the differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates and laws expected to be in effect when the differences are expected to reverse. The Company records associated interest and penalties as a component of income tax expense. The Company records a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Management evaluates on a quarterly basis all available positive and negative evidence considering factors such as the reversal of deferred income tax liabilities, taxable income in eligible carryback years, projected future taxable income, the character of the income tax asset, tax planning strategies, changes in tax laws and other factors. 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 3 of the Notes included in Item 8 of this Form 10-K.
