Stagwell Inc (Form: 10-Q, Received: 11/09/2021 18:07:55)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number: 001-13718

Stagwell Inc.

(Exact name of registrant as specified in its charter)


Delaware		86-1390679
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

One World Trade Center, Floor 65
New York,	New York	10007
(Address of principal executive offices)		(Zip Code)

(646) 429-1800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.001 per share	STGW	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated Filer	☐	Accelerated Filer	☒
Non-accelerated Filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of common shares outstanding as of November 8, 2021 was 113,198,517 shares of Class A Common Stock, 3,946 shares of Class B Common Stock, and 179,970,051 shares of Class C Common Stock.

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STAGWELL INC.

QUARTERLY REPORT ON FORM 10-Q

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		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	5
	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020	5
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2021 and 2020	6
	Unaudited Condensed Consolidated Balance Sheet as of September 30, 2021 and Audited Condensed Consolidated Balance Sheet as December 31, 2020	7
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	8
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020	10
	Notes to Unaudited Condensed Consolidated Financial Statements	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	60
Item 4.	Controls and Procedures	61

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	64
Item 6.	Exhibits	65
Signatures		66

EXPLANATORY NOTE

On December 21, 2020, MDC Partners Inc. (“MDC”) and Stagwell Media LP (“Stagwell Media”) announced that they had entered into the Transaction Agreement, providing for the combination of MDC with the operating businesses and subsidiaries of Stagwell Media (the “Stagwell Subject Entities”). The Stagwell Subject Entities comprised Stagwell Marketing Group LLC (“Stagwell Marketing or SMG”) and its direct and indirect subsidiaries.

On August 2, 2021 (the “Closing Date”), we completed the combination of MDC and the Stagwell Subject Entities and a series of steps and related transactions (such combination and transactions, the “Transactions”). In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of the Company, converted into a Delaware limited liability company and changed its name to Midas OpCo Holdings LLC (“OpCo”); (ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo; and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc.

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for events occurring or periods ending before August 2, 2021 does not reflect the impact of the Transactions or the financial results of MDC and may not be comparable with historical information for events occurring or periods ending on or after August 2, 2021.

References in this Quarterly Report on Form 10-Q to Stagwell,” “we,” “us,” “our” and the “Company” refer (i) with respect to events occurring or periods ending before August 2, 2021, to Stagwell Marketing Group LLC and its direct and indirect subsidiaries and (ii) with respect to events occurring or periods ending on or after August 2, 2021, to Stagwell Inc. and its direct and indirect subsidiaries.

All dollar amounts are stated in U.S. dollars unless otherwise stated.

Note About Forward-Looking Statements

This document contains forward-looking statements. 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, recent business and economic trends, potential acquisitions, and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. These statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. 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, including as a result of the novel coronavirus pandemic (“COVID-19”);

•the effects of the outbreak of COVID-19, including the measures to reduce its spread, and the impact on the economy and demand for our services, which may precipitate or exacerbate other risks and uncertainties;

•an inability to realize expected benefits of the combination of the Company’s business with MDC (the “Business Combination” and, together with the related transactions, the “Transactions”);

•adverse tax consequences in connection with the Transactions for the Company, its operations and its shareholders, that may differ from the expectations of the Company, including that future changes in tax law, potential increases to corporate tax rates in the United States and disagreements with the tax authorities on the Company’s determination of value and computations of its attributes may result in increased tax costs;

•the occurrence of material Canadian federal income tax (including material “emigration tax”) as a result of the Transactions;

•the impact of uncertainty associated with the Transactions on the Company’s businesses;

•direct or indirect costs associated with the Transactions, which could be greater than expected;

•risks associated with severe effects of international, national and regional economic conditions;

•the Company’s ability to attract new clients and retain existing clients;

•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 achieve the full amount of its stated 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 successful completion and integration of acquisitions which complement and expand the Company’s business capabilities; and

•foreign currency fluctuations.

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Investors should carefully consider these risk factors, other risk factors described herein, and the additional risk factors outlined in more detail in Exhibit 99.2 to our Current Report on Form 8-K, filed with the Securities and Exchange Commission (the “SEC”) on August 10, 2021, and accessible on the SEC’s website at www.sec.gov, under the caption “Risk Factors,” and in the Company’s other SEC filings.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(thousands of United States dollars, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue	$	466,634	$	228,097	$	857,436	$	574,970
Operating Expenses
Cost of services	324,782		149,011		558,856		373,064
Office and general expenses	121,770		42,666		226,720		127,181
Depreciation and amortization	24,790		9,974		46,122		29,838
Impairment and other losses	14,926		—		14,926		—
	486,268		201,651		846,624		530,083
Operating income (loss)	(19,634)		26,446		10,812		44,887
Other Income (expenses):
Interest expense, net	(11,912)		(1,778)		(15,197)		(4,665)
Foreign exchange, net	(893)		(856)		(1,955)		794
Gain on sale of business and other, net	45,621		263		46,806		948
	32,816		(2,371)		29,654		(2,923)
Income before income taxes and equity in earnings of non-consolidated affiliates	13,182		24,075		40,466		41,964
Income tax expense	5,183		2,618		9,205		3,211
Income before equity in earnings of non-consolidated affiliates	7,999		21,457		31,261		38,753
Equity in losses (income) of non-consolidated affiliates	(76)		(35)		(75)		7
Net income	7,923		21,422		31,186		38,760
Net income attributable to noncontrolling and redeemable noncontrolling interests	(9,994)		(3,614)		(10,987)		(4,636)
Net income (loss) attributable to Stagwell Inc. common shareholders	$	(2,071)	$	17,808	$	20,199	$	34,124


Income (loss) Per Common Share:
Basic
Net loss attributable to Stagwell Inc. common shareholders	$	(0.06)	N/A		$	(0.06)	N/A
Diluted
Net income attributable to Stagwell Inc. common shareholders	$	(0.06)	N/A		$	(0.06)	N/A
Weighted Average Number of Common Shares Outstanding:
Basic	76,105,807		N/A		76,105,807		N/A
Diluted	76,105,807		N/A		76,105,807		N/A

See notes to the Unaudited Condensed Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(thousands of United States dollars)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
COMPREHENSIVE INCOME
Net income	$	7,923	$	21,422	$	31,186	$	38,760
Other comprehensive income (loss), net of applicable tax:
Foreign currency translation adjustment	12,537		3,231		12,537		(1,749)
Net unrealized loss on available for sale investment	—		(28)		—		(5,024)
Other comprehensive income (loss)	12,537		3,203		12,537		(6,773)
Comprehensive income for the period	20,460		24,625		43,723		31,987
Comprehensive income attributable to the noncontrolling interests	(9,994)		(3,614)		(10,987)		(4,636)
Comprehensive income attributable to Stagwell Inc.	$	10,466	$	21,011	$	32,736	$	27,351

See notes to the Unaudited Condensed Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(thousands of United States dollars)


	September 30, 2021		December 31, 2020

ASSETS
Current Assets
Cash and cash equivalents	$	115,489	$	92,457
Accounts receivable, net	669,612		225,733
Expenditures billable to clients	37,101		11,063
Other current assets	78,884		36,433
Total Current Assets	901,086		365,686
Fixed assets, net	118,526		35,614
Right-of-use lease assets - operating leases	334,867		57,752
Goodwill	1,619,272		351,725
Other intangible assets, net	945,081		186,035

Other assets	24,789		17,043
Total Assets	$	3,943,621	$	1,013,855
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	277,385	$	147,826
Accruals and other liabilities	371,289		90,557
Advance billings	286,790		66,418
Current portion of lease liabilities - operating leases	74,162		19,579
Current portion of deferred acquisition consideration	60,951		12,579
Total Current Liabilities	1,070,577		336,959
Long-term debt	1,265,747		198,024
Long-term portion of deferred acquisition consideration	14,754		5,268
Long-term lease liabilities - operating leases	328,048		52,606
Deferred tax liabilities, net	134,288		16,050
Other liabilities	59,190		5,801
Total Liabilities	2,872,604		614,708
Redeemable Noncontrolling Interests	29,787		604
Commitments, Contingencies and Guarantees (Note 11)
Shareholders' Equity:
Convertible preferred shares, 123,849,000 and 0 authorized, issued and outstanding at September 30, 2021 and December 31, 2020, respectively	209,980		—
Members' capital	—		358,756
Common shares - Class A & B	77		—
Common shares - Class C	2		—
Paid-in capital	169,537		—
Accumulated deficit	(6,153)		—
Accumulated other comprehensive income	12,537		—
Stagwell Inc. Shareholders' Equity	385,980		358,756
Noncontrolling interests	655,250		39,787
Total Shareholders' Equity	1,041,230		398,543
Total Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity	$	3,943,621	$	1,013,855

See notes to the Unaudited Condensed Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(thousands of United States dollars)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net income	$	31,186	$	38,760
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Stock-based compensation	53,465		—
Depreciation and amortization	46,122		29,838
Impairment and other losses	14,926		—
Provision for bad debt	1,893		3,241
Deferred income taxes	2,710		(2,631)
Adjustment to deferred acquisition consideration	9,456		2,270
Other	6,998		(882)
Gain on sale of an asset	(43,440)		—
Changes in working capital:
Accounts receivable	(26,095)		6,951
Expenditures billable to clients	(9,230)		(12,225)
Other assets	(14,568)		(6,637)
Accounts payable	(37,435)		4,539
Accruals and other liabilities	(26,668)		11,128
Advance billings	16,598		18,832
Acquisition related payments	(5,772)		—
Net cash provided by operating activities	20,146		93,184
Cash flows from investing activities:
Capital expenditures	(13,666)		(8,977)
Proceeds from sale of assets	37,232		—
Acquisitions, net of cash acquired	130,155		(5,549)
Other	—		(1,895)
Net cash provided by (used in) investing activities	153,721		(16,421)
Cash flows from financing activities:
Repayment of borrowings under revolving credit facility	(535,472)		(108,744)
Proceeds from borrowings under revolving credit facility	408,369		167,000
Shares acquired and cancelled	(820)		—
Distributions to noncontrolling interests and other	(19,245)		(3,075)
Payment of deferred consideration and other	—		(1,500)
Contributions	—		1,576
Proceeds from issuance of the 5.625% Notes	1,100,000		—
Debt issuance costs	(15,365)		(319)

Distributions	(204,929)		(98,638)
Repurchase of 7.50% Senior Notes	(884,398)		—

Net cash used in financing activities	(151,860)		(43,700)
Effect of exchange rate changes on cash and cash equivalents	1,025		555
Net increase in cash and cash equivalents	23,032		33,618
Cash and cash equivalents at beginning of period	92,457		63,860
Cash and cash equivalents at end of period	$	115,489	$	97,478
Supplemental disclosures:
Cash income taxes paid	$	42,346	$	3,618

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)

(thousands of United States dollars)


	Nine Months Ended September 30,
	2021		2020
Cash interest paid	$	22,493	$	7,288

Non-cash investing and financing activities:
Acquisitions of business	$	426,396	$	23,720
Acquisitions of noncontrolling interest	37,559		—
Net unrealized (loss) gain on available for sale investment	—		5,024
Non-cash contributions included in Member’s equity	12,372		83,242
Non-cash distributions to Stagwell Media LP	13,000		—
Non-cash payment of deferred acquisition consideration	$	7,080	$	64,322

See notes to the Unaudited Condensed Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(thousands of United States dollars, except share amounts)



			Three Months Ended
			September 30, 2021
	Members' capital		Convertible Preference Shares			Common Shares - Class A & B			Common Shares - Class C			Paid-in Capital		Accumulated Deficit		Other Comprehensive Income		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity


			Shares	Amount		Shares	Amount		Shares	Amount
Balance at June 30, 2021	$	350,395	—	$	—	—	$	—	—	$	—	$	—	$	—	$	—	$	350,395	$	30,947	$	381,342
Net income prior to reorganization	3,032		—	—		—	—		—	—		—		—		—		3,032		70		3,102
Other comprehensive income (loss)	(63)		—	—		—	—		—	—		—		—		—		(63)		—		(63)
Contributions	(11,834)		—	—		—	—		—	—		—		—		—		(11,834)		—		(11,834)
Distributions	(165,717)		—	—		—	—		—	—		—		—		—		(165,717)		—		(165,717)
Distributions to noncontrolling interests	—		—	—		—	—		—	—		—		—		—		—		(934)		(934)
Changes in redemption value of RNCI	2,559		—	—		—	—		—	—		—		—		—		2,559		—		2,559
Other	—		—	—		—	—		—	—		—		—		—		—		161		161
Effect of reorganization	(178,372)		123,849,000	209,980		78,793,502	77		179,970,051	2		110,555		—		—		142,242		636,416		778,658
Net income (loss) attributable to Stagwell Inc.	—		—	—		—	—		—	—		—		(4,545)		—		(4,545)		6,774		2,229
Other comprehensive income	—		—	—		—	—		—	—		—		—		12,537		12,537		—		12,537
Distributions to noncontrolling interests	—		—	—		—	—		—	—		—		—		—		—		(7,561)		(7,561)
Changes in redemption value of RNCI	—		—	—		—	—		—	—		—		(1,608)		—		(1,608)		—		(1,608)
Vesting of restricted awards	—		—	—		202,488	—		—	—		—		—		—		—		—		—
Shares acquired and cancelled	—		—	—		(12,084)	—		—	—		(820)		—		—		(820)		—		(820)
Stock-based compensation	—		—	—		—	—		—	—		49,895		—		—		49,895		—		49,895
Purchases of NCI	—		—	—		—	—		—	—		9,679		—		—		9,679		(10,450)		(771)
Other	—		—	—		—	—		—	—		228		—		—		228		(173)		55
Balance at September 30, 2021	$	—	123,849,000	$	209,980	78,983,906	$	77	179,970,051	$	2	$	169,537	$	(6,153)	$	12,537	$	385,980	$	655,250	$	1,041,230

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)

(thousands of United States dollars, except share amounts)



			Nine Months Ended
			September 30, 2021
	Members' capital		Convertible Preference Shares			Common Shares - Class A & B			Common Shares - Class C			Paid-in Capital		Accumulated Deficit		Other Comprehensive Income		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity


			Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2020	$	358,756	—	$	—	—	$	—	—	$	—	$	—	$	—	$	—	$	358,756	$	39,787	$	398,543
Net income prior to reorganization	24,742		—	—		—	—		—	—		—		—		—		24,742		2,693		27,435
Other comprehensive loss	(375)		—	—		—	—		—	—		—		—		—		(375)		—		(375)
Contributions	250		—	—		—	—		—	—		—		—		—		250		—		250
Distributions	(204,929)		—	—		—	—		—	—		—		—		—		(204,929)		—		(204,929)
Distributions to noncontrolling interests	—		—	—		—	—		—	—		—		—		—		—		(11,936)		(11,936)
Changes in redemption value of RNCI	(72)		—	—		—	—		—	—		—		—		—		(72)		—		(72)
Other	—		—	—		—	—		—	—		—		—		—		—		(300)		(300)
Effect of reorganization	(178,372)		123,849,000	209,980		78,793,502	77		179,970,051	2		110,555		—		—		142,242		636,416		778,658
Net loss attributable to Stagwell Inc.	—		—	—		—	—		—	—		—		(4,545)		—		(4,545)		6,774		2,229
Other comprehensive income	—		—	—		—	—		—	—		—		—		12,537		12,537		—		12,537
Distributions to noncontrolling interests	—		—	—		—	—		—	—		—		—		—		—		(7,561)		(7,561)
Changes in redemption value of RNCI	—		—	—		—	—		—	—		—		(1,608)		—		(1,608)		—		(1,608)
Vesting of restricted awards	—		—	—		202,488	—		—	—		—		—		—		—		—		—
Shares acquired and cancelled	—		—	—		(12,084)	—		—	—		(820)		—		—		(820)		—		(820)
Stock-based compensation	—		—	—		—	—		—	—		49,895		—		—		49,895		—		49,895
Purchases of NCI	—		—	—		—	—		—	—		9,679		—		—		9,679		(10,450)		(771)
Other	—		—	—		—	—		—	—		228		—		—		228		(173)		55
Balance at September 30, 2021	$	—	123,849,000	$	209,980	78,983,906	$	77	179,970,051	$	2	$	169,537	$	(6,153)	$	12,537	$	385,980	$	655,250	$	1,041,230

See notes to the Unaudited Condensed Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - (continued)

(thousands of United States dollars, except share amounts)



			Three Months Ended
			September 30, 2020
	Members' capital		Convertible Preference Shares			Common Shares - Class A & B			Common Shares - Class C			Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity


			Shares	Amount		Shares	Amount		Shares	Amount
Balance at June 30,, 2020	$	314,598	—	$	—	—	$	—	—	$	—	$	—	$	—	$	—	$	314,598	$	34,386	$	348,984
Net income attributable to Stagwell Inc.	17,808		—	—		—	—		—	—		—		—		—		17,808		4,522		22,330
Other comprehensive loss	3,203		—	—		—	—		—	—		—		—		—		3,203		—		3,203

Distributions	(4,724)		—	—		—	—		—	—		—		—		—		(4,724)		—		(4,724)
Distributions to noncontrolling interests	—		—	—		—	—		—	—		—		—		—		—		(3,075)		(3,075)
Changes in redemption value of RNCI	(199)																	(199)				(199)
Other	—		—	—		—	—		—	—		—		—		—		—		—		—










Balance at September 30, 2020	$	330,686	—	$	—	—	$	—	—	$	—	$	—	$	—	$	—	$	330,686	$	35,833	$	366,519



			Nine Months Ended
			September 30, 2020
	Members' capital		Convertible Preference Shares			Common Shares - Class A & B			Common Shares - Class C			Paid-in Capital		Accumulated Deficit		Other Comprehensive Income		Stagwell Inc. Shareholders' Equity		Noncontrolling Interests		Shareholders' Equity


			Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2019	$	316,960	—	$	—	—	$	—	—	$	—	$	—	$	—	$	—	$	316,960	$	31,577	$	348,537
Net income attributable to Stagwell Inc.	34,124		—	—		—	—		—	—		—				—		34,124		7,331		41,455
Other comprehensive loss	(6,773)		—	—		—	—		—	—		—		—		—		(6,773)		—		(6,773)
Contributions	84,818		—	—		—	—		—	—		—		—		—		84,818		—		84,818
Distributions	(98,638)		—	—		—	—		—	—		—		—		—		(98,638)		—		(98,638)
Distributions to noncontrolling interests	—		—	—		—	—		—	—		—		—		—		—		(3,075)		(3,075)
Changes in redemption value of RNCI	193		—	—		—	—		—	—		—		—		—		193		—		193










Other	2		—	—		—	—		—	—		—		—		—		2		—		2
Balance at September 30, 2020	$	330,686	—	$	—	—	$	—	—	$	—	$	—	$	—	$	—	$	330,686	$	35,833	$	366,519

See notes to the Unaudited Condensed Consolidated Financial Statements.

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STAGWELL INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(thousands of United States dollars, except per share amounts, unless otherwise stated)

1. Business and Basis of Presentation

Stagwell Inc. (the “Company” or “Stagwell”), incorporated under the laws of Delaware, conducts its business through its networks and their Brands ("Brands"), 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.

The accompanying consolidated financial statements include the accounts of Stagwell and its subsidiaries. Stagwell has prepared the unaudited condensed consolidated interim financial statements included herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting interim financial information on Form 10-Q. Accordingly, the financial statements have been condensed and do not include certain information and disclosures pursuant to these rules. The preparation of financial statements in conformity with GAAP requires us to make judgments, assumptions and estimates about current and future results of operations and cash flows that affect the amounts reported and disclosed. Actual results could differ from these estimates and assumptions. The consolidated results for interim periods are not necessarily indicative of results for the full year and should be read in conjunction with the Company’s other SEC filings.

On August 2, 2021, we completed the previously announced combination of MDC Partners Inc. (“MDC”) and the operating businesses and subsidiaries of Stagwell Media LP. (“Stagwell Media”) and a series related transactions (such combination and transactions, the “Transactions”). The Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing Group LLC (“Stagwell Marketing or SMG”) treated as the accounting acquirer. The results of MDC are included within the Unaudited Condensed Consolidated Statements of Operations for the period beginning on the date of the acquisition through the end of the respective period presented and the results of SMG are included for the entire period presented. See Note 4 for information in connection with the acquisition of MDC.

While a recovery from the COVID-19 pandemic is underway, economic conditions will be volatile as long as COVID-19 remains a public health threat. The Company continues to monitor developments. We will continue to monitor the worldwide public health threat, government actions to combat COVID-19 and the impact such developments may have on the overall economy, our clients and operations. The impact of the pandemic and the corresponding actions are reflected in our judgments, assumptions and estimates in the preparation of the financial statements. The judgments, assumptions and estimates will be updated and could result in different results in the future depending on the continued impact of the COVID-19 pandemic.

The accompanying financial statements reflect all adjustments, consisting of normally recurring accruals, which in the opinion of management are necessary for a fair presentation, in all material respects, of the information contained therein. Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior year financial information to conform to the current year presentation.

Recent Developments

On September 23, 2021, the Company provided notices of conversion to each holder of record of each of the Company’s Series 6 and Series 8 Preferred Stock. See Note 12 for additional information in connection with the conversion of the Preferred Stock to Class A Common Stock.

On October 1, 2021 (the "closing date"), the Company entered into an agreement to purchase the remaining 26.7% interest in Targeted Victory it did not previously own for a combination of cash and Class A Common Stock, up to 50% with certain exceptions, determined at the option of the Company. The agreement provides for the purchase of half of the remaining interest on the closing date and the other half on July 31, 2023 ("second purchase"). The total purchase price, which is capped at $135,000 with certain exceptions, is based on a formula taking a multiple of the two-year average of earnings that includes the year of and the year subsequent to the year of the purchase. The seller has the option to extend the measurement period for two years in connection with the second purchase.

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2. Significant Accounting Policies

The Company’s significant accounting policies are summarized as follows:

Principles of Consolidation. The accompanying consolidated financial statements include the accounts of Stagwell Inc. and its domestic and international controlled subsidiaries that are not considered variable interest entities, and variable interest entities for which the Company is the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates. The preparation of the consolidated financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities including goodwill, intangible assets, contingent deferred acquisition consideration, redeemable noncontrolling interests, deferred tax assets, right-of-use assets and the amounts of revenue and expenses reported during the period. These estimates are evaluated on an ongoing basis and are based on historical experience, current conditions and various other assumptions believed to be reasonable under the circumstances. These estimates require the use of assumptions about future performance, which are uncertain at the time of estimation. To the extent actual results differ from the assumptions used, results of operations and cash flows could be materially affected.

Fair Value. The Company applies the fair value measurement guidance for financial assets and liabilities that are required to be measured at fair value and for non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis, including goodwill, right-of-use assets and other identifiable intangible assets. See Note 13 included herein for additional information regarding fair value measurements.

Concentration of Credit Risk. The Company provides marketing communications services to clients who operate in most industry sectors. Credit is granted to qualified clients in the ordinary course of business. Due to the diversified nature of the Company’s client base, the Company does not believe that it is exposed to a concentration of credit risk. No client accounted for more than 10% of the Company’s consolidated accounts receivable as of September 30, 2021 or December 31, 2020. No sales to an individual client accounted for more than 10% of revenue for the three and nine months ended September 30, 2021 and 2020.

Cash and Cash Equivalents. The Company’s cash equivalents are primarily comprised of investments in overnight interest-bearing deposits, money market instruments and other short-term investments with original maturity dates of three months or less at the time of purchase. The Company has a concentration of credit risk in that there are cash deposits in excess of federally insured amounts and international cash balances may not qualify for foreign government insurance programs. To date, the Company has not experienced any losses on cash and cash equivalents.

Allowance for Doubtful Accounts. Trade receivables are stated at invoiced amounts less allowances for doubtful accounts. The allowances represent estimated uncollectible receivables associated with potential customer defaults usually due to customers’ potential insolvency. The allowances include amounts for certain customers where a risk of default has been specifically identified. The assessment of the likelihood of customer defaults is based on various factors, including the length of time the receivables are past due, historical experience and existing economic conditions. Allowance for doubtful accounts was $5,294 and $5,109 at September 30, 2021 and December 31, 2020, respectively.

Expenditures Billable to Clients. Expenditures billable to clients consist principally of outside vendor costs incurred on behalf of clients when providing services that have not yet been invoiced to clients. Such amounts are invoiced to clients at various times over the course of the period.

Fixed Assets. Fixed assets are stated at cost, net of accumulated depreciation. Computers, furniture and fixtures, and capitalized software are depreciated on a straight-line basis over periods of three to ten years. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset. Repairs and maintenance costs are expensed as incurred. Accumulated depreciation was $39,357 and $28,365 at September 30, 2021 and December 31, 2020, respectively.

Leases. Effective January 1, 2019, the Company adopted Accounting Standards Codification, Leases (“ASC 842”). The Company recognizes on the balance sheet at the time of lease commencement a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments. All right-of-use lease assets are reviewed for impairment. With the adoption of ASC 842, the Company elected to apply the package of practical expedients: (i) whether a contract is or contains a lease, (ii) the classification of existing leases, and (iii) whether previously capitalized costs continue to qualify as initial indirect costs. Additionally, the Company elected the practical expedient to not separate non-lease components from lease components for all operating leases. See Note 8 included herein for further information on leases.

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Impairment of Long-lived Assets. A long-lived asset or asset group is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such events occur, the Company compares the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of such asset or asset group. If this comparison indicates that there is an impairment, the amount of the impairment is typically calculated using discounted expected future cash flows where observable fair values are not readily determinable. The discount rate applied to these cash flows is based on the Company’s weighted average cost of capital (“WACC”), risk adjusted where appropriate, or other appropriate discount rate.

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 and for reporting units for which the qualitative assessment is not performed, 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 uses a combination of the income approach, which incorporates the use of the discounted cash flow (“DCF”) method, and the market approach, which incorporates the use of earnings and revenue multiples based on market data. The Company generally applies an equal weighting to the income and market approaches for the impairment test. The 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 long-term growth rates, demand trends and appropriate discount rates based on a reporting unit’s 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.

Definite Lived Intangible Assets. Definite lived intangible assets are subject to amortization over their useful lives. A straight-line amortization method is used over the estimated useful life which is representative of the pattern of how the economic benefits of the specific intangible asset is consumed. Intangible assets that are subject to amortization are reviewed for potential impairment at least annually or whenever events or circumstances indicate that carrying amounts may not be recoverable. The Company uses an income approach, which incorporates the use of the discounted cash flow (“DCF”) method.

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 assets 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, as well as tradenames and trademarks.

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

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as deferred acquisition consideration liabilities on the balance sheet, at the acquisition date fair value and are remeasured at each reporting period. These liabilities are derived from the projected performance of the acquired entity. These arrangements may be dependent on future events, such as the growth rate of the earnings of the relevant subsidiary during the contractual period. At each reporting date, the Company models each business’ future performance, including revenue growth and free cash flows, to estimate the value of each deferred acquisition consideration liability. 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 results of operations. In instances where such contingent payments require the sellers’ continuous employment with the Company after the transaction, they are recorded as compensation expense in the Unaudited Condensed Consolidated Statements of Operations.

Redeemable Noncontrolling Interests. Many of the Company’s acquisitions include contractual arrangements where the noncontrolling shareholders have an option to purchase, or may require the Company to purchase, such noncontrolling shareholders’ incremental ownership interests under certain circumstances. The Company typically has similar call options under the same contractual terms. The amount of consideration under these contractual arrangements is not a fixed amount, but rather is dependent upon various valuation formulas, such as the average earnings of the relevant subsidiary through the date of exercise or the growth rate of the earnings of the relevant subsidiary during that period. In the event that an incremental purchase may be required by the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity on the Unaudited Condensed Consolidated Balance Sheets at their acquisition date fair value and adjusted for changes to their estimated redemption value through Retained earnings or Paid-in capital (when at an accumulated deficit) in the Unaudited Condensed Consolidated Balance Sheets (but not less than their initial redemption value), except for foreign currency translation adjustments. These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values.

Subsidiary and Equity Investment Stock Transactions. Transactions involving the purchase, sale or issuance of interests of a subsidiary where control is maintained are recorded as a reduction in the redeemable noncontrolling interests or noncontrolling interests, as applicable. Any difference between the purchase price and noncontrolling interest is recorded to Common stock and other paid-in capital in the Unaudited Condensed Consolidated Balance Sheets. In circumstances where the purchase of shares of an equity investment results in obtaining control, the existing carrying value of the investment is remeasured to the acquisition date fair value and any gain or loss is recognized in the results of operations.

Revenue Recognition. The Company’s revenue is recognized when control of the promised services are 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 included herein for additional information.

Cost of Services. Cost of services sold primarily consists of staff costs that are directly attributable to the Company’s client engagements, as well as third-party direct costs of production and delivery of services to its clients. Cost of services sold does not include depreciation, amortization, and other office and general expenses that are not directly attributable to the Company’s client engagements.

Deferred Financing Costs. The Company uses the effective interest method to amortize deferred financing costs and any original issue premium or discount, if applicable. The Company also uses the straight-line method, which approximates the effective interest method, to amortize the deferred financing costs on the Credit Agreement.

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.

Stock-Based Compensation. Under the fair value method, compensation cost is measured at fair value at the date of grant and is expensed over the service period, generally the award’s vesting period. The Company uses its historical volatility derived over the expected term of the award to determine the volatility factor used in determining the fair value of the award. The Company recognizes forfeitures as they occur.

Stock-based awards that are settled in cash or equity at the option of the Company are recorded at fair value on the date of grant. The fair value measurement of the compensation cost for these awards is based on using the Black-Scholes option

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pricing-model or other acceptable method and is recorded in Operating income over the service period, in this case the award’s vesting period.

The Company has adopted the straight-line attribution method for determining the compensation cost to be recorded during each accounting period. The Company commences recording compensation expense related to awards that are based on performance conditions under the straight-line attribution method when it is probable that such performance conditions will be met.

Income (Loss) per Common Share. Basic income (loss) per common share is based upon the weighted average number of common shares outstanding during each period. Diluted income (loss) per common share is based on the above, in addition, if dilutive, common share equivalents, which include outstanding options, stock appreciation rights, and unvested restricted stock units. In periods of net loss, all potentially issuable common shares are excluded from diluted net loss per common share because they are anti-dilutive.

Foreign Currency Translation. The functional and reporting currency of the Company is the US dollar. Generally, the Company’s subsidiaries use their local currency as their functional currency. Accordingly, the currency impacts of the translation of the Unaudited Condensed Consolidated Balance Sheets of the Company and its non-U.S. dollar based subsidiaries to U.S. dollar statements are included as cumulative translation adjustments in Accumulated other comprehensive income (loss). Translation of intercompany debt, which is not intended to be repaid, is included in cumulative translation adjustments. Cumulative translation adjustments are not included in net income (loss) unless they are actually realized through a sale or upon complete, or substantially complete, liquidation of the Company’s net investment in the foreign operation. Translation of current intercompany balances are included in net income (loss). The balance sheets of non-U.S. dollar based subsidiaries are translated at the period end rate. The Unaudited Condensed Consolidated Statements of Operations of the Company and its non-U.S. dollar based subsidiaries are translated at average exchange rates for the period.

Gains and losses arising from the Company’s foreign currency transactions are reflected in Foreign exchange, net on the Consolidated Statements of Operations.

3. New Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and other items. ASU 2021-08 is effective January 1, 2023; however, the Company has early adopted the standard and retrospectively applied it to the financial statements herein.

In March 2020, the FASB issued ASU 2020-04, and in January subsequently issued ASU 2021-01, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, to provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective upon issuance, through December 31, 2022. The Company is evaluating the impact of the adoption of this guidance on the Company's financial statements and disclosures.

4. Acquisitions and Dispositions

2021 Acquisition

In respect of the Transactions, the acquired assets and assumed liabilities, together with acquired processes and employees, represent a business as defined in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). The Transactions was accounted for as a reverse acquisition using the acquisition method of accounting, pursuant to FASB Topic 805-10, Business Combinations, with MDC treated as the legal

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acquirer and SMG treated as the accounting acquirer. In identifying SMG as the acquiring entity for accounting purposes, MDC and SMG took into account a number of factors, including the relative voting rights and the corporate governance structure of the Company. SMG is considered the accounting acquirer since Stagwell Media controls the board of directors of the Company following the Transactions and received an indirect ownership interest in the Company’s only operating subsidiary, OpCo, of 69.55% ownership of OpCo’s common units. However, no single factor was the sole determinant in the overall conclusion that Stagwell is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion. Under the acquisition method of accounting, the assets and liabilities of MDC, as the accounting acquiree, were recorded at their respective fair value as of the date the Transactions were completed.

On August 2, 2021, an aggregate of 179,970,051 shares of the Company’s Class C common stock were issued to Stagwell Media in exchange for $1,800 (the “Stagwell New MDC Contribution”). The Class C common stock does not participate in the earnings of the Company. Additionally, an aggregate of 179,970,051 OpCo common units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities (the “Stagwell OpCo Contribution”).

The fair value of the purchase consideration is $426,396, consisting of approximately 80,000,000 shares of the Company’s Class A and B common stock and common stock equivalents based on a per share price of approximately $5.42, the closing stock price on the date of the combination.

ASC 805 requires the allocation of the purchase price consideration to the fair value of the identified assets acquired and liabilities assumed upon consummation of a business combination. For this purpose, fair value shall be determined in accordance with the fair value concepts defined in ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”). Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements can be highly subjective and can involve a high degree of estimation.

The total purchase price to acquire MDC has been allocated to the assets acquired and assumed liabilities based upon preliminary estimated fair values, with any excess purchase price allocated to goodwill. The fair value of the acquired assets and assumed liabilities as of the date of acquisition are based on preliminary estimates assisted, in part, by a third-party valuation expert. The estimates are subject to change upon the finalization of appraisals and other valuation analyses, which are expected to be completed no later than one year from the date of acquisition. Although the completion of the valuation activities may result in asset and liability fair values that are different from the preliminary estimates included herein, it is not expected that those differences would alter the understanding of the impact of this transaction on the consolidated financial position and results of operations of the Company.

The preliminary purchase price allocation is as follows:

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	Amount
Cash and cash equivalents	$	130,155
Accounts receivable	419,742
Other current assets	44,508
Fixed Assets	80,047
Right-of-use lease assets - operating leases	293,034
Intangible assets	809,900
Other assets	16,928
Accounts payable	(165,443)
Accruals and other liabilities	(308,757)
Advance billings	(211,687)
Current portion of lease liabilities	(55,878)
Current portion of deferred acquisition consideration	(53,054)
Long-term debt	(1,011,690)
Long-term portion of deferred acquisition consideration	(8,056)
Long-term portion of lease liabilities	(292,497)
Other liabilities	(131,897)
Redeemable noncontrolling interests	(30,830)
Preferred shares	(209,980)
Noncontrolling interests	(158,230)
Net liabilities assumed	(843,685)
Goodwill	1,270,081
Purchase price consideration	$	426,396

The excess of purchase consideration over the fair value of the net assets acquired was recorded as goodwill, which is primarily attributed to the assembled workforce of MDC. Goodwill of $1,041,277, $166,658 and $62,146 was assigned to the Integrated Agencies Network, the Media Network and the Communications Network reportable segments, respectively. The majority of the goodwill is non-deductible for income tax purposes.

Intangible assets consist of trade names and customer relationships. We amortize purchased intangible assets on a straight-line basis over their respective useful lives. The weighted average life of the total acquired identifiable intangible assets is 13 years. The following table presents the details of identifiable intangible assets acquired.


	Estimated Fair Value		Estimated Useful Life in Years
Trade Names	$	98,000	10
Customer Relationships	711,900		6-15
Total Acquired Intangible Assets	$	809,900

MDC operating results are included in the Condensed Consolidated Statements of Operations from the date of the acquisition through September 30, 2021 with revenue of $241,257 and a nominal net loss.

Transaction expenses were approximately $15,000 for the nine months ended September 30, 2021.

Pro Forma Financial Information (unaudited)

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The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if it occurred as of January 1, 2020. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time.


	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Revenue	$	1,612,399	$	1,445,813

The proforma net loss was nominal for the nine months ended September 30, 2021 and 2020.

2020 Acquisitions

On February 14, 2020, the Company acquired Sloane & Company (“Sloane”) from an affiliate of MDC for approximately $24,400 of total consideration. Total consideration included a cash payment of $18,900 made by Stagwell Media (Non-consolidated related party) which was accounted for as a non-cash contribution for the purposes of the Company’s Consolidated Statement of Cash Flows and Statement of Changes in Equity, the acquisition date fair value of the contingent deferred acquisition consideration of $4,800, and $700 of cash paid by the Company. Sloane is an industry-leading strategic communications firm, based out of New York. Sloane will extend SKDK’s current suite of services and allow for the expansion into the capital markets and special situations verticals.

On August 14, 2020, the Company acquired Kettle Solutions, LLC (“Kettle”) for approximately $5,400 of total consideration. Total consideration included a cash payment of $4,900, plus an additional $500 due upon the finalization of Kettle’s working capital accounts, as outlined in the purchase agreement. The purchase agreement also offers the previous owners of Kettle an additional $11,900 in deferred consideration, and is dependent on Kettle reaching contractually defined operating goals in 2020, 2021, 2022 and 2023. Kettle is an industry recognized web design and content creation firm that assists its customers in developing and executing marketing campaigns, based out of New York.

On October 30, 2020, the Company acquired Truelogic Software, LLC, Ramenu S.A., and Polar Bear Development S.R.L. (collectively referred to as “Truelogic”), for approximately $17,300 of total consideration. Total consideration included a cash payment of $8,900, the acquisition date fair value of the contingent deferred acquisition consideration of $7,900, and an additional $500 due upon the finalization of Truelogic’s working capital accounts, as outlined in the purchase agreement. Truelogic is a software development firm based in Buenos Aires that assists customers in sourcing top South American engineering talent and developing small-scale software projects. Truelogic is included in the Company’s Code and Theory Brand, which is part of its Digital - Marketing reportable segment.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the date of each acquisition (in thousands):


	2020
	Sloane		Kettle		Truelogic		Total
Cash, cash equivalents and restricted cash	$	—	$	49	$	90	$	139
Accounts receivable and other current assets	2,768		2,732		2,958		8,458
Other noncurrent assets	—		172		10		182
Intangible assets	5,900		1,930		9,500		17,330
Property and equipment	72		58		50		180
Right-of-use assets – operating leases	—		533		201		734
Accounts payable and other current liabilities	(469)		(552)		(1,063)		(2,084)
Advanced billings	(130)		(310)		(429)		(869)
Operating lease liabilities	—		(533)		(201)		(734)
Goodwill	16,275		1,323		6,184		23,782
Total net assets acquired	$	24,416	$	5,402	$	17,300	$	47,118

Goodwill recognized on the Sloane, Kettle and Truelogic acquisitions is fully-deductible for income tax purposes.

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The following table reports the fair value of intangible assets acquired, including the corresponding weighted average amortization periods, as of the date of each acquisition (in thousands, except years):


		2020
	Weighted Average Amortization Period	Sloane		Kettle		Truelogic		Total
Customer relationships	10 years	$	4,600	$	1,600	$	9,100	$	15,300
Tradenames and trademarks	11 years	1,300		330		400		2,030
Total		$	5,900	$	1,930	$	9,500	$	17,330

The following table summarizes the total revenue and net income included in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) from the date of each acquisition (in thousands):


	Nine Months Ended September 30, 2020
Revenue	$	10,794
Net Income	$	1,199

Pro Forma Financial Information (unaudited)

The unaudited pro forma information for the periods set forth below gives effect to the 2020 acquisitions as if they had occurred as of January 1, 2020. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time (in thousands):


	Nine Months Ended September 30, 2020
Revenue	$	587,343
Net Income	$	39,801

2021 Disposition

On September 15, 2021, the Company sold Reputation Defender to a strategic buyer for approximately $40,000 resulting in a gain of approximately $43,000. The gain is recognized within the All Other category in Gain on sale of business and other, net within the Unaudited Condensed Consolidated Statements of Operations.

5. Revenue

The Company’s revenue recognition policies are established in accordance with ASC 606, and accordingly, 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.

The Stagwell network provides an extensive range of services to our clients, offering a variety of marketing and communication capabilities including strategy, creative and production for advertising campaigns across a variety of platforms (print, digital, social media, television broadcast), public relations services including strategy, editorial, crisis support or issues management, media training, influencer engagement and events management. We also provide media buying and planning across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast), experiential marketing and application/website design and development.

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The primary source of the Company’s revenue is from agency arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses, depending on the terms of the client contract. In all circumstances, revenue is only recognized when collection is reasonably assured. Certain of the Company’s contractual arrangements have more than one performance obligation. For such arrangements, revenue is allocated to each performance obligation based on its relative stand-alone selling price. Stand-alone selling prices are determined based on the prices charged to clients or using expected cost plus margin.

The determination of our performance obligations is specific to the services included within each contract. Based on a client’s requirements within the contract, and how these services are provided, multiple services could represent separate performance obligations or be combined and considered one performance obligation. Contracts that contain services that are not significantly integrated or interdependent, and that do not significantly modify or customize each other, are considered separate performance obligations. Typically, we consider media planning, media buying, creative (or strategy), production and experiential marketing services to be separate performance obligations if included in the same contract as each of these services can be provided on a stand-alone basis, and do not significantly modify or customize each other. Public relations services and application/website design and development are typically each considered one performance obligation as there is a significant integration of these services into a combined output.

Certain of the Company’s contracts consist of a single performance obligation. In these instances, the Company does not consider the underlying activities as separate or distinct performance obligations because its services are highly interrelated, and the integration of the various components is essential to the overall promise to the Company’s customer. In certain of the Company’s client contracts, the performance obligation is a stand-ready obligation because the Company provides a constant level of similar services over the term of the contract.

We typically satisfy our performance obligations over time, as services are performed. Fees for services are typically recognized using input methods (direct labor hours, materials and third-party costs) that correspond with efforts incurred to date in relation to total estimated efforts to complete the contract. To a lesser extent, revenue is recognized using output measures, such as impressions or ongoing reporting. For client contracts when the Company has a stand-ready obligation to perform services on an ongoing basis over the life of the contract, where the scope of these arrangements includes an undefined number of broad activities and there are no significant gaps in performing the services, the Company recognizes revenue ratably using a time-based measure. In addition, for client contracts where the Company is providing online subscription-based hosted services, it recognizes revenue ratably over the contract term. Point in time recognition primarily relates to certain commission-based contracts, which are recognized upon the placement of advertisements in various media when the Company has no further performance obligation.

Revenue is recognized net of sales and other taxes due to be collected and remitted to governmental authorities. The Company’s contracts typically provide for termination by either party within 30 to 90 days. Although payment terms vary by client, they are typically within 30 to 60 days. In addition, the Company generally has the right to payment for all services provided through the end of the contract or termination date.

Within each contract, we identify whether the Company is principal or agent at the performance obligation level. In arrangements where the Company has substantive control over the service before transferring it to the client, and is primarily responsible for integrating the services into the final deliverables, we act as principal. In these arrangements, revenue is recorded at the gross amount billed. Accordingly, for these contracts the Company has included reimbursed expenses in revenue. In other arrangements where a third-party supplier, rather than the Company, is primarily responsible for the integration of services into the final deliverables, and thus the Company is solely arranging for the third-party supplier to provide these services to our client, we generally act as agent and record revenue equal to the net amount retained, when the fee or commission is earned. The role of Stagwell’s agencies under a production services agreement is to facilitate a client’s purchasing of production capabilities from a third-party production company in accordance with the client’s strategy and guidelines. The obligation of Stagwell’s agencies under media buying services is to negotiate and purchase advertising media from a third-party media vendor on behalf of a client to execute its media plan. We do not obtain control prior to transferring these services to our clients; therefore, we primarily act as agent for production and media buying services.

A small portion of the Company’s contractual arrangements with clients include performance incentive provisions, which allow the Company to earn additional revenues as a result of its performance relative to both quantitative and qualitative goals. Incentive compensation is primarily estimated using the most likely amount method and is included in revenue up to the amount that is not expected to result in a reversal of a significant amount of cumulative revenue recognized. We recognize revenue related to performance incentives as we satisfy the performance obligation to which the performance incentives are related.

Disaggregated Revenue Data

The Company provides a broad range of services to a large base of clients across the full spectrum of verticals globally. The primary source of revenue is from agency arrangements in the form of fees for services performed, commissions, and from

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performance incentives or bonuses. Certain clients may engage with the Company in various geographic locations, across multiple disciplines, and through multiple Brands. Representation of a client rarely means that Stagwell handles marketing communications for all brands or product lines of the client in every geographical location. The Company’s Brands often cooperate with one another through referrals and the sharing of both services and expertise, which enables Stagwell to service clients’ varied marketing needs by crafting custom integrated solutions. Additionally, the Company maintains separate, independent operating companies to enable it to effectively manage potential conflicts of interest by representing competing clients across the Stagwell network.

The following table presents revenue disaggregated by lines of business for the three and nine months ended September 30, 2021 and 2020:


		Three Months Ended September 30,				Nine Months Ended September 30,
Lines of Business	Reportable Segment	2021		2020		2021		2020
Public Relations	Integrated Agencies Network, Communications Network, Other	$	67,497	$	43,497	$	118,380	$	97,217
Creative	Integrated Agencies Network	125,637		1,927		127,791		6,792
Digital	All Segments	191,643		153,284		445,485		370,711
Experiential	Integrated Agencies Network	14,413		—		14,413		—
Media	Media Network	10,819		—		10,819		—
Research	Integrated Agencies Network	46,363		24,863		117,467		78,242
Other	Media Network, Integrated Agencies Network, Other	10,262		4,526		23,081		22,008
		$	466,634	$	228,097	$	857,436	$	574,970

Stagwell has historically largely focused where the Company was founded in North America, the largest market for its services in the world. The Company has expanded its global footprint to support clients looking for help to grow their businesses in new markets. Stagwell’s Brands are located in the United States and United Kingdom, and an additional eighteen countries around the world. In the past, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which included discretionary components that are easier to reduce in the short term than other operating expenses.

The following table presents revenue disaggregated by geography for the three and nine months ended September 30, 2021 and 2020:


		Three Months Ended September 30,				Nine Months Ended September 30,
Geographical Location	Reportable Segment	2021		2020		2021		2020
United States	All	$	387,662	$	208,045	$	733,038	$	515,403
United Kingdom	All	32,218		4,904		62,416		18,658
Other	All	46,754		15,148		61,982		40,909
		$	466,634	$	228,097	$	857,436	$	574,970

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Contract Assets and Liabilities

Contract assets consist of fees and reimbursable outside vendor costs incurred on behalf of clients when providing advertising, marketing and corporate communications services that have not yet been invoiced to clients. Unbilled service fees were $137,938 and $30,570 at September 30, 2021 and December 31, 2020, respectively, and are included as a component of Accounts receivable on the Unaudited Condensed Consolidated Balance Sheets. Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $37,101 and $11,063 at September 30, 2021 and December 31, 2020, respectively, and are included on the Unaudited Condensed Consolidated Balance Sheets as Expenditures billable to clients. Such amounts are invoiced to clients at various times over the course of providing services. Additions to contract assets of $99,853 were added during the period as a result of the acquisition of MDC.

Contract liabilities consist of fees billed to clients in excess of fees recognized as revenue and are classified as Advance billings and also are included within Accruals and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets. In arrangements in which we are acting as an agent, the revenue recognition related to the contract liability is presented on a net basis within the Unaudited Condensed Consolidated Statements of Operations. Advance billings at September 30, 2021 and December 31, 2020 were $286,790 and $66,418, respectively. The increase in the Advance billings balance of $220,372 for the nine months ended September 30, 2021 was primarily driven by the acquisition of MDC, representing a $211,687 increase, and by cash payments received or due in advance of satisfying our performance obligations, offset by $45,432 of revenues recognized that were included in the Advance billings balances as of December 31, 2020 and reductions due to the incurrence of third-party costs. Contract liabilities classified within Accruals and other liabilities at September 30, 2021 and December 31, 2020 were $168,882 and $9,311, respectively. The increase in the balance of $159,571 for the nine months ended September 30, 2021 was primarily driven by was primarily driven by the acquisition of MDC, representing a $108,488 increase, and by cash payments received or due in advance of satisfying our performance obligations, offset by $9,311 of revenues recognized that were included in the balance as of December 31, 2020 and reductions due to the incurrence of third-party costs.

Changes in the contract asset and liability balances during the nine months ended September 30, 2021 were not materially impacted by write offs, impairment losses or any other factors.

The majority of our contracts are for periods of one year or less. For those contracts with a term of more than one year, we had approximately $8,498 of unsatisfied performance obligations as of September 30, 2021, of which we expect to recognize approximately 35% in 2021, 60% in 2022 and 4% in 2023.

6. Income (Loss) Per Common Share

The following table sets forth the computations of basic and diluted income (loss) per common share:


	Three Months Ended September 30,	Nine Months Ended September 30,
	2021		2021

Numerator:



Net loss attributable to Stagwell Inc. common shareholders	$ (4,545)		$ (4,545)



Denominator:
Weighted average number of common shares outstanding	76,105,807		76,105,807

Earnings Per Share - Basic & Diluted	$ (0.06)		$ (0.06)


















Anti-dilutive:
Class C shares	179,970,051		179,970,051
Stock Appreciation Rights and Restricted Awards	6,596,023		6,596,023

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There were 123,849,000 Preferred Shares outstanding which were convertible into 33,035,446 of Class A common shares at September 30, 2021. These Preferred Shares were anti-dilutive for each period presented in the table above and are therefore excluded from the diluted earnings per share calculation.

The combination of MDC and SMG was completed on August 2, 2021, which was treated as a reverse acquisition for financial reporting purposes. SMG was treated as the accounting acquirer and MDC was the accounting acquiree. Therefore, under applicable accounting principles, the historical financial results of SMG prior to August 2, 2021 are considered our historical financial results. Accordingly, historical information presented in this Form 10-Q for events occurring or periods ending before August 2, 2021 does not reflect the impact of the Transactions or the financial results of MDC and may not be comparable with historical information for events occurring or periods ending on or after August 2, 2021.

SMG’s equity structure, prior to the combination with MDC, was a non-unitized single member limited liability company, resulting in all components of equity attributable to the member being reported within Members' Capital. Given that SMG was a non-unitized single member limited liability company, net income (loss) prior to the combination is not applicable for purposes of calculating earnings per share. Therefore, the net income (loss) in the table above includes the income or loss for the period beginning on the acquisition date through the end of the respective reporting period and as such will not reconcile to the respective amounts presented within the Unaudited Condensed Consolidated Statements of Operations.

7. Deferred Acquisition Consideration

Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments, and to a lesser extent, contingent and fixed retention payments tied to continued employment of specific personnel. Contingent deferred acquisition consideration is recorded at the acquisition date fair value and adjusted at each reporting period through operating income. The Company accounts for certain retention payments through operating income as compensation expense over the required retention period.

The following table presents changes in contingent deferred acquisition consideration, which is measured at fair value on a recurring basis using significant unobservable inputs, and a reconciliation to the amounts reported on the balance sheets as of September 30, 2021 and December 31, 2020:


	September 30,		December 31,
	2021		2020
Beginning Balance of Contingent Payments	$	17,847	$	65,792
Payments	(12,286)		(66,235)
Redemption value adjustments (1)	9,535		2,520
Additions (2)	61,110		15,717
Other	(501)		53
Ending balance of contingent payments	$	75,705	$	17,847

(1) Redemption value adjustments are fair value changes from the Company’s initial estimates of deferred acquisition payments. Redemption value adjustments are recorded within Office and general expenses on the Unaudited Condensed Consolidated Statements of Operations.

(2) Additions in 2021 represent deferred acquisition consideration acquired in connection with the acquisition of MDC.

8. Leases

The Company leases office space in North America, Europe, Asia, South America, and Australia. This space is primarily used for office and administrative purposes by the Company’s employees in performing professional services. These leases are classified as operating leases and expire between years 2021 through 2034. The Company’s finance leases are immaterial.

The Company’s leasing policies are established in accordance with ASC 842, and accordingly, the Company recognizes on the balance sheet at the time of lease commencement a right-of-use lease asset and a lease liability, initially measured at the present value of the lease payments. Right-of-use lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. All right-of-use lease assets are reviewed for impairment. As the Company’s implicit rate in its leases is not readily determinable, in

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determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the commencement date. Lease payments included in the measurement of the lease liability are comprised of noncancelable lease payments, payments based upon an index or rate, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.

Lease costs are recognized in the Unaudited Condensed Consolidated Statements of Operations over the lease term on a straight-line basis. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset.

Some of the Company’s leases contain variable lease payments, including payments based upon an index or rate. Variable lease payments based upon an index or rate are initially measured using the index or rate in effect at the lease commencement date and are included within the lease liabilities. Lease liabilities are not remeasured as a result of changes in the index or rate, rather changes in these types of payments are recognized in the period in which the obligation for those payments is incurred. In addition, some of our leases contain variable payments for utilities, insurance, real estate tax, repairs and maintenance, and other variable operating expenses. Such amounts are not included in the measurement of the lease liability and are recognized in the period when the facts and circumstances which the variable lease payments are based upon occur.

Some of the Company’s leases include options to extend or renew the leases through 2044. The renewal and extension options are not included in the lease term as the Company is not reasonably certain that it will exercise its option.

From time to time, the Company enters into sublease arrangements both with unrelated third-parties and with our partner agencies. These leases are classified as operating leases and expire between years 2021 through 2031. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company subleases office space in North America, Asia, Europe and Australia.

As of September 30, 2021, the Company has entered into three operating leases for which the commencement date has not yet occurred as the premises are in the process of being prepared for occupancy by the landlord. Accordingly, these three leases represent an obligation of the Company that is not reflected within the Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021. The aggregate future liability related to these leases is approximately $31,310.

The discount rate used for leases accounted for under ASC 842 is the Company’s collateralized credit adjusted borrowing rate.

The following table presents lease costs and other quantitative information for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Lease Cost:
Operating lease cost	$	13,502		$	5,900		$	27,779		$	19,279
Variable lease cost	3,230			928			5,167			2,959
Sublease rental income	(2,359)			(938)			(4,290)			(2,818)
Total lease cost	$	14,373		$	5,890		$	28,656		$	19,420
Additional information:
Cash paid for amounts included in the measurement of lease liabilities for operating leases
Operating cash flows	$	16,490		$	5,260		$	29,854		$	15,580

Right-of-use lease assets obtained in exchange for operating lease liabilities and other non-cash adjustments	$	353,984		$	128		$	353,984		$	1,961
Weighted average remaining lease term (in years) - Operating leases	6.8			4.6			6.8			4.6
Weighted average discount rate - Operating leases	4.0		%	4.1		%	4.0		%	4.1		%

Operating lease expense is included in office and general expenses in the Unaudited Condensed Consolidated Statements of Operations. The Company’s lease expense for leases with a term of 12 months or less is immaterial.

The following table presents minimum future rental payments under the Company’s leases at September 30, 2021 and their reconciliation to the corresponding lease liabilities:

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	Maturity Analysis
Remaining 2021	$	23,452
2022	84,730
2023	80,281
2024	65,242
2025	50,076
2026 and thereafter	161,462
Total	465,243
Less: Present value discount	(63,033)
Lease liability	$	402,210

9. Debt

As of September 30, 2021 and December 31, 2020, the Company’s indebtedness was comprised as follows:


	September 30, 2021		December 31, 2020
Revolving credit facility	$	181,112	$	201,636
Term debt	—		994
5.625% Notes	1,100,000		—
Debt issuance costs	(15,365)		(3,612)
Total debt	$	1,265,747	$	199,018
Less: Current maturities of long-term debt	$	—	$	(994)
Long-term debt	$	1,265,747	$	198,024

Interest expense related to long-term debt included in Interest expense, net on the Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021 and 2020 was $15,560 and $4,317, respectively.

The amortization of debt issuance costs included in Interest expense, net on the Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021 and 2020 was $2,092 and $396, respectively.

Revolving Credit Agreement

On November 18, 2019, the Company entered into a debt agreement (“JPM Syndicated Facility”) with a syndicate of banks led by JPMorgan Chase Bank, N.A (“JPM”). The JPM Syndicated Facility consisted of a five-year revolving credit facility of $265,000 (“JPM Revolver”) with the right to be increased by an additional $150,000. On March 18, 2020, the Company increased the commitments on the JPM Revolver by $60,000 to $325,000.

On August 2, 2021, in connection with the closing of the acquisition of MDC, the Company entered into an amended and restated credit agreement (the “Combined Credit Agreement”) with a syndicate of banks led by JPM to increase commitments on the existing JPM Revolver. The Combined Credit Agreement consists of a $500,000 senior secured revolving credit facility with a five-year maturity.

The Combined Credit Agreement contains sub-limits for revolving loans and letters of credit of $50,000 for loans denominated in pounds sterling or euros. It also includes an accordion feature under which the Company may request, subject to lender approval and certain conditions, to increase the amount of the commitments to an aggregate amount not to exceed $650,000.

Borrowings under the Combined Credit Agreement bear interest at a rate equal to, at the Company’s option, (i) the greatest of (a) the prime rate of interest announced from time to time by JPM, (b) the federal funds effective rate from time to time plus 0.50% and (c) the LIBOR rate plus 1%, in each case, plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time or (ii) the LIBOR rate plus the applicable margin (calculated based on the Company’s total leverage ratio) at that time. The Company is also required to pay an unused revolver fee to the lenders under the Combined Credit Agreement in respect of the unused commitments thereunder ranging from 0.15% to 0.30% of unused commitments depending on the total leverage ratio, as well as customary letter of credit fees.

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Advances under the Combined Credit Agreement may be prepaid in whole or in part from time to time without penalty or premium. The Combined Credit Agreement commitment may be reduced by the Company from time to time. Principal amounts outstanding under the Combined Credit Agreement are due and payable in full at maturity within five years of the date of the Combined Credit Agreement.

If an event of default occurs under the Combined Credit Agreement or any future secured indebtedness, the holders of such secured indebtedness will have a prior right to our assets securing such indebtedness, to the exclusion of the holders of the 5.625% Notes (as defined below), even if we are in default with respect to the 5.625% Notes. In that event, our assets securing such indebtedness would first be used to repay in full all indebtedness and other obligations secured by them (including all amounts outstanding under the Combined Credit Agreement), resulting in all or a portion of our assets being unavailable to satisfy the claims of the holders of the 5.625% Notes and other unsecured indebtedness.

The Combined Credit Agreement contains a number of financial and nonfinancial covenants and is guaranteed by substantially all of our present and future subsidiaries, subject to customary exceptions.

The Company was in compliance with all covenants at September 30, 2021.

A portion of the Combined Credit Agreement in an amount not to exceed $50,000 is available for the issuance of standby letters of credit. At September 30, 2021 and December 31, 2020, the Company had issued undrawn outstanding letters of credit of $25,628 and $5,500, respectively.

Term Loan

On November 13, 2020, the Company, JPM as administrative agent, and a group of lenders entered into a term loan agreement that provided the Company with a delayed draw term loan in an aggregate principal amount of $90,000 (“DD Term Loan A”) with a maturity date of November 13, 2023.

In connection with the acquisition of MDC, the Company drew down on the full amount of the DD Term Loan A, repaid the amount with the Combined Credit Agreement, and terminated the agreement.

Line of Credit

On August 2, 2021, the Company entered into an unsecured uncommitted line of credit in the aggregate amount of $30,000 with JPM (the “Line of Credit”) to meet certain short-term working capital needs. The Line of Credit expired on August 20, 2021.

Senior Notes

In August 2021, the Company issued $1,100,000 aggregate principal amount of 5.625% senior notes ("5.625% Notes"). A portion of the proceeds from the issuance of the 5.625% Notes was used to redeem $870,300 aggregate principal amount of the outstanding 7.50% Senior Notes due 2024 (the “Existing Notes”) for a price of $904,200. This price is equal to 101.625% of the outstanding principal amount of the Existing Notes being redeemed, plus, accrued, and unpaid interest on the principal amount of such Existing Notes. The Company did not recognize a gain or loss on redemption.

The 5.625% Notes are due August 15, 2029 and bear interest of 5.625% to be paid on February 15 and August 15 of each year, commencing on February 15, 2022.

The 5.625% Notes are guaranteed on a senior unsecured basis by substantially all of the Company’s subsidiaries. The 5.625% Notes rank (i) equally in right of payment with all of the Company’s or any guarantor’s existing and future unsubordinated indebtedness, (ii) senior in right of payment to the Company’s or any guarantor’s existing and future subordinated indebtedness, (iii) effectively subordinated to any of the Company’s or any guarantor’s existing and future secured indebtedness to the extent of the collateral securing such indebtedness, including the Combined Credit Agreement, and (iv) structurally subordinated to all existing and future liabilities of the Company’s subsidiaries that are not guarantors.

Our obligations under the 5.625% Notes are unsecured and are effectively junior to our secured indebtedness to the extent of the value of the collateral securing such secured indebtedness. Borrowings under the Combined Credit Agreement are secured by substantially all of the assets of the Company, and any existing and future subsidiary guarantors, including all of the capital stock of each restricted subsidiary.

The Company may, at its option, redeem the 5.625% Notes in whole at any time or in part from time to time, on and after August 15, 2024 at a redemption price of 102.813% of the principal amount thereof if redeemed during the twelve-month

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period beginning on August 15, 2024, at a redemption price of 101.406% of the principal amount thereof if redeemed during the twelve-month period beginning on August 15, 2025 and at a redemption price of 100% of the principal amount thereof if redeemed on August 15, 2026 and thereafter. Prior to August 15, 2024, the Company may, at its option, redeem some or all of the 5.625% Notes at a price equal to 100% of the principal amount of the 5.625% Notes plus a “make whole” premium and accrued and unpaid interest. The Company may also redeem, at its option, prior to August 15, 2024, up to 40% of the 5.625% Notes with the net proceeds from one or more equity offerings at a redemption price of 105.625% of the principal amount thereof.

If the Company experiences certain kinds of changes of control (as defined in the indenture), holders of the 5.625% Notes may require the Company to repurchase any 5.625% Notes held by them at a price equal to 101% of the principal amount of the 5.625% Notes plus accrued and unpaid interest. In addition, if the Company sells assets under certain circumstances, it must offer to repurchase the 5.625% Notes at a price equal to 100% of the principal amount of the 5.625% Notes plus accrued and unpaid interest.

The indenture includes covenants that, among other things, restrict the Company’s ability and the ability of its restricted subsidiaries (as defined in the indenture) to incur or guarantee additional indebtedness; pay dividends on or redeem or repurchase the capital stock of the Company; make certain types of investments; create restrictions on the payment of dividends or other amounts from the Company’s restricted subsidiaries; sell assets; enter into transactions with affiliates; create liens; enter into sale and leaseback transactions; and consolidate or merge with or into, or sell substantially all of the Company’s assets to, another person. These covenants are subject to a number of important limitations and exceptions. The 5.625% Notes are also subject to customary events of default, including cross-payment default and cross-acceleration provisions. The Company was in compliance with all covenants at September 30, 2021.

Interest Rate Swap

The Company also owns an interest rate swap maturing April 2022 with Bank of America to convert $11,563 of its variable rate debt as of September 30, 2021 to a fixed rate of 2.7%. The fair value of the swap was $155 and $416 and is included in Accruals and other liabilities on the Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, respectively.

10. Noncontrolling and Redeemable Noncontrolling Interests

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 option to purchase the incremental ownership is within the Company’s control, the amounts are recorded as noncontrolling interests in the equity section of the Company’s Unaudited Condensed Consolidated Balance Sheets. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through Retained earnings (but not less than their initial redemption value), except for foreign currency translation adjustments.

Changes in the Company’s ownership interests in our less than 100% owned subsidiaries during the three and nine months ended September 30, 2021 and 2020 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss) attributable to Stagwell Inc. common shareholders	$	(2,071)	$	17,808	$	20,199	$	34,124
Transfers from the noncontrolling interest:
Increase in Stagwell Inc. paid-in capital for purchase of redeemable noncontrolling interests and noncontrolling interests	9,679		—		9,679		—
Net transfers from noncontrolling interests	9,679		—		9,679		—
Change from net income (loss) attributable to Stagwell Inc. and transfers to noncontrolling interests	$	7,608	$	17,808	$	29,878	$	34,124

Redeemable Noncontrolling Interests

The following table presents changes in redeemable noncontrolling interests:

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	September 30,		December 31,
	2021		2020
Beginning Balance	$	604	$	3,603
Redemptions	(2,831)		—
Acquisitions(1)	30,830		—
Changes in redemption value	1,680		127

Net loss attributable to redeemable noncontrolling interests	(956)		(3,126)
Other	460		—
Ending Balance	$	29,787	$	604

(1) Represents redeemable noncontrolling interests acquired in connection with the acquisition of MDC.

The noncontrolling shareholders’ ability to exercise any such option right is subject to the satisfaction of certain conditions, including conditions requiring notice in advance of exercise and specific employment termination conditions. In addition, these rights cannot be exercised prior to specified staggered exercise dates. The exercise of these rights at their earliest contractual date would result in obligations of the Company to fund the related amounts during 2021 to 2025. It is not determinable, at this time, if or when the owners of these rights will exercise all or a portion of these rights.

The redeemable noncontrolling interest of $29,787 as of September 30, 2021, consists of $14,847, assuming that the subsidiaries perform over the relevant periods at their current profit levels, $14,940 upon termination of such owner’s employment with the applicable subsidiary or death, and $0 representing the initial redemption value (required floor) recorded for certain acquisitions in excess of the amount the Company would have to pay should the Company acquire the remaining ownership interests for such subsidiaries.

These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. There is no related impact on the Company’s income per share calculations.

11. Commitments, Contingencies, and Guarantees

Legal Proceedings. The Company’s operating entities are involved in legal proceedings of various types. While any litigation contains an element of uncertainty, the Company has no reason to believe that the outcome of such proceedings or claims will have a material adverse effect on the financial condition or results of operations of the Company.

Deferred Acquisition Consideration and Options to Purchase. See Notes 7 and 10 of the Notes included herein for information regarding potential payments associated with deferred acquisition consideration and the acquisition of noncontrolling shareholders’ ownership interest in subsidiaries.

Guarantees. Generally, the Company has indemnified the purchasers of certain assets in the event that a third party asserts a claim against the purchaser that relates to a liability retained by the Company. These types of indemnification guarantees typically extend for a number of years. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification guarantees. The Company continues to monitor the conditions that are subject to guarantees and indemnifications to identify whether it is probable that a loss has occurred and would recognize any such losses under any guarantees or indemnifications in the period when those losses are probable and estimable.

Commitments. At September 30, 2021, the Company had $25,628 of undrawn letters of credit.

The Company entered into 3 operating leases for which the commencement date has not yet occurred as of September 30, 2021. See Note 8 included herein for additional information.

In the ordinary course of business, the Company may enter into long-term, non-cancellable contracts with partner associations that include revenue or profit-sharing commitments related to the provision of its services. These contracts may also include provisions that require the partner associations to meet certain performance targets prior to any obligation to the Company. As of September 30, 2021, the Company estimates its future minimum commitments under these non-cancellable agreements to be: $2,435, $10,636, $5,990, $2,098 for the remainder of 2021, 2022, 2023, and 2024, respectively.

12. Share Capital

The authorized and outstanding share capital of the Company is below. See Note 1 for information regarding the Transactions.

Class A Common Stock (“Class A Shares”)

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There are 1,000,000,000 shares of Class A common stock authorized. There were 78,979,960 Class A Shares issued and outstanding as of September 30, 2021. The Class A Shares are an unlimited number of subordinate voting shares, carrying one vote each, with a par value of $0.001 entitled to dividends equal to or greater than Class B Shares, convertible at the option of the holder into one Class B Share for each Class A Share after the occurrence of certain events related to an offer to purchase all Class B shares.

Class B Common Stock (“Class B Shares”)

There are 5,000 shares of Class B common stock authorized. There were 3,946 of Class B Shares issued and outstanding as of September 30, 2021. These are an unlimited number of voting shares, carrying twenty votes each, with a par value of $0, convertible at any time at the option of the holder into one Class A share for each Class B share.

Class C Common Stock (“Class C Shares”)

There are 250,000,000 shares of Class C common stock authorized. There were 179,970,051 Class C Shares issued and outstanding as of September 30, 2021. The Class C shares do not participate in the earnings of the Company. In addition, an aggregate of 179,970,051 OpCo common units were issued to Stagwell Media in exchange for the equity interests of the Stagwell Subject Entities. Each Class C Share, together with the related Class C unit in OpCo, is convertible at any time, at the option of the holder, into one Class A Share.

Convertible Preferred Stock ("Preferred Shares")

There are 50,000,000 Series 6 Preferred Shares (par value $0.001 per share) outstanding held by Stagwell Agency Holdings LLC (a third party with an ownership interest in the Company) and 73,849,000 Series 8 Preferred Shares (par value $0.001 per share) held by affiliates of The Goldman Sachs Group, Inc. ("Goldman") as of September 30, 2021. The Company entered into an agreement with Goldman and on August 4, 2021, redeemed $30,000 of liquidation value of the Series 8 Preferred Shares for $25,000, resulting in the redemption of 21,151,000 shares.

The terms of the Preferred Shares provided the Company the option to convert the Preferred Shares to Class A Common Shares if Class A Common Shares traded above 125% of the $5.00 per share conversion price for 30 consecutive trading days. On September 23, 2021, the Company provided notices of conversion to each holder of record of each of the Company’s Series 6 and Series 8 Preferred Shares. Pursuant to the notices, the 50,000,000 issued and outstanding Series 6 Preferred Shares were converted into 12,086,700 Class A Common Shares, in the aggregate, on October 7, 2021 and the 73,849,000 issued and outstanding Series 8 Preferred Shares were converted into 20,948,746 Class A Common Shares, in the aggregate, on November 8, 2021. Subsequent to the conversion of the Series 6 and Series 8 preferred shares, the number of Class A Common Shares outstanding was 113,198,517 as of November 8, 2021.

13. Fair Value Measurements

A fair value measurement assumes a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. The hierarchy for observable and unobservable inputs used to measure fair value into three broad levels are described below:

•Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

•Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

•Level 3 - Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

Financial Instruments that are not Measured at Fair Value on a Recurring Basis

The following table presents certain information for our financial liability that is not measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020:

September 30, 2021

December 31, 2020

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

5.625% Notes

1,100,000

1,133,891

—

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Our long-term debt includes fixed rate debt. The fair value of this instrument is based on quoted market prices in markets that are not active. Therefore, this debt is classified as Level 2 within the fair value hierarchy.

Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents certain information for our financial instruments that are measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020:



	September 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Interest Rate Swap	$	155	$	155	$	416	$	416
Call Options	—		—		360		360
Preferred Shares	—		—		12,033		12,033

The interest rate swap and call options are classified as Level 3 within the fair value hierarchy.

As of December 31, 2020, the Company owned preferred shares in a company called Finn Partners. The preferred shares had a cost basis of $10,000, accrued non-cash dividends, on a cost basis, at a rate of 6% annually. The shares were redeemable to cash in the amount of the cost-plus accrued interest at any time after February 28, 2021 or upon a liquidation event and were also were convertible to common shares of Finn Partners at any time until February 28, 2021 using a conversion ratio of 1% per $1,000 of preferred shares held including accrued dividends. The conversion feature was not bifurcated and was clearly and closely related to the host instrument, preferred shares. Management determined that the preferred shares were a debt-like financial instrument and should be accounted for as available-for-sale securities at their fair value at each reporting period. These preferred shares are considered to be a Level 3 fair value measurement since they utilize unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions.

On March 11, 2021, the Company transferred all of its ownership in the preferred shares. The Company recognized a gain of $1,200 within Gain on sale of business and other, net on the Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 31, 2021 related to this transaction.

Contingent deferred acquisition consideration (Level 3 fair value measurement) is recorded at the acquisition date fair value and adjusted at each reporting period. The estimated liability is determined in accordance with models of each business' future performance, including revenue growth and free cash flows. These models are dependent upon significant assumptions, such as the growth rate of the earnings of the relevant subsidiary during the contractual period and the discount rate. These growth rates are consistent with the Company’s long-term forecasts. As of September 30, 2021, the discount rate used to measure these liabilities ranged from 3.5% to 5.1%.

As these estimates require the use of assumptions about future performance, which are uncertain at the time of estimation, the fair value measurements presented on the Unaudited Condensed Consolidated Balance Sheets are subject to material uncertainty.

See Note 7 included herein for additional information regarding contingent deferred acquisition consideration.

At September 30, 2021 and December 31, 2020, the carrying amount of the Company’s financial instruments, including cash, cash equivalents, accounts receivable and accounts payable, approximated fair value because of their short-term maturity.

Non-financial Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Certain non-financial assets are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value measurement) and right-of-use lease assets (Level 2 fair value measurement). Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment. The Company did not recognize an impairment of goodwill in the three and nine months ended September 30, 2021 and 2020. The Company did recognize an impairment for intangible assets in the three and nine months ended September 30, 2021 . Refer to Note 14 for further detail.

14. Supplemental Information

Stock-Based Compensation & Purchase of Noncontrolling Interests

The Company recognized stock-based compensation expense of $53,465 for the three and nine months ended September 30, 2021, of which $45,986 was for SMG unit awards (consisting of one share of the Company’s Class C Common stock and one Opco Common Unit) issued in the third quarter of 2021. Immediately following the acquisition of MDC, the Company issued 12,131 SMG unit awards, of which 6,661 were fully vested and 5,470 vest over a 6-month service period. Each SMG unit award is exchangeable into one share of the Company’s Class A Common Stock. The unit awards were issued from

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Stagwell Media's total 179,970,051 Class C common shares and Stagwell OpCo common units issued to it in the business combination. Class C common shares and Stagwell OpCo common units.

Immediately following the acquisition of MDC, the Company also purchased the remaining interest it did not already own in Code and Theory (8.5%) and Observatory (8.1%) and an incremental interest in Targeted Victory (13.3%). The acquired interests were also funded from Stagwell Media’s total 179,970,051 Class C common shares and Stagwell OpCo common units issued to it in the business. A total of 6,930 units with a value of $37,560 were exchanged for the above interests in accordance with the business combination transaction agreement. See Note 1 for information related to the purchase of the remaining noncontrolling interest in Targeted Victory.

Impairment and Other Losses

The Company recognized a charge of $14,926 for the nine months ended September 30, 2021 primarily to reduce the carrying value of intangible assets within the Media Network reportable segment in connection with the abandonment of certain trade names as part of the rebranding of the Media Network.

15. Income Taxes

Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in interim periods.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act includes provisions relating to delaying certain payroll tax payments, refundable payroll tax credits, net operating loss carryback periods, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property. The tax law changes in the CARES Act did not have a material impact on the Company’s income tax provision.

The Company had an income tax expense for the three months ended September 30, 2021 of $5,183 (on a pre-tax income of $13,182 resulting in an effective tax rate of 39.3%) compared to an income tax expense of $2,618 (on pre-tax income of $24,075 resulting in an effective tax rate of 10.9%) for the three months ended September 30, 2020.

The difference in the effective tax rate of 39.3% in the three months ended September 30, 2021 as compared to 10.9% in the same period in 2020 primarily results from the expansion of the group to include more tax-paying entities and proportionally less pre-tax income not subject to tax within the group, as well as non-deductible share based compensation expenses incurred during the third quarter related to the merger.

The Company had an income tax expense for the nine months ended September 30, 2021 of $9,205 (on a pre-tax income of $40,466 resulting in an effective tax rate of 22.7%) compared to income tax expense of $3,211 (on pre-tax income of $41,964 resulting in an effective tax rate of 7.7%) for the nine months ended September 30, 2020.

The difference in the effective tax rate of 22.7% in the nine months ended September 30, 2021 as compared to 7.7% in the same period in 2020 primarily results from the expansion of the group to include more tax-paying entities and proportionally less pre-tax income not subject to tax within the group, as well as non-deductible share based compensation expenses incurred during the third quarter related to the merger.

The significant change of our deferred tax liability balance of $16,050 to $134,288 from December 31, 2020 to September 30, 2021, respectively, was primarily due to adjustments related to the reverse merger.

16. Related Party Transactions

In the ordinary course of business, the Company enters into transactions with related parties, including its affiliates. The transactions may range in the nature and value of services underlying the arrangements. Below are the related party transactions that are significant in nature:

In August 2016, a Brand of the Company entered into an arrangement to provide technology development services to a client in which several of Brand's partners hold key leadership positions. Under the arrangement, the Brand is expected to receive from the client approximately $1,800, which is expected to be fully recognized as of October 31, 2022. During the three and nine months ended September 30, 2021, the Company recognized $200 and $300, respectively, in revenue related to this transaction. As of September 30, 2021, $200 was due from the client.

In December 2018, a Brand entered into a continuous arrangement with a third-party in which the third-party was to perform marketing services. Several of the Company’s Brand partners hold key leadership positions in this entity. Under the

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arrangement, the Brand is expected to pay the affiliate based upon the success of their services with no minimum or maximum spend. During the three and nine months ended September 30, 2021, the Company incurred $400 and $1,200, respectively, in expenses related to this transaction. As of September 30, 2021, $700 was due to the vendor.

In October 2020, a Brand entered into a continuous arrangement to provide marketing services to a client in which one of the Brands's partners holds a key leadership position. During the three and nine months ended September 30, 2021, the Company recognized $500 and $5,100, respectively, in revenue related to this transaction. As of September 30, 2021, no receivables remained outstanding related to this arrangement.

In June 2021, a Brand entered into a continuous arrangement to provide marketing services to a client in which one of Brand's partners has an ownership interest. During the three and nine months ended September 30, 2021, the Company recognized $1,300 and $2,700, respectively, in revenue related to this transaction. As of September 30, 2021, $2,200 was due from the client.

In December 2018, a Brand entered into a continuous arrangement to provide marketing services to a client in which a family member of one of the Brand's partners holds an executive leadership position. During the three and nine months ended September 30, 2021, the Company recognized $100 and $200, respectively, in revenue related to this transaction. As of September 30, 2021, $200 was due from the client.

In March 2019, a Brand of the Company, entered into a loan agreement with a third-party who holds a minority interest in the Brand. The loan receivable of $3,800 and $3,400 due from the third-party is included within Other current assets in the Company's Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, respectively. The Company recognized $200 and $300 of interest income within interest expense, net on its Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021, respectively.

The Stagwell Group LLC, the registered investment advisor of Stagwell Media, engaged certain of its Brands to provide services for the Stagwell Group for interagency customers. The Company recorded $100 and $1,200 of related party revenue for the three and nine months ended September 30, 2020, respectively, and nil and $200 of cost of service paid to the Stagwell Group for the three and nine months ended September 30, 2020, respectively, in connection with such services. The Company did not recognize any related party revenue or cost of services paid to the Stagwell Group for the three and nine months ended September 30, 2021.

Stagwell Media made noncash investments in the Company of $300 and nil, during the three months ended September 30, 2021 and 2020, respectively, and $12,400 and $83,200, during the nine months ended September 30, 2021 and 2020, respectively. Additionally, during the three and nine months ended September 30, 2021, the Company made cash investments of $1,600

On March 11, 2021, Stagwell Media received a Noncash distribution of $13,000 for the transfer of the Company’s ownership in the Finn Partners Preferred shares.

Additionally, the Company made cash distributions to Stagwell Media of $165,700 and $4,700 for the three months ended September 30, 2021 and 2020, respectively, and $191,900 and $98,600 for the nine months ended September 30, 2021 and 2020, respectively.

17. Segment Information

The Company determines an operating segment if a component (i) engages in business activities from which it earns revenues and incurs expenses, (ii) has discrete financial information, and is (iii) regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is Mark Penn, Chief Executive Officer and Chairman, to make decisions regarding resource allocation for the segment and assess its performance. Once operating segments are identified, the Company performs an analysis to determine if aggregation of operating segments is applicable. This determination is based upon a quantitative analysis of the expected and historic average long-term profitability for each operating segment, together with a qualitative assessment to determine if operating segments have similar operating characteristics.

The CODM uses Adjusted EBITDA (defined below) 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. Adjusted EBITDA is 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.

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aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies as those described throughout the Notes to the Unaudited Condensed Consolidated Financial Statements included herein.

•The Integrated Agencies Network reportable segment is comprised of Constellation (72andSunny, Crispin Porter Bogusky, Instrument, Team Enterprises, Harris, and Redscout brands), the Anomaly Alliance (Anomaly, Concentric, Hunter, Mono, YML and Scout brands), the Doner Partner Network (Doner, 6 Degrees, KWT Global, Union, Bruce Mau Design, Vitro, Harris X, Northstar, Veritas and Yamamoto brands) and the Code & Theory Network (Code & Theory, Forsman & Bodenfors, National Research Group, Observatory, Hello Design, and Colle McVoy brands) operating segments.

The Integrated Agencies Networks provide a range of services for their clients, primarily including strategy, creative and production for advertising campaigns across a variety of platforms (digital, social media, television broadcast and print) as well as public relations and communications services, experiential, social media and influencer marketing. These operating segments share similar characteristics related to (i) the nature of their services; (ii) the type of clients and the methods used to provide services; and (iii) the extent to which they may be impacted by global economic and geopolitical risks. In addition, these operating segments compete with each other for new business and from time to time have business move between them.

•The Media Network reportable segment is comprised of a single operating segment that combines media buying and planning across a range of platforms (out-of-home, paid search, social media, lead generation, programmatic, television broadcast) with technology and data capabilities and includes the Assembly, GALE, MMI Agency, Ink, Multiview, and Kenna brands.

•The Communications Network reportable segment is comprised of a single operating segment that provides advocacy, corporate communications, public relations and other services and includes SKDK, Allison & Partners, and Targeted Victory brands.

•All Other consists of the Company’s our central innovations group, Reputation Defender (sold in September 2021) and infancy stage digital products such as Prophet.

•Corporate consists of corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These 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. Additional expenses managed by the corporate office that are directly related to the operating segments are allocated to the appropriate reportable segment and the All Other category.

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue:	(Dollars in Thousands)


Integrated Agencies Network	$	288,479	$	55,293	$	441,229	$	163,540



Media Network	103,418		60,777		235,539		185,714



Communications Network	67,348		106,909		157,794		210,100




All Other	$	7,389	$	5,118	$	22,874	$	15,616
Total Revenue	$	466,634	$	228,097	$	857,436	$	574,970








Adjusted EBITDA:
Integrated Agencies Network	$	68,356	$	11,270	$	100,960	$	28,913
Media Network	15,371		8,131		29,789		14,993
Communications Network	10,312		20,231		28,302		39,139
All Other	419		(193)		(1,316)		(749)
Corporate	(6,940)		(2,316)		(7,656)		(3,325)
Total Adjusted EBITDA	$	87,518	$	37,123	$	150,079	$	78,971

Depreciation and amortization	$	(24,790)	$	(9,974)	$	(46,122)	$	(29,838)
Impairment and other losses	(14,926)		—		(14,926)		—
Stock-based compensation	(53,465)		—		(53,465)		—
Deferred acquisition consideration	(3,422)		(149)		(9,456)		(1,270)
Other items, net	(10,549)		(554)		(15,298)		(2,976)
Total Operating Income (Loss)	$	(19,634)	$	26,446	$	10,812	$	44,887

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Dollars in Thousands)
Other Income (expenses):
Interest expense, net	$	(11,912)	$	(1,778)	$	(15,197)	$	(4,665)
Foreign exchange, net	(893)		(856)		(1,955)		794
Gain on sale of business and other, net	45,621		263		46,806		948
Income before income taxes and equity in earnings of non-consolidated affiliates	13,182		24,075		40,466		41,964
Income tax expense	5,183		2,618		9,205		3,211
Income before equity in earnings of non-consolidated affiliates	7,999		21,457		31,261		38,753
Equity in losses (income) of non-consolidated affiliates	(76)		(35)		(75)		7
Net income	7,923		21,422		31,186		38,760
Net income attributable to noncontrolling and redeemable noncontrolling interests	(9,994)		(3,614)		(10,987)		(4,636)
Net income (loss) attributable to Stagwell Inc. common shareholders	$	(2,071)	$	17,808	$	20,199	$	34,124



Depreciation and amortization:
Integrated Agencies Network	$	14,396	$	2,292	$	19,816	$	6,715
Media Network	6,597		4,903		17,041		14,751
Communications Network	2,110		1,455		5,087		4,210
All Other	493		815		2,013		2,696
Corporate	1,194		509		2,165		1,466
Total	$	24,790	$	9,974	$	46,122	$	29,838

Stock-based compensation:
Integrated Agencies Network	$	32,443	$	—	$	32,443	$	—
Media Network	2,608		—		2,608		—
Communications Network	15,384		—		15,384		—
All Other	16		—		16		—
Corporate	3,014		—		3,014		—
Total	$	53,465	$	—	$	53,465	$	—

The Company’s CODM does not use segment assets to allocate resources or to assess performance of the segments and therefore, total segment assets have not been disclosed.

See Note 5 of the Notes included herein for a summary of the Company’s revenue by geographic region for the three and nine months ended September 30, 2021 and 2020.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis are based on and should be read in conjunction with our unaudited condensed consolidated financial statements and the notes related thereto included elsewhere in this Current Report on Form 10-Q. The following discussion and analysis contains forward-looking statements and should be read in conjunction with the disclosures and information contained and referenced under the captions “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” in this Quarterly Report on Form 10-Q (this “Form 10-Q”). The following discussion and analysis also includes a discussion of certain non-GAAP financial measures. A description of the non-GAAP 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 (i) with respect to events occurring or periods ending before August 2, 2021, to Stagwell Marketing Group LLC and its direct and indirect subsidiaries and (ii) with respect to events occurring or periods ending on or after August 2, 2021, to Stagwell Inc. and its direct and indirect subsidiaries.

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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 2021 means the period beginning January 1, 2021, and ending December 31, 2021).

Executive Summary

Business Combination

On August 2, 2021 (the “Closing Date”), we completed the previously announced combination of MDC and the Stagwell Subject Entities and a series of steps and related transactions (such combination transactions, the “Transactions”). In connection with the Transactions, among other things, (i) MDC completed a series of transactions pursuant to which it emerged as a wholly owned subsidiary of the Company, converted into a Delaware limited liability company and changed its name to Midas OpCo Holdings LLC (“OpCo”); (ii) Stagwell Media contributed the equity interests of Stagwell Marketing and its direct and indirect subsidiaries to OpCo; and (iii) the Company converted into a Delaware corporation, succeeded MDC as the publicly-traded company and changed its name to Stagwell Inc.

The Transactions were treated as a reverse acquisition for financial reporting purposes, with MDC treated as the legal acquirer and Stagwell Marketing treated as the accounting acquirer. As a result of the Transactions and the change in our business and operations, under applicable accounting principles, the historical financial results of Stagwell Marketing prior to August 2, 2021 are considered our historical financial results. Accordingly, historical information presented in this Form 10-Q for events occurring or periods ending before August 2, 2021 does not reflect the impact of the Transactions and may not be comparable with historical information for events occurring or periods ending on or after August 2, 2021, which do not include the financial results of MDC. See Note 4 of the Unaudited Condensed Consolidated Financial Statements for additional information in connection with the Transaction.

Overview

Stagwell conducts its business through its networks, which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment. Stagwell’s differentiation lies in its creative roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients. 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 work is designed to challenge the industry status quo, realize outsized returns on investment, and drive transformative growth and business performance for its clients and stakeholders.

Stagwell manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenue, operating expenses, capital expenditures and non-GAAP measures described below. Revenue growth is analyzed by reviewing a mix of measurements, including (i) growth by major geographic location, (ii) growth by client industry vertical, (iii) growth from existing clients and the addition of new clients, (iv) growth by primary discipline, (v) growth from currency changes, and (vi) 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 networks 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.

While a recovery from the COVID-19 pandemic is underway, economic conditions will be volatile as long as COVID-19 remains a public health threat. The Company continues to monitor developments, We will continue to monitor the worldwide public health threat, government actions to combat COVID-19 and the impact such developments may have on the overall economy, our clients and operations. If the impact of the pandemic continues to go beyond expectations, the Company believes it is well positioned through the actions implemented at the onset of the pandemic to successfully work through the effects of COVID-19 on our business. The impact of the pandemic and the corresponding actions are reflected in our judgments, assumptions and estimates in the preparation of the financial statements. The judgments, assumptions and estimates will be updated and could result in different results in the future depending on the continued impact of the COVID-19 pandemic.

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Recent Developments

On October 1, 2021 (the "closing date"), the Company entered into an agreement to purchase the remaining 26.7% interest in Targeted Victory it did not previously own for a combination of cash and Class A Common shares, up to 50% with certain exceptions, determined at the option of the Company. The agreement provides for the purchase of half of the remaining interest on the closing date and the other half on July 31, 2023 ("second purchase"). The total purchase price, which is capped at $135 million with certain exceptions, is based on a formula taking a multiple of the two-year average of earnings that includes the year of and the year subsequent to the year of the purchase. The seller has the option to extend the measurement period for two years in connection with the second purchase.

On September 23, 2021, the Company provided notices of conversion to each holder of record of each of the Company’s Series 6 and Series 8 Preferred Stock. See Note 12 of the Unaudited Condensed Consolidated Financial Statements for additional information in connection with the conversion of the Preferred Stock to Class A Common Shares.

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. The two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the digital and data-driven products that our Brands offer. A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain an agency 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 in each year with a significant increase during the even years. The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season. The even years benefit from the U.S. election cycles.

Non-GAAP Measures

The Company reports its financial results in accordance with accounting principles generally accepted in the United States of America (“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 measures included are “organic revenue growth or decline” and “Adjusted EBITDA.”

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

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

All amounts are in 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.

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The percentage changes included in the tables herein Item 2 that are not considered meaningful are presented as “NM.”

Segments

The CODM uses Adjusted EBITDA as a key metric, to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions.

The Company has three reportable segments as follows: “Integrated Agencies Network,” “Media Network” and the “Communications Network.” In addition, the Company combines and discloses operating segments that do not meet the aggregation criteria as “All Other.” The Company also reports corporate expenses, as further detailed below, as “Corporate.” All segments follow the same basis of presentation and accounting policies. See Note 2 of the Notes to the Unaudited Condensed Consolidated Financial Statements for the Company's significant accounting policies.

In addition, Stagwell reports its corporate office expenses incurred in connection with the strategic resources provided to the networks, as well as certain other centrally managed expenses that are not fully allocated to the operating segments as Corporate. Corporate provides client and business development support to the networks as well as certain strategic resources, including accounting, administrative, financial, real estate, human resource and legal functions.

The following discussion focuses on the operating performance of the Company for the three and nine months ended September 30, 2021 and 2020 and the financial condition of the Company as of September 30, 2021.

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Results of Operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Dollars in Thousands)
Revenue:
Integrated Agencies Network	$	288,479	$	55,293	$	441,229	$	163,540
Media Network	103,418		60,777		235,539		185,714
Communications Network	67,348		106,909		157,794		210,100
All Other	7,389		5,118		22,874		15,616
Total Revenue	$	466,634	$	228,097	$	857,436	$	574,970

Operating Income (Loss):
Integrated Agencies Network	$	17,173	$	7,909	$	37,838	$	20,403
Media Network	(9,088)		2,957		(5,580)		(1,748)
Communications Network	(6,871)		19,414		7,886		34,420
All Other	(90)		(1,010)		(3,345)		(3,446)
Corporate	(20,758)		(2,824)		(25,987)		(4,742)
Operating Income (loss)	$	(19,634)	$	26,446	$	10,812	$	44,887
Other Income (Expenses):
Interest expense, net	$	(11,912)	$	(1,778)	$	(15,197)	$	(4,665)
Foreign exchange, net	(893)		(856)		(1,955)		794
Gain on sale of business and other, net	45,621		263		46,806		948
Income before income taxes and equity in earnings of non-consolidated affiliates	13,182		24,075		40,466		41,964
Income tax expense	5,183		2,618		9,205		3,211
Income before equity in earnings of non-consolidated affiliates	7,999		21,457		31,261		38,753
Equity in losses (income) of non-consolidated affiliates	(76)		(35)		(75)		7
Net income	7,923		21,422		31,186		38,760
Net income attributable to noncontrolling and redeemable noncontrolling interests	(9,994)		(3,614)		(10,987)		(4,636)
Net income (loss) attributable to Stagwell Inc. common shareholders	(2,071)		17,808		20,199		34,124
Net income allocated to convertible preference shares	—		—		—		—
Net income (loss) attributable to Stagwell Inc. common shareholders	$	(2,071)	$	17,808	$	20,199	$	34,124

Reconciliation to Adjusted EBITDA
Net income (loss) attributable to Stagwell Inc. common shareholders	$	(2,071)	$	17,808	$	20,199	$	34,124
Non-operating items	(17,563)		8,638		(9,387)		10,763
Operating Income (loss)	$	(19,634)	$	26,446	$	10,812	$	44,887
Depreciation and amortization	24,790		9,974		46,122		29,838

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Impairment and other losses	14,926		—		14,926		—
Stock-based compensation	53,465		—		9,456		1,270
Deferred acquisition consideration	3,422		149		53,465		—
Total other items, net	10,549		554		15,298		2,976
Adjusted EBITDA	$	87,518	$	37,123	$	150,079	$	78,971

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THREE MONTHS ENDED SEPTEMBER 30, 2021 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2020

Consolidated Results of Operations

The components of operating results for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:



	Three Months Ended September 30,
	2021		2020			Change
	$			$			$		%
	(Dollars in Thousands)
Revenue:	$	466,634		$	228,097		$	238,537	NM
Operating Expenses:
Cost of services sold	324,782			149,011			175,771		NM
Office and general expenses	121,770			42,666			79,104		NM
Depreciation and amortization	24,790			9,974			14,816		NM
Impairment and other losses	$	14,926		$	—		$	14,926	$	—
	$	486,268		$	201,651		$	284,617	NM
Operating Income (loss)	$	(19,634)		$	26,446		$	(46,080)	NM



	Three Months Ended September 30,
	2021		2020		Change
					$		%
Net Revenue	$	409,328	$	152,860	$	256,468	NM
Billable costs	57,306		75,237		(17,931)		(23.8)	%
Revenue	466,634		228,097		238,537		104.6	%

Billable costs	57,306		75,237		(17,931)		(23.8)	%
Staff costs	270,067		97,744		172,323		NM
Administrative costs	42,799		21,846		20,953		95.9	%
Other, net	8,944		(3,853)		12,797		NM
Adjusted EBITDA	87,518		37,123		50,395		NM

Stock-based compensation	53,465		—		53,465		—	%
Depreciation and amortization	24,790		9,974		14,816		NM
Deferred acquisition consideration	3,422		149		3,273		NM
Impairment and other losses	14,926		—		14,926		—	%
Other items, net	10,549		554		9,995		NM
Operating Income(1)	$	(19,634)	$	26,446	$	(46,080)	NM
(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 was $466.6 million three months ended September 30, 2021 and $228.1 million for three months ended September 30, 2020, an increase of $238.5 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:

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			Net Revenue - Components of Change										Change
	Three Months Ended September 30, 2020		Foreign Currency		Net Acquisitions (Divestitures)		Organic		Total Change		Three Months Ended September 30, 2021		Organic		Total
	(Dollars in Thousands)
Integrated Agencies Network	$	53,044	$	2,129	$	138,896	$	62,163	$	203,188	$	256,232	117.2	%	NM
Media Network	55,602		(1,558)		19,969		25,072		43,483		99,085		45.1	%	78.2	%
Communications Network	39,096		235		12,202		(4,917)		7,520		46,616		(12.6)	%	19.2	%
All Other	5,118		131		1,558		588		2,277		7,395		11.5	%	44.5	%
Total	$	152,860	$	937	$	172,625	$	82,906	$	256,468	$	409,328	54.2	%	NM
Component % change			0.6%		N/M		54.2%		N/M

For the three months ended September 30, 2021, organic net revenue increased $82.9 million, or 54.2%, primarily attributable to increased spending in connection with the recovery from the COVID-19 pandemic and the impact from the acquisition of MDC.

The geographic mix in net revenues for the three months ended September 30, 2021 and 2020 was as follows:


	2021		2020
United States	$	337,814	$	134,831
United Kingdom	30,194		13,589
Other	41,320		4,440
	$	409,328	$	152,860

Operating Income (Loss)

Operating loss for the three months ended September 30, 2021 was $19.6 million, compared to operating income of $26.4 million for the three months ended September 30, 2020, representing an increase of $46.1 million, primarily driven by the increase in revenue, more than offset by an increase in operating expenses. The operating loss for the three months ended September 30, 2021 was impacted by the impairment and other losses of $14.9 million in connection with a write-down of trade names no longer in use and stock-based compensation expense of $53.5 million in connection with the merger.

Adjusted EBITDA

Adjusted EBITDA for the three months ended September 30, 2021 was $87.5 million, compared to $37.1 million for the three months ended September 30, 2020, representing an increase of $50.4 million, principally resulting from an increase in revenue, partially offset by higher operating expenses. The acquisition of MDC contributed to higher revenue and expenses.

Gain on Sale of Business and Other, net

Gain on sale of business and other, net, for the three months ended September 30, 2021 was income of $45.6 million compared to income of $0.3 million for the three months ended September 30, 2020, primarily due to the a gain of approximately $43 million in connection with sale of Reputation Defender in the third quarter of 2021.

Foreign Exchange, Net

The foreign exchange loss for the three months ended September 30, 2021 was $0.9 million compared to a loss of $0.9 million for the three months ended September 30, 2020.

Interest Expense, Net

Interest expense, net for the three months ended September 30, 2021 was $11.9 million compared to $1.8 million for the three months ended September 30, 2020, representing an increase of $10.1 million, primarily driven by an increase in debt in connection with the acquisition of MDC.

Income Tax Expense

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The Company had an income tax expense for the three months ended September 30, 2021 of $5.2 million (on a pre-tax income of $13.2 million resulting in an effective tax rate of 39.3%) compared to an income tax expense of $2.6 million (on pre-tax loss of $24.1 million resulting in an effective tax rate of 10.9%) for the three months ended September 30, 2020.

Noncontrolling Interests

The effect of noncontrolling interests for the three months ended September 30, 2021 was $10.0 million compared to $3.6 million for the three months ended September 30, 2020.

Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders

As a result of the foregoing, net loss attributable to Stagwell Inc. common shareholders for the three months ended September 30, 2021 was $2.1 million compared to income of $17.8 million for the three months ended September 30, 2020.

Integrated Agencies Network

The components of operating results for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:



	Three Months Ended September 30,
	2021		2020			Change
Integrated Agencies Network	$			$			$		%
	(Dollars in Thousands)
Revenue:	$	288,479		$	55,293		$	233,186	NM
Operating Expenses:
Cost of services sold	203,377			32,034			171,343		NM
Office and general expenses	53,452			13,058			40,394		NM
Depreciation and amortization	14,396			2,292			12,104		NM
Impairment and other losses	$	81		$	—		$	81	—	%
	$	271,306		$	47,384		$	223,922	NM
Operating income	$	17,173		$	7,909		$	9,264	NM


	Three Months Ended September 30,
	2021		2020		Change
					$		%
Net Revenue	$	256,232	$	53,044	$	203,188	NM
Billable costs	32,247		2,249		29,998		NM
GAAP Revenue	288,479		55,293		233,186		NM

Billable costs	32,247		2,249		29,998		NM
Staff costs	162,685		37,481		125,204		NM
Administrative costs	21,448		5,533		15,915		NM
Other, net	3,743		(1,240)		4,983		NM
Adjusted EBITDA	68,356		11,270		57,086		NM

Stock-based compensation	32,443		—		32,443		—	%
Depreciation and amortization	14,396		2,292		12,104		NM
Deferred acquisition consideration	3,422		787		2,635		NM
Impairment and other losses	81		—		81		—	%
Other items, net	841		282		559		NM
Operating Income	$	17,173	$	7,909	$	9,264	NM

Revenue

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Revenue was $288.5 million three months ended September 30, 2021 and $55.3 million for three months ended September 30, 2020, an increase of $233.2 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:


			Net Revenue - Components of Change										Change
	Three Months Ended September 30, 2020		Foreign Currency		Net Acquisitions (Divestitures)		Organic		Total Change		Three Months Ended September 30, 2021		Organic		Total
Integrated Agencies Network	$	53,044	$	2,129	$	138,896	$	62,163	$	203,188	$	256,232	117.2	%	NM
Component % change			4.0%		NM		NM		NM

The increase in organic net revenue was primarily attributable to increased spending by clients in connection with the recovery from the COVID-19 pandemic and the impact from the acquisition of MDC in the third quarter of 2021.

The increase in expenses was driven by the impact from the acquisition of MDC. Stock-based compensation expense increased in the third quarter of 2021, driven by awards issued in connection with the acquisition of MDC and depreciation and amortization grew due to the recognition of amortizable intangible assets in connection with the acquisition of MDC.

Operating income increased $9.3 million as the increase in revenue, more than offset higher operating expenses.

The increase in Adjusted EBITDA was driven by higher revenue, partially offset by higher expenses.

Media Network

The components of operating results for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:


	Three Months Ended September 30,
	2021		2020		Change
Media Network	$		$		$		%
	(Dollars in Thousands)
Revenue:	$	103,418	$	60,777	$	42,641	70.2	%
Operating Expenses:
Cost of services sold	56,994		33,966		23,028		67.8	%
Office and general expenses	34,069		18,951		15,118		79.8	%
Depreciation and amortization	6,597		4,903		1,694		34.6	%
Impairment and other losses	14,846		—		14,846		—	%
	$	112,506	$	57,820	$	54,686	94.6	%
Operating income (loss)	$	(9,088)	$	2,957	$	(12,045)	NM

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	Three Months Ended September 30,
	2021		2020		Change
					$		%
Net Revenue	$	99,085	$	55,602	$	43,483	78.2	%
Billable costs	4,333		5,175		(842)		(16.3)	%
GAAP Revenue	103,418		60,777		42,641		70.2	%

Billable costs	4,333		5,175		(842)		(16.3)	%
Staff costs	66,608		37,196		29,412		79.1	%
Administrative costs	12,589		9,544		3,045		31.9	%
Other, net	4,517		731		3,786		517.9	%
Adjusted EBITDA	15,371		8,131		7,240		89.0	%
Stock-based compensation	2,608		—		2,608		—	%
Depreciation and amortization	6,597		4,903		1,694		34.6	%

Impairment and other losses	14,846		—		14,846		—	%
Other items, net	408		271		137		50.5	%
Operating Income	$	(9,088)	$	2,957	$	(12,045)	NM

Revenue

Revenue was $103.4 million three months ended September 30, 2021 and $60.8 million for three months ended September 30, 2020, an increase of $42.6 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:


			Net Revenue - Components of Change										Change
	Three Months Ended September 30, 2020		Foreign Currency		Net Acquisitions (Divestitures)		Organic		Total Change		Three Months Ended September 30, 2021		Organic		Total
	(Dollars in Thousands)
Media Network	$	55,602	$	(1,558)	$	19,969	$	25,072	$	43,483	$	99,085	45.1	%	78.2	%
Component % change			(2.8)%		35.9%		45.1%		78.2%

The increase in expenses was driven by the impact from the acquisition of MDC and an impairment loss of $14.9 million in connection with a write-down of trade names no longer in use.

The operating loss in the third quarter of 2021 was driven by the impairment of the trade names.

The increase in Adjusted EBITDA was driven by higher revenue, partially offset by higher expenses.

Communications Network

The components of operating results for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:

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	Three Months Ended September 30,
	2021		2020	Change
Communications Network	$			$		$		%
	(Dollars in Thousands)
Revenue:	$	67,348		$	106,909	$	(39,561)	(37.0)	%
Operating Expenses:
Cost of services sold	59,550			81,536		(21,986)		(27.0)	%
Office and general expenses	12,559			4,504		8,055		NM
Depreciation and amortization	2,110			1,455		655		45.0	%
Impairment and other losses	—			$	—	$	—	—	%
	$	74,219		$	87,495	$	(13,276)	(15.2)	%
Operating income	(6,871)			19,414		(26,285)		NM


	Three Months Ended September 30,
	2021		2020		Change
					$		%
Net Revenue	$	46,616	$	39,096	$	7,520	19.2	%
Billable costs	20,732		67,813		(47,081)		(69.4)	%
GAAP Revenue	67,348		106,909		(39,561)		(37.0)	%

Billable costs	20,732		67,813		(47,081)		(69.4)	%
Staff costs	30,071		17,258		12,813		74.2	%
Administrative costs	5,445		1,926		3,519		182.7	%
Other, net	788		(319)		1,107		NM
Adjusted EBITDA	10,312		20,231		(9,919)		(49.0)	%
Stock-based compensation	15,384		—		15,384		—	%
Depreciation and amortization	2,110		1,455		655		45.0	%
Deferred acquisition consideration	—		(638)		638		(100.0)	%

Other items, net	(311)		—		(311)		—	%
Operating Income	$	(6,871)	$	19,414	$	(26,285)	NM

Revenue

Revenue was $67.3 million three months ended September 30, 2021 and $106.9 million for three months ended September 30, 2020, a decrease of $39.6 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:


			Net Revenue - Components of Change										Change
	Three Months Ended September 30, 2020		Foreign Currency		Net Acquisitions (Divestitures)		Organic		Total Change		Three Months Ended September 30, 2021		Organic		Total
	(Dollars in Thousands)
Communications Network	$	39,096	$	235	$	12,202	$	(4,917)	$	7,520	$	46,616	(12.6)	%	19.2	%
Component % change			0.6%		31.2%		(12.6)%		19.2%

The decline in organic net revenue was attributable to lower advocacy business compared to the prior year period that included higher levels of business in connection with the 2020 elections.

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The increase in expenses was driven by higher staff costs from the impact of the acquisition of MDC and stock-based compensation expense in the third quarter of 2021, driven by awards issued in connection with the acquisition of MDC.

The operating loss in the third quarter of 2021 was driven by stock-based compensation expense.

Adjusted EBITDA was lower in the third quarter of 2021 driven by higher net revenue, more than offset by higher expenses.

All Other

The components of operating results for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:


	Three Months Ended September 30,
	2021		2020		Change
All Other	$		$		$		%
	(Dollars in Thousands)
Revenue:	$	7,389	$	5,118	$	2,271	44.4	%
Operating Expenses:
Cost of services sold	3,286		1,388		1,898		NM
Office and general expenses	3,701		3,925		(224)		(5.7)	%
Depreciation and amortization	493		815		(322)		(39.5)	%
Impairment and other losses	$	(1)	$	—	$	(1)	—	%
	$	7,479	$	6,128	$	1,351	22.0	%
Operating income	$	(90)	$	(1,010)	$	920	(91.1)	%


	Three Months Ended September 30,
	2021		2020		Change
					$		%
Net Revenue	$	7,395	$	5,118	$	2,277	44.5	%
Billable costs	(6)		—		(6)		—	%
GAAP Revenue	7,389		5,118		2,271		44.5	%

Billable costs	(6)		—		(6)		—	%
Staff costs	5,211		5,282		(71)		(1.3)	%
Administrative costs	2,101		3,054		(953)		(31.2)	%
Other, net	(336)		(3,025)		2,689		88.9	%
Adjusted EBITDA	419		(193)		612		NM
Stock-based compensation	16		—		16		—	%
Depreciation and amortization	493		815		(322)		(39.5)	%

Impairment	(1)		—		(1)		—	%
Other items, net	1		2		(1)		(100.0)	%
Operating Income	$	(90)	$	(1,010)	$	920	91.1	%

Revenue

Revenue was $7.4 million three months ended September 30, 2021 and $5.1 million for three months ended September 30, 2020, an increase of $2.3 million.

Net Revenue

The components of the fluctuations in net revenue for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:

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			Net Revenue - Components of Change														Change
	Three Months Ended September 30, 2020		Foreign Currency			Net Acquisitions (Divestitures)			Organic			Total Change			Three Months Ended September 30, 2021		Organic		Total
	(Dollars in Thousands)
All Other	$	5,118	$	131		$	1,558		$	588		$	2,277		$	7,395	11.5	%	44.5	%
Component % change			2.6		%	30.4		%	11.5		%	44.5		%

The increase in organic net revenue was attributable to higher levels of business at the central innovations group.

The increase in revenue was more than offset by higher expenses resulting in an operating loss in both periods.

Corporate

The components of operating results for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 were as follows:


	Three Months Ended September 30,
	2021		2020		Change
					$		%




Total Direct Costs	$	—	$	—	$	—	—	%
Staff costs	$	5,492	$	527	$	4,965	NM
Administrative costs	1,216		1,789		(573)		(32.0)	%
Other costs	232		—		232		—
Adjusted EBITDA	(6,940)		(2,316)		(4,624)		NM
Stock-based compensation	3,014		—		3,014		NM
Depreciation and amortization	1,194		509		685		NM
Deferred acquisition consideration	—		—		—		—
Impairment and other losses	—		—		—		—
Other items, net	9,610		(1)		9,611		NM
Operating Loss	$	(20,758)	$	(2,824)	$	(17,934)	NM

Operating expenses increased primarily in connection with the acquisition of MDC, including professional fees associated with the transaction.

NINE MONTHS ENDED SEPTEMBER 30, 2021 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2020

Consolidated Results of Operations

The components of operating results for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:


	Nine Months Ended September 30,
	2021		2020			Change
	$			$			$		%
	(Dollars in Thousands)
Revenue:	$	857,436		$	574,970		$	282,466	49.1	%
Operating Expenses:
Cost of services sold	558,856			373,064			185,792		49.8	%
Office and general expenses	226,720			127,181			99,539		78.3	%
Depreciation and amortization	46,122			29,838			16,284		54.6	%
Impairment and other losses	$	14,926		$	—		$	14,926	—	%
	$	846,624		$	530,083		$	316,541	59.7	%
Operating income	$	10,812		$	44,887		$	(34,075)	(75.9)	%

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	Nine Months Ended September 30,
	2021		2020		Change
					$		%
Net Revenue	$	749,246	$	434,052	$	315,194	72.6	%
Billable costs	108,190		140,918		(32,728)		(23.2)	%
GAAP Revenue	857,436		574,970		282,466		49.1	%

Billable costs	108,190		140,918		(32,728)		(23.2)	%
Staff costs	512,511		305,737		206,774		67.6	%
Administrative costs	84,612		60,771		23,841		39.2	%
Other, net	2,044		(11,427)		13,471		NM
Adjusted EBITDA	150,079		78,971		71,108		90.0	%
Stock-based compensation	53,465		—		53,465		—	%
Depreciation and amortization	46,122		29,838		16,284		54.6	%
Deferred acquisition consideration	9,456		1,270		8,186		NM
Impairment and other losses	14,926		—		14,926		—	%
Other items, net	15,298		2,976		12,322		NM
Operating Income	$	10,812	$	44,887	$	(34,075)	(75.9)	%

Revenue

Revenue for the nine months ended September 30, 2021 was $857.4 million compared to $575.0 million for the nine months ended September 30, 2020, an increase of $282.5 million.

Net Revenue


			Net Revenue - Components of Change										Change
	Nine Months Ended September 30, 2020		Foreign Currency		Net Acquisitions (Divestitures)		Organic		Total Change		Nine Months Ended September 30, 2021		Organic		Total
	(Dollars in Thousands)
Integrated Agencies Network	$	156,757	$	1,057	$	138,896	$	108,198	$	248,151	$	404,908	69.0	%	158.3	%
Media Network	171,286		3,659		19,969		21,278		44,906		216,192		12.4	%	26.2	%
Communications Network	90,393		72		12,202		2,605		14,879		105,272		2.9	%	16.5	%
All Other	15,616		476		1,558		5,224		7,258		22,874		33.5	%	46.5	%
	$	434,052	$	5,264	$	172,625	$	137,305	$	315,194	$	749,246	31.6	%	72.6	%
Component % change			1.2%		39.8%		31.6%		72.6%

For the nine months ended September 30, 2021, organic net revenue increased $137.3 million, or 31.6%, primarily attributable to higher spending by clients in connection with the recovery from the COVID-19 pandemic and the impact from the acquisition of MDC.

The geographic mix in net revenues for the nine months ended September 30, 2021 and 2020 is as follows:


	2021		2020
United States	$	632,307	$	376,737
United Kingdom	60,392		41,550
Other	56,547		15,765
Total	$	749,246	$	434,052

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Operating Income

Operating income for the nine months ended September 30, 2021 was $10.8 million compared to $44.9 million for the nine months ended September 30, 2020, representing an increase of $34.1 million, primarily driven by the increase in revenue, more than offset by an increase in operating expenses. The nine months ended September 30, 2021 was impacted by the impairment and other losses of $14.9 million in connection with a write-down of trade names no longer in use and stock-based compensation expense of $53.5 million in connection with the merger.

Adjusted EBITDA

Adjusted EBITDA for the nine months ended September 30, 2021 was $150.1 million, compared to $79.0 million for the nine months ended September 30, 2020, representing an increase of $71.1 million, principally resulting from an increase in revenue, partially offset by higher operating expenses. The acquisition of MDC contributed to higher revenue and expenses.

Gain on Sale of Business and Other, net

Gain on sale of business and other, net, for the nine months ended September 30, 2021 was income of $46.8 million, compared to income of $0.9 million for the nine months ended September 30, 2020, primarily due to the a gain of approximately $43 million in connection with sale of Reputation Defender in the third quarter of 2021.

Foreign Exchange Transaction Gain (Loss)

The foreign exchange gain for the nine months ended September 30, 2021 was $2.0 million compared to a loss of $0.8 million for the nine months ended September 30, 2020.

Interest Expense, Net

Interest expense, net, for the nine months ended September 30, 2021 was $15.2 million compared to $4.7 million for the nine months ended September 30, 2020, representing an increase of $10.5 million, primarily driven by an increase in debt in connection with the acquisition of MDC.

Income Tax Expense (Benefit)

The Company had an income tax expense for the nine months ended September 30, 2021 of $9.2 million (on a pre-tax income of $40.5 million resulting in an effective tax rate of 22.7%) compared to income tax expense of $3.2 million (on pre-tax income of $42.0 million resulting in an effective tax rate of 7.7%) for the nine months ended September 30, 2020.

Noncontrolling Interests

The effect of noncontrolling interests for the nine months ended September 30, 2021 was $11.0 million compared to $4.6 million for the nine months ended September 30, 2020.

Net Income (Loss) Attributable to Stagwell Inc. Common Shareholders

As a result of the foregoing, net income attributable to Stagwell Inc. common shareholders for the nine months ended September 30, 2021 was $20.2 million compared to net loss attributable to Stagwell Inc. common shareholders of $34.1 million for the nine months ended September 30, 2020.

Integrated Agencies Network

The components of operating results for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:

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	Nine Months Ended September 30,
	2021		2020		Change
Integrated Agencies Network	$		$		$		%
	(Dollars in Thousands)
Revenue	$	441,229	$	163,540	$	277,689	NM
Operating expenses
Cost of services sold	292,523		96,951		195,572		NM
Office and general expenses	90,971		39,471		51,500		NM
Depreciation and amortization	19,816		6,715		13,101		NM
Impairment and other losses	81		—		81		—	%
	$	403,391	$	143,137	$	260,254	NM
Operating income	$	37,838	$	20,403	$	17,435	85.5	%


	Nine Months Ended September 30,
Integrated Agencies Network	2021		2020		Change
					$		%
Net Revenue	$	404,908	$	156,757	$	248,151	NM
Billable costs	36,321		6,783		29,538		NM
GAAP Revenue	441,229		163,540		277,689		NM

Billable costs	36,321		6,783		29,538		NM
Staff costs	269,191		112,321		156,870		NM
Administrative costs	34,150		17,086		17,064		99.9	%
Other, net	607		(1,563)		2,170		NM
Adjusted EBITDA	100,960		28,913		72,047		NM
Stock-based compensation	32,443		—		32,443		—	%
Depreciation and amortization	19,816		6,715		13,101		NM
Deferred acquisition consideration	9,456		787		8,669		NM
Impairment	81		—		81		—	%
Other items, net	1,326		1,008		318		31.6	%
Operating Income	$	37,838	$	20,403	$	17,435	85.5	%

Revenue

Revenue for the nine months ended September 30, 2021 was $441.2 million compared to $163.5 million for the nine months ended September 30, 2020, an increase of $277.7 million.

Net Revenue

The components of the fluctuations in net revenue for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:


			Net Revenue - Components of Change										Change
	Nine Months Ended September 30, 2020		Foreign Currency		Net Acquisitions (Divestitures)		Organic		Total Change		Nine Months Ended September 30, 2021		Organic		Total
	(Dollars in Thousands)
Integrated Agencies Network	$	156,757	$	1,057	$	138,896	$	108,198	$	248,151	$	404,908	69.0	%	158.3	%
Component % change			0.7%		88.6%		69.0%		NM

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The increase in organic net revenue was primarily attributable to increased spending by clients in connection with the recovery from the COVID-19 pandemic and the impact from the acquisition of MDC.

The increase in expenses was driven by the impact from the acquisition of MDC. Stock-based compensation expense increased, driven by awards issued in connection with the acquisition of MDC and depreciation and amortization grew due to the recognition of amortizable intangible assets in connection with the acquisition of MDC.

Operating income increased as the increase in revenue, more than offset higher operating expenses.

The increase in Adjusted EBITDA was driven by higher revenue, partially offset by higher expenses.

Media Network

The components of operating results for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:


	Nine Months Ended September 30,
	2021		2020		Change
Media Network	$		$		$		%
	(Dollars in Thousands)
Revenue	$	235,539	$	185,714	$	49,825	26.8	%
Operating expenses
Cost of services sold	134,183		114,686		19,497		17.0	%
Office and general expenses	75,049		58,025		17,024		29.3	%
Depreciation and amortization	17,041		14,751		2,290		15.5	%
Impairment and other losses	14,846		—		14,846		—	%
	$	241,119	$	187,462	$	53,647	28.6	%
Operating income	$	(5,580)	$	(1,748)	$	(3,822)	NM


	Nine Months Ended September 30,
	2021		2020		Change
					$		%
Net Revenue	$	216,192	$	171,286	$	44,906	26.2	%
Billable costs	19,347		14,428		4,919		34.1	%
GAAP Revenue	235,539		185,714		49,825		26.8	%

Billable costs	19,347		14,428		4,919		34.1	%
Staff costs	154,422		129,782		24,640		19.0	%
Administrative costs	30,445		27,265		3,180		11.7	%
Other, net	1,536		(754)		2,290		NM
Adjusted EBITDA	29,789		14,993		14,796		98.7	%
Stock-based compensation	2,608		—		2,608		—	%
Depreciation and amortization	17,041		14,751		2,290		15.5	%

Impairment	14,846		—		14,846		—	%
Other items, net	874		1,990		(1,116)		(56.1)	%
Operating Income	$	(5,580)	$	(1,748)	$	(3,832)	NM

Revenue

Revenue for the nine months ended September 30, 2021 was $235.5 million compared to $185.7 million for the nine months ended September 30, 2020, an increase of $49.8 million.

Net Revenue

The components of the fluctuations in net revenue for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:

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			Net Revenue - Components of Change										Change
	Nine Months Ended September 30, 2020		Foreign Currency		Net Acquisitions (Divestitures)		Organic		Total Change		Nine Months Ended September 30, 2021		Organic		Total
	(Dollars in Thousands)
Media Network	$	171,286	$	3,659	$	19,969	$	21,278	$	44,906	$	216,192	12.4	%	26.2	%
Component % change			2.1%		11.7%		12.4%		26.2%

The increase in organic net revenue was primarily attributable to increased spending by clients in connection with the recovery from the COVID-19 pandemic and the impact from the acquisition of MDC.

The increase in expenses was driven by the impact from the acquisition of MDC and an impairment loss of $14.9 million in connection with a write-down of trade names no longer in use.

The operating loss in the third quarter of 2021 was driven by the impairment of the trade names.

The increase in Adjusted EBITDA was driven by higher revenue, partially offset by higher expenses.

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Communications Network

The components of operating results for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:


	Nine Months Ended September 30,
	2021		2020		Change
Communications Network	$		$		$		%
	(Dollars in Thousands)
Revenue	$	157,794	$	210,100	$	(52,306)	(24.9)	%
Operating expenses
Cost of services sold	119,147		156,272		(37,125)		(23.8)	%
Office and general expenses	25,674		15,198		10,476		68.9	%
Depreciation and amortization	5,087		4,210		877		20.8	%
Impairment and other losses	—		—		—		—	%
	$	149,908	$	175,680	$	(25,772)	(14.7)	%
Operating income	$	7,886	$	34,420	$	(26,534)	(77.1)


	Nine Months Ended September 30,
	2021		2020		Change
					$		%
Net Revenue	$	105,272	$	90,393	$	14,879	16.5	%
Billable costs	52,522		119,707		(67,185)		(56.1)	%
GAAP Revenue	157,794		210,100		(52,306)		(24.9)	%

Billable costs	52,522		119,707		(67,185)		(56.1)	%
Staff costs	67,332		46,174		21,158		45.8	%
Administrative costs	9,637		5,768		3,869		67.1	%
Other, net	1		(688)		689		(100.1)	%
Adjusted EBITDA	28,302		39,139		(10,837)		(27.7)	%
Stock-based compensation	15,384		—		15,384		NM
Depreciation and amortization	5,087		4,210		877		20.8	%
Deferred acquisition consideration	—		483		(483)		(100.0)	%

Other items, net	(55)		26		(81)		NM
Operating Income	$	7,886	$	34,420	$	(26,534)	(77.1)	%

Revenue

Revenue for the nine months ended September 30, 2021 was $157.8 million compared to $210.1 million for the nine months ended September 30, 2020, a decrease of $52.3 million.

Net Revenue

The components of the fluctuations in net revenue for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:


			Net Revenue - Components of Change										Change
	Nine Months Ended September 30, 2020		Foreign Currency		Net Acquisitions (Divestitures)		Organic		Total Change		Nine Months Ended September 30, 2021		Organic		Total
	(Dollars in Thousands)
Communications Network	$	90,393	$	72	$	12,202	$	2,605	$	14,879	$	105,272	2.9	%	16.5	%
Component % change			0.1%		13.5%		2.9%		16.5%

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The increase in organic net revenue was attributable to the impact from the acquisition of MDC and higher levels of communications services in connection with the recovery from the COVID-19 pandemic.

The increase in expenses was driven by higher staff costs from the impact of the acquisition of MDC and stock-based compensation expense driven by awards issued in connection with the acquisition of MDC.

Operating income declined due to higher net revenue, more than offset by the increase in expenses.

The decrease in Adjusted EBITDA was due to higher net revenue, more than offset by the increase in expenses.

All Other

The components of operating results for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:


	Nine Months Ended September 30,
	2021		2020		Change
All Other	$		$		$		%
	(Dollars in Thousands)
Revenue	$	22,874	$	15,616	$	7,258	46.5	%
Operating expenses
Cost of services sold	11,850		4,971		6,879		NM
Office and general expenses	12,357		11,395		962		8.4	%
Depreciation and amortization	2,013		2,696		(683)		(25.3)	%
Impairment and other losses	(1)		—		(1)		—	%
	$	26,219	$	19,062	$	7,157	37.5	%
Operating income	$	(3,345)	$	(3,446)	$	101	(2.9)	%


	Nine Months Ended September 30,
	2021		2020		Change
					$		%
Net Revenue	$	22,874	$	15,616	$	7,258	46.5	%
Billable costs	—		—		—		—	%
GAAP Revenue	22,874		15,616		7,258		46.5	%

Billable costs	—		—		—		—	%
Staff costs	15,643		16,116		(473)		(2.9)	%
Administrative costs	8,647		8,671		(24)		(0.3)	%
Other, net	(100)		(8,422)		8,322		(98.8)	%
Adjusted EBITDA	(1,316)		(749)		(567)		(75.7)	%
Stock-based compensation	16		—		16		—	%
Depreciation and amortization	2,013		2,696		(683)		(25.3)	%



Operating Income	$	(3,345)	$	(3,446)	$	101	(2.9)	%

Revenue

Revenue for the nine months ended September 30, 2021 was $22.9 million compared to $15.6 million for the nine months ended September 30, 2020, an increase of $7.3 million.

Net Revenue

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The components of the fluctuations in net revenue for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:


			Net Revenue - Components of Change										Change
	Nine Months Ended September 30, 2020		Foreign Currency		Net Acquisitions (Divestitures)		Organic		Total Change		Nine Months Ended September 30, 2021		Organic		Total
	(Dollars in Thousands)
All Other	$	15,616	$	476	$	1,558	$	5,224	$	7,258	$	22,874	33.5	%	46.5	%
Component % change			3.0%		10.0%		33.5%		46.5%

The increase in organic net revenue was attributable to higher levels of business at the central innovations group.

The increase in revenue was more than offset by higher expenses resulting in an operating loss in both periods.

Corporate

The components of operating results for the nine months ended September 30, 2021 compared to the nine months ended September 30,2020 were as follows:


	Nine Months Ended September 30,
Corporate	2021		2020		Change
					$		%





Staff costs	$	5,923	$	1,344	$	4,579	NM
Administrative costs	1,733		1,981		(248)		(12.5)	%
Other, net	—		—		—		—	%
Adjusted EBITDA	(7,656)		(3,325)		(4,331)		NM
Stock-based compensation	3,014		—		3,014		NM
Depreciation and amortization	2,165		1,466		699		NM
Impairment	—		—		—		—	%
Other items, net	13,152		(49)		13,201		(100.2)	%
Operating Income	$	(25,987)	$	(4,742)	$	(21,245)	NM

Operating expenses increased primarily in connection with the acquisition of MDC, including professional fees associated with the transaction.

Liquidity and Capital Resources:

Liquidity

The following table provides summary information about the Company’s liquidity position:


	September 30, 2021		September 30, 2020
	(Dollars in Thousands)
Net cash provided by operating activities	$	20,146	$	93,184
Net cash provided by (used in) investing activities	$	153,721	$	(16,421)
Net cash used in financing activities	$	(151,860)	$	(43,700)

We continue to monitor the worldwide public health threat, government actions to combat COVID-19 and the impact such developments may have on our liquidity. If the impact of the pandemic is beyond our expectation, the Company believes it is well positioned through the actions implemented at the beginning of the pandemic to successfully work through the effects of COVID-19 for the foreseeable future.

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The Company had cash and cash equivalents of $115.5 million and $92.5 million as of September 30, 2021 and December 31, 2020, respectively. The Company intends to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months. The Company has historically been able to maintain and expand its business using cash generated from operating activities, funds available under its revolving credit agreement, and other initiatives, such as obtaining additional debt and equity financing. At September 30, 2021, the Company had $181.1 million of borrowings outstanding and $292.8 million available under the revolving credit agreement.

The Company’s obligations extending beyond twelve months primarily consist of deferred acquisition payments, purchases of noncontrolling interests, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company’s 5.625% Notes. 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 Company’s revolving credit agreement, will be sufficient to meet the Company’s anticipated cash needs for the next twelve months. The Company’s ability to make scheduled deferred acquisition payments, principal and interest payments, to refinance indebtedness or to fund planned capital expenditures 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-Q and in the Company’s other SEC filings.

Cash Flows

Operating Activities

Cash flows provided by operating activities for the nine months ended September 30, 2021 were $20.1 million, primarily reflecting earnings, partially offset by unfavorable working capital requirements.

Cash flows provided by operating activities for the nine months ended September 30, 2020 were $93.2 million, primarily reflecting earnings and favorable working capital requirements.

Investing Activities

During the nine months ended September 30, 2021, cash flows provided by investing activities were $153.7 million, which was primarily driven by $130.2 million of MDC cash in connection with the combination, $37.2 million from the sale of Reputation Defender, partially offset by capital expenditures of $13.7 million.

During the nine months ended September 30, 2020, cash flows used in investing activities were $16.4 million, which primarily consisted of $9.0 million of capital expenditures and $5.5 million for acquisitions.

Financing Activities

During the nine months ended September 30, 2021, cash flows used in financing activities were $151.9 million, which primarily consisted of $884.4 million for the in repurchase of the 7.50% Notes, $127.1 million in net repayments under the revolving credit agreement, $19.2 million in distributions to minority interest holders, as well as distributions of $204.9 million to Stagwell Media, offset by receipt of $1.1 billion from the issuance of the 5.625% Notes.

During the nine months ended September 30, 2020, cash flows used in financing activities was $43.7 million, primarily driven by $58.3 million in net borrowings under the revolving credit agreement, more than offset by distributions of $98.6 million to Stagwell Media.

Total Debt

Debt, net of debt issuance costs, as of September 30, 2021 was $1,265.7 million as compared to $198.0 million outstanding at December 31, 2020. The increase of $1,067.7 million in debt was primarily a result of the Company’s issuance of the 5.625% Notes. See Note 9 for information regarding the Company’s 5.625% Notes and $500.0 million revolving credit agreement.

The Company is currently in compliance with all of the terms and conditions of the Credit Agreement, and management believes, based on its current financial projections, that the Company will be in compliance with its covenants over the next twelve months.

If the Company loses all or a substantial portion of its lines of credit under its revolving 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 revolving credit agreement, the Company must comply with its total leverage ratio covenant, as such term is specifically defined in the agreement. For the period ended September 30, 2021, the Company’s calculation of each of these covenants, and the specific requirements under the revolving credit agreement, respectively, were calculated based on the trailing twelve months as follows:

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			September 30, 2021
Total Leverage Ratio			3.08
Maximum per covenant			4.75

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.

Contractual Obligations and Other Commercial Commitments

The Company’s agencies enter into contractual commitments with media providers and agreements with production companies on behalf of its clients at levels that exceed the revenue from services. Some of our agencies purchase media for clients and act as an agent for a disclosed principal. These commitments are included in Accounts payable and Accruals and other liabilities when the media services are delivered by the media providers. Stagwell takes precautions against default on payment for these services and has historically had a very low incidence of default. Stagwell is still exposed to the risk of significant uncollectible receivables from our clients. The risk of a material loss could significantly increase in periods of severe economic downturn.

Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent and fixed purchase price payments. See Note 7 for additional information regarding contingent deferred acquisition consideration.

The Company intends to finance the cash portion of these contingent payment obligations using available cash from operations, borrowings under the revolving credit agreement (and refinancings thereof), and, if necessary, through the incurrence of additional debt and/or issuance of additional equity. The ultimate amount payable in the future relating to these transactions will vary because it is dependent on the future results of operations of the subject businesses and the timing of when these rights are exercised.

Critical Accounting Policies

See Note 2 for information regarding the Company’s critical accounting policies.

Website Access to Company Reports and Information

Stagwell Inc. is the successor SEC registrant to MDC Partners Inc. Stagwell Inc.’s Internet website address is www.stagwellglobal.com. The Company’s Annual Reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act” ), will be made available free of charge through the Company’s website as soon as reasonably practical after those reports are electronically filed with, or furnished to, the SEC. The information found on, or otherwise accessible through, the Company’s website is not incorporated into, and does not form a part of, this quarterly report on Form 10-Q. From time to time, the Company may use its website as a channel of distribution of material company information.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk related to interest rates, foreign currencies and impairment risk.

Debt Instruments: At September 30, 2021, the Company’s debt obligations consisted of amounts outstanding under its revolving credit agreement and the 5.625% Notes. The 5.625% Notes bear a fixed 5.625% interest rate. The revolving credit agreement bears interest at variable rates based upon the U.S. bank prime rate, U.S. base rate, LIBOR or its replacement SOFR, EURIBOR, and SONIA depending on the duration of the borrowing product. The Company’s ability to obtain the required bank syndication commitments depends in part on conditions in the bank market at the time of syndication. Given that there were $181.1 million in borrowings under the revolving credit agreement, as of September 30, 2021, a 1.0% increase or decrease in the weighted average interest rate, which was 2.45% at September 30, 2021, would have an interest impact of approximately $0.4 million.

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Foreign Exchange: While the Company primarily conducts business in markets that use the U.S. dollar, the Canadian dollar, the Euro and the British Pound, its non-U.S. operations transact business in numerous different currencies. The Company’s results of operations are subject to risk from the translation to the U.S. dollar of the revenue and expenses of its non-U.S. operations. The effects of currency exchange rate fluctuations on the translation of the Company’s results of operations are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 2. For the most part, revenues and expenses incurred related to the non-U.S. operations are denominated in their functional currency. This minimizes the impact that fluctuations in exchange rates will have on profit margins. Translation of intercompany debt, which is not intended to be repaid, is included in cumulative translation adjustments. Translation of current intercompany balances are included in net income (loss). The Company generally does not enter into foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.

Impairment Risk: At September 30, 2021, the Company did not have any impairment of goodwill. The Company reviews goodwill for impairment annually as of October 1st of each year or more frequently if indicators of potential impairment exist. See the Significant Accounting Policies in Note 2 for information related to impairment testing and the risk of potential impairment charges in future periods.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be included in our SEC reports is recorded, processed, summarized and reported within the applicable time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”), who is our principal executive officer, and Chief Financial Officer (“CFO”), who is our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. However, our disclosure controls and procedures are designed to provide reasonable assurances of achieving our control objectives.

We conducted an evaluation, under the supervision and with the participation of our management, including our CEO, CFO and management Disclosure Committee, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(e) and 15(d)-15(e) of the Exchange Act. Based on that evaluation, and in light of the material weaknesses identified in the internal controls over financial reporting of Stagwell Marketing Group LLC (“SMG”), our CEO and CFO concluded that, as of September 30, 2021, our disclosure controls and procedures are ineffective to ensure that decisions can be made timely with respect to required disclosures, as well as ensuring that the recording, processing, summarization and reporting of information required to be included in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 is appropriate.

Material Weaknesses in Internal Control Over Financial Reporting

In connection with the preparation of SMG's consolidated financial statements as of December 31, 2020, 2019 and 2018 and for the years then ended, SMG identified material weaknesses in its internal controls over financial reporting, including not designing or maintaining an effective control environment that meets SMG’s accounting and reporting requirements. Specifically, SMG did not maintain a sufficient complement of personnel with an appropriate degree of internal controls and accounting knowledge, experience and training commensurate with its accounting and reporting requirements. This material weakness contributed to the following additional material weaknesses:

•SMG did not establish effective controls in response to the risks of material misstatement, including designing and maintaining formal accounting policies, procedures and controls over journal entries, significant accounts and disclosures, in order to achieve complete and accurate financial accounting, reporting and disclosures;

•SMG did not design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of its financial statements. Specifically, SMG did not design and maintain: (i) program change management controls for the financial systems to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) appropriate user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs and data to appropriate SMG personnel; (iii) computer operations controls to ensure critical data interfaces between systems are appropriately identified and monitored, and data backups are authorized and restorations monitored; and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements; and

•SMG has not established a sufficient risk assessment process to identify risks of material misstatement due to fraud and/or error and implement controls against such risks.

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Remediation Efforts to Address Material Weakness

We are evaluating the weaknesses and intend to evaluate what remedial actions are necessary to enhance and improve our internal controls over financial reporting (“ICFR”) and therefore have not yet remediated the material weakness described above. Our remediation efforts will continue to be evaluated through 2022. We believe the controls that will be put in place will eliminate the material weaknesses and solidify the effectiveness of our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

The business combination of MDC with SMG, which was completed on August 2, 2021, had a material impact on the financial position, results of operations and cash flows of the combined company from the completion date through September 30, 2021. The business combination also resulted in material changes in the combined company’s internal controls over financial reporting. In addition to the remediation efforts described above, the Company is in the process of designing and integrating policies, processes, operations, technology and other components of internal controls over financial reporting of the combined company. Management will monitor the implementation of new controls and test the operating effectiveness when instances are available in future periods.

We have given consideration to the impact of COVID-19 and have concluded that there have been no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we are involved in various legal proceedings. We do not currently expect that these proceedings will have a material adverse effect on our results of operations, cash flows or financial position.

Item 1A. Risk Factors

There have been no material changes that we are aware of from the risk factors set forth under “Risk Factors” in Exhibit 99.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 10, 2021. These risks could materially and adversely affect our business, results of operations, financial condition, cash flows, projected results and future prospects. These risks are not exclusive and additional risks to which we are subject include the factors listed under “Note About Forward-Looking Statements” and the risks described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In the three months ended September 30, 2021, the Company issued no Class A shares in transactions exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

For the three months ended September 30, 2021, the Company made no open market purchases of its Class A, B, or C shares. Pursuant to its Combined Credit Agreement and the indenture governing the 5.625% Notes, the Company is currently limited as to the dollar amount of shares it may repurchase in the open market.

For the three months ended September 30, 2021, the Company’s employees surrendered Class A shares in connection with the required tax withholding resulting from the vesting of restricted stock. The Company paid these withholding taxes on behalf of the related employees. These Class A shares were subsequently retired and no longer remain outstanding as of September 30, 2021. The following table details those shares withheld during the third quarter of 2021:


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares That May Yet Be Purchased Under the Program
7/1/2021 - 7/31/2021	—	$	—	—	—
8/1/2021 - 8/31/2021	—	—		—	—
9/1/2021 - 9/30/2021	(12,084)	8.39		—	—
Total	(12,084)	$	8.39	—	—

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information

None

Item 6. Exhibits

The exhibits required by this item are listed on the Exhibit Index.

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EXHIBIT INDEX


Exhibit No.						Description
2.1						Transaction Agreement, dated as of December 21, 2020, by and among Stagwell Media LP and the Company (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on December 22, 2020).
2.2						Amendment No. 1 to the Transaction Agreement, dated as of June 4, 2021 (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on June 7, 2021).
2.3						Amendment No. 2 to the Transaction Agreement, dated as of July 8, 2021 (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on July 9, 2021).
3.1						Second Amended and Restated Certificate of Incorporation of Stagwell Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on August 2, 2021).
3.1.1						Certificate of Amendment to the Amended and Restated Certificate of Designation of Series 6 Convertible Preferred Stock of Stagwell Inc., dated September 23, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on September 23, 2021).
3.1.2						Certificate of Amendment to the Certificate of Designation of Series 8 Convertible Preferred Stock of Stagwell Inc., dated September 23, 2021 (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on September 23, 2021).
3.2						Amended and Restated Bylaws of Stagwell Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on August 2, 2021).
4.1						Indenture, dated as of August 20, 2021, among Midas OpCo Holdings LLC, the Note Guarantors party thereto, and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on August 20, 2021).
4.2						Form of 5.625% Senior Note due 2029 (included in Exhibit 4.1).
10.1						Goldman Letter Agreement, dated as of July 8, 2021, by and among MDC Partners Inc., Broad Street Principal Investments, L.L.C., Stonebridge 2017, L.P. and Stonebridge 2017 Offshore, L.P. (incorporated by reference to Exhibit 2.2 to the Company’s Form 8-K filed on July 9, 2021).
10.2						Stagwell Letter Agreement, dated as of July 8, 2021, by and between MDC Partners Inc. and Stagwell Agency Holdings LLC (incorporated by reference to Exhibit 2.3 to the Company’s Form 8-K filed on July 9, 2021).
10.3						Registration Rights Agreement, dated August 2, 2021, by and among the Company and the Stagwell Parties (as defined therein) (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 2, 2021).
10.4						Tax Receivable Agreement, dated August 2, 2021, by and among the Company, Midas OpCo Holdings LLC and Stagwell Media LP (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on August 2, 2021).
10.5						Information Rights Letter Agreement, dated August 2, 2021, by and among the Company, Stagwell Media LP, Stagwell Group LLC and Stagwell Agency Holdings LLC (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on August 2, 2021).
10.6						Amended and Restated Credit Agreement, dated August 2, 2021, by and among Midas OpCo Holdings LLC, Maxxcom LLC, Stagwell Marketing Group LLC, and the other Borrowers party thereto, and JP Morgan Chase Bank, as Administrative Agent, and the other Agents and Lenders party thereto (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on August 2, 2021).
10.7						Amendment to Securities Purchase Agreement, dated August 4, 2021, by and between Stagwell Inc. and Broad Street Principal Investments, L.L.C. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on August 4, 2021).
10.8						OpCo Letter Agreement, dated August 4, 2021, by and among Stagwell Inc., Broad Street Principal Investments, L.L.C., Stonebridge 2017, L.P. and Stonebridge 2017 Offshore, L.P. (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on August 4, 2021).
10.9						Amendment to Securities Purchase Agreement, dated August 4, 2021, by and between Stagwell Inc. and Stagwell Agency Holdings LLC (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on August 4, 2021).
10.10						Employment Agreement Amendment, dated as of September 8, 2021, by and between the Company and Mark Penn (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on September 8, 2021).
10.11						Employment Agreement Amendment, dated as of September 8, 2021, by and between the Company and Frank Lanuto (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on September 8, 2021).
10.12						Employment Agreement, dated as of September 12, 2021, by and between the Company and Jay Leveton (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on September 16, 2021).
10.13						Employment Agreement, dated as of September 12, 2021, by and between the Company and Ryan Greene (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on September 16, 2021).

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10.14						Form of Financial Performance-Based Restricted Stock Grant Agreement (2021). *
10.15						Separation Agreement and Mutual General Release, made and entered into as of July 30, 2021, by and between David Ross and Midas OpCo Holdings LLC (as successor-in-interest to MDC Partners Inc.). *
31.1						Certification by Chief Executive Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2						Certification by Chief Financial Officer pursuant to Rules 13a - 14(a) and 15d - 14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1						Certification by Chief Executive Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2						Certification by Chief Financial Officer pursuant to 18 USC. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101						Interactive Data File, for the period ended September 30, 2021. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.*
104						Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document and are included in Exhibit 101.*

* Filed electronically herewith.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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STAGWELL INC.

/s/ Mark Penn
Mark Penn
Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
November 9, 2021

/s/ Frank Lanuto
Frank Lanuto
Chief Financial Officer (Principal Financial Officer)
November 9, 2021

Exhibit 10.14

FINANCIAL PERFORMANCE-BASED

RESTRICTED STOCK AGREEMENT (2021)

THIS AGREEMENT is made as of October 15, 2021 (the “Grant Date”), between Stagwell Inc., a Delaware corporation (the “Corporation”), and [ ] (the “Grantee”).

WHEREAS, the Corporation has adopted the 2016 Stock Incentive Plan (as amended, the “Plan”) for the purpose of providing employees of the Corporation and eligible non-employee directors of the Board of Directors a proprietary interest in pursuing the long-term growth, profitability and financial success of the Corporation (except as otherwise expressly set forth herein, capitalized terms used in this Agreement shall have the definitions set forth in the Plan);

WHEREAS, the Human Resources & Compensation Committee (the “Committee”) of the Board of Directors has determined that it is in the best interests of the Corporation to make the award set forth herein, which award will vest upon achievement by the Corporation of the specified financial growth target during the financial performance period of January 1, 2021 through December 31, 2023; and

WHEREAS, pursuant to the Plan, the Committee has determined to grant an Other Stock-Based Award to the Grantee in the form of shares of Class A common stock, subject to the terms, conditions and limitations provided herein, including achievement of the financial performance target, and in the Plan (the “Restricted Stock”).

NOW, THEREFORE, the parties hereto agree as follows:

1. Grant of Restricted Stock.

1.1 The Corporation hereby grants to the Grantee, on the terms and conditions set forth in this Agreement, the number of shares of Restricted Stock set forth under the Grantee’s name on the signature page hereto (the “2021 Restricted Stock Award”).

1.2 The Grantee’s rights with respect to all the shares of Restricted Stock underlying the 2021 Restricted Stock Award shall not vest and will remain forfeitable at all times prior to the Vesting Date, subject to the occurrence of a Permitted Acceleration Event (each as defined below). At any time, reference to the 2021 Restricted Stock Award shall be deemed to be a reference to the shares of Restricted Stock granted under Section 1.1 that have neither vested nor been forfeited pursuant to the terms of this Agreement.

1.3 This Agreement shall be construed in accordance with, and subject to, the terms of the Plan (the provisions of which are incorporated herein by reference).

2. Rights of Grantee.

Except as otherwise provided in this Agreement, the Grantee shall be entitled, at all times on and after the Grant Date, to exercise all rights of a shareholder with respect to the 2021 Restricted Stock Award, including the right to vote the shares of Restricted Stock. Prior to the Vesting Date, the Grantee shall not be entitled to transfer, sell, pledge, hypothecate or assign any portion of the 2021 Restricted Stock Award (collectively, the “Transfer Restrictions”), nor to receive current payment of dividends as per Section 5 below.

3. Vesting; Lapse of Restrictions.

3.1 The 2021 Restricted Stock Award shall vest, and the Transfer Restrictions shall lapse, on March 31, 2024 (the “Vesting Date”), solely to the extent (A) the Corporation achieves the performance thresholds set forth below in Section 3.3, as determined by the Committee on or prior to March 31, 2024 (the date of such determination, the “Determination Date”), and (B) the Grantee continues to serve as an employee of the Corporation through the Vesting Date (the “Service Condition”); provided, however, that the 2021 Restricted Stock Award shall vest, and the Transfer Restrictions with respect to the 2021 Restricted Stock Award shall lapse, if sooner, as the result of any Permitted Acceleration Event, as provided below. “Permitted Acceleration Event” means one of the following: (i) termination of Grantee’s employment by the Corporation without Cause or by the Grantee for Good Reason (solely to the extent Grantee and the Corporation are parties to an employment agreement that defines Good Reason); (ii) Qualified Retirement; or (iii) the Grantee’s death or Disability.

In the event that Grantee’s employment is terminated (i) by the Corporation without Cause, or (ii) or by the Grantee for Good Reason, a number of shares of Restricted Stock under the 2021 Restricted Stock Award shall vest (A) if such termination occurs within one (1) year following the occurrence of a Change of a Control, on the termination date, in an amount equal to the full number of shares under the 2021 Restricted Stock Award, and (B) if such termination does not occur within one (1) year following the occurrence of a Change of a Control, on the Vesting Date, in an amount equal to the product of (x) the number of shares of Restricted Stock under the 2021 Restricted Stock Award that would otherwise performance vest in accordance with Section 3.3 hereof, if any, and (y) a fraction, the numerator of which shall be the number of full months of service completed by the Grantee from October 1, 2021 through the termination date, and the denominator of which shall be 30.

In the event of Grantee’s Qualified Retirement, the number of shares of Restricted Stock that performance vest in accordance with Section 3.3 hereof shall vest on the Vesting Date.

In the event of Grantee’s death or Disability, the full number of shares under the 2021 Restricted Stock Award shall vest on the date of death or Disability.

3.2 Upon the earliest of (i) any termination of the Grantee for Cause; (ii) resignation by the Grantee without Good Reason or (iii) the failure by the Corporation to achieve the Minimum EBITDA Threshold, as determined by the Committee on the Determination Date, the 2021 Restricted Stock Award shall be forfeited and automatically transferred to and reacquired by the Corporation at no cost to the Corporation, and neither the Grantee nor any heirs, executors or successors of such Grantee shall thereafter have any right or interest in such shares of Restricted Stock.

3.3 The 2021 Restricted Stock Award shall performance vest (but not satisfy the Service Condition) based upon the Corporation’s level of achievement of “EBITDA” (as defined below) during the performance period commencing on January 1, 2021 and ending on December 31, 2023 (the “Performance Period”), as described in this Section 3.3. All determinations required to be made hereunder shall be made by the Committee:

For the Performance Period, as determined on the Determination Date:

(i)If the Corporation achieves EBITDA for the Performance Period in an amount equal to or greater than the EBITDA Target, then 100% of the 2021 Restricted Stock Award shall performance vest on the Vesting Date;


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(ii)If the Corporation achieves EBITDA for the Performance Period in an amount equal to or greater than 90% of the EBITDA Target (the “Minimum EBITDA Threshold”) but less than 100% of the EBITDA Target, then a prorated amount between 75% and 100% of the 2021 Restricted Stock Award shall performance vest on the Vesting Date, determined based on straight-line interpolation for EBITDA between the Minimum EBITDA Threshold and EBITDA Target; and

(iii)If the Corporation achieves EBITDA for the Performance Period in an amount less than the Minimum EBITDA Threshold, then no part of the Restricted Stock Award shall performance vest pursuant to this Section 3.3.

In the event of a Change of Control, 100% of the 2021 Restricted Stock Award shall performance vest (but not satisfy the Service Condition).

For purposes of the foregoing, the following terms shall have the meanings indicated below. Capitalized terms used in this Agreement but not defined herein shall have the meaning assigned to them in the Plan.

(a)“Cause” shall have the meaning set forth in the Grantee’s employment agreement with the Corporation. If such term is not defined in the Grantee’s employment agreement, then Cause means the Grantee’s termination by reason of (i) his/her continued or willful failure substantially to perform his/her duties for the Corporation, (ii) his/her willful and serious misconduct in connection with the performance of his/her duties for the Corporation, (iii) the Grantee’s conviction of, or entering a plea of guilty to, a crime that constitutes a felony or a crime involving moral turpitude, (iv) his/her fraudulent or dishonest conduct or (v) his/her material breach of any of his/her obligations or covenants under any written policies of the Corporation or any written agreement between such Grantee and the Corporation.

(b)“Change in Control” shall have the meaning set forth in Section 2(b) of the Plan.

(c)“Disability” shall have the meaning set forth in the Grantee’s employment agreement. If such term is not defined in the Grantee’s employment agreement, then Disability means the inability of the Grantee to have performed the Grantee’s material duties due to a physical or mental injury, infirmity or incapacity for one hundred eighty (180) consecutive days (including weekends and holidays) in any 365-day period, as determined by the Corporation in its reasonable discretion.

(d)“EBITDA” shall mean Adjusted EBITDA for the Performance Period as reported in the Corporation’s public filings, but excluding the effect of acquisitions made during the Performance Period; provided, however, that the Committee shall retain discretion to make appropriate adjustments to EBITDA for extraordinary events in accordance with the Plan.

(e)“EBITDA Target” shall equal $1.1 billion; provided, however, that the Committee shall retain discretion to make appropriate adjustments to the


			3

EBITDA Target, including adjustments to take into account any asset disposition.

(f)“Employment Agreement” shall mean the Participant’s applicable employment agreement with the Corporation.

(g)“Good Reason” shall have the meaning set forth in the Grantee’s employment agreement with the Corporation, and if not so defined shall be inapplicable.

(h)“Qualified Retirement” shall mean (i) the Participant’s voluntary termination of employment with the Corporation after (A) attaining seventy (70) years of age and (B) providing a minimum five (5) years of service to the Corporation or its affiliates or predecessors; provided that the Participant does not provide services to any competing business, other than as a member of a board of directors, from the date of retirement through the Vesting Date, or (ii) as determined by the Committee.

4. Escrow and Delivery of Shares.

4.1 Certificates (or an electronic “book entry” on the books of the Corporation's stock transfer agent) representing the shares of Restricted Stock shall be issued and held by the Corporation (or its stock transfer agent) in escrow (together with any stock transfer powers which the Corporation may request of Grantee) and shall remain in the custody of the Corporation (or its stock transfer agent) until (i) their delivery to the Grantee as set forth in Section 4.2 hereof, or (ii) their forfeiture and transfer to the Corporation as set forth in Section 3.2 hereof. The appointment of an independent escrow agent shall not be required.

4.2 (a) Certificates (or an electronic “book entry”) representing those shares of Restricted Stock in respect of which the Transfer Restrictions have lapsed pursuant to Section 3.1 hereof shall be delivered to the Grantee as soon as practicable following the Vesting Date.

(b) The Grantee, or the executors or administrators of the Grantee's estate, as the case may be, may receive, hold, sell or otherwise dispose of those shares of Restricted Stock delivered to him or her pursuant to this Section 4.2 free and clear of the Transfer Restrictions, but subject to compliance with all federal and state securities laws.

4.3 (a) Each stock certificate issued pursuant to Section 4.1 shall bear a legend in substantially the following form:

THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS APPLICABLE TO RESTRICTED STOCK CONTAINED IN THE 2016 STOCK INCENTIVE PLAN (AS AMENDED, THE “PLAN”) AND A RESTRICTED STOCK AGREEMENT (THE “AGREEMENT”) BETWEEN THE CORPORATION AND THE REGISTERED OWNER OF THE SHARES REPRESENTED HEREBY. RELEASE FROM SUCH TERMS AND CONDITIONS SHALL BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF THE PLAN AND THE AGREEMENT, COPIES OF WHICH ARE ON FILE IN THE OFFICE OF THE SECRETARY OF THE CORPORATION.


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(b) As soon as practicable following the Vesting Date, the Corporation shall issue a new certificate (or electronic “book entry”) for shares of the Restricted Stock which have become non-forfeitable in relation to such Vesting Date, which new certificate (or electronic “book entry”) shall not bear the legend set forth in paragraph (a) of this Section 4.3 and shall be delivered in accordance with Section 4.2 hereof.

5. Dividends. All dividends declared and paid by the Corporation on shares underlying the 2021 Restricted Stock Award shall be deferred until the lapsing of the Transfer Restrictions pursuant to Section 3.1 and shall be distributed only to the extent the underlying shares of Restricted Stock vest in accordance with Section 3. The deferred dividends shall be held by the Corporation for the account of the Grantee until the Vesting Date, at which time the dividends shall be paid to the Grantee. Upon the forfeiture of the shares of Restricted Stock pursuant to Section 3, any deferred dividends shall also be forfeited to the Corporation.

6. No Right to Continued Retention. Nothing in this Agreement or the Plan shall be interpreted or construed to confer upon the Grantee any right with respect to continuance as an employee, nor shall this Agreement or the Plan interfere in any way with the right of the Corporation to terminate the Grantee's service as an employee at any time.

7. Adjustments Upon Change in Capitalization. If, by operation of Section 10 of the Plan, the Grantee shall be entitled to new, additional or different shares of stock or securities of the Corporation or any successor corporation, such new, additional or different shares or other property shall thereupon be subject to all of the conditions and restrictions which were applicable to the shares of Restricted Stock immediately prior to the event and/or transaction.

8. Modification of Agreement. Except as set forth in the Plan and herein, this Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto.

9. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force and effect in accordance with their terms.

10. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without regard to its conflict of laws principle, except to the extent that the application of New York law would result in a violation of the Canadian Business Corporation Act.

11. Successors in Interest. This Agreement shall inure to the benefit of and be binding upon any successor to the Corporation. This Agreement shall inure to the benefit of the Grantee's heirs, executors, administrators and successors. All obligations imposed upon the Grantee and all rights granted to the Corporation under this Agreement shall be binding upon the Grantee's heirs, executors, administrators and successors.

12. Tax Withholding. In addition to the rights of the Corporation pursuant to Section 14(a) of the Plan, upon the vesting of shares of Restricted Stock granted under this Agreement or otherwise, the Corporation may withhold (or sell on Grantee’s behalf) a number of shares of Class A common stock having a Fair Market Value on the vesting date sufficient to satisfy the federal, state and local


			5

withholding tax requirements, if any, attributable to such vesting, but not greater than such withholding obligations.

[Signature Page Follows]


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STAGWELL INC.

By:

Name:

Title:

STAGWELL INC.

By:

Name:

Title:

GRANTEE:

By:

Name: [ ]

Number of Shares of Restricted

Stock Hereby Granted: [ ]


			7

Exhibit 10.15

SEPARATION AGREEMENT AND MUTUAL GENERAL RELEASE

This SEPARATION AGREEMENT AND MUTUAL GENERAL RELEASE (this “Agreement”) is made and entered into on the first date set forth on the signature page hereto (the “Execution Date”), by and between David Ross (“Executive”) and Midas OpCo Holdings LLC (as successor-in-interest to MDC Partners Inc.) (“MDC” or the “Company” and, together with Executive, the “Parties”). Capitalized terms used and not otherwise defined in this Agreement shall have the meanings set forth in the Second Amended and Restated Employment Agreement by and between Executive and the Company, dated as of February 27, 2017 (the “Employment Agreement”).

WHEREAS, Executive is General Counsel & Executive Vice President, Strategy and Corporate Development, of the Company pursuant to the Employment Agreement and subsequent promotions; and

WHEREAS, MDC and Executive intend to terminate their relationship of employer and employee, respectively, on the mutually agreed terms and conditions set forth below.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

1.Transition Period. For the duration of the period commencing on the Execution Date and ending on the earliest to occur of (i) the consummation of a Change of Control transaction (including, without limitation the consummation of the business combination between the Company and certain subsidiaries of Stagwell Media LP (the “Stagwell Transaction”)); pursuant to that certain Transaction Agreement, dated as of December 21, 2020 and amended as of June 4, 2021 and July 8, 2021 (the “Transaction Agreement”)); (ii) the termination of the Transaction Agreement; and (iii) August 31, 2021, (such period, the “Transition Period” and the last day of such Transition Period, the “Termination Date”) the Company agrees to continue to employ Executive, and Executive agrees to continue to serve, as General Counsel & Executive Vice President, Strategy and Corporate Development of the Company and shall continue to report directly to the Board of Directors of the Company (the “Board”) as requested or, with respect to any matters related to the Stagwell Transaction, to the Special Committee of the Board (the “Special Committee”). Upon the Termination Date, Executive’s employment with the Company and the Term will terminate and Executive will be deemed to resign, effective as of the Termination Date, from all positions, titles, duties and authorities with the Company and its affiliates that Executive holds at such time.

2.Accrued Obligations. Following the Termination Date, MDC shall pay to Executive an amount equal to: (i) Executive’s accrued but unpaid Base Salary through the Termination Date; (ii) the value of Executive’s accrued and unused vacation days as of the Termination Date; and (ii) reimbursement for any unpaid reimbursable business expenses incurred in the course of his employment through the Termination Date, in each case in accordance with MDC’s regular vacation, payroll and expense reimbursement practices (but in no event later than five (5) business days following the Termination Date).

3.Severance Entitlements. In the event: (i) Executive remains employed with the Company through the completion of the Transition Period; or (ii) Executive’s employment is terminated by the Company for any reason or by Executive for Good Reason prior to the completion of the Transition Period (in which case, the date of such termination shall be treated as the Termination Date for all purposes hereunder), and subject to Paragraph 6(h), MDC shall pay or provide (as applicable) to Executive the following amounts and benefits (collectively, the “Severance Payments”):

(a)Solely to the extent the Termination Date is prior to August 31, 2021, a cash amount equal to the base salary Executive would have earned had his employment continued through August 31, 2021 on, or as soon as reasonably practicable following (but in no event later than five (5) business days following), the Termination Date;

(b)an amount equal to $1,522,500, which amount shall be paid in cash by the Company on, or as soon as reasonably practicable following (but in no event later than five (5) business days following), the Termination Date;

(c)his Annual Discretionary Bonus with respect to calendar year 2021, in an amount equal to $797,500, which amount shall be paid in cash by the Company on, or as soon as reasonably practicable following (but in no event later than five (5) business days following), the Termination Date;

(d)pursuant to paragraph 7(b)(vi) of the Employment Agreement, continued participation on the same basis in the plans and programs set forth in paragraph 5(b) of the Employment Agreement and to the extent permitted under applicable law, paragraph 5(c) of the Employment Agreement (such benefits collectively called the "Continued Plans") in which Executive was participating on the Termination Date (as such Continued Plans are from time to time in effect at the Company) for a period to end on the earlier of (A) the one-year anniversary of the Termination Date and (B) the date on which Executive is eligible to receive coverage and benefits under the same type of plan of a subsequent employer; provided, however, if Executive is precluded from continuing his participation in any Continued Plan, then the Company will pay Executive the economic equivalent of the benefits provided under the Continued Plan in which he is unable to participate, for the period specified above, it being understood that the economic equivalent of a benefit foregone shall be deemed the lowest cost in New York, N.Y. that would be incurred by Executive in obtaining such benefit himself on an individual basis;

(e)any then unvested portion of the 190,148 shares of restricted stock held by Executive as of the date hereof pursuant to that certain Restricted Stock Agreement, dated as of November 4, 2019 between the Company and Executive (the “LTIP Restricted Stock Agreement”), shall immediately vest as of the Termination Date;

(f)the cash LTIP award granted to Executive pursuant to that certain Award Agreement, dated as of November 4, 2019 (the “LTIP Cash Award”), between the Company and Executive, pursuant to which Executive is entitled to receive up to $800,000 in cash (the “Maximum LTIP Cash Amount”) under certain circumstances shall vest and be paid out at the Maximum LTIP Cash Amount at the time such LTIP Cash Award would otherwise be paid in accordance with its existing terms and conditions; and

(g)In the event either the Stagwell Transaction is consummated on the Termination Date, or the Transaction Agreement is terminated and a Change of Control occurs within the twelve (12) month period immediately following the Termination Date (inclusive of that date), an additional amount equal to $2,072,500, which amount shall be paid in cash by the Company on, or as soon as reasonably practicable following (but in no event later than five (5) business days following), the date the Stagwell Transaction or such other Change of Control, as applicable, is consummated.

4.No Further Entitlements. Executive acknowledges and agrees that Executive no longer has any rights, and the Company no longer has any obligations, pursuant to Paragraphs 6 and 7 of the Employment Agreement. Except as expressly provided in this Agreement, the Company shall have no further liability to Executive or Executive’s heirs, beneficiaries or estate for damages, compensation, benefits, severance or other amounts of whatever nature, directly or indirectly, arising out of or otherwise related to this Agreement and Executive’s employment or cessation of employment with the Company. Except as otherwise expressly set forth or acknowledged in this Agreement, Executive is not entitled to any further compensation or benefits from MDC. Executive further acknowledges and agrees, and represents and warrants, that he does not own or have any right to any stock, stock appreciation rights or other equity in MDC, except for (A) the restricted stock pursuant to the LTIP Restricted Stock Agreement, (B) 154,179 Class A shares previously vested and/or purchased in the open market and (C) 43,000 previously vested stock appreciation rights with a strike price of $6.60 (which remain subject to their existing terms and conditions).

5.Release of Claims by Executive. In exchange for the consideration set forth in Paragraph 3 above, Executive knowingly and voluntarily (for himself, and on behalf of his heirs, estate planning entities, executors, administrators, assigns, agents, attorneys, trustees, fiduciaries, representatives and all persons or entities acting by, through, under, or in concert with any or all of them (the “Executive Releasors”)) releases and forever discharges MDC, its parents, subsidiaries and affiliates, and their respective officers, directors, employees, shareholders, members, agents, attorneys, trustees, fiduciaries, representatives, benefit plans and plan administrators, successors and/or assigns, and all persons or entities acting by, through, under, or in concert with any or all of them (collectively, the “MDC Released Parties”) from any and all claims, suits, controversies, actions, causes of action, crossclaims, counterclaims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date hereof) and whether known or unknown, suspected, or

claimed against any of the Company Released Parties which the Executive Releasors, may have, which arise out of or are connected with Executive’s provision of services to, employment with, or his separation or termination from, the Company or any of its affiliates (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Employee Retirement Income Security Act of 1974; the New York State Human Rights Law (NYSHRL); the New York Labor Law (NYLL) (including but not limited to the Retaliatory Action by Employers Law, the New York State Worker Adjustment and Retraining Notification Act, all provisions prohibiting discrimination and retaliation, and all provisions regulating wage and hour law); the New York Civil Rights Law, Section 125 of the New York Workers' Compensation Law, Article 23-A of the New York Correction Law; the New York City Human Rights Law (NYCHRL); the New York City Earned Sick Leave Law (NYCESLL); any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under any policies, practices or procedures of the Company Group; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing are collectively referred to herein as the “Claims”); provided, however, that the MDC Released Parties acknowledge and agree that this Agreement does not waive or release any Claims (i) to enforce the terms and conditions of this Agreement; (ii) for Executive’s accrued benefits earned and vested as of Executive’s Termination Date under an employee benefit plan maintained by any Company Released Party and governed by the Employee Retirement Income Security Act, (iii) to enforce Executive’s rights to indemnification, advancement and liability insurance protection, as further detailed herein, (iv) challenging Executive’s waiver of any and all claims under the Age Discrimination in Employment Act of 1967 pursuant to this Agreement is a knowing and voluntary waiver, (v) to bring to the attention of the Equal Employment Opportunity Commission (EEOC) claims of discrimination; provided, however, that Executive does release his right to secure any damages for alleged discriminatory treatment, or (vi) that cannot be released as a matter of law.

6.Knowing and Voluntary Waiver; Acknowledgements. By executing this Agreement, Executive and the Company, where applicable, acknowledge and confirm that:

(a)Executive has been afforded a reasonable and sufficient period of time to review this Agreement, for deliberation thereon and for negotiation of the terms thereof, and Executive is hereby specifically urged and advised by the Company to consult with an attorney, legal counsel or a representative of Executive’s choice before signing it;

(b)Executive has carefully read and understands the terms of this Agreement, all of which have been fully explained to Executive;

(c)Executive has signed this Agreement freely and voluntarily and without duress or coercion and with full knowledge of its significance and consequences and of the rights relinquished, surrendered, released and discharged hereunder;

(d)The only consideration for signing this Agreement are the terms stated herein and no other promise, agreement or representation of any kind has been made to Executive or the Company by any person or entity whatsoever to cause Executive or the Company to sign this Agreement, but for the Term Sheet from which this Agreement emanates;

(e)Executive acknowledges that Executive has been informed that Executive has the right to consider this Agreement for a period of at least twenty one (21) days prior to entering into this Agreement. Executive expressly acknowledges that Executive has taken sufficient time to consider this Agreement before signing it;

(f)Executive expressly acknowledges that, if any changes – whether material or immaterial – are or were made to this Agreement after Executive’s receipt for review, such changes do not commence a new twenty one (21) day period for consideration;

(g)Executive and the Company acknowledge that this Agreement does not waive rights or claims that may arise after the date this Agreement is signed;

(h)The Parties understand, acknowledge and agree that their obligations to each other under this Agreement (including any release of claims), will not be effective until the First Effective Date. Absent a breach of this Agreement, the Executive and the Company will sign a Second Release of Claims Agreement (in the form of Exhibit A which is identical to the releases set forth in this Agreement but for date, and will apply to the time period between the Parties execution of this Agreement and the Termination Date). The Second Release of Claims Agreement will become effective after the lapse of the Second Release Agreement’s Rescissionary Period (as defined therein) without the delivery of a notice of rescission by the Executive as outlined in the Second Release of Claims Agreement (the “Second Effective Date”). Absent a breach of this Agreement, in the event the Second Effective Date does not occur as a result of Executive’s failure to execute the Second Release of Claims Agreement or Executive’s recission of the Second Release of Claims Agreement, Executive shall immediately forfeit any rights to the Severance Payments and, to the extent already paid to Executive, Executive shall immediately repay to the Company such Severance Payments (on a pre-tax basis); and

(i)Executive acknowledges and agrees that, by entering into this Agreement, he is waiving his right to resign his employment with the Company for Good Reason based on any action, inaction, fact or circumstance that occurred prior to his

execution of this Agreement, and thereby waives any right to claim Good Reason with respect to any such actions, inactions, facts or circumstances.

7.Release of Claims by Company. The Company, on behalf of itself and the MDC Released Parties, knowingly and voluntarily releases and forever discharges the Executive Releasors from any and all past and present claims, suits, controversies, actions, causes of action, crossclaims, counterclaims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, which the MDC Released Parties may have which arise out of or are connected with Executive’s provision of services to, employment with, or his separation or termination from, the MDC Released Parties, whether arising under federal, state, local, or common law, or under a regulation or ordinance, any public policy, whether sounding in contract or tort or arising under any policies, practices or procedures of the Company Group, whether secured or unsecured, accrued or unaccrued, whether direct, indirect, derivative, by subrogation or brought in any other capacity and whether known or unknown, suspected, claimed or unclaimed the “Potential Company Claims”); provided, however, that Executive acknowledges and agrees that this Agreement does not waive or release any Potential Company Claims (i) relating to Executive’s commission of any felony or intentional fraud; (ii) to enforce the terms and conditions of this Agreement; (iii) to enforce the restrictive covenants set forth in paragraphs 8, 9, and 10 of the Employment Agreement (as modified by Paragraph 9, below with respect to Executive’s ability to practice law) (together, the “Restrictive Covenants”) or (iv) that cannot be released as a matter of law. By signing this Agreement, the Company represents and warrants that as of the date of its execution, the Company (in the form of Mark Penn, its Chief Executive Officer and Frank Lanuto, its Chief Financial Officer) does not have knowledge of any prior conduct by Executive that would give rise to a claim of intentional fraud or constitute a felony.

8.Continued Applicability of Restrictive Covenants. Executive will continue to be subject to the Restrictive Covenants set forth in paragraphs 8, 9, and 10 of the Employment Agreement as if such paragraphs were incorporated directly herein. In addition, Employee acknowledges and agrees that neither the Company nor any of its affiliates, successors or assigns is hereby waiving or releasing any of its rights to enforce any such restrictive covenants in accordance with their terms. Notwithstanding anything in this Agreement or the Employment Agreement to the contrary, the Company and Executive acknowledge and agree that the Restrictive Covenants shall not restrict Executive’s ability to practice law to the extent consistent with NY ST RPC Rule 5.6.

9.Mutual Agreements and Acknowledgements.

(a)Executive and the Company each represents that Executive or the Company, as applicable, has not made any assignment or transfer of any right, claim, demand, cause of action or other matter covered by Paragraph 5 above, with respect to Executive, or by Paragraph 7 above, with respect to the Company.

(b)Each Party represents and warrants that (i) it is duly authorized to execute and deliver this Agreement; (ii) it has taken all necessary action to authorize the execution and delivery of this Agreement; (iii) the person signing this Agreement on its behalf is duly authorized to do so; and (iv) this Agreement constitutes its valid, binding and enforceable obligation subject, in the case of Executive, to the right of revocation described in Paragraph 28 hereof.

(c)In signing this Agreement, Executive and the Company each acknowledges and intends that it shall be bar each and every one of the Claims and Potential Company Claims, except as otherwise expressly provided herein. Executive and the Company each expressly consents that this Agreement shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims or Potential Company Claims (notwithstanding any state statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims or Potential Company Claims), if any, as well as those relating to any other Claims or Potential Company Claims hereinabove mentioned or implied. Executive and the Company each acknowledges and agrees that these waivers are an essential and material term of this Agreement and that without such waivers the other party would not have agreed to the terms of this Agreement. Executive and the Company each further agrees that in the event it should bring a Claim or Potential Company Claim, as applicable, seeking damages against the MDC Released Parties, in the case of any Executive Releasors, or any Executive Releasors, in the case of the MDC Released Parties, or in the event any Executive Releasor should seek to recover against any MDC Released Party in any Claim brought by a governmental agency on such Executive Releasor’s behalf, in the case of Executive, this Agreement shall serve as a complete defense to such Claims or Potential Company Claims, as applicable. Executive and the Company each further agrees that it is not aware of any pending charge or complaint of the type described herein as of the execution of this Agreement.

(d)Executive and the Company each agrees that neither this Agreement, nor the furnishing of the consideration for this Agreement, shall be deemed or construed at any time to be an admission by any MDC Released Party or Executive of any improper or unlawful conduct.

(e)Except as prohibited by applicable law, Executive and the Company each agrees that if it challenges the validity of this Agreement or if it violates this Agreement by suing any of the MDC Released Parties, in the case of Executive, or the Executive Releasors, in the case of the Company, for any Claims or Potential Company Claims, as applicable, released pursuant to this Agreement, the other Party’s release of claims pursuant to this Agreement will cease to be effective. For the avoidance of doubt, this provision does not apply to any action that seeks to enforce the terms and conditions of this Agreement, or asserts a breach thereof.

(f)Notwithstanding anything herein to the contrary, nothing in this Agreement shall (i) prohibit Executive from making reports of possible violations of federal law or

regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934, as amended, or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of federal or state law or regulation, (ii) prohibit Executive from filing or proceeding with a charge with or participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission (EEOC), National Labor Relations Board (NLRB) or any other comparable federal, state, or local agency charged with the investigation and enforcement of any employment laws, or (iii) require notification or prior approval by the Company of any reporting described in provisions (i) or (ii). Executive is not authorized to disclose communications with the Company’s counsel that were made for the purpose of receiving legal advice or that contain legal advice or that are protected by the attorney work product or similar privilege. Furthermore, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law or (2) in a complaint or other document filed in a lawsuit or proceeding, if such filings is made under seal.

10.Return of Property.

(a)On or prior to the Termination Date Executive shall return to the Company any and all property, tangible or intangible, relating to its business, in Executive’s possession, custody or control (including, but not limited to, companyprovided credit cards, building or office access cards, keys, computer equipment, mobile phones, other IT equipment, manuals, files, documents, records, software, customer data base and other data) (the “Company Property”) and Executive shall not retain any copies, compilations, extracts, excerpts, summaries or other notes of any such Company Property; provided, however, that subject to Executive’s compliance with the Company’s policies and procedures regarding the removal of Company data, information and property, Executive shall be entitled to retain any Company issued laptop, mobile phone and any related accessories lawfully in Executive’s possession as of immediately prior to the Termination Date. In connection with these obligations, the Company will: (a) transfer to Executive his mobile phone number, and (b) remove Company security and access programs from Executive’s personal laptop (but not otherwise disturb or access the laptop).

(b)Within ten (10) business days of the Termination Date, the Company shall use commercially reasonable efforts to transfer Executive’s personal electronic files, which are contained under a folder in Box called “On The Go Network/DCR”, via a USB drive. Upon Executive confirming his receipt of the USB Drive, the Company will permanently delete Executive’s personal electronic files. Executive hereby represents and warrants that such personal electronic files do not contain any confidential information of the Company or any of its affiliates.

11.References and Non-Disparagement.

(a)Executive and the Company agree that inquiries from prospective employers with whom Executive applies for employment (as well as similar inquiries) will be directed to Frank Lanuto or his successor as Chief Financial Officer, who will limit any response to the statements made in “Exhibit B.”

(b)Furthermore, following the date hereof, the Executive and the Company shall each use their reasonable best efforts not to disparage, criticize or make statements to the detriment of the other.

12.Cooperation. Executive agrees to cooperate (with his own counsel, if he so elects) with the Company in matters concerning prior business arrangements, investigations, pending litigation or litigation which may arise in the future concerning matters about which Executive has personal knowledge or which were within the purview of Executive’s job responsibilities at the Company. Executive agrees to cooperate (with his own counsel, if he so elects) in the prosecution or defense of such claims involving the Company, whether or not such claims involve litigation, including giving truthful testimony as needed. Unless Executive agrees in writing to be represented by MDC’s counsel, MDC agrees that Executive is entitled to retain, and be indemnified for the reasonable legal fees of, separate counsel. The Company agrees to pay Executive’s reasonable out-of-pocket expenses (including paying and advancing reasonable outside counsel fees) incurred in complying with his obligations under this Paragraph 12.

13.Public Announcements. Subject to the provisions of the next sentence and except for the agreed-to public announcement attached hereto as “Exhibit B”, no party to this Agreement shall issue any press release or other public document or make any public statement relating to this Agreement or the matters contained herein without obtaining the prior approval of the Company and Executive. Notwithstanding the foregoing, the foregoing provision shall not apply to the extent that the Company is required to make any announcement relating to or arising out of this Agreement by virtue of applicable securities laws or other stock exchange rules, or any announcement by any party pursuant to applicable law or regulations following reasonable consultation with the other party to the extent practical.

14.Confidentiality of Agreement. Executive and the Company shall maintain the confidentiality of, and shall not disclose, this Agreement or matters related to its negotiation; provided, however that nothing herein shall prohibit: (a) Executive from disclosing this Agreement to his immediate family, attorneys, accountant and/or tax advisor; (b) the Company from making any (1) public disclosure to the extent consistent with the Company’s reporting and disclosure obligations or (2) internal disclosure on a management and operational need to know basis; or (c) either Party from making any disclosure required by law following reasonable consultation with the other Party to the extent practicable under the circumstances.

15.Attorney’s Fees. The Company shall reimburse Executive for his reasonable attorneys’ fees in preparing this Agreement and its negotiation (including the Term Sheet from which this Agreement emanates) subject to receipt by the Company of a detailed invoice

of any such expenses. Company shall pay such invoice(s) within ten (10) business days of receipt. To protect applicable privileges, the Company agrees and acknowledges that Executive may redact all time entry descriptions set forth in any such invoice.

16.Indemnification.

(a)The Company agrees and acknowledges that Executive is entitled to the maximum indemnity and advancement protections (subject to Executive executing customary undertakings) provided for either (i) in his March 12, 2021 Indemnification Agreement (which remains in full force and effect) (the “Indemnification Agreement”) or (ii) pursuant to applicable law, which the Parties agree is the Delaware General Corporation Law.

(b)Unless Executive agrees in writing to be represented by MDC’s counsel, MDC agrees that Executive is entitled to retain, and be indemnified for the reasonable legal fees of, separate counsel and such fees shall be advanced subject to Executive’s execution of a customary undertaking.

(c)In the event Executive participates or prepares to participate in any investigation, administrative proceeding or litigation relating to any matter in which Executive was involved or of which he has knowledge as a result of his employment with the Company, the Company shall pay to Executive reasonable out-of-pocket costs and expenses (including paying and advancing reasonable outside counsel fees).

(d)The Company further acknowledges and agrees that, with respect to indemnity and advancement protections to which Executive is entitled, it will pay Executive’s reasonable out-of-pocket costs and expenses (including reasonable outside counsel fees) in any proceeding brought by any person, including MDC, against Executive related to MDC (inclusive of Executive’s employment with it), as well any proceeding brought by Executive against MDC to successfully enforce the terms of this Agreement.

17.Governing Law. Executive and the Company each agrees and acknowledges that this Agreement shall be interpreted in accordance with and governed by in all respects by the substantive and procedural law of the State of New York without regard to the conflicts of law provisions thereof .

18.Arbitration.

(a)The Parties agree that any dispute, controversy or claim arising out of, relating to, or in connection with this Agreement (including, without limitation, any claim regarding or related to the interpretation, scope, effect, enforcement, termination, extension, breach, legality, remedies and other aspects of this Agreement or the conduct and communications of the Parties regarding this Agreement and the subject matter of this Agreement) shall be settled in private by binding arbitration, to be held in the Borough of Manhattan in New York City, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, this Paragraph 18 and the Federal Arbitration Act; provided, however, that nothing in

this Agreement shall waive or prejudice (i) Executive’s right to enforce any indemnification or advancement obligations pursuant to Paragraph 16; or (ii) the Company’s right to seek enforcement of any Restrictive Covenant in court. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Pending the resolution of any arbitration proceeding, Executive (and his beneficiaries) shall continue to receive all payments and benefits due under this Agreement or otherwise. No Party or arbitrator shall disclose in whole or in part to any other person, firm or entity any confidential information submitted in connection with the arbitration proceedings, except to the extent reasonably necessary to assist counsel in the arbitration, preparation for arbitration of the dispute, or in connection with a proceeding to confirm an arbitral award. Confidential Information may be disclosed to (i) attorneys, (ii) parties, and (iii) outside experts requested by either Party’s counsel to furnish technical or expert services or to give testimony at the arbitration proceedings, subject, in the case of such experts, to execution of a legally binding written statement that such expert is fully familiar with the terms of this provision, agree to comply with the confidentiality terms of this provision, and will not use any confidential information disclosed to such expert for personal or business advantage. The prevailing Party in any arbitration shall be entitled to receive its reasonable attorneys’ fees and costs from the other Party(ies) as may be awarded by the arbitrator.

(b)Notwithstanding anything above to the contrary, Executive shall be entitled, at his election, to enforce any indemnification or advancement rights in: (1) AAA arbitration; (2) the court in which the underlying dispute to which the claim for indemnification or advancement relates is being adjudicated; or (3) the federal and state courts located in the State of New York, which the Parties will contractually agree is an appropriate forum to adjudicate any such dispute. If Executive commences a proceeding to enforce any indemnification or advancement rights in accordance with Paragraph 16, the Company: (i) waives any objection to the venue of any such proceeding and the right to assert that such forum is not a convenient forum for such proceeding, (ii) irrevocably consents to the jurisdiction of such proceeding, and (iii) agrees to accept and acknowledge service of process that may be served in any such proceeding.

(c)Executive has read and understands this Paragraph 18. Executive understands that by signing this Agreement, Executive is agreeing that, but for any claims to enforce any indemnification or advancement rights, he will submit any claims arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach or termination thereof, or his employment or the termination thereof, to binding arbitration, and that this arbitration provision constitutes a waiver of Executive’s right to a jury trial and relates to the resolution of all disputes relating to all aspects of any such claims.

(d)To the extent that any part of this Paragraph 18 is found to be legally unenforceable for any reason, that part shall be modified or deleted in such a manner as to render this Paragraph 18 (or the remainder of this Paragraph 18)

legally enforceable and as to ensure that except as otherwise provided in this Paragraph 18, all conflicts between the Company and Executive shall be resolved by neutral, binding arbitration. The remainder of this Paragraph 18 shall not be affected by any such modification or deletion but shall be construed as severable and independent. If a court finds that the arbitration procedures of this Paragraph 18 are not absolutely binding, then the Parties intend any arbitration decision to be fully admissible in evidence, given great weight by any finder of fact, and treated as determinative to the maximum extent permitted by law.

19.Withholdings. The Company may withhold from any amounts payable under this Agreement, including, without limitation, the Severance Payments, such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

20.Golden Parachute Cutback.

(a)If the aggregate of all amounts and benefits due to Executive (or his beneficiaries), under this Agreement or any plan, program, agreement or arrangement of the Company (or any payments, benefits or entitlements by or on behalf of any person that effectuates a related transaction) (collectively, "Change in Control Benefits"), would cause Executive to have "parachute payments" as such term is defined in and under Section 280G of the Code, and would result in the imposition of excise taxes pursuant to Section 4999 of the Code, the Company will reduce (or cause to be reduced) any such payments and benefits so that the Parachute Value of all Change in Control Benefits, in the aggregate, equals the Safe Harbor Amount minus $1,000.00, but only if, by reason of such reduction, the Net After-Tax Benefit shall exceed the Net After-Tax Benefit if such reduction were not made (a "Required Reduction"). The determinations with respect to this Paragraph 20 shall be made by an independent auditor (the "Auditor"). The Auditor shall be Deloitte or another nationally-recognized United States public accounting firm chosen, and paid for, by the Company in consultation with Executive. Notwithstanding any provision to the contrary in this Agreement or in any other applicable plan, program, agreement or arrangement of the Company (A) the Auditor shall make its calculations using the methodology set forth in the spreadsheet prepared by Deloitte entitled MDC Partners Inc 280G v13 Detailed.pdf (the “Preliminary 280G Calculation”) (it being understood and agreed that the actual calculations set forth therein will be rerun as of the Termination Date to reflect changes in factual inputs); (B) unless required by a final decision of a court of competent jurisdiction or change in applicable law, each of the Parties agrees to treat, for all purposes, each portion of the Severance Payments as a “parachute payment” or not a “parachute payment” in a manner consistent with the Preliminary 280G Calculation and the Parties shall use their reasonable best efforts to support such treatment if challenged by any government tax authority, including the U.S. Internal Revenue Service, until a court of competent jurisdiction issues a final decision contradicting the Parties’ treatment of the Severance Payments; and (C) any Required Reduction shall be implemented as follows: first, by reducing any cash payments to be made to

Executive under Paragraph 3 above; second, by reducing the cash portions of any payments payable to Executive under any other agreements, policies, plans, programs or arrangements; and third, then by reducing non-cash portions of any payments or entitlement payable to Executive; provided that in all events any payment or entitlement which receives the favorable valuation under Q&A 24(b) and (c) of Treas. Reg. §1-280G shall not be reduced before all payments or entitlements which do not receive such favorable valuation have been reduced. In the case of the reductions to be made pursuant to each of the above-mentioned sequencing, the payment and/or benefit amounts to be reduced shall be reduced in the inverse order of their originally scheduled dates of payment or vesting, as applicable, and shall be so reduced (x) only to the extent that the payment and/or benefit otherwise to be paid, or the vesting of the award that otherwise would be accelerated, would be treated as a "parachute payment" within the meaning of Section 280G(b)(2)(A) of the Code, and (y) only to the extent necessary to achieve the Required Reduction.

(b)It is possible that after the determinations and selections made pursuant to Paragraph 20(a) Executive will receive Change in Control Benefits that are, in the aggregate, either more or less than the limitations provided in Paragraph 20(a) above (hereafter referred to as an "Excess Payment" or "Underpayment", respectively). In the event that it is determined (1) pursuant to a final and conclusive determination (x) by arbitration under Paragraph18 above, (y) by a court of competent jurisdiction, or (z) an Internal Revenue Service proceeding, or (2) by the Auditor upon request by Executive or the Company, that an Excess Payment has been made, then Executive shall refund the Excess Payment to the Company promptly on demand, together with an additional payment in an amount equal to the product obtained by multiplying the Excess Payment times the applicable annual federal rate (as determined in and under Section 1274(d) of the Code), or such higher rate as is necessary to ensure that the Change in Control Benefits are less than the Safe Harbor Amount, times a fraction whose numerator is the number of days elapsed from the date of Executive's receipt of such Excess Payment through the date of such refund and whose denominator is 365. In the event that it is determined (1) pursuant to a final and conclusive determination (x) by arbitration under Paragraph 18 above, (y) by a court of competent jurisdiction, or (z) an Internal Revenue Service proceeding, or (2) by the Auditor upon request by Executive or the Company, that an Underpayment has occurred, the Company shall pay an amount equal to the Underpayment to Executive within ten (10) days of such determination.

(c)All determinations made by the Auditor under this Paragraph 20 shall be final and binding upon the Company and Executive and shall be made as soon as reasonably practicable following the event giving rise to the Change in Control Benefits, or such later date on which a Change in Control Benefit has been paid.

(d)Definitions. The following terms shall have the following meanings for purposes of this Paragraph 20.

(A)"Net After-Tax Benefit" shall mean the present value (as determined in accordance with Section 280G(d)(4) of the Code) of the Change in Control Benefits net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Executive's taxable income for the immediately preceding taxable year, or such other rate(s) as Executive certifies is likely to apply to Executive in the relevant tax year(s).

(B)"Parachute Value" of a Change in Control Benefit shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Change in Control Benefit that constitutes a "parachute payment" under Section 280G(b)(2) of the Code and its implementing regulations, as determined by the Auditor for purposes of determining whether and to what extent the parachute tax will apply to such Change in Control Benefit.

(C)The "Safe Harbor Amount" means 2.99 times Executive's "base amount," within the meaning of Section 280G(b)(3) of the Code and its implementing regulations.

21.Severability. Whenever possible, each provision of this Agreement shall be interpreted in, such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or its validity and enforceability in any other jurisdiction, and, instead, this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, the remaining provisions of this Agreement shall continue in full force and effect without such provision.

22.Counterparts / Electronic Signatures. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. Facsimile and PDF signatures shall have the same force and effect as original signatures.

23.Assignment. The Company and Executive agree that this Agreement shall inure to the benefit of, be binding upon and may be enforced by or against, any and all successors and assigns of the Company, including, without limitation, any successor entity as a result of the consummation of the Stagwell Transaction or any other Change in Control transaction. The Company and Executive agree that Executive’s rights and obligations under this Agreement are personal to the Executive, and Executive shall not have the

right to assign or otherwise transfer his rights or obligations under this Agreement, and any purported assignment or transfer shall be void and ineffective, provided that the rights of Executive to receive certain payments under this Agreement upon death shall inure to Executive’s estate and heirs. The rights and obligations of the Company hereunder shall be binding upon and run in favor of the successors and assigns of the Company.

24.Entire Agreement. The Company and Executive hereby acknowledge and represent that this Agreement contains the entire agreement between Executive and the Company concerning the Employee’s separation of employment from the Company, and upon its execution supersedes any and all previous agreements, including the Term Sheet between the Parties dated July 19, 2021 (the “Term Sheet”), concerning the subject matter hereof. The Parties further acknowledge and represent that the only earlier agreed-to promises, representations or warranties whatsoever made, express, implied or statutory, not contained herein, concerning the Employee’s separation of employment from the Company are set forth in the Term Sheet. The Employment Agreement, the Indemnification Agreement, the LTIP Restricted Stock Agreement and the LTIP Cash Award remain in force and effect, except as modified herein. In the event of any discrepancy or inconsistency between the terms of this Agreement and the terms of any prior agreement between or involving the Parties, including without limitation the Employment Agreement, the Indemnification Agreement, the LTIP Restricted Stock Agreement and the LTIP Cash Award, the terms of this Agreement shall control.

25.Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

26.No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the Company and Executive to express their mutual intent, and no rule of law or contract interpretation that provides that in the case of ambiguity or uncertainty a provision should be construed against the draftsman will be applied against any party hereto.

27.Equitable Relief. The Parties each acknowledges and agrees that a remedy at law for any breach or attempted breach of this Agreement may be inadequate, and agree that the other party may be entitled to specific performance and injunctive and other equitable relief in the case of any such breach or attempted breach.

28.Amendment. This Agreement may not be amended or modified in any way, except pursuant to a written instrument signed by both parties.

29.Attorney Review; Review Period; Revocation Period. Executive is hereby advised that he should consult with an attorney prior to executing this Agreement. Executive is also advised that he has twenty-one (21) days from the date this Agreement is delivered to him within which to consider whether he will sign it. If Executive signs this Agreement, he acknowledges that he understands that he may revoke this Agreement within seven (7) days after he has signed it by notifying MDC in writing that he has revoked this Agreement. Such notice shall be addressed to Mark Penn, c/o Stagwell Inc., One World

Trade Center, 65th Floor, New York, NY 10007. This Agreement shall not be effective or enforceable in accordance with its terms until the 7-day revocation period has expired (the date such revocation period expires without revocation, the “First Effective Date”).

[Signature Page Follows]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed, effective as of the date first written below.

DATE: July 30, 2021 /s/ David Ross
David Ross

Midas OpCo Holdings LLC

(as successor-in-interest to MDC Partners Inc.)

DATE: July 30, 2021 /s/ Mark Penn
Name: Mark Penn

Title: Chief Executive Officer

Exhibit A: Second Release of Claims

This SECOND RELEASE OF CLAIMS AGREEMENT (the “Second Release of Claims”) is made and entered into on the first date set forth on the signature page hereto pursuant to the SEPARATION AGREEMENT AND MUTUAL GENERAL RELEASE (the “Agreement), by and between David Ross (“Executive”) and Midas OpCo Holdings LLC (as successor-in-interest to MDC Partners Inc.) (“MDC” or the “Company” and, together with Executive, the “Parties”). Capitalized terms used and not otherwise defined in this Second Release of Claims shall have the meanings, set forth, respectively, in the Agreement and in the Second Amended and Restated Employment Agreement by and between Executive and the Company, dated as of February 27, 2017 (the “Employment Agreement”).

WHEREAS, Executive served General Counsel & Executive Vice President, Strategy and Corporate Development, of the Company pursuant to the Employment Agreement and subsequent promotions;

WHEREAS, MDC and Executive terminated their relationship of employer and employee, respectively, on the mutually agreed terms and conditions set forth in the Agreement;

WHEREAS, the Executive and the Company agreed to sign this Second Release of Claims for the purpose of exchanging releases covering the time period between the Parties execution of the Agreement and the Executive’s Termination Date, at the time the Termination Date was reached;

WHEREAS, the Termination Date has been reached.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

1.Second Release of Claims by Executive. In exchange for the consideration set forth herein and in the Agreement, the Executive Releasors knowingly and voluntarily release and forever discharge the MDC Released Parties from any and all claims, suits, controversies, actions, causes of action, crossclaims, counterclaims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date hereof) and whether known or unknown, suspected, or claimed against any of the Company Released Parties which the Executive Releasors, may have, which arise out of or are connected with Executive’s provision of services to, employment with, or his separation or termination from, the Company or any of its affiliates between the day Executive executed the Agreement and the day Executive is executing this Second Release (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Employee Retirement Income Security Act of 1974; the New York State Human

Rights Law (NYSHRL); the New York Labor Law (NYLL) (including but not limited to the Retaliatory Action by Employers Law, the New York State Worker Adjustment and Retraining Notification Act, all provisions prohibiting discrimination and retaliation, and all provisions regulating wage and hour law); the New York Civil Rights Law, Section 125 of the New York Workers' Compensation Law, Article 23-A of the New York Correction Law; the New York City Human Rights Law (NYCHRL); the New York City Earned Sick Leave Law (NYCESLL); any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under any policies, practices or procedures of the Company Group; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing are collectively referred to herein as the “Claims”); provided, however, that the MDC Released Parties acknowledge and agree that this Second Release of Claims does not waive or release any Claims (i) to enforce the terms and conditions of the Agreement or this Second Release of Claims; (ii) for Executive’s accrued benefits earned and vested as of Executive’s Termination Date under an employee benefit plan maintained by any Company Released Party and governed by the Employee Retirement Income Security Act, (iii) to enforce Executive’s rights to indemnification, advancement and liability insurance protection, as further detailed in the Agreement, (iv) challenging Executive’s waiver of any and all claims under the Age Discrimination in Employment Act of 1967 pursuant to this Second Release of Claims is a knowing and voluntary waiver, (v) to bring to the attention of the Equal Employment Opportunity Commission (EEOC) claims of discrimination; provided, however, that Executive does release his right to secure any damages for alleged discriminatory treatment, or (vi) that cannot be released as a matter of law.

2.Second Release of Claims by Company. In exchange for the consideration set forth herein and in the Agreement, the Company, on behalf of itself and the MDC Released Parties, knowingly and voluntarily releases and forever discharges the Executive Releasors from any and all past and present claims, suits, controversies, actions, causes of action, crossclaims, counterclaims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in law and in equity, which the MDC Released Parties may have which arise out of or are connected with Executive’s provision of services to, employment with, or his separation or termination from, the MDC Released Parties between the day the MDC Released Parties executed the Agreement and the day the MDC Released Parties are executing this Second Release of Claims, whether arising under federal, state, local, or common law, or under a regulation or ordinance, any public policy, whether sounding in contract or tort or arising under any policies, practices or procedures of the Company Group, whether secured or unsecured, accrued or unaccrued, whether direct, indirect, derivative, by subrogation or brought in any other capacity and whether known or unknown, suspected, claimed or unclaimed the “Potential Company Claims”); provided, however, that Executive acknowledges and agrees that this Second Release of Claims does not waive or release any Potential Company Claims (i) relating to Executive’s commission of any felony or intentional

– p.2

fraud; (ii) to enforce the terms and conditions of the Agreement or this Second Release of Claims; (iii) to enforce the Restrictive Covenants; or (iv) that cannot be released as a matter of law. By signing this Second Release of Claims, the Company represents and warrants that as of the date of its execution, the Company (in the form of Mark Penn, its Chief Executive Officer and Frank Lanuto, its Chief Financial Officer) does not have knowledge of any prior conduct by Executive that would give rise to a claim of intentional fraud or constitute a felony.

3.Acknowledgments. By executing this Second Release of Claims, Executive and the Company, where applicable, acknowledge and confirm that:

(a)Executive has been afforded a reasonable and sufficient period of time to review this Second Release of Claims, for deliberation thereon and for negotiation of the terms thereof, and Executive is hereby specifically urged and advised by the Company to consult with an attorney, legal counsel or a representative of Executive’s choice before signing it;

(b)Executive has carefully read and understands the terms of this Second Release of Claims, all of which have been fully explained to Executive;

(c)Executive has signed this Second Release of Claims freely and voluntarily and without duress or coercion and with full knowledge of its significance and consequences and of the rights relinquished, surrendered, released and discharged hereunder;

(d)The only consideration for signing this Second Release of Claims are the terms stated herein and in the Agreement, and no other promise, agreement or representation of any kind has been made to Executive or the Company by any person or entity whatsoever to cause Executive or the Company to sign this Second Release of Claims, but for the Term Sheet from which the Agreement emanates;

(e)Executive acknowledges that Executive has been informed that Executive has the right to consider this Second Release of Claims for a period of at least twenty one (21) days prior to entering into this Second Release of Claims. Executive expressly acknowledges that Executive has taken sufficient time to consider this Second Release of Claims before signing it;

(f)Executive expressly acknowledges that, if any changes – whether material or immaterial – are or were made to this Second Release of Claims after Executive’s receipt for review, such changes do not commence a new twenty one (21) day period for consideration;

(g)Executive and the Company acknowledge that this Second Release of Claims does not waive rights or claims that may arise after the date this Second Release of Claims is signed; and

– p.3

(h)Executive and the Company acknowledge that this Second Release of Claims does not waive any and all rights or claims that they have under the Agreement, or pursuant thereto.

4.Revocation Period. If Executive signs this Second Release of Claims, he acknowledges that he understands that he may revoke this Second Release of Claims within seven (7) days after he has signed it by notifying MDC in writing that he has revoked this Agreement. Such notice shall be addressed to Mark Penn, c/o Stagwell Inc., One World Trade Center, 65th Floor, New York, NY 10007. This Second Release of Claims shall not be effective or enforceable in accordance with its terms until the 7-day revocation period has expired (the date such revocation period expires without revocation, the “Second Effective Date”).

IN WITNESS WHEREOF, the Parties have caused this Second Release of Claims to be executed, effective as of the date first written below.

DATE: 8/2/2021 /s/ David Ross
David Ross

Midas OpCo Holdings LLC

(as successor-in-interest to MDC Partners Inc.)

DATE: 8/2/2021 /s/ Mark Penn
Name: Mark Penn

Title: Chief Executive Officer

– p.4

EXHIBIT B: AGREED-TO PUBLIC STATEMENT

David Ross, MDC’s General Counsel and Executive Vice President, Strategy and Corporate Development, [will be leaving the Company within the next month/has left the Company]. In his more than 11 years at MDC, David has played an integral role at every critical juncture for the Company, serving as a key leader throughout acquisitions, financings, leadership transitions and strategic investments. David was appointed by the Board of Directors as interim co-CEO over the course of three months in 2019 prior to Mark Penn’s arrival as Chairman and CEO, and then teamed up with Mr. Penn to help lead the Company’s transformation and its merger with Stagwell. David originally joined the Company in 2010 as Associate General Counsel, became Senior Vice President in 2012, and Executive Vice President in 2017. MDC is grateful to David for his service and wishes him all the best.

– p.5

Exhibit 31.1

Certification Pursuant to Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section

302 of the Sarbanes-Oxley Act of 2002

I, Mark Penn, certify that:

1.I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2021 of Stagwell Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 9, 2021		/s/ MARK PENN
	By:	Mark Penn
	Title:	Chairman and Chief Executive Officer

Exhibit 31.2

Certification Pursuant to Rules 13a-14(a) and 15d-14(a) as Adopted Pursuant to Section

302 of the Sarbanes-Oxley Act of 2002

I, Frank Lanuto, certify that:

1.I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2021 of Stagwell Inc.;

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: November 9, 2021		/s/ FRANK LANUTO
	By:	Frank Lanuto
	Title:	Chief Financial Officer

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Stagwell Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark Penn, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: November 9, 2021

/s/ MARK PENN
By:			Mark Penn
Title:			Chairman and Chief Executive Officer

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Stagwell Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frank Lanuto, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: November 9, 2021

/s/ FRANK LANUTO
By:			Frank Lanuto
Title:			Chief Financial Officer