Stagwell Acquires Movers+Shakers and Releases Q3 2023 Earnings

Stagwell Inc. today announced financial results for the three and nine months ended September 30th, 2023.

Third quarter and nine months highlights:

• Q3 revenue of $618 million, a decrease of 7% versus the prior year period; YTD revenue of $1,872 million, a decrease of 5% versus the prior year period
• Q3 net revenue of $535 million, a decrease of 4% versus the prior period; YTD net revenue of $1,596 million, a decrease of 3% versus the prior year period
• Q3 organic net revenue declined 7% versus the prior year period and 5% ex-Advocacy; YTD organic net revenue declined 6% versus the prior year period and 4% ex-Advocacy
• Q3 net revenue from international increased 25%, led by increases of 30% in EMEA, 18% in LATAM and 12% in APAC
• Q3 revenue from the Stagwell Marketing Cloud Group capability increased 7%, and net revenue increased 20%
• Q3 revenue from the Performance Media & Data capability increased 8%, and net revenue increased 11%
• Q3 net income of $3 million versus net income of $35 million in the prior year period; YTD net loss of $12 million versus net income of $93 million in the prior year period
• Q3 net income attributable to Stagwell Inc. common shareholders of $653 thousand versus net income of $11 million in the prior year period; YTD net loss attributable to Stagwell Inc. common shareholders of $4 million versus net income of $34 million in the prior year period
• Q3 Adjusted EBITDA of $102 million, a decrease of 12% versus the prior year period; YTD Adjusted EBITDA of $265 million, a decrease of 19% versus the prior year period
• Q3 Adjusted EBITDA Margin of 19% on net revenue, an increase of 210 basis points sequentially; YTD Adjusted EBITDA Margin of 17% on net revenue
• Q3 earnings per share attributable to Stagwell Inc. common shareholders of $0.003
• Q3 Adjusted earnings per share attributable to Stagwell Inc. common shareholders of $0.18; YTD Adjusted earnings per share of $0.45
• Q3 net new business of $81 million; YTD net new business of $209 million

"Stagwell achieved over $100 million of EBITDA in Q3 and is on course to return to growth over the next two quarters as new business continues to flow in and the tech industry pauses and auto and entertainment strikes which have impacted this sector are ebbing," said Mark Penn, chairman and CEO, Stagwell. "We are already growing in key areas like media and international and made adjustments to again achieve a 19% margin on net revenue."

"We have trimmed our costs, implemented new systems, reordered our portfolio, and are ready for a strong 2024 as the political cycle kicks in again and as we introduce our cutting-edge AI products within the Stagwell Marketing Cloud. Our disposition of a single non-core asset for $245 million, which has now closed, both improves our balance sheet and readies the company for further growth and expansion through prudent investment."

Frank Lanuto, chief financial officer, commented, "In the face of continued sector-wide headwinds, we took decisive measures to reduce costs to align with our revenue which resulted in a third quarter adjusted EBITDA margin of 19 percent, in line with our targeted operating range. Continued progress with our initiatives to standardise and centralise our cost structure to the shared services platform will be accretive to margins over the next several quarters. The sale of ConcentricLife will serve to reduce net debt and will support our goal of strengthening the balance sheet and reducing financial leverage.

Financial Outlook

2023 financial guidance is as follows:

• Organic Net Revenue decline of about 4%
• Organic Net Revenue excluding Advocacy decline of about 2.5%
• Adjusted EBITDA of $390 million – $410 million
• Free Cash Flow Conversion of 40% - 50%
• Adjusted EPS of $0.73 - $0.78

Guidance assumes no impact from foreign exchange, acquisitions or dispositions.

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

On October 2nd, 2023, the Company acquired 100% of the membership interest of Left Field Labs, LLC, a digital experience design and strategy company, for approximately $9.4 million in cash, and 825,402 shares of Class A Common Stock, par value $.001 per share (the 'Class A Common Stock'), subject to post-closing adjustments. In connection with the agreement, the previous owners are entitled to contingent consideration up to a maximum value of $51.0 million, subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company's discretion.

On October 31st, 2023, the Company completed the sale of its integrated healthcare marketing agency and pharmaceutical commercialisation platform, ConcentricLife, for $245 million in cash.

On November 1st, 2023, the Company acquired Movers and Shakers LLC, a business that provides social media marketing solutions, for approximately $15 million, to be paid in cash or up to 30% in shares of Class A Common stock, subject to post-closing adjustments. In connection with the agreement, the previous owners are entitled to contingent consideration up to a maximum value of $35 million, subject to meeting certain future earnings targets, of which a portion may be settled in shares of Class A Common Stock at the Company's discretion.

Video Webcast

Management will host a video webcast on Thursday, November 2nd, 2023, at 8:30 a.m. (ET) to discuss results for Stagwell Inc. for the three and nine months ended September 30th, 2023. The video webcast will be accessible here. An investor presentation has been posted on our website at www.stagwellglobal.com and may be referred to during the webcast.