STGW 10-K & 10-Q changes, risk factors and insider trading

You should carefully consider the risk factors set forth below, as well as the other information contained in this Form 10-K, including our Audited Consolidated Financial Statements and related notes. Any of the following risks could materially and adversely affect our business, results of operations, financial condition, cash flows, projected results and future prospects. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also 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 discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K.

Advertising, marketing and communications expenditures are sensitive to global, national and regional macroeconomic conditions, including inflationary pressures, currency fluctuations, geopolitical uncertainty and elevated interest rates, as well as specific budgeting levels and buying patterns. Adverse developments such as inflationinflation, evolving tariff and trade policies, or heightened economic uncertainty can reduce the demand for our services and pose a risk that clients may reduce, postpone or cancel spending on advertising, marketing and corporate communications projects. For example, inflation rates have increased in recent years, and the effects of increased inflation and other adverse conditions on our customers have in the past resulted and may in the future result in decreased demand for our products and services, decreased revenue, increases in ourincreased operating costs (including our labor costs), and decreased profitability, and may result in reduced liquidity and limits on our ability to access credit or otherwise raise capital. In cases of sustained inflation across several of our major markets, it becomes increasingly difficult to effectively control increases to our costs. If we are unable to increase our fees or take other actions to mitigate the effect of the resulting higher costs, our business, results of operations and financial position could be negatively impacted. In addition, in the past, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which include discretionary components that are easier to reduce in the short term than other operating expenses. This pattern may recur in the future and could have a material adverse effect on our revenue, results of operations, cash flows and financial condition. In addition, elevated interest rates have had and may continue to have the effect of further increasing economic uncertainty and heightening these risks, as well as increasing the cost of capital.

Our revenue and profitability depend on the demand for our services and favorable margins, which have been and may continue to be negatively affected by numerous factors, many of which are beyond our control and unrelated to our work product. To increase our revenues and achieve favorable margins, we will need to attract additional clients or generate demand for additional services and products from existing clients, and such demand will depend on factors including clients’ and potential clients’ requirements, pre-existing vendor relationships, financial condition, strategic plans, internal resources and satisfaction with our work product and services, as well as broader economic conditions, competition and the quality of our Brands’ employees, services and reputation.reputation and the breadth of our services. In addition, developments in the markets we serve, which may be rapid, could shift demand to services and solutions where we are less competitive, or might require significant investment by us to upgrade, enhance or expand our services and solutions to meet that demand. To the extent that we are unable to generate sufficient and profitable client demand, our ability to grow our business, increase our revenues and achieve favorable margins will be limited, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

Our clients may terminate or reduce the scope of their relationships with us on short notice. Our ability to attract and retain clients is an important aspect of our competitiveness, and client loss, including due to competitors, as a consequence of client consolidation, insolvency or a reduction in marketing budgets due to recessionary economic conditions, or a shift in client spending could have a material adverse effect on our business, results of operations, financial condition and prospects. Many companies, including companies with which we have long-standing relationships, put their advertising and marketing communications business up for competitive review from time to time, and we have lost client accounts in the past as a result of such reviews. Our clients may choose to terminate their contracts, or reduce their relationships with us, on a relatively short time frame and for any reason, including as a result of such competitive reviews, a reduction in marketing budgets due to external factors such as economic conditions or their own financial distress or insolvency, competition from other marketing services providers, clients’ consolidation, a shift in their spending or clients’ dissatisfaction with our services, reputation or personnel.

A relatively small number of clients contributes a significant portion of our revenue, which magnifies this risk. In the aggregate, our top ten clients based on revenue accounted for approximately 21%18% of our revenue for the year ended December 31, 2024.2025. No customer represented more than 4% of total revenue. Historically, client concentration has increased during election years due to the cyclical nature of our advocacy Brands. A substantial decline in a large client’s advertising and marketing spending, the loss of a significant part of their business or the loss of one or more of our largest clients could have a material adverse effect on our business, prospects, results of operations and financial condition.

We have made investments to develop new marketing services products and technologies, including theThe StagwellMachine, our Palantir partnership, products at The Marketing Cloud and other marketing data, campaign martech,MarTech, AR and VR applications, and AI and generative AI offerings, and we intend to continue investing significant resources in developing and/or acquiring new technologies, tools, features, services, products and offerings. Our new initiatives are inherently risky, as each involves development of new software platforms or other product offerings, unproven business strategies and technologies with which we may have limited prior development or operating experience. We may also encounter significant technical or other challenges with respect to the development of these products. They may also involve additional claims and liabilities (including intellectual property claims), expenses, regulatory challenges, and other risks that we do not currently anticipate.

There can be no assurance that client demand for our new products, and technologies will exist or be sustained at the levels that we anticipate, or that any of these initiatives will gain sufficient traction or market acceptance to generate sufficient revenue to offset any new expenses or liabilities associated with these new investments. It is also possible that products and offerings developed by others will render our new products and offerings noncompetitive or obsolete. If we do not realize the expected benefits of our investments, our business, financial condition, results of operations and prospects may be harmed.

We are increasingly building generative AI features into some of our offerings, such as generative AI content creation tools, and are making investments in expanding our generative AI capabilities. As part of this process, we also utilize generative AI tools offered by third-party providers in the development and testing of our offerings. Generative AI is a new and emerging technology in itsthe relatively early stages of commercial use and presents certain inherent risks. Generative AI algorithms are based on machine ‑learning and predictive analytics, which can create or amplify unintended biases and discriminatory outcomes, andand, their outputs canmay be completelyincomplete, fabricatedinaccurate or false.misleading. There is a risk that ourthe algorithmsgenerative AI tools we deploy could produce such outcomes or other unexpected results or behaviors that could harm our reputation, business, or clients.

The AI regulatory landscape is still uncertain and evolving, and the development and use of AI technologies, including generative AI, in new or existing content creation tools and other offerings may result in new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns or other complications that could be costly and time-consuming and could adversely affect our business, reputation or financial results. Furthermore, the use of AI by bad actors presents increasingly complex and sophisticated security threats to our confidential Company data, and we must make additional efforts to maintain network security.

We are a global business, with Brands operating in 35over 34 countries as of December 31, 2024.2025. Operations outside the United States represent a significant portion of our revenues and represented approximately 18%23% of our revenues in 2024.2025. The operational and financial performance of our international businesses are affected by global and regional economic conditions, competition for new business and staff, political conditions, differing regulatory environments and other issues associated with extensive international operations. Conducting our business internationally, particularly in developing markets in which we have limited experience, subjects us to risks that we do not face to the same degree in the United States. These risks include, among others:

•potential changes to import and export restrictions, changes induties, trade regulation and economic sanctions compliance;

•war, conflict, geopolitical tensions and other political, social, and economic instability abroad, terrorist attacks and security concerns, such as escalating tensions in the Taiwan Strait and the ongoing conflicts in Iran and the Middle East, and between Russia and Ukraine and in Israel and Gaza; and

Geopolitical events, international hostilities, acts of terrorism or natural disasters could negatively impact our business through, among other things, disruption of our and our Brands’ business operations, decreased demand for our or our clients’ services, disruption in the credit markets, heightened risk of cybersecurity attacks and disruptions to our information technology infrastructure, increased energy costs and labor and supply chain disruptions. This could result in suspension of our or our clients’ businesses in the affected region, which could impact client spending on our services. Any of these occurrences could have a material adverse impact on our business, results of operations, financial condition and prospects. For example, followingthe Russia’sconflict invasionin of UkraineIran and the impositionMiddle ofEast economichas sanctionsdisrupted targetingtravel Russiato byand from our Brands’ offices in the UnitedMiddle StatesEast, could disrupt our Brands’ operations, and othercould countries,result wein suspendeda decrease in demand for our business operationsservices in Ukrainethe region. The conflict in Iran and disposedthe ofMiddle all our businesses in Russia. The war in UkraineEast is ongoing, and its duration is uncertain. We cannotmay not be able to accurately predict the impact of the war in Ukraineconflict or other international hostilities on our businesses and operations.

Our revenue, cash flow, operating results and other key operating and performance metrics vary from quarter to quarter due to the seasonal nature of our clients’ spending on the services we provide. For example, clients tend to devote more of their advertising budgets to the fourth calendar quarter to coincide with consumer holiday spending, and we typically generate our highest quarterly revenue during the fourth quarter in each year. Political advertising and related activity have also historically caused our revenue to increase during election cycles, which is most pronounced in even years, in particular during the third and fourth quarters of such years, and to decrease during other periods. Seasonality could have a more significant impact on our revenue, cash flow and operating results from period to period inas thea eventresult of declines in our growth rate or if seasonal spending becomes more pronounced.

Our business strategy includes engaging in acquisitions, investments and strategic mergers to enhance the services and solutions we provide, enter new industries, expand our client base, and strengthen our global presence and scale of operations. We may be unable to realize the benefits we expect from our past and future acquisitions and other strategic transactions for a variety of reasons, including due to our failure to effectively integrate newly acquired businesses into our operations, errors in our forecasting or factors that we do not control, such as the reactions of existing and potential clients, employees, investors and regulators.

Our integration efforts are subject to significant risks and uncertainties, including with respect to our ability to realize our anticipated synergies and cost savings, our ability to retain and attract executives, employees and clients, the acquired company’s technology that is not easily compatible with ours, or difficulty in retaining the clients of any acquired business due to changes in management, the diversion of management’s attention from other business concerns, and undisclosed, unknown or potential legal liabilities, including litigation against the companies we may acquire, for example from failure to identify all of the significant risks or liabilities associated with the target business. In addition, we may not accurately forecast the financial impact of aan strategicacquisition transaction, andincluding mayaccounting incurcharges. substantialOur depreciationfailure orto amortizationaddress expenses,these impairment of goodwill and/or purchased long-lived assets, restructuring charges, deferred compensationrisks or other acquisition-relatedproblems accountingcould charges.cause We may also become subjectus to adverseincur taxunanticipated consequences. Any of these risks could materiallyliabilities and adversely affectharm our business,business financial condition, results of operations and prospects.generally.

We are dependent on information technology networks and systems to securely process, transmit and store electronic information and to communicate among our locations around the world and with our people, clients, Global Affiliates partners and vendors. As the breadth and complexity of this infrastructure continues to grow, including as a result of the increasing reliance on, and use of, mobile technologies, social media and cloud-based services, the risk of security incidents and cyberattacks has increased. Such incidents could lead to shutdowns or disruptions of or damage to our systems and those of our clients, Global Affiliates partners and vendors, and unauthorized disclosure of sensitive or confidential information, including personal data and proprietary business information. Also, given the unpredictability of the timing, nature and scope of such cybersecurity threats and attacks, we may be unable to anticipate attempted security breaches and, in turn, implement adequate preventative measures. Our systems and processes to protect against, detect, prevent, respond to and mitigate cybersecurity incidents and our organizational training for employees to develop an understanding of cybersecurity risks and threats may be unable to prevent material security breaches, theft, modification or loss of data, employee malfeasance (including improper use of social media) and additional known and unknown threats. We have experienced, and may again experience, data security incidents resulting from unauthorized access to our and our service providers’ systems and unauthorized acquisition of our data and our clients’ data, including inadvertent disclosure,systems, misconfiguration of systems, phishing ransomware or malware attacks. In addition, certain of our clients may experience breaches of systems and cloud-based services enabled by or provided by us.

We and certain of our Brands produce AI, software and e-commerce tools for clients, including theThe StagwellMachine, our partnership with Palantir, The Marketing Cloud and other martechmarketing products,data, campaign MarTech, AR and VR applications, and AI and generative AI offerings, and such types of software and e-commerce product offerings have become increasingly subject to litigation based on allegations of patent infringement or other violations of intellectual property rights. In addition, the intellectual property ownership and license rights, including copyrights, surrounding AI technologies, including generative AI, have not been fully addressed by U.S. courts or other federal, state, or international laws or regulations, and the use or adoption of third-party generative AI technologies into our offerings may result in exposure to claims of copyright infringement or other intellectual property claims, which could harm our business and financial results. As we expand these product offerings, the possibility of an intellectual property claim against us grows.

Existing and proposed laws and regulations, in particular in the European Union and the United States, concerning user privacy, use of personal data and online tracking technologies could also affect the efficacy and profitability of internet-based, digital and targeted marketing. We are subject to laws and regulations that govern whether and how we can transfer, process or receive certain data that we use in our operations. For example, federal laws and regulations governing privacy and security of consumer information generally apply to our clients and/or to us as a service provider. These laws and regulations include, but are not limited to, the federal Fair Credit Reporting Act, the Gramm-Leach-Bliley Act and regulations implementing its information safeguarding requirements, the Junk Fax Prevention Act of 2005, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, the Telephone Consumer Protection Act, the Do-Not-Call-Implementation Act, applicable Federal Communications Commission telemarketing rules (including the declaratory ruling affirming the blocking of unwanted robocalls), the Federal Trade Commission Privacy Rule, Safeguards Rule, Consumer Report Information Disposal Rule, Telemarketing Sales Rule, Risk-Based Pricing Rule, Red Flags Rule, and the CCPA. Laws of foreign jurisdictions, such as Canada’s Anti-Spam Law and Personal Information Protection and Electronic Documents Act, and the GDPR similarly apply to our collection, processing, storage, use, and transmission of protected data. The European Union, for example, has tightened its rules on the transferability of data to the United States. Collection,Additional processing,laws, such as the European Union’s Artificial Intelligence Act (Regulation (EU) 2024/1689) entered into force in August 2024 and storage of biometric identifiers has comebecome underapplicable increasingon regulationa phased basis, including with respect to prohibited AI practices and, subsequently, broad compliance obligations for certain ‘high-risk’ AI systems and isspecified thetransparency subjectrequirements. ofAccordingly, classthese actionlaws litigation.could Anyrequire failure on our partus to complyalter, with these legal requirements,restrict, or theirincur applicationadditional incosts anto unanticipatedprocess manner,personal could harm our business and result in penaltiesdata or significantuse legalAI-enabled liability. The imposition of restrictions on certain technologies by private market participants in response to privacy concerns could also have a negative impact on our digital business. If we are unable to transfer data between countries and regions in which we operate, or if we are prohibited from sharing data among our productstools and services, it could affect the manner in which we provideincrease our servicescompliance, monitoring, documentation, and governance costs, expose us to enforcement actions or civil claims, and adversely affect our financialresults results.of operations.

We are subject to many laws and regulations in the United States and other countries in which we operate that restrict our international operations, includingsuch as applicable economic sanctions and export control laws thatand prohibitregulations activities involving restricted countries, organizations, entitiesadministered and personsenforced thatby have been identified as unlawful actors or that are subject tothe U.S. sanctions.Department Theof U.S.Treasury Office of Foreign Assets Control (“OFAC”), the U.S. Department of State, The U.S. Department of Commerce, the United Nations Security Council and other internationalrelevant bodiesauthorities. haveSuch imposedlaws sanctionsand thatregulations prohibit or restrict us from engaging in tradecertain oroperations, financialinvestment transactionsdecisions withand sales activities, including dealings involving certain countries, businesses, organizations and individuals. Despite our efforts to ensurepromote compliance with applicable law,laws and regulations, it is difficult to anticipate the effect such economic sanctions and export controls may have on us, and compliance with any further sanctions imposed or actions taken by the United States or other countries, as well as the effect of current or further economic sanctions (and any retaliatory responses thereto) may otherwise have an adverse effect on our operations.

We are also subject to the U.S. Foreign Corrupt Practices Act (“FCPA”) and anti-bribery and anti-corruption laws in otherthe countries.countries where we do business. The FCPA prohibits U.S.covered businesses and their representativesparties from offeringoffering, topromising, pay, paying, promising to payauthorizing or authorizing the payment of money orgiving anything of valuevalue, directly or indirectly, to a “foreign government official” inwith orderthe tointent influenceof anyimproperly influencing the official’s act or decisiondecision, inducing the official to act or refrain from acting in violation of thelawful foreign official in hisduty, or her official capacityobtaining or toretaining secure any otheran improper advantagebusiness inadvantage. orderThe FCPA also requires publicly traded companies to obtainmaintain orrecords retainthat business.accurately Globally,and fairly represent their transactions and to have an adequate system of internal accounting controls. In addition, other countries have enacted anti-bribery and anti-corruption laws similar to the FCPA, such as the U.K. Bribery Act 2010,2010. allSome oflaws whichthat may apply to our operations prohibit companiescommercial andbribery, theirincluding intermediariesgiving or receiving improper payments to or from bribingnon-government governmentparties, officialsas forwell theas purposeso-called of“facilitation” obtaining or keeping business or otherwise obtaining favorable treatment.payments. We operate in many parts of the world that have experienced government corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices, although adherence to local customs and practices is generally not a defense under U.S. and other anti-bribery laws.

We may be subject to an intellectual property infringement or misappropriation claims.claim.

Some of our solutions use software made available under open source licenses, and we expect to continue to incorporate open source software in our solutions in the future. Open source software is typically freely available. While this may reduce development costs and speed up the development process, it may also present certain risks that may be greater than those associated with the use of third-party commercial software. For example, open source software is generally provided without any warranties or other contractual protections regarding infringement or the quality of the code, including the existence of security vulnerabilities. We cannot guarantee we comply with all obligations under these licenses. If the owner of the copyright in the relevant open source software were to allege that we had not complied with the conditions of one or more open source licenses, we could be required to incur significant expenses defending against such allegations and could be subject to the payment of damages, enjoined from further use of the software, required to comply with conditions of the license (which may include releasing the source code of our proprietary software to third parties without charge), or forced to devote additional resources to re-engineer all or a portion of our solutions to avoid using the open source software. Any of these events could create liability for us, damage our reputation, and have an adverse effect on our business, resultresults of operations, financial condition and prospects.

We are highly leveraged. As of December 31, 2024,2025, we had $1.4$1.3 billion of total consolidated indebtedness outstanding. Our outstanding credit agreement and notes are guaranteed by substantially all of our material domestic subsidiaries, and our outstanding credit agreement is secured by substantially all of the assets and stock of such subsidiaries. Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us in an amount sufficient to enable us to service all our debt, to refinance all our debt or to fund our other liquidity needs. If we are unable to meet all our debt service obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a portion of our debt. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations. If we cannot make scheduled payments on our debt, we will be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable; the lenders under our outstanding credit agreement could terminate their commitments to loan us money and foreclose against the assets securing our borrowings; and we could be forced into bankruptcy or liquidation, which could adversely affect our business, results of operations, financial condition and prospects.

Our high degree of leverage could have important consequences for us, including:

•exposing us to the risk of increased interest rates becauseas substantiallyborrowings all ofunder our borrowings,credit other than the $1,100,000 aggregate principal amount of 5.625% senior notes due 2029 (the “5.625% Notes”),agreement are at a variable ratesrate of interest;

•limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting.

We maintain our credit agreement, together with cash flow from operations and proceeds from our recent notes financing, to fund our working capital needs and to fund the exercise of put option obligations and contingent deferred acquisition payments. If credit were unavailable or insufficient under our credit agreement, our liquidity could be adversely affected, and our ability to fund our working capital needs and any contingent obligations with respect to put options or contingent deferred acquisition payments could be adversely affected. We have made acquisitions for which we have deferred payment of a portion of the purchase price, with the deferred acquisition consideration generally payable based on achievement of certain thresholds of future earnings of the acquired company. In addition, a noncontrolling equity holder in an acquired business sometimes has the right to require the us to purchase all or part of such holder’s interest, either at specified dates or upon the termination of such holder’s employment with the subsidiary or death (put rights). Payments we are required to make in respect of deferred acquisition consideration and noncontrolling equity holder put rights may be significantly higher than the amounts we estimate because the actual obligation adjusts based on the performance of the acquired businesses over time. If available liquidity is insufficient, we may be unable to fund contingent deferred acquisition payments.

As part of our umbrella partnership-C corporation (“Up-C”) structure, we are a holding company and our principal asset is our ownership of common units of our operating subsidiary, OpCo. This structure is designed to enable us to obtain certain tax benefits, and 85% of such tax benefits are payable to Stagwell Media under our Tax Receivables Agreement with Stagwell Media and OpCo. However, we have no independent means of generating revenue or cash flow, and our ability to pay taxes and operating expenses, and to service our liabilities, is dependent upon the financial results and cash flows of OpCo and its subsidiaries, along with the distributions we receive from OpCo. We intend, as OpCo’s sole manager, to cause OpCo intends to make paymentscash distributions to us out of its available funds,funds andas required for our operations as a holding company subject only to limitations imposed under the agreements governing our indebtedness,indebtedness. andNevertheless, there can be no assurance that OpCo and its subsidiaries will generate sufficient cash flow to distribute funds to us or that applicable state law and contractual restrictions will permit such distributions. Moreover, because of our Up-C structure, this financing arrangement can give rise to U.S. corporate income tax liabilities for us in respect of assets deemed contributed to OpCo on the formation of OpCo, and subsequentlyOpCo as OpCo makes cash distributions to us to the extent theysuch distributions are subject to certain technical regulations regarding disguised sales, subject to certain exceptions in such regulations including for distributions of operating cash flows and leveraged distributions. In such an event, we would depend on further cash distributions from OpCo in order to enable us to pay such tax liabilities.

We also incur expenses related to our operations, which may be significant. We intend, as OpCo’s sole manager, to cause OpCo to make cash distributions to us as the ownersowner of all OpCo membership interests so that we receive (i) an amount sufficient to allow us to fund all of our tax obligations in respect of taxable income allocated to us from OpCo and (ii) distributions to cover our operating expenses, including any obligations to make payments under the Tax Receivables Agreement. When OpCo makes distributions, Stagwell Media and the other members of OpCo besides us are and will be entitled to receive proportionate distributions based on their economic interests in OpCo’s common units at the time of such distributions. OpCo’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement to which OpCo is then a party, or any applicable law, or that would have the effect of rendering OpCo insolvent or exceed the amounts that OpCo is permitted to distribute under the agreements governing our indebtedness. If we do not have sufficient funds to pay tax or other liabilities or to fund our operations, we may have to borrow funds, which could materially and adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such indebtedness. To the extent that we are unable to make payments under the Tax Receivables Agreement for any reason, such payments generally will be deferred and will accrue interest until paid, but nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivables Agreement and therefore accelerate payments due under the Tax Receivables Agreement. Any inability to pay tax or other liabilities or to fund our operations could have a material and adverse effect on our business, results of operations, financial condition and prospects.

Our Tax Receivables Agreement with Stagwell Media requires us to make cash payments to Stagwell Media (or its assignees) in respect of certain tax benefits to which we mayhave become entitled, and we expect the payments we are required to make to be substantial, may be required to be made prior to the time that we recognize any associated tax benefits and may make our company a less attractive target to potential acquirers.

In connection with the closing of the Transactions, we entered into the Tax Receivables Agreement with OpCo and Stagwell Media, pursuant to which we are required to make cash payments to Stagwell Media equal to 85% of certain U.S. federal, state and local income tax or franchise tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (i) increases in the tax basis of OpCo’s assets resulting from redemptions or exchanges by the other holders of OpCo’s common units, together with a corresponding number of shares of our Class C common stock, par value $0.00001 per share (the “Class C Common Stock,Stock”), for shares of our Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to us making payments under the Tax Receivables Agreement. As of April 4, 2025, all of OpCo’s units and our Class C Common Stock formerly held by Stagwell Media have been exchanged for our Class A Common Stock. We expect the amount of cash payments that we are required to make under the Tax Receivables Agreement (or to assignees of its rights thereunder) to be significant. Any payments made to Stagwell Media under the Tax Receivables Agreement will generally reduce the amount of overall cash flow that may have otherwise been available to us.

The actual increase in tax basis, as well as the amount and timing of any payments under the Tax Receivables Agreement, varieswill vary depending on a number of factors, including, but not limited to, the timing of any future redemptions or exchanges, the price of our Class A Common Stock at the time of such redemptions or exchanges, the extent to which redemptions or exchanges are taxable, the amount and timing of the taxable income that we generate in the future, the timing and amount of any earlier payments we make under the Tax Receivables Agreement itself, the tax rates thenapplicable applicablefor the year in which tax benefits arising from prior redemptions or exchanges of OpCo common units are utilized and the portion of our payments under the Tax Receivables Agreement constituting imputed interest. We expect that, as a result of the increases in the tax basis of OpCo’s tangible and intangible assets attributable to the redeemed or exchanged OpCo common units, the payments that we may make to Stagwell Media could be substantial. The amounts we may be required to pay under the Tax Receivables Agreement will be calculated based in part on the market value of our Class A Common Stock at the time of redemption or exchange and the prevailing federal tax rates applicable to us over the life of the Tax Receivables Agreement (as well as the assumed combined state and local tax rate), and will generally be dependent on our ability to generate sufficient future taxable income to realize all of these tax savings.

Under its amended and restated operating agreement, subject to availability of funds and limitations imposed under the agreements governing our indebtedness, OpCo is generally required from time to time to make distributions in cash to us in amounts that are intended to be sufficient to cover the taxes on our allocable share of the taxable income of OpCo, and OpCo is also required to make pro rata distributions at such time to the other holders of its common units, including Stagwell Media, without taking into account the tax savings realized by us that result in our obligations under the Tax Receivables Agreement. There is no guarantee that the amounts or timing of such distributions will be sufficient to cover payments required under the Tax Receivables Agreement, including in the event payments under the Tax Receivables Agreement are due prior to the time that we realize the associated tax benefits. In particular, the Tax Receivables Agreement provides that in the case of a change in control, a material breach of our obligations under the Tax Receivables Agreement, or if, at any time, we elect an early termination of the Tax Receivables Agreement, then the Tax Receivables Agreement will terminate and our obligations under the Tax Receivables Agreement would accelerate and become due and payable. In such a case, we would be required to make an immediate cash payment to Stagwell Media in an amount equal to the present value of all future payments (calculated using a discount rate equal to the Secured Overnight Financing Rate (“SOFR”) plus 100 basis points) under the Tax Receivables Agreement, which payment would be based on certain assumptions, including that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivables Agreement and that Stagwell Media had exchanged any remaining outstanding common units of OpCo, together with shares of our Class C Common Stock, for shares of our Class A Common Stock.Agreement.

As discussed in Item 9A. “Controls and Procedures” of this Form 10-K, managementManagement previously identified material weaknesses in our internal control over financial reporting for the fiscal year ended December 31, 2023. The material weaknesses related to our lack of a sufficient complement of resources with an appropriate level of accounting knowledge, experience and training, ineffective risk assessment process, ineffective controls over information and communication relating to communicating accurate information internally and externally and ineffective monitoring controls. These material weaknesses contributed to an additional material weakness relating to ineffective control activities that address relevant risks at the appropriate level of precision. We remediated the material weaknesses during 2024 byand implementingconcluded several enhancements tothat our internal control over financial reporting.reporting was effective as of December 31, 2024 and December 31, 2025. However, there can be no assurance that additional material weaknesses in our internal control over financial reporting will not be identified in the future.

We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. WeAny believecontrol that any disclosure controls and procedures or internal controls and procedures,system, no matter how well-conceivedwell designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that theits objectives ofwill the control system arebe met. These inherent limitations include the reality that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make judgments, estimates, and assumptions that affect the amounts reported in the Audited Consolidated Financial Statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A Common Stock. Significant judgments, estimates, and assumptions used in preparing our Audited Consolidated Financial Statements include, or may in the future include, those related to revenue recognition, business combinations, deferred acquisition consideration, noncontrolling and redeemable noncontrolling interests, goodwill and intangible assets, right-of-use lease assets, and income taxes.

We and OpCo are subject to tax in multiple tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that jurisdictional tax authorities may take a contrary view, which may have a significant impact on our global provision for income taxes. Additionally, asunder aOpCo’s pass-throughLLC entity for U.S. tax purposes,Agreement, OpCo is required to make periodic distributions to (i) us, to enable us to pay taxes allocable to our investment in OpCo, and (ii) the holders of OpCo’s common units and corresponding shares of our Class C Common Stock.OpCo. If our or OpCo’s effective tax rate were to increase, such obligations to make tax distributions will correspondingly increase. See “—Risks Related to Our Capital Structure and Financing—Our Up-C structure places significant limitations on our cash flow and accordingly, we depend on distributions from OpCo to pay our taxes and expenses, including payments under the Tax Receivables Agreement.”

A significant portion of our Class A Common Stock is held by our affiliates and these shares of Class A Common Stock may be sold into the market in the future, or should allow the affiliates to control decisions requiring stockholder approval, either of which could negatively affect our stock price.

As of December 31, 2024,2025, Stagwellaffiliates Mediaof the Company beneficially owned approximately 57%64% of our outstanding shares of Class A Common Stock on an as-converted basis.Stock. Although the shares held by Stagwell Media are subject to securities law restrictions on sales by affiliates, we, Stagwell Mediawe and certain otherof partiesthe affiliates are party to a registration rights agreement and a securities purchase agreement pursuant to which, among other things and subject to certain restrictions, we are required to file (and have filed) with the SEC a registration statement registering for resale the shares of our Class A Common Stock that are held by, or are issuable upon exchange of units of OpCo (in combination with corresponding shares of our Class C Common Stock) held by, such parties,affiliates, and to conduct certain underwritten offerings upon the request of holders of registrable securities, including direct and indirect transferees of such holders. In addition, we are party to a securities purchase agreement pursuant to which we are required to register for resale the shares of Class A Common Stock issued to certain of our stockholders upon the conversion of our previously outstanding Series 8 convertible preferred stock.affiliates.

In addition, this concentration of ownership and voting power allowscould Mr.allow Pennthe affiliates to control our decisions, including matters requiring approval by our stockholders (such as, subject to certain limitations, the election of directors and the approval of mergers or other extraordinary transactions), regardless of whether or not other stockholders believe that the transaction is in their own best interests. Such concentration of voting power could also have the effect of delaying, deterring or precluding a change of control or other business combination that might otherwise be beneficial to our stockholders, could deprive our stockholders of an opportunity to receive a premium for their Class A Common Stock as part of a sale of our company and might ultimately affect the market price of our Class A Common Stock.

Stagwell conducts its business through its networks,segments, which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell’s strategy is to build, grow, and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment. We believe Stagwell’s differentiation lies in its creativedigital-first and technology-based roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients. Stagwell leverages its range of services in an integrated manner, offering strategic, creative and innovative solutions that are technologically forward and media-agnostic. The Company’s strategy is intended to challenge the industry status quo, realize returns on investment, and drive transformative growth and business performance for its clients and stakeholders.

Stagwell manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenue, operating expenses, staff cost ratio, capital expendituresexpenditures, net income (loss), net income (loss) attributable to Stagwell Inc. common shareholders, net income (loss) per share and the non-GAAP financial measures including Adjusted EBITDA, Free cash flow and Adjusted EPS, described below. Revenue growth is analyzed by reviewing a mix of measurements, including (i) growth by major geographic location, (ii) growth from existing clients and the addition of new clients, (iii) growth by principal capability, (iv) growth from currency changes, and (v) growth from acquisitions. In addition to monitoring the foregoing financial indicators, the Company assesses and monitors several non-financial performance indicators relating to the business performance of our networks. These indicators may include a network’s recent new client win/loss record; the depth and scope of a pipeline of potential new client account activity; the overall quality of the services provided to clients; and the relative strength of the network’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.

On DecemberJanuary 23,30, 2024,2026, the Company enteredacquired intoWavelength, a saledigital advocacy and communications company, for an estimated purchase agreementprice toof acquire$10.2 Createmillion, Groupof Holdingwhich Limited,approximately a$4.6 strategicmillion digitalwas communications grouppaid in Middlecash East, forand approximately $16$5.6 million was paid in 863,624 shares of the Company’s Class A Common Stock subject to post-closing adjustments. UnderIn connection with the agreement,acquisition, the sellers are entitledeligible to earn contingent consideration up to a maximum value of approximately $24$24.8 million, subject to continued employment and meeting certain future earnings targets, of which a portion may be settled in shares of Class A common stock, par value $0.001 per share (the “Class A Common Stock”)Stock, at the Company’s discretion. The acquisition is expected to close in the second quarter of 2025.

Historically, we typically generate the highest quarterly revenue during the fourth quarter of each year. In addition, within our Communications Network, client concentration increases during election years due to the cyclical nature of our advocacy Brands. The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season. In addition, within our Communications segment, client concentration increases during election years due to the cyclical nature of our advocacy Brands.

The Company reports its financial results in accordance with accounting principles generally accepted in the United States (“GAAP”).GAAP. In addition, the Company has included non-GAAP financial measures and ratios, which management uses to operate the business, which it believes provide useful supplemental information to both management and readers of this report in making period-to-period comparisons in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP. The non-GAAP financial measures included are “net revenue,” “organic net revenue growth (decline),” “Adjusted EBITDA,” and “Adjusted Diluted EPS.”

The net impact of acquisitions (divestitures) reflects the year-over-year change in the Company’s reported net revenue attributable to the impact of all individual entities that were acquired or divested in the current and prior year. WeBeginning with the quarter ended September 30, 2025, we calculate the impact of an acquisition as follows: (a) for an entity acquired during the current year, we present the entity’s current period reported revenue as the impact of the acquisition in the current year; and (b) for an entity acquired in the prior year, we present an amount equal to the entity’s current year net revenue for the same period during which we didn’t own the entity in the prior year as the impact of the acquisition in the current year. Previously, we calculated the impact of an acquisition as follows: (a) for an entity acquired during the current year, we presented the entity’s prior year net revenue for the same period during which we owned it in the current year as impact of the acquisition in the current year; and (b) for an entity acquired in the prior year, we presentpresented the entity’s prior year net revenue for the period during which we did not own the entity in the prior year as impact of the acquisition in the current year. We believe that this change in the method of calculating the impact of an acquisition results in a measurement of organic net revenue growth (decline) that better reflects the effect of our management of an acquired entity by including the revenue of the acquired entity in such measurement after we have owned it for 12 months. We calculate impact of a divestiture as follows: (a) for a divestiture in the current year, we present the entity’s prior year net revenue for the same period during which we no longer owned it in the current year as impact of the divestiture in the current year; and (b) for a divestiture in the prior year, we present the entity’s prior year net revenue for the period during which we owned it in the prior year as impact of the divestiture in the current year. We calculate the impact of any acquisition or divestiture without adjusting for foreign currency exchange fluctuations.

“Adjusted EBITDA” is defined as Net income (loss) attributable to Stagwell Inc. common shareholders excluding non-operating income or expense to achieve operatingOperating income (loss), plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, impairment and other losses, and other items. Other items primarily includes restructuring, certain system implementationimplementation, working capital administrative fees and acquisition-related expenses. Adjusted EBITDA for our reportable segments is reconciled to Operating Incomeincome (Lossloss), as Net Incomeincome (Lossloss) is not a relevant reportable segment financial metric.

“Adjusted Diluted EPS” is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income (loss) attributable to Class C shareholders, excluding the impact of amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items (as defined above), based on total consolidated amounts, then allocated to Stagwell Inc. common shareholders and Class C shareholders, based on their respective income allocation percentage using a normalized effective income tax rate divided by (ii) the diluted weighted average shares outstanding. The diluted weighted average shares outstanding is calculated as (a) the diluted weighted average number of common shares outstanding plus (b) the weighted average number of outstanding shares of Class C common stockstock, par value $0.00001 per share (the “Class C Common Stock”). The diluted weighted average shares outstanding include shares of Class C Common Stock as if converted to shares of Class A Common Stock toif calculatenot Adjustedincluded Dilutedbecause EPS.they were anti-dilutive.

The Company’s Chief Operating Decision Maker (“CODM”) uses Adjusted EBITDA (as defined above) as a key metric,metric to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions.

The“Corporate, Companyeliminations reportsand corporate expenses as “Corporate.other” Corporate consists of revenue generated by the Other business components, strategic investments in new technologies, elimination of certain intercompany revenue and expenses, and corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These corporate office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office.

The geographic mix in netNet revenuesrevenue for the yearyears ended December 31, 20242025 and 20232024 was as follows:

Deferred acquisition consideration increaseddecreased $9.9by $30.5 million, primarily attributable to acquisitions,a the changereduction in the fair value of the deferred acquisition consideration liability associated with certain obligations,Brands asdriven wellby asperformance timing, partially offset by the earnstrong outperformance periodin certain Brands, causing an increase in the fair value of certainthe brandsdeferred endingacquisition duringconsideration 2024.liability of those Brands .

Interest expense, net for the year ended December 31, 20242025 was $92.3$96.4 million, compared to $90.6$92.3 million for the year ended December 31, 2023,2024, an increase of $1.7$4.1 million,million. This increase was primarily attributable to higher levels of debt outstanding under the Credit Agreement (as defined and discussed in Note 11 of the Notes to the Audited Consolidated Financial Statements included herein), andused to support the growth in working capital attributable to the growth of Net revenue of the business, partially offset by a higherlower average interest rate on amounts outstanding under the Credit Agreement.rate.

The foreign exchange loss for the year ended December 31, 2024,2025, was $1.7$1.6 million, compared to a loss of $3.0$1.7 million for the year ended December 31, 2023,2024, primarilynearly attributableflat todespite theincreased movementvolatility in the Britishprimary Pound.currencies in which we operate.

GainLoss on Sale of Business

The Company had an incomeIncome tax expense for the year ended December 31, 20242025 of $38.3 million (on a pre-tax income of $68.8 million resulting in an effective tax rate of 55.6%) compared to Income tax expense of $13.2 million (on a pre-tax income of $37.7 million resulting in an effective tax rate of 34.9%), compared to income tax expense of $40.6 million (on pre-tax income of $91.1 million resulting in an effective tax rate of 44.5%) for the year ended December 31, 2023.2024.

The difference in the effective tax rate of 55.6% in the year ended December 31, 2025, as compared to 34.9% in the year ended December 31, 2024, compared to 44.5% in the year ended December 31, 2023, iswas primarily due to a decrease on gain related to sale of business, and a change in priorbenefits periodfrom adjustmentsexpired offsetforeign bytax credits, an increase in foreignvaluation taxallowance, and a reductiondecrease in taxthe benefitsbenefit forof sharethe baseddisregarded compensationentity structure due to the full exchange in April 2025.

The effect of noncontrollingNoncontrolling and redeemable noncontrolling interests for the year ended December 31, 20242025 was an income of $22.8$1.5 million, compared to an income of $41.5$22.8 million for the year ended December 31, 2023.2024. The amounts arewere driven by the mix of income and loss derived from entities not entirely owned by the Company. Additionally, the change was driven by the Class C Exchange during the second quarter of 2025, which increased the income allocated to Stagwell Inc.’s common shareholders.

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

The following discussion and analysis are based on and should be read in conjunction with our Unaudited Consolidated Financial Statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended MarchJune 31,30, 2026 (the “Form 10-Q”). The following discussion and analysis contain forward-looking statements and should be read in conjunction with the disclosures and information contained and referenced under the captions “Forward-Looking Statements” and “Risk Factors” in thisthe 2025 Form 10-Q.10-K, our Quarterly Reports on Form 10-Q, and in other documents we file with the SEC from time to time. The following discussion and analysis also include a discussion of certain non-GAAP financial measures. A description of the non-GAAP financial measures discussed in this section and reconciliations to the comparable United States (“U.S.”) generally accepted accounting principles (“GAAP”) measures are below.

Stagwell manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenue, operating expenses, staff cost ratio, capital expenditures, net income (loss), net income (loss) attributable to Stagwell Inc. common shareholders, net income (loss) per share and the non-GAAP financial measures including Adjusted EBITDA, Organic net revenue growth (decline), Free cash flow at consolidated level, and Adjusted Diluted EPS, as defined and described below. Revenue growth is analyzed by reviewing a mix of measurements, including (i) growth by major geographic location, (ii) growth from existing clients and the addition of new clients, (iii) growth by service line, (iv) growth from currency changes, and (v) growth from acquisitions. In addition to monitoring the foregoing financial indicators, the Company assesses and monitors several non-financial performance indicators relating to the business performance of our segments. These indicators may include the Company’s recent new client win/loss record; the depth and scope of a pipeline of potential new client account activity; the overall quality of the services provided to clients; and the relative strength of the Company’s next generation team that is in place as part of a potential succession plan to succeed the current senior executive team.

The most significant factors affecting our business and results of operations include national, regional, and local economic conditions, our clients’ profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees. New business wins and client losses occur due to a variety of factors. We believe the two most significant factors are (i) our clients’ desire to change marketing communication firms, and (ii) the digital and data-driven products that our portfolio of marketing services firms, which we refer to as “Brands,” offer. A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain a Brand that it may have previously worked with. In addition, if the client ismerges mergedwith or is 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.

The Company reports its financial results in accordance with GAAP. In addition, the Company has included non-GAAP financial measures and ratios, which management uses to operate the business, which it believes provide useful supplemental information to both management and readers of this report in making period-to-period comparisons in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP. The non-GAAP financial measures included are “net revenue,” “organic net revenue growth (decline),” “Adjusted EBITDA,” “Free Cash Flow,” and “Adjusted Diluted EPS.”

“Adjusted EBITDA” is defined as Net income (loss) attributable to Stagwell Inc. common shareholders excluding non-operating income or expense, income tax expense or benefit, equity in income or loss of non-consolidated entities and net income or loss attributable to noncontrolling and redeemable noncontrolling interest holders to achieve Operating income (loss), plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, impairment and other losses, and other items. Other items primarily includes restructuring, certain system implementation,implementation costs, working capital administrative fees and acquisition-related expenses. Adjusted EBITDA for our reportable segments is reconciled to Operating income (loss), as Net income (loss) is not relevant for reportable segment financial metric.

“Adjusted Diluted EPS” is defined as Adjusted Net Income (iloss) attributable to Stagwell Inc. common and Class C shareholders, divided by the diluted weighted average shares outstanding. Adjusted Net Income represents net income (loss) attributable to Stagwell Inc. common shareholders, plus net income (loss) attributable toand Class C shareholders, excluding the impact of amortization expense,amortization, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items (as defined above), based on total consolidated amounts, then allocated tobetween Stagwellthe Inc.two commonshare shareholders and Class C shareholders,classes based on their respective income allocation percentagepercentages using a normalized effective income tax rate divided by (ii) the diluted weighted average shares outstanding.rate. The diluted weighted average shares outstanding is calculated as (a)includes the diluted weighted average number of common shares outstanding plus (b) the shares of Class C common stock, par value $0.00001 per share (the “Class C Common Stock”) as if converted to shares of Class A Common Stock if not included because they were anti-dilutive.

The following discussion focuses on the operating performance of the Company for the three and six months ended MarchJune 31,30, 2026 and 2025 and the financial condition of the Company as of MarchJune 31,30, 2026.

THREE MONTHS ENDED MARCHJUNE 31,30, 2026 COMPARED TO THREE MONTHS ENDED MARCHJUNE 31,30, 2025

The components of operating results for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 were as follows:

Revenue for the three months ended MarchJune 31,30, 2026 was $704.1$786.3 million, compared to $651.7$706.8 million for the three months ended MarchJune 31,30, 2025, an increase of $52.4$79.5 million.

The components of the fluctuations in Netnet revenue for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 were as follows:

The increase in net acquisitions (divestitures) was impacted by the prior year acquisitions of JetFuel Studio LLC and Powered by JetFuel LLC (collectively, “Jetfuel”), Create Group Holding Limited (“Create”), and ADK Global (“ADK”), and current year acquisition of Wavelength Strategy LLC (“Wavelength”), which expanded the Company’s capabilities in experiential marketing, digital communications,marketing and integrated marketing in the Asia-Pacific (“APAC”) region, and digital advocacy and communications, respectively, partially offset by the divestiture of a Brand in the Marketing Services segment.

The geographic mix in Netnet revenue for the three months ended MarchJune 31,30, 2026 and 2025 was as follows:

Cost of services increased by $47.4$57.8 million.million, or 12.6%. Excluding the increase in Billable costs of $32.0$46.0 millionmillion, and the addition of $1.8 million of expenses from acquired entities of $3.5 million,entities, Cost of services increased $12.0$10.0 millionmillion, primarilyor dueonly 2.9%, compared to aOrganic $3.7net millionrevenue of 5.0%. The increase was driven by increases in severance to reorganize the business,Unbillable and higherother costs, net and staff costs to support the growth of theNet business.revenue.

Office and general expenses increased by $11.3 million. Excluding the addition of expenses of acquired entities of $4.7 million, Office and general expenses increased $6.6$30.7 million, primarily attributable to non-cash Deferred acquisition consideration, as discussed below, and due to higher software licenselicensing fees due tofrom investments in automation and AI intended to improve workflow efficiency and support future margin expansion and higher staff costs to support the growth in the business and an increase in Deferred acquisition consideration expense as explained below.expansion.

Deferred acquisition consideration increased by $3.6$12.1 million, primarily attributable to strong performance inat certain acquired Brands, causingwhich an increase inincreased the fair value of the related deferred acquisition consideration liability of those Brands,liabilities, partially offset by a reduction in the fair value of the deferred acquisition consideration liabilityliabilities associated with certain other Brands driven by performance timing.

Interest expense, net for the three months ended MarchJune 31,30, 2026 was $23.3$22.3 million, compared to $23.4$23.5 million for the three months ended MarchJune 31,30, 2025, a decrease of $0.1$1.1 million. This decrease was primarily attributable to a lower average interest rate, partially offset by higher levels of debt outstanding under the Credit Agreement (as defined and discussed in Note 7 of the Notes to the Unaudited Consolidated Financial Statements included herein) used to support the growth in working capital attributable to the growth of Net revenue of the business.

The foreign exchange lossgain for the three months ended MarchJune 31,30, 2026,2026 was $3.0$0.6 million, compared to a gainloss of $1.2$1.3 million for the three months ended MarchJune 31,30, 2025,2025. The $1.9 million improvement was primarily attributabledriven toby foreign exchange gains realized by our Brands operating in Canada, partially offset by foreign exchange losses incurred by our Brands operating in Europe during the movementsame in the British Pound, Canadian dollar and Euro.period.

For the three months ended MarchJune 31,30, 2026, the Company recordedhad an income tax benefit of $2.9$0.3 million (on a pre-tax loss of $16.7$9.2 million,million resulting in an effective tax rate of 17.3%,3.8%) compared to an income tax expense for the three months ended June 30, 2025 of $1.7$2.7 million (on a smaller pre-tax loss of $3.6$2.0 million in the prior-year period, which resultedresulting in an effective tax rate of negative 47.8%.(134.9)%).

The effective tax rate increased by 65.1138.7 percentage points compared to the prior‑ year period, primarily due to (i) a 49.173.3 percentage point increase from additional pre-tax losses, which were not subject to valuation allowances, for which we recorded aan $3.9additional $1.4 million tax benefit,benefit; (ii) a 4.231.9 percentage point increase related to a corporatereduction restructurein shortfall of deductions for stock-based compensation expense vested during the year for which the Companywe recorded a $0.7$0.9 million less tax benefit,expense and an(iii) 11.8a 33.5 percentage point increase from changesrelated to othera discretedecrease in interest and penalties for which we recorded $0.7 million less tax items totaling less than $0.1 million tax impact.expense.

The effect of Noncontrollingnoncontrolling and redeemable noncontrolling interests for the three months ended MarchJune 31,30, 2026 was a loss of $1.0$0.6 million, compared to a lossincome of $2.4$0.6 million for the three months ended MarchJune 31,30, 2025. The amountschange were driven byreflects the mix of income and loss derivedgenerated fromby entities that are not entirelywholly owned by the Company. Additionally, the change was driven by the Class C Exchange during the second quarter of 2025, which increased the loss allocated to Stagwell Inc.’s common shareholders.

As a result of the foregoing, Netnet loss attributable to Stagwell Inc. common shareholders for the three months ended MarchJune 31,30, 2026 was $13.0$8.1 million, compared to a net loss of $2.9$5.3 million for the three months ended MarchJune 31,30, 2025.

Diluted EPS and Adjusted Diluted EPS for the three months ended MarchJune 31,30, 2026 were as follows:

Diluted EPS and Adjusted Diluted EPS for the three months ended MarchJune 31,30, 2025 were as follows:

The components of operating results for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 were as follows:

Revenue for the three months ended MarchJune 31,30, 2026 was $250.8$277.3 million, compared to $248.0$275.9 million for the three months ended MarchJune 31,30, 2025, an increase of $2.8$1.4 million.

The components of the fluctuations in Netnet revenue for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 were as follows:

Cost of services increased $8.5by million.$4.3 million or 2.3%. Excluding thea $2.4 million increase in Billable costs ofand $0.4a $1.2 million decrease related to acquired and the decrease of expenses from acquired/divested entities of $0.9 million,entities, Cost of services increased $9.0$3.0 million.million, Thisor 2.1%. The increase was primarilydriven attributableby $4.9 million of higher Unbillable and other costs, net. Unbillable and other costs, net in Research increased $2.3 million, or 15.7%, compared to higherOrganic staffnet costs to supportrevenue growth of business,14.1%. increaseAdditionally, inUnbillable severanceand other costs, net increased due to reorganizeoutsourced Creative costs and the businessexpansion andof increaseSport Beach within Experiential. This was reduced by a $1.5 million decrease in stock-based compensation discussed below.expense.

The components of operating results for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 were as follows:

Revenue for the three months ended MarchJune 31,30, 2026 was $101.5$117.7 million, compared to $90.9$97.6 million for the three months ended MarchJune 31,30, 2025, an increase of $10.6$20.1 million.

The components of the fluctuations in Netnet revenue for the three months ended MarchJune 31,30, 20262026, compared to the three months ended MarchJune 31,30, 2025 were as follows: