Revenue Growth of 8%, Led by 13% Growth from Performance Media & Data Net Loss Attributable to Stagwell Inc. Common Shareholders of $1.3 million Adjusted EBITDA of $90 million, An Increase of 25% Year-Over-Year Adjusted EBITDA Margin of 17%, An Increase of 320 Basis Points Year-Over-Year EPS of $(0.01); Adjusted EPS of $0.16, An Increase of 14% Year-Over-Year Net New Business of $66 million in Q1; LTM Net New Business of $284 million Reaffirm Guidance for 2024 of Organic Net Revenue Growth of 5% to 7%; Adjusted EBITDA of $400 million to $450 million; Free Cash Flow Conversion of ~50% NEW YORK, May 1, 2024 /PRNewswire/ -- (NASDAQ:STGW) – Stagwell Inc. ("Stagwell") today announced financial results for the three months ended March 31, 2024. FIRST QUARTER RESULTS: Q1 Revenue of $670 million, an increase of 8% versus the prior year period. Q1 Net Loss attributable to Stagwell Inc. Common Shareholders of $1.3 million versus Income of $1.4 million in the prior year period. Q1 Adjusted EBITDA of $90 million, an increase of 25% versus the prior year period. Q1 Adjusted EBITDA Margin of 17% on net revenue, an improvement of 320 basis points versus the prior year period. Q1 Earnings Per Share Attributable to Stagwell Inc. Common Shareholders of $(0.01) versus $0.00 in the prior year period. Q1 Adjusted Earnings Per Share attributable to Stagwell Inc. Common Shareholders of $0.16 versus $0.14 in the prior year period. Net new business wins of $66 million in the first quarter, last twelve-month net new business wins of $284 million. Q1 Net Revenue of $532 million, an increase of 2% versus the prior year period. Q1 Organic Net Revenue increased 2% versus the prior year period, led by 54% increase in Advocacy. Mark Penn, Chairman and CEO, said, "We are on target for 2024 with a return to growth and strong margin expansion led by the double-digit growth of the Performance Media & Data Capability. We see tailwinds of record new business, growth in advertising generally, and a strengthened market position given growing industry accolades for our work." "We continue to invest in technology with the Stagwell Marketing Cloud setting the pace for innovation and we believe that we will see growth in AI-related digital transformation assignments building in the second half of the year along with a strong advocacy season. At the same time, we are successfully expanding our global presence, and we are seeing that pay dividends with enhanced growth." Frank Lanuto, Chief Financial Officer, commented: "Revenue in Q1 grew by 8% year-over-year to $670 million. Cost actions taken in 2023 contributed to 25% growth in adjusted EBITDA or $90 million, representing a 17% adjusted EBITDA margin, an improvement of 320 basis points over the prior year. We are well positioned to achieve our 2024 targets, as we continue to focus on efficiency, especially through the implementation of AI on our shared services platform."  Financial Outlook 2024 financial guidance is reiterated as follows: Organic Net Revenue growth of 5% to 7% Organic Net Revenue excluding Advocacy growth of 4% to 5% Adjusted EBITDA of $400 million to $450 million Free Cash Flow Conversion of approximately 50% Adjusted EPS of $0.75 - $0.88 Guidance assumes no impact from foreign exchange, acquisitions or dispositions. * The Company has excluded a quantitative reconciliation with respect to the Company's 2024 guidance under the "unreasonable efforts" exception in Item 10(e)(1)(i)(B) of Regulation S-K. See "Non-GAAP Financial Measures" below for additional information. Video Webcast Management will host a video webcast on Wednesday, May 1, 2024, at 8:30 a.m. (ET) to discuss results for Stagwell Inc. for the three months ended March 31, 2024. The video webcast will be accessible at https://stgw.io/Earnings. An investor presentation has been posted on our website at www.stagwellglobal.com and may be referred to during the webcast. A recording of the webcast will be accessible one hour after the webcast and available for ninety days at www.stagwellglobal.com. Stagwell Inc. Stagwell is the challenger network built to transform marketing. We deliver scaled creative performance for the world's most ambitious brands, connecting culture-moving creativity with leading-edge technology to harmonize the art and science of marketing. Led by entrepreneurs, our specialists in 34+ countries are unified under a single purpose: to drive effectiveness and improve business results for their clients. Join us at www.stagwellglobal.com. Contacts For Investors: Ben For Press:Beth Non-GAAP Financial Measures In addition to its reported results, Stagwell Inc. has included in this earnings release certain financial results that the Securities and Exchange Commission (SEC) defines as "non-GAAP Financial Measures." Management believes that such non-GAAP financial measures, when read in conjunction with the Company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the Company's results. Such non-GAAP financial measures include the following: (1) Organic Revenue: "Organic revenue growth" and "Organic revenue decline" reflects the year-over-year change in the Company's reported net revenue attributable to the Company's management of the entities it owns. We calculate organic net revenue growth (decline) by subtracting the net impact of acquisitions (divestitures) and the impact of foreign currency exchange fluctuations from the aggregate year-over-year increase or decrease in the Company's reported net revenue. The net impact of acquisitions (divestitures) reflects the year-over-year change in the Company's reported net revenue attributable to the impact of all individual entities that were acquired or divested in the current and prior year. We calculate impact of an acquisition as follows: (a) for an entity acquired during the current year, we present the entity's prior year net revenue for the same period during which we owned it in the current year as impact of the acquisition in the current year; and (b) for an entity acquired in the prior year, we present the entity's prior year net revenue for the period during which we did not own the entity in the prior year as impact of the acquisition in the current year. We calculate impact of a divestiture as follows: (a) for a divestiture in the current year, we present the entity's prior year net revenue for the same period during which we no longer owned it in the current year as impact of the divestiture in the current year; and (b) for a divestiture in the prior year, we present the entity's prior year net revenue for the period during which we owned it in the prior year as impact of the divestiture in the current year. We calculate the impact of any acquisition or divestiture without adjusting for foreign currency exchange fluctuations. The impact of foreign currency exchange fluctuations reflects the year-over-year change in the Company's reported net revenue attributable to changes in foreign currency exchange rates. We calculate the impact of foreign currency exchange fluctuations for the portion of the reporting period in which we recognized revenue from a foreign entity in both the current year and the prior year. The impact is calculated as the difference between (1) reported prior period net revenue (converted to U.S. dollars at historical foreign currency exchange rates) and (2) prior period net revenue converted to U.S. dollars at current period foreign exchange rates. (2) Net New Business: Estimate of annualized revenue for new wins less annualized revenue for losses incurred in the period. (3) Adjusted EBITDA: defined as Net income excluding non-operating income or expense to achieve operating income, plus depreciation and amortization, stock-based compensation, deferred acquisition consideration adjustments, and other items. Other items include restructuring costs, acquisition-related expenses, and non-recurring items. (4) Adjusted Diluted EPS is defined as (i) Net income (loss) attributable to Stagwell Inc. common shareholders, plus net income attributable to Class C shareholders, excluding amortization expense, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items, divided by (ii) (a) the per weighted average number of common shares outstanding plus (b) the weighted average number of Class C shares outstanding, (if dilutive). Other items includes restructuring costs, acquisition-related expenses, and non-recurring items, and subject to the anti-dilution rules. (5) Free Cash Flow: defined as Adjusted EBITDA less capital expenditures, change in net working capital, cash taxes, interest, and distributions to minority interests, but excludes contingent M&A payments. Free Cash Flow Conversion is the percentage of adjusted EBITDA. Included in this earnings release are tables reconciling reported Stagwell Inc. results to arrive at certain of these non-GAAP financial measures. This document contains forward-looking statements. within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company's representatives may also make forward-looking statements orally or in writing from time to time. Statements in this document that are not historical facts, including, statements about the Company's beliefs and expectations, future financial performance, growth, and future prospects, the Company's strategy, business and economic trends and growth, technological leadership and differentiation, potential acquisitions, anticipated operating efficiencies and synergies and estimates of amounts for redeemable noncontrolling interests and deferred acquisition consideration, constitute forward-looking statements. Forward-looking statements, which are generally denoted by words such as "aim," "anticipate," "assume," "believe," "continue," "could," "create," "estimate," "expect," "focus," "forecast," "foresee," "future," "goal," "guidance," "in development," "intend," "likely," "look," "maintain," "may," "ongoing," "opportunity," "outlook," "plan," "possible," "potential," "predict," "project," "should," "target," "will," "would" or the negative of such terms or other variations thereof and terms of similar substance used in connection with any discussion of current plans, estimates and projections are subject to change based on a number of factors, including those outlined in this section.  Forward-looking statements in this document are based on certain key expectations and assumptions made by the Company. Although the management of the Company believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. The material assumptions upon which such forward-looking statements are based include, among others, assumptions with respect to general business, economic and market conditions, the competitive environment, anticipated and unanticipated tax consequences and anticipated and unanticipated costs. These forward-looking statements are based on current plans, estimates and projections, and are subject to change based on a number of factors, including those outlined in this section. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company's control. Therefore, you should not place undue reliance on such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events, if any. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Such risk factors include, but are not limited to, the following: risks associated with international, national and regional unfavorable economic conditions that could affect the Company or its clients; and demand for the Company's services, which may precipitate or exacerbate other risks and uncertainties; inflation and actions taken by central banks to counter inflation; the Company's ability to attract new clients and retain existing clients; the impact of a reduction in client spending and changes in client advertising, marketing and corporate communications requirements; financial failure of the Company's clients; the Company's ability to retain and attract key employees; the Company's ability to compete in the markets in which it operates; the Company's ability to achieve its cost saving initiatives; the Company's implementation of strategic initiatives; the Company's ability to remain in compliance with its debt agreements and the Company's ability to finance its contingent payment obligations when due and payable, including but not limited to those relating to redeemable noncontrolling interests and deferred acquisition consideration; the Company's ability to manage its growth effectively, including the successful completion and integration of acquisitions that complement and expand the Company's business capabilities; the Company's ability to develop products incorporating new technologies, including augmented reality, artificial intelligence, and virtual reality, and realize benefits from such products; adverse tax consequences for the Company, its operations and its stockholders, that may differ from the expectations of the Company, including that future changes in tax laws, potential increases to corporate tax rates in the United States and disagreements with tax authorities on the Company's determinations may result in increased tax costs; adverse tax consequences in connection with the Transactions, including the incurrence of material Canadian federal income tax (including material "emigration tax"); the Company's unremediated material weaknesses in internal control over financial reporting and its ability to establish and maintain an effective system of internal control over financial reporting; the Company's ability to protect client data from security incidents or cyberattacks; economic disruptions resulting from war and other geopolitical tensions (such as the ongoing military conflicts between Russia and Ukraine and in Israel and Gaza), terrorist activities and natural disasters; stock price volatility; and foreign currency fluctuations. Investors should carefully consider these risk factors, other risk factors described herein, and the additional risk factors outlined in more detail in our 2023 Form 10-K, filed with the Securities and Exchange Commission (the "SEC") on March 11, 2024, and accessible on the SEC's website at www.sec.gov, under the caption "Risk Factors," and in the Company's other SEC filings. SCHEDULE 1 STAGWELL INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share amounts) Three Months Ended March 31, 2024 2023 Revenue $        670,059 $        622,444 Operating Expenses Cost of services 444,526 413,898 Office and general expenses 163,343 158,836 Depreciation and amortization 34,836 33,477 Impairment and other losses 1,500 — 644,205 606,211 Operating Income (Loss) 25,854 16,233 Other income (expenses): Interest expense, net (20,965) (18,189) Foreign exchange, net (2,258) (670) Other, net (1,267) 220 (24,490) (18,639) Income (loss) before income taxes and equity in earnings of non-consolidated affiliates 1,364 (2,406) Income tax expense 2,585 236 Income (loss) before equity in earnings of non-consolidated affiliates (1,221) (2,642) Equity in income (loss) of non-consolidated affiliates 508 (227) Net income (loss) (713) (2,869) Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests (569) 4,258 Net income (loss) attributable to Stagwell Inc. common shareholders $          (1,282) $            1,389 Earnings (Loss) Per Common Share:    Basic $             (0.01) $               0.01    Diluted $             (0.01) $                  — Weighted Average Number of Common Shares Outstanding:    Basic 112,633 125,199    Diluted 116,405 289,806   SCHEDULE 2 STAGWELL INC. UNAUDITED COMPONENTS OF NET REVENUE CHANGE (amounts in thousands) Net Revenue - Components of Change Change Three Months Ended March 31, 2023 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Three Months Ended March 31, 2024 Organic Total Integrated Agencies Network $        304,187 $               369 $             (357) $       (11,429) $       (11,417) $       292,770 (3.8) % (3.8) % Brand Performance Network