Stagwell Inc.

07/31/2026 | Press release | Distributed by Public on 07/31/2026 13:41

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis are based on and should be read in conjunction with our Unaudited Consolidated Financial Statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the period ended June 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 the 2025 Form 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.
In this section, the terms "Stagwell," "we," "us," "our" and the "Company" refer to Stagwell Inc. and its direct and indirect subsidiaries. References to a "fiscal year" mean the Company's year commencing on January 1 of that year and ending December 31 of that year (e.g., fiscal 2026 means the period beginning January 1, 2026, and ending December 31, 2026).
Executive Summary
Overview
Stagwell conducts its business through its segments, which provide marketing and business solutions that realize the potential of combining data and creativity. Stagwell's strategy is to build, grow, and acquire market-leading businesses that deliver the modern suite of services that marketers need to thrive in a rapidly evolving business environment. We believe Stagwell's differentiation lies in its digital-first and technology-based roots and proven entrepreneurial leaders, which together with innovations in technology and data, bring transformational marketing, activation, communications and strategic consulting services to clients. Stagwell leverages its range of services in an integrated manner, offering strategic, creative and innovative solutions that are technologically forward and media-agnostic. The Company's strategy is intended to challenge the industry status quo, realize returns on investment, and drive transformative growth and business performance for its clients and stakeholders.
Stagwell manages its business by monitoring several financial and non-financial performance indicators. The key indicators that we focus on are revenue, operating expenses, staff cost ratio, capital expenditures, net income (loss), net income (loss) attributable to Stagwell Inc. common shareholders, net income (loss) per share and the non-GAAP financial measures including Adjusted EBITDA, 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.
Recent Developments
On July 17, 2026, the Company entered into an agreement to acquire the net assets of QStrauss Consulting, a Colombian technology consulting firm, for an estimated purchase price of $4.0 million, up to $2.0 million of which may be paid in shares of the Company's Class A Common Stock, at the Company's discretion. The acquisition is expected to close in August 2026, subject to the satisfaction of customary closing conditions. In connection with the acquisition, the sellers are eligible to earn contingent consideration of up to $8.0 million, a portion of which may be settled in shares of the Company's Class A Common Stock, at the Company's discretion.
Significant Factors Affecting our Business and Results of Operations
The most significant factors affecting our business and results of operations include national, regional, and local economic conditions, our clients' profitability, mergers and acquisitions of our clients, changes in top management of our clients and our ability to retain and attract key employees. New business wins and client losses occur due to a variety of factors. We believe the two most significant factors are (i) our clients' desire to change marketing communication firms, and (ii) the digital and data-driven products that our portfolio of marketing services firms, which we refer to as "Brands," offer. A client may choose to change marketing communication firms for several reasons, such as a change in leadership where new management wants to retain a Brand that it may have previously worked with. In addition, if the client merges with 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.
Seasonality
Historically, we typically generate the highest quarterly revenue during the fourth quarter of each year. The highest volumes of retail related consumer marketing increase with the back-to-school season through the end of the holiday season. In addition, within our Communications segment, client concentration increases during election years due to the cyclical nature of our advocacy services.
Non-GAAP Financial Measures
The Company reports its financial results in accordance with GAAP. In addition, the Company has included non-GAAP financial measures and ratios, which management uses to operate the business, which it believes provide useful supplemental information to both management and readers of this report in making period-to-period comparisons in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by GAAP and should not be construed as an alternative to other titled measures determined in accordance with GAAP. The non-GAAP financial measures included are "net revenue," "organic net revenue growth (decline)," "Adjusted EBITDA," "Free Cash Flow," and "Adjusted Diluted EPS."
"Net revenue" refers to revenue excluding billable costs. The Company believes billable costs and their fluctuations are not indicative of the operating performance of its underlying business.
"Organic net revenue growth (decline)" reflects the year-over-year change in the Company's reported net revenue attributable to the Company's management of the entities it owns. We calculate organic net revenue growth (decline) by subtracting the net impact of acquisitions (divestitures) and the impact of foreign currency exchange fluctuations from the aggregate year-over-year increase or decrease in the Company's reported net revenue.
The net impact of acquisitions (divestitures) reflects the year-over-year change in the Company's reported net revenue attributable to the impact of all individual entities that were acquired or divested in the current and prior year. Beginning with the quarter ended September 30, 2025, we calculate the impact of an acquisition as follows: (a) for an entity acquired during the current year, we present the entity's current period reported revenue as the impact of the acquisition in the current year; and (b) for an entity acquired in the prior year, we present an amount equal to the entity's current year net revenue for the same period during which we didn't own the entity in the prior year as the impact of the acquisition in the current year. Previously, we calculated the impact of an acquisition as follows: (a) for an entity acquired during the current year, we presented the entity's prior year net revenue for the same period during which we owned it in the current year as impact of the acquisition in the current year; and (b) for an entity acquired in the prior year, we presented the entity's prior year net revenue for the period during which we did not own the entity in the prior year as impact of the acquisition in the current year. We believe that this change in the method of calculating the impact of an acquisition results in a measurement of organic net revenue growth (decline) that 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.
The impact of foreign currency exchange fluctuations reflects the year-over-year change in the Company's reported net revenue attributable to changes in foreign currency exchange rates. We calculate the impact of foreign currency exchange fluctuations for the portion of the reporting period in which we recognized revenue from a foreign entity in both the current year and the prior year. The impact is calculated as the difference between (1) reported prior period net revenue (converted to U.S. dollars at historical foreign currency exchange rates) and (2) prior period net revenue converted to U.S. dollars at current period foreign exchange rates.
"Adjusted EBITDA" is defined as Net income (loss) attributable to Stagwell Inc. common shareholders excluding non-operating income or expense, 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 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.
"Free Cash Flow" is defined as consolidated net cash flow from operations less cash outflow from capital expenditures and capitalized software, excluding material nonrecurring capital purchases.
"Adjusted Diluted EPS" is defined as Adjusted Net Income (loss) 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 and Class C shareholders, excluding amortization, impairment and other losses, stock-based compensation, deferred acquisition consideration adjustments, discrete tax items, and other items (as defined above),
allocated between the two share classes based on their respective income allocation percentages using a normalized effective tax rate. The diluted weighted average shares outstanding includes the diluted weighted average common shares outstanding plus Class C common stock, par value $0.00001 per share (the "Class C Common Stock") as if converted to shares of Class A Common Stock if not included because they were anti-dilutive.
All amounts are in U.S. dollars unless otherwise stated. Amounts reported in millions herein are computed based on the amounts in thousands. As a result, the sum of the components, and related calculations, reported in millions may not equal the total amounts due to rounding.
The percentage changes included in the tables in Item 2 herein that are not considered meaningful are presented as "NM."
Segments
The Company's Chief Operating Decision Maker uses Adjusted EBITDA as a key metric to evaluate the operating and financial performance of a segment, identify trends affecting the segments, develop projections and make strategic business decisions.
On September 30, 2025, the Company reorganized its organizational structure to better reflect how the Company manages its business and goes to market, to simplify reporting and to provide clearer visibility into performance trends across its service offerings. The reorganization also seeks to enhance consistency in the Company's portfolio of services and improve the transparency and comparability of financial information provided to investors.
As a result of the reorganization, the Company now has five operating and reportable segments: "Marketing Services," "Digital Transformation," "Media & Commerce," "Communications," and "The Marketing Cloud." Prior period presented has been recast to reflect the reclassification of Brands within the reportable segments. Based on the segment analysis, management concluded that the operating segments do not exhibit similar economic characteristics or share other aggregation criteria. As a result, none of our operating segments are aggregated for reporting purposes. Further, as a result of the reorganization, certain reporting units have been redefined, and the composition of others has changed. The new structure fairly reflects the allocation of the Company's resources, thereby improving comparability for investors and supporting the Company's long-term strategic objectives. The composition of these segments is as follows:
•The Marketing Services segment delivers a broad range of services across four closely related client needs: creative, research, experiential, and social media solutions designed to build and elevate brands. Capabilities include developing breakthrough brand campaigns, providing consumer insights through advanced research methodologies, creating immersive experiential marketing programs and social engagement strategies that connect brands with audiences across digital platforms. By combining creative excellence, data-driven insights, and innovative experiences, Marketing Services empowers organizations to differentiate themselves in the marketplace, drive audience engagement, and achieve measurable business results. These services employ a wide variety of artificial intelligence ("AI")-powered services in the delivery, such as AI-powered creative production and data analysis. Brands in this segment include, but are not limited to, creative agencies 72 and Sunny and Anomaly, research agencies NRG and Harris Insights, experiential agency TEAM, and social agency Movers & Shakers.
•The Digital Transformation segment designs, implements and activates modern digital ecosystems that enable brand and customer experiences through the integration of strategy, design, and technology. This segment helps clients modernize their digital infrastructure, enhance customer engagement, and accelerate enterprise transformation. Its capabilities span the delivery of digital products and experiences that connect brand storytelling with technology, including website and content development, digital campaigns, product and platform design, AI-native strategies and integration, and implementation of marketing technology ("MarTech") products and solutions for customers. It also provides managed services, staff augmentation, and engineering expertise across various delivery models, offering system integration, full-stack development, and ongoing platform management. Additionally, Digital Transformation connects digital ecosystems to physical experiences through innovative, technology-driven customer engagements, such as business-to-business ("B2B") platforms and multimodal activations that blend physical and digital environments using augmented reality ("AR"), virtual reality ("VR"), and emerging technologies. Together, these capabilities empower organizations to transform their digital presence and drive sustained business growth. Brands in this segment include, but are not limited to, strategy and design agencies Code and Theory and Instrument, development and implementation agency TrueLogic, and digital activation agency Left Field Labs.
•The Media & Commerce segment delivers integrated AI-based data solutions that drive audience engagement and business growth through media buying, owned media platforms, commerce enablement, and Customer Relationship Management ("CRM") strategies. Its capabilities include planning and executing media campaigns across global platforms, leveraging data-driven approaches to optimize reach and effectiveness across first-party data, second-party data, and third-party data, and providing commerce and CRM tools that connect brands with consumers throughout the purchase journey. The segment also offers specialized media platforms and translation services to support targeted communication and market expansion. By combining expertise in media strategy, commerce activation, and audience analytics, Media & Commerce empowers organizations to maximize their marketing investments and achieve
measurably efficient commercial outcomes. Brands in this segment include, but are not limited to, media buying and strategy agency Assembly Global, owned media platforms Reach TV, and commerce and CRM agency Gale.
•The Communications segment provides a leading edge set of solutions designed to help organizations build, protect, and enhance their reputation across diverse audiences and channels. Its capabilities include strategic communications, public relations, and advocacy services that leverage AI and data-driven insights to craft compelling narratives and influence public perception. The segment also offers expertise in targeted communications, corporate public affairs consulting, crisis management, and stakeholder engagement, ensuring clients can respond effectively to emerging issues and opportunities. Advocacy services encompass strategic political campaign management, grassroots mobilization, and fundraising expertise that reach across the political spectrum. By combining deep industry knowledge with innovative digital approaches to media and advocacy, Communications empowers organizations to connect with key audiences, shape conversations, and achieve their strategic objectives. Brands in this segment include, but are not limited to, Allison, Consulum, SKDK and Targeted Victory.
•The Marketing Cloud segment delivers a comprehensive suite of technology solutions for in-house marketers, combining SaaS and DaaS offerings. Its key products cover a range of areas. Advanced research tools that enable real-time customer insights through syndicated and Do It Yourself ("DIY") generative AI-drafted surveys, AI-driven text analysis, and predictive analytics. Communications technology that aggregates data from millions of sources, including news, social media, print, and TV/radio broadcasts, on a daily basis to monitor, analyze, and respond to market trends. Media studio products that leverage first-party, third-party, and proprietary data to provide actionable audience insights and attribution analytics and advanced media platforms that encompass audience engagement solutions such as AR, quick response ("QR") codes, and loyalty programs, all designed to collect consumer data and generate actionable insights. Together, these capabilities empower marketers to understand, engage, and influence their audiences with precision and agility. Brands in this segment include, but are not limited to, QUEST, Unicepta, Holy Grail and Smart Assets.
"Corporate, eliminations and other" consists of revenue generated by the Other business components, elimination of certain intercompany revenue and expenses, and corporate office expenses incurred in connection with the strategic resources provided to the operating segments, as well as certain other centrally managed expenses that are not fully allocated to the operating segments. These corporate office and general expenses include (i) salaries and related expenses for corporate office employees, including employees dedicated to supporting the operating segments, (ii) occupancy expenses relating to properties occupied by all corporate office employees, (iii) other office and general expenses including professional fees for the financial statement audits and other public company costs, and (iv) certain other professional fees managed by the corporate office.
The following discussion focuses on the operating performance of the Company for the three and six months ended June 30, 2026 and 2025 and the financial condition of the Company as of June 30, 2026.
Results of Operations and Reconciliation of Net Loss to Adjusted EBITDA:
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
(dollars in thousands)
Revenue:
Marketing Services $ 277,256 $ 275,888 $ 528,034 $ 524,940
Digital Transformation 117,672 97,592 219,138 188,479
Media & Commerce 179,943 164,025 354,454 324,447
Communications 188,426 146,180 341,528 275,268
The Marketing Cloud 27,380 25,276 53,895 49,382
Corporate, eliminations and other (4,370) (2,143) (6,599) (3,958)
Total revenue $ 786,307 $ 706,818 $ 1,490,450 $ 1,358,558
Operating income $ 11,546 $ 23,172 $ 21,188 $ 41,457
Other income (expenses):
Interest expense, net (22,328) (23,455) (45,594) (46,811)
Foreign exchange, net 605 (1,338) (2,416) (118)
Other, net
937 (360) 868 (111)
Loss before income taxes and equity in earnings of non-consolidated affiliates
(9,240) (1,981) (25,954) (5,583)
Income tax (benefit) expense
(348) 2,673 (3,236) 4,395
Loss before equity in earnings of non-consolidated affiliates (8,892) (4,654) (22,718) (9,978)
Equity in income of non-consolidated affiliates 191 20 70 19
Net loss (8,701) (4,634) (22,648) (9,959)
Net (income) loss attributable to noncontrolling and redeemable noncontrolling interests 585 (627) 1,559 1,781
Net loss attributable to Stagwell Inc. common shareholders $ (8,116) $ (5,261) $ (21,089) $ (8,178)
Reconciliation to Adjusted EBITDA:
Net loss attributable to Stagwell Inc. common shareholders $ (8,116) $ (5,261) $ (21,089) $ (8,178)
Non-operating items (1)
19,662 28,433 42,277 49,635
Operating income 11,546 23,172 21,188 41,457
Depreciation and amortization 43,955 41,369 88,286 83,375
Stock-based compensation 18,567 19,954 32,815 31,497
Deferred acquisition consideration 8,837 (3,220) 19,091 3,437
Other items, net (2)
25,782 13,016 36,992 16,818
Adjusted EBITDA $ 108,687 $ 94,291 $ 198,372 $ 176,584
(1) Non-operating items includes items within the Statements of Operations, below Operating income, and above Net loss attributable to Stagwell Inc. common shareholders.
(2) Other items, net, primarily includes restructuring, certain system implementation costs, working capital administrative fees, acquisition-related expense, and other non-recurring expenses.
THREE MONTHS ENDED JUNE 30, 2026 COMPARED TO THREE MONTHS ENDED JUNE 30, 2025
Consolidated Results of Operations
The components of operating results for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 were as follows:
Three Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 786,307 $ 706,818 $ 79,489 11.2 %
Operating expenses
Cost of services 517,064 459,216 57,848 12.6 %
Office and general expenses 213,742 183,061 30,681 16.8 %
Depreciation and amortization 43,955 41,369 2,586 6.3 %
$ 774,761 $ 683,646 $ 91,115 13.3 %
Operating income $ 11,546 $ 23,172 $ (11,626) (50.2) %
Three Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue
$ 786,307 $ 706,818 $ 79,489 11.2 %
Billable costs 154,724 108,689 46,035 42.4 %
Net Revenue 631,583 100.0 % 598,129 100.0 % 33,454 5.6 %
Staff costs 384,382 60.9 % 381,270 63.7 % 3,112 0.8 %
Administrative costs 82,353 13.0 % 74,438 12.4 % 7,915 10.6 %
Unbillable and other costs, net 56,161 8.9 % 48,130 8.0 % 8,031 16.7 %
Adjusted EBITDA 108,687 17.2 % 94,291 15.8 % 14,396 15.3 %
Stock-based compensation 18,567 2.9 % 19,954 3.3 % (1,387) (7.0) %
Depreciation and amortization 43,955 7.0 % 41,369 6.9 % 2,586 6.3 %
Deferred acquisition consideration 8,837 1.4 % (3,220) (0.5) % 12,057 NM
Other items, net (1)
25,782 4.1 % 13,016 2.2 % 12,766 98.1 %
Operating income (2)
$ 11,546 1.8 % $ 23,172 3.9 % $ (11,626) (50.2) %
(1) Other items, net, primarily includes restructuring, certain system implementation costs, working capital administrative fees, acquisition-related expense, and other non-recurring expenses.
(2) See the Results of Operations section above for a reconciliation of Operating Income to Net loss attributable to Stagwell Inc. common shareholders.
Revenue
Revenue for the three months ended June 30, 2026 was $786.3 million, compared to $706.8 million for the three months ended June 30, 2025, an increase of $79.5 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Three Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Three Months Ended June 30, 2026 Organic Total
(dollars in thousands)
Marketing Services $ 235,304 $ 624 $ (2,868) $ 1,182 $ (1,062) $ 234,242 0.5 % (0.5) %
Digital Transformation 91,100 (251) - 16,575 16,324 107,424 18.2 % 17.9 %
Media & Commerce 150,964 (73) 2,221 1,558 3,706 154,670 1.0 % 2.5 %
Communications 97,632 229 2,373 11,855 14,457 112,089 12.1 % 14.8 %
The Marketing Cloud 25,272 1,072 - 1,034 2,106 27,378 4.1 % 8.3 %
Corporate, eliminations and other (2,143) 3 - (2,080) (2,077) (4,220) 97.1 % 96.9 %
$ 598,129 $ 1,604 $ 1,726 $ 30,124 $ 33,454 $ 631,583 5.0 % 5.6 %
Component % change 0.3% 0.3% 5.0% 5.6%
For the three months ended June 30, 2026, organic net revenue increased $30.1 million, or 5.0%. Digital Transformation grew $16.6 million, reflecting higher demand for AI-related services and marketing-technology transformation among technology-sector clients. Communications grew $11.9 million as it entered an on-cycle U.S. election year, which increased public affairs activity across digital, advertising, direct-mail, and political fundraising work. Marketing Services, Media & Commerce, and The Marketing Cloud each contributed additional growth from new client wins, higher platform utilization, and subscription-based offerings. These increases were partially offset by reduced client spending in the Middle East related to the ongoing conflict.
The increase in net acquisitions (divestitures) was impacted by the prior year acquisitions of JetFuel Studio LLC and Powered by JetFuel LLC (collectively, "Jetfuel"), ADK Global ("ADK"), and current year acquisition of Wavelength Strategy LLC ("Wavelength"), which expanded the Company's capabilities in experiential 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 net revenue for the three months ended June 30, 2026 and 2025 was as follows:
Three Months Ended June 30,
2026 2025
(dollars in thousands)
United States $ 497,121 $ 464,882
United Kingdom 41,586 36,555
Other 92,876 96,692
Total $ 631,583 $ 598,129
Expenses
Cost of services increased by $57.8 million, or 12.6%. Excluding the increase in Billable costs of $46.0 million, and the addition of $1.8 million of expenses from acquired entities, Cost of services increased $10.0 million, or only 2.9%, compared to Organic net revenue of 5.0%. The increase was driven by increases in Unbillable and other costs, net and staff costs to support the growth of Net revenue.
Office and general expenses increased $30.7 million, primarily attributable to non-cash Deferred acquisition consideration, as discussed below, and due to higher software licensing fees from investments in automation and AI intended to improve workflow efficiency and support future margin expansion.
Deferred acquisition consideration increased $12.1 million, primarily attributable to strong performance at certain acquired Brands, which increased the fair value of the related deferred acquisition consideration liabilities, partially offset by a reduction in the fair value of the liabilities associated with certain other Brands driven by performance timing.
Operating Income
Operating income decreased by $11.6 million, or 50.2%, and operating margin decreased to 1.8% from 3.9%. The decrease was driven by a $13.3 million increase in non-cash expenses of Stock-based compensation, Depreciation and amortization, and Deferred Acquisition consideration expenses and a 12.8 million increase in Other items, net, related to non-recurring tax and insurance adjustments. These increases were partially offset by Net revenue growth of $33.5 million, or 5.6%, while Staff, Administrative, and Unbillable and other costs, net increased only $19.1 million, or 3.8%, resulting in a 1.4 percentage point improvement in those costs as a percentage of Net revenue.
Interest Expense, Net
Interest expense, net for the three months ended June 30, 2026 was $22.3 million, compared to $23.5 million for the three months ended June 30, 2025, a decrease of $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.
Foreign Exchange, Net
The foreign exchange gain for the three months ended June 30, 2026 was $0.6 million, compared to a loss of $1.3 million for the three months ended June 30, 2025. The $1.9 million improvement was primarily driven by 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 same period.
Income Tax (Benefit) Expense
For the three months ended June 30, 2026, the Company had an income tax benefit of $0.3 million (on a pre-tax loss of $9.2 million resulting in an effective tax rate of 3.8%) compared to income tax expense for the three months ended June 30, 2025 of $2.7 million (on a pre-tax loss of $2.0 million resulting in an effective tax rate of (134.9)%).
The effective tax rate increased by 138.7 percentage points compared to the prior year period, primarily due to (i) a 73.3 percentage point increase from additional pre-tax losses, which were not subject to valuation allowances, for which we recorded an additional $1.4 million tax benefit; (ii) a 31.9 percentage point increase related to a reduction in shortfall of deductions for stock-based compensation expense vested during the year for which we recorded $0.9 million less tax expense and (iii) a 33.5 percentage point increase related to a decrease in interest and penalties for which we recorded $0.7 million less tax expense.
Noncontrolling and Redeemable Noncontrolling Interests
The effect of noncontrolling and redeemable noncontrolling interests for the three months ended June 30, 2026 was a loss of $0.6 million, compared to income of $0.6 million for the three months ended June 30, 2025. The change reflects the mix of income and loss generated by entities that are not wholly owned by the Company.
Net Loss Attributable to Stagwell Inc. Common Shareholders
As a result of the foregoing, net loss attributable to Stagwell Inc. common shareholders for the three months ended June 30, 2026 was $8.1 million, compared to a net loss of $5.3 million for the three months ended June 30, 2025.
Adjusted EBITDA
Adjusted EBITDA increased by $14.4 million or 15.3% and Adjusted EBITDA margin as a percentage of Net revenue increased to 17.2% from 15.8%. The increase was driven by Net revenue growth of $33.5 million, or 5.6%, while Staff costs increased only $3.1 million, resulting in a 2.9 percentage point improvement in Staff costs as a percentage of Net revenue. These benefits were partially offset by an increase of $7.9 million in Administrative costs and $8.0 million in Unbillable and other costs, net, as explained above.
Earnings Per Share
Diluted EPS and Adjusted Diluted EPS for the three months ended June 30, 2026 were as follows:
GAAP
Adjustments (1)
Non-GAAP
(amounts in thousands, except per share amounts)
Net income (loss) attributable to Stagwell Inc. common shareholders and adjusted net income $ (8,116) $ 69,381 $ 61,265
Diluted - Weighted average number of common shares outstanding
245,908 - 245,908
Diluted EPS and Adjusted Diluted EPS (1)
$ (0.03) $ 0.25
Adjustments to Net income (loss)
Amortization
$ 38,352
Stock-based compensation 18,567
Deferred acquisition consideration 8,837
Other items, net (2)
25,782
$ 91,538
Adjustment to GAAP income tax expense (3)
(22,157)
$ 69,381
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
(2) Other items, net, primarily includes restructuring, certain system implementation costs, working capital administrative fees, acquisition-related expense, and other non-recurring expenses.
(3) Represents the difference between the income tax benefit of $0.3 million at an effective tax rate of 3.8% on a GAAP basis and the income tax expense of $21.8 million at an effective tax rate of 26.5% on a non-GAAP basis. The difference reflects the tax impact of non-GAAP adjustments.
Diluted EPS and Adjusted Diluted EPS for the three months ended June 30, 2025 were as follows:
GAAP
Adjustments (1)
Non-GAAP
(amounts in thousands, except per share amounts)
Net income (loss) attributable to Stagwell Inc. common shareholders $ (5,261) $ 51,386 $ 46,125
Diluted - Weighted average number of common shares outstanding
260,774 - 260,774
Diluted EPS and Adjusted Diluted EPS (1)
$ (0.02) $ 0.18
Adjustments to Net income (loss)
Amortization
$ 35,593
Stock-based compensation 19,954
Deferred acquisition consideration (3,220)
Other items, net (2)
13,016
$ 65,343
Adjustment to GAAP income tax expense (3)
(13,957)
$ 51,386
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
(2) Other items, net, primarily includes restructuring, certain system implementation costs, working capital administrative fees, acquisition-related expense, and other non-recurring expenses.
(3) Represents the difference between the income tax expense of $2.7 million at an effective tax rate of (134.9)% on a GAAP basis and the income tax expense of $16.6 million at an effective tax rate of 26.5% on a non-GAAP basis. The difference reflects the tax impact of non-GAAP adjustments.
Marketing Services
The components of operating results for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 were as follows:
Three Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 277,256 $ 275,888 $ 1,368 0.5 %
Operating expenses
Cost of services 190,662 186,385 4,277 2.3 %
Office and general expenses 50,439 49,454 985 2.0 %
Depreciation and amortization 12,426 12,422 4 - %
$ 253,527 $ 248,261 $ 5,266 2.1 %
Operating income $ 23,729 $ 27,627 $ (3,898) (14.1) %
Three Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue
$ 277,256 $ 275,888 $ 1,368 0.5 %
Billable costs 43,014 40,584 2,430 6.0 %
Net Revenue 234,242 100.0 % 235,304 100.0 % (1,062) (0.5) %
Staff costs 131,354 56.1 % 134,397 57.1 % (3,043) (2.3) %
Administrative costs 25,999 11.1 % 29,393 12.5 % (3,394) (11.5) %
Unbillable and other costs, net 31,673 13.5 % 26,745 11.4 % 4,928 18.4 %
Adjusted EBITDA 45,216 19.3 % 44,769 19.0 % 447 1.0 %
Stock-based compensation 7,929 3.4 % 8,111 3.4 % (182) (2.2) %
Depreciation and amortization 12,426 5.3 % 12,422 5.3 % 4 - %
Deferred acquisition consideration (1,969) (0.8) % (6,867) (2.9) % 4,898 (71.3) %
Other items, net 3,101 1.3 % 3,476 1.5 % (375) (10.8) %
Operating income $ 23,729 10.1 % $ 27,627 11.7 % $ (3,898) (14.1) %
`
Revenue
Revenue for the three months ended June 30, 2026 was $277.3 million, compared to $275.9 million for the three months ended June 30, 2025, an increase of $1.4 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Three Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Three Months Ended June 30, 2026 Organic Total
(dollars in thousands)
Marketing Services $ 235,304 $ 624 $ (2,868) $ 1,182 $ (1,062) $ 234,242 0.5% (0.5)%
Component % change 0.3 % (1.2) % 0.5 % (0.5) %
Organic net revenue increased by $1.2 million or 0.5% as growth in Research, Experiential, and Social was largely offset by the decline in Creative. Research benefited by new client wins and expanded relationships with communications, technology, and transportation and lodging clients including increased demand related to AI adoption. Creative declined as Billable costs increased while Revenue remained relatively the same, although several significant new client engagements began ramping up during the quarter. The impact of acquisitions and divestitures primarily reflected the divestiture of an Experiential brand, partially offset by the prior year acquisition of Jetfuel.
Expenses
Cost of services increased by $4.3 million or 2.3%. Excluding a $2.4 million increase in Billable costs and a $1.2 million decrease related to acquired and divested entities, Cost of services increased $3.0 million, or 2.1%. The increase was driven by $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 Organic net revenue growth of 14.1%. Additionally, Unbillable and other costs, net increased due to outsourced Creative costs and the expansion of Sport Beach within Experiential. This was reduced by a $1.5 million decrease in stock-based compensation expense.
Office and general expenses increased $1.0 million, primarily due to a non-cash $4.9 million increase in deferred acquisition consideration reflecting a decrease in the fair value of contingent consideration associated with a certain brand in the prior-year period. This increase was partially offset by lower staff costs from AI-enabled business optimization and cost reduction initiatives, as well as savings from the consolidation of the Company's real estate footprint.
Operating Income
Operating income decreased $3.9 million, or 14.1%, and operating margin decreased to 10.1% from 11.7%. The decrease was driven by a $4.7 million increase in non-cash expenses for Stock-based compensation and Deferred acquisition consideration, and Net revenue decline of 1.1 million, or 0.5%. These were partially offset by the Staff, Administrative, and Unbillable and other costs, net decrease of $1.5 million, or 0.8%, resulting in a 0.3 percentage point improvement in those costs as a percentage of Net revenue.
Adjusted EBITDA
Adjusted EBITDA increased by $0.4 million or 1.0%, and Adjusted EBITDA margin as a percentage of Net revenue increased to 19.3% from 19.0%. The increase was driven by a $6.4 million, or 3.9%, decrease in Staff costs and Administrative costs, resulting in a 2.4 percentage point improvement in Staff costs and Administrative costs as a percentage of Net revenue. These benefits were partially offset by a decrease in Net revenue of $1.1 million, or 0.5%, and an increase of $4.9 million in Unbillable and other costs, net.
Digital Transformation
The components of operating results for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 were as follows:
Three Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 117,672 $ 97,592 $ 20,080 20.6 %
Operating expenses
Cost of services 68,884 60,560 8,324 13.7 %
Office and general expenses 27,451 20,818 6,633 31.9 %
Depreciation and amortization 5,907 5,873 34 0.6 %
$ 102,242 $ 87,251 $ 14,991 17.2 %
Operating income $ 15,430 $ 10,341 $ 5,089 49.2 %
Three Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue
$ 117,672 $ 97,592 $ 20,080 20.6 %
Billable costs 10,248 6,492 3,756 57.9 %
Net Revenue 107,424 100.0 % 91,100 100.0 % 16,324 17.9 %
Staff costs 67,316 62.7 % 63,537 69.7 % 3,779 5.9 %
Administrative costs 7,720 7.2 % 7,176 7.9 % 544 7.6 %
Unbillable and other costs, net 169 0.2 % 3 - % 166 NM
Adjusted EBITDA 32,219 30.0 % 20,384 22.4 % 11,835 58.1 %
Stock-based compensation 3,656 3.4 % 759 0.8 % 2,897 381.7 %
Depreciation and amortization 5,907 5.5 % 5,873 6.4 % 34 0.6 %
Deferred acquisition consideration 6,949 6.5 % 2,575 2.8 % 4,374 169.9 %
Other items, net 277 0.3 % 836 0.9 % (559) (66.9) %
Operating income $ 15,430 14.4 % $ 10,341 11.4 % $ 5,089 49.2 %
Revenue
Revenue for the three months ended June 30, 2026 was $117.7 million, compared to $97.6 million for the three months ended June 30, 2025, an increase of $20.1 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended June 30, 2026, compared to the three months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Three Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Three Months Ended June 30, 2026 Organic Total
(dollars in thousands)
Digital Transformation $ 91,100 $ (251) $ - $ 16,575 $ 16,324 $ 107,424 18.2% 17.9%
Component % change (0.3) % - % 18.2 % 17.9 %
Organic net revenue increased by $16.6 million, or 18.2%. The increase was led by a $13.8 million increase in Strategy and Design driven by increased demand for AI-related services, expanded marketing-technology transformation work with technology-sector clients, additional scope on existing engagements, and new client wins, including several large enterprise engagements. Development and Implementation increased by $2.2 million, reflecting revenue synergies from the integration of recently combined agencies, growth in recurring retainers, higher renewal rates, and continued demand for staff-augmentation services. Digital Activation increased by $2.3 million, driven by expanded enterprise software activation engagements, additional work with existing enterprise clients, and new program activity, partially offset by the completion of certain prior-year engagements.
Expenses
Cost of services increased $8.3 million or 13.7%. Excluding a $3.8 million increase in Billable costs, Cost of services increased $4.6 million, or 8.5%, approximately half the 18.2% increase in Organic net revenue. The Organic net revenue growth outpacing higher staff costs reflects improvement in the operating leverage due to cost reduction initiatives and labor market conditions.
Office and general expenses increased by $6.6 million, including non-cash adjustments of $4.4 million from higher Deferred acquisition consideration and $2.9 million from higher Stock-based compensation. Deferred acquisition consideration increased due to the 2026 performance of a certain acquired brand, which raised the fair value of the related liability. Stock-based compensation increased because a greater proportion of annual incentive compensation was allocated to stock-based awards than in the prior year.
Operating Income
Operating income increased $5.1 million, or 49.2%, and operating margin increased to 14.4% from 11.4%. The increase was driven by Net revenue growth of $16.3 million, or 17.9%. This increase was partially offset by a $7.3 million increase in non-cash expenses explained above and a $4.5 million increase in Staff, Administrative, and Unbillable and other costs, net. These cumulative expenses only increased 14.8%, resulting in a 2.3 percentage point improvement in those costs as a percentage of Net revenue.
Adjusted EBITDA
Adjusted EBITDA increased by $11.8 million or 58.1% and Adjusted EBITDA margin as a percentage of Net revenue increased to 30.0% from 22.4%. The increase was driven by Net revenue growth of $16.3 million, or 17.9%, while Staff, Administrative, and Unbillable and other costs, net only increased $4.5 million, or 6.4%, improving these costs as a percentage of Net revenue by 7.6 percentage points.
Media & Commerce
The components of operating results for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 were as follows:
Three Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 179,943 $ 164,025 $ 15,918 9.7 %
Operating expenses
Cost of services 114,302 97,323 16,979 17.4 %
Office and general expenses 56,404 58,303 (1,899) (3.3) %
Depreciation and amortization 7,994 7,538 456 6.0 %
$ 178,700 $ 163,164 $ 15,536 9.5 %
Operating income $ 1,243 $ 861 $ 382 44.4 %
Three Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue
$ 179,943 $ 164,025 $ 15,918 9.7 %
Billable costs 25,273 13,061 12,212 93.5 %
Net Revenue 154,670 100.0 % 150,964 100.0 % 3,706 2.5 %
Staff costs 98,710 63.8 % 98,038 64.9 % 672 0.7 %
Administrative costs 24,738 16.0 % 24,325 16.1 % 413 1.7 %
Unbillable and other costs, net 15,130 9.8 % 13,395 8.9 % 1,735 13.0 %
Adjusted EBITDA 16,092 10.4 % 15,206 10.1 % 886 5.8 %
Stock-based compensation 497 0.3 % 868 0.6 % (371) (42.7) %
Depreciation and amortization 7,994 5.2 % 7,538 5.0 % 456 6.0 %
Deferred acquisition consideration 1,537 1.0 % 2,812 1.9 % (1,275) (45.3) %
Other items, net 4,821 3.1 % 3,127 2.1 % 1,694 54.2 %
Operating income $ 1,243 0.8 % $ 861 0.6 % $ 382 44.4 %
Revenue
Revenue for the three months ended June 30, 2026 was $179.9 million, compared to $164.0 million for the three months ended June 30, 2025, an increase of $15.9 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Three Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Three Months Ended June 30, 2026 Organic Total
(dollars in thousands)
Media & Commerce $ 150,964 $ (73) $ 2,221 $ 1,558 $ 3,706 $ 154,670 1.0% 2.5%
Component % change - % 1.5 % 1.0 % 2.5 %
Organic net revenue increased by $1.6 million or 1.0%, primarily due to a $3.8 million, or 11.4% increase in Media Platforms. The increase reflected higher connected television advertising for the World Cup, expansion of in-flight connectivity products across additional airline partners and growth in travel media publications. These increases were partially offset by reduced marketing spend in the Middle East due to ongoing conflict. The impact of acquisitions and divestitures reflected the prior year acquisition of ADK.
Expenses
Cost of services increased by $17.0 million or 17.4%. Excluding the $12.2 million increase in Billable costs and a $1.9 million of expenses from acquired entities, Cost of services increased $2.9 million, or 3.4%, primarily attributable to the $1.7 million, or 13.0%, increase in Unbillable and other costs, net. The increase in Unbillable and other costs, net was primarily due to a 11.4% increase in Organic net revenue in Media Platforms.
Office and general expenses decreased $1.9 million, primarily due to lower Deferred acquisition consideration and cost discipline across the services lines. Deferred acquisition consideration decreased $1.3 million, primarily due to a lower year-over-year fair-value non-cash adjustment from a certain acquired brand. The prior-year period reflected a larger increase in the fair value of the liability driven by that brand's 2025 performance. Ongoing cost reduction initiatives across the segment also contributed to the decrease.
Operating Income
Operating income increased $0.4 million, or 44.4%, and operating margin improved to 0.8% from 0.6%. The increase was driven by Net revenue growth of $3.7 million, or 2.5%, and a net decrease of $1.2 million primarily due to a non-cash adjustment explained above. These were partially offset by the increase of Staff, Administrative, and Unbillable and other costs, net of $2.8 million, or 2.1%, resulting in a 0.3 percentage point improvement in those costs as a percentage of Net revenue.
Adjusted EBITDA
Adjusted EBITDA increased $0.9 million, or 5.8%, and Adjusted EBITDA margin as a percentage of Net revenue increased to 10.4% from 10.1%. The increase was driven by Net revenue growth of $3.7 million, or 2.5%, while Staff, Administrative, and Unbillable and other costs, net increased only $2.8 million, improving these costs as a percentage of Net revenue by 0.3 percentage points.
Communications
The components of operating results for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 were as follows:
Three Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 188,426 $ 146,180 $ 42,246 28.9 %
Operating Expenses
Cost of services 130,835 102,855 27,980 27.2 %
Office and general expenses 29,061 20,527 8,534 41.6 %
Depreciation and amortization 6,189 6,390 (201) (3.1) %
$ 166,085 $ 129,772 $ 36,313 28.0 %
Operating income $ 22,341 $ 16,408 $ 5,933 36.2 %
Three Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue $ 188,426 $ 146,180 $ 42,246 28.9 %
Billable costs 76,337 48,548 27,789 57.2 %
Net Revenue 112,089 100.0 % 97,632 100.0 % 14,457 14.8 %
Staff costs 61,197 54.6 % 57,311 58.7 % 3,886 6.8 %
Administrative costs 14,179 12.6 % 11,530 11.8 % 2,649 23.0 %
Unbillable and other costs, net 1,819 1.6 % 2,584 2.6 % (765) (29.6) %
Adjusted EBITDA 34,894 31.1 % 26,207 26.8 % 8,687 33.1 %
Stock-based compensation 2,513 2.2 % 4,133 4.2 % (1,620) (39.2) %
Depreciation and amortization 6,189 5.5 % 6,390 6.5 % (201) (3.1) %
Deferred acquisition consideration 1,760 1.6 % (2,376) (2.4) % 4,136 NM
Other items, net 2,091 1.9 % 1,652 1.7 % 439 26.6 %
Operating income $ 22,341 19.9 % $ 16,408 16.8 % $ 5,933 36.2 %
Revenue
Revenue for the three months ended June 30, 2026 was $188.4 million, compared to $146.2 million for the three months ended June 30, 2025, an increase of $42.2 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended June 30, 2026, compared to the three months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Three Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Three Months Ended June 30, 2026 Organic Total
(dollars in thousands)
Communications $ 97,632 $ 229 $ 2,373 $ 11,855 $ 14,457 $ 112,089 12.1 % 14.8 %
Component % change 0.2 % 2.4 % 12.1 % 14.8 %
Organic net revenue increased by $11.9 million, or 12.1%, primarily due to growth in corporate public affairs consulting and the transition into an on-cycle U.S. election year. Compared with the prior year off-cycle period, increased demand for corporate public affairs consulting, political fundraising, and early primary-campaign activity generated higher volumes of digital, texting, advertising, and direct-mail production work. New client wins and expanded engagements with existing clients also contributed to the increase. These benefits were partially offset by lower activity in the international strategic advisory practice due to geopolitical uncertainty in the Middle East, and lower demand for certain integrated communications and research offerings, partially mitigated by growth in influencer and event-based work. The impact of acquisitions and divestitures reflected Wavelength.
Expenses
Cost of services increased $28.0 million or 27.2%, primarily due to a $27.8 million increase in Billable costs associated with higher activity. Excluding Billable costs and $1.1 million of expenses from acquired entities, Cost of services decreased $0.9 million or 1.6% compared to Organic net revenue growth of 12.1%, reflecting ongoing cost reduction initiatives, including the transition of certain functions to shared services and AI-enabled workflow efficiencies.
Office and general expenses increased $8.5 million, due to costs to support Net revenue growth and a $4.1 million increase in deferred acquisition consideration. The increase reflected a prior year decrease in the fair value of the related liability for a certain Brand due to timing of its 2025 performance.
Operating Income
Operating income increased $5.9 million, or 36.2%, and operating margin increased to 19.9% from 16.8%. The increase was driven by Net revenue growth of $14.5 million, or 14.8%. This increase was partially offset by a $2.3 million increase in the non-cash adjustment to Stock-based compensation, Deferred acquisition consideration, and Depreciation and amortization, and a $5.8 million increase in Staff, Administrative, and Unbillable and other costs, net. These cumulative expenses only increased 10.2%, resulting in a 3.3 percentage point improvement in those costs as a percentage of Net revenue.
Adjusted EBITDA
Adjusted EBITDA increased by $8.7 million, or 33.1% and Adjusted EBITDA margin as a percentage of Net revenue increased to 31.1% from 26.8%. The increase was driven by Net revenue growth of $14.5 million, or 14.8%, This increase was partially offset by a $5.8 million, or 8.1%, increase in Staff, Administrative, and Unbillable and other costs, net, resulting in a 4.3 percentage point improvement in Staff, Administrative, and Unbillable and other costs, net as a percentage of Net revenue.
The Marketing Cloud
The components of operating results for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 were as follows:
Three Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 27,380 $ 25,276 $ 2,104 8.3 %
Operating Expenses
Cost of services 15,523 14,133 1,390 9.8 %
Office and general expenses 18,130 13,702 4,428 32.3 %
Depreciation and amortization 6,222 5,923 299 5.0 %
$ 39,875 $ 33,758 $ 6,117 18.1 %
Operating loss $ (12,495) $ (8,482) $ (4,013) 47.3 %
Three Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue $ 27,380 $ 25,276 $ 2,104 8.3 %
Billable costs 2 4 (2) (50.0) %
Net Revenue 27,378 100.0 % 25,272 100.0 % 2,106 8.3 %
Staff costs 18,085 66.1 % 17,136 67.8 % 949 5.5 %
Administrative costs 7,201 26.3 % 3,313 13.1 % 3,888 117.4 %
Unbillable and other costs, net 7,370 26.9 % 5,403 21.4 % 1,967 36.4 %
Adjusted EBITDA (5,278) (19.3) % (580) (2.3) % (4,698) 810.0 %
Stock-based compensation 391 1.4 % 132 0.5 % 259 196.2 %
Depreciation and amortization 6,222 22.7 % 5,923 23.4 % 299 5.0 %
Deferred acquisition consideration 560 2.0 % 636 2.5 % (76) (11.9) %
Other items, net 44 0.2 % 1,211 4.8 % (1,167) (96.4) %
Operating loss $ (12,495) (45.6) % $ (8,482) (33.6) % $ (4,013) 47.3 %
Revenue
Revenue for the three months ended June 30, 2026 was $27.4 million, compared to $25.3 million for the three months ended June 30, 2025, an increase of $2.1 million.
Net Revenue
The components of the fluctuations in net revenue for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Three Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Three Months Ended June 30, 2026 Organic Total
(dollars in thousands)
The Marketing Cloud $ 25,272 $ 1,072 $ - $ 1,034 $ 2,106 $ 27,378 4.1 % 8.3 %
Component % change 4.2 % - % 4.1 % 8.3 %
Organic net revenue increased by $1.0 million or 4.1%, driven by growth in Research. The increases reflected higher demand from new and existing consumer products and financial services clients, increased platform utilization and the introduction of additional subscription-based service offerings.
Expenses
Office and general expenses increased $4.4 million, primarily due to higher costs to support product development, customer adoption and the continued growth of the business.
Operating Loss
Operating loss increased $4.0 million or 47.3%, and operating margin decreased to (45.6)% from (33.6)%. The decrease was driven by an increase of $6.8 million, or 26.3%, in Staff, Administrative, and Unbillable and other costs, net. This increase was partially offset by an increase in Net Revenue of $2.1 million, or 8.3%, resulting in a 17.0 percentage point deterioration in those costs as a percentage of Net revenue.
Adjusted EBITDA
Adjusted EBITDA decreased by $4.7 million, or 810.0%, and Adjusted EBITDA margin as a percentage of Net revenue decreased to (19.3)% from (2.3)%. The decrease was driven by an increase of $6.8 million, or 26.3%, in Staff, Administrative, and Unbillable and other costs, net. This increase was partially offset by an increase in Net Revenue of $2.1 million, or 8.3%, resulting in a 17.0 percentage point deterioration in those costs as a percentage of Net revenue.
Corporate
The components of operating results for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 were as follows:
Three Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Staff costs $ 16,805 $ 12,977 $ 3,828 29.5 %
Administrative costs 4,504 (1,299) 5,803 NM
Adjusted EBITDA (21,309) (11,678) (9,631) 82.5 %
Stock-based compensation 3,581 5,951 (2,370) (39.8) %
Depreciation and amortization 5,172 3,223 1,949 60.5 %
Other items, net 8,133 2,714 5,419 199.7 %
Operating loss $ (38,195) $ (23,566) $ (14,629) 62.1 %
Expenses
Staff costs increased by $3.8 million, primarily attributable to an increase in headcount to support the implementation of a standardized shared services platform to optimize cost structures and support future growth and higher healthcare-related insurance claims.
Administrative costs increased $5.8 million, primarily due to a $11.1 million increase in computer software and licensing fees reflecting investments in automation and AI intended to improve workflow efficiency and support future margin expansion, partially offset by a $4.4 million decrease resulting from a higher allocation of Corporate's administrative costs to the Brands through the implementation of the shared services platform, which leverages Stagwell's scale and buying power to reduce overall costs and drive centralized service efficiencies reflected in the Brands' income statements. These costs include rent, IT services, accounting services, financial operations services, and business applications.
Operating Loss
Operating loss for the three months ended June 30, 2026 was $38.2 million compared to $23.6 million for the three months ended June 30, 2025, representing an increase of $14.6 million, primarily attributable to higher expenses, as discussed above.
SIX MONTHS ENDED JUNE 30, 2026 COMPARED TO SIX MONTHS ENDED JUNE 30, 2025
Consolidated Results of Operations
The components of operating results for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Six Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 1,490,450 $ 1,358,558 $ 131,892 9.7 %
Operating expenses
Cost of services 976,595 871,303 105,292 12.1 %
Office and general expenses 404,381 362,423 41,958 11.6 %
Depreciation and amortization 88,286 83,375 4,911 5.9 %
$ 1,469,262 $ 1,317,101 $ 152,161 11.6 %
Operating income $ 21,188 $ 41,457 $ (20,269) (48.9) %
Six Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue
$ 1,490,450 $ 1,358,558 $ 131,892 9.7 %
Billable costs 274,243 196,242 78,001 39.7 %
Net revenue
1,216,207 100.0 % 1,162,316 100.0 % 53,891 4.6 %
Staff costs 764,568 62.9 % 749,532 64.5 % 15,036 2.0 %
Administrative costs 156,715 12.9 % 147,836 12.7 % 8,879 6.0 %
Unbillable and other costs, net 96,552 7.9 % 88,364 7.6 % 8,188 9.3 %
Adjusted EBITDA 198,372 16.3 % 176,584 15.2 % 21,788 12.3 %
Stock-based compensation 32,815 2.7 % 31,497 2.7 % 1,318 4.2 %
Depreciation and amortization 88,286 7.3 % 83,375 7.2 % 4,911 5.9 %
Deferred acquisition consideration 19,091 1.6 % 3,437 0.3 % 15,654 455.5 %
Other items, net (1)
36,992 3.0 % 16,818 1.4 % 20,174 120.0 %
Operating income (2)
$ 21,188 1.7 % $ 41,457 3.6 % $ (20,269) (48.9) %
(1) Other items, net, primarily includes restructuring, certain system implementation costs, working capital administrative fees, acquisition-related expense, and other non-recurring expenses.
(2) See the Results of Operations section above for a reconciliation of Operating income to Net loss attributable to Stagwell Inc. common shareholders.
*Consolidated amounts in the table above are net of eliminations.
Revenue
Revenue for the six months ended June 30, 2026 was $1,490.5 million, compared to $1,358.6 million for the six months ended June 30, 2025, an increase of $131.9 million.
Net Revenue
The components of the fluctuations in Net revenue for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Six Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Six Months Ended June 30, 2026 Organic Total
(dollars in thousands)
Marketing Services $ 451,534 $ 3,263 $ (3,744) $ 765 $ 284 $ 451,818 0.2 % 0.1 %
Digital Transformation 179,604 (385) 3,227 21,487 24,329 203,933 12.0 % 13.5 %
Media & Commerce 297,152 2,286 4,185 542 7,013 304,165 0.2 % 2.4 %
Communications 188,613 969 2,613 16,668 20,250 208,863 8.8 % 10.7 %
The Marketing Cloud 49,371 2,540 - 1,966 4,506 53,877 4.0 % 9.1 %
Corporate, eliminations and other (3,958) 1 - (2,492) (2,491) (6,449) 63.0 % 62.9 %
$ 1,162,316 $ 8,674 $ 6,281 $ 38,936 $ 53,891 $ 1,216,207 3.3 % 4.6 %
Component % change 0.7 % 0.5 % 3.3 % 4.6 %
For the six months ended June 30, 2026, organic net revenue increased by $38.9 million, or 3.3%. Digital Transformation grew $21.5 million, reflecting higher demand for AI-related services and marketing-technology transformation among technology-sector clients. Communications grew $16.7 million as it entered an on-cycle U.S. election year, which increased public affairs activity across digital, advertising, direct-mail, and political fundraising work. Marketing Services, Media & Commerce, and The Marketing Cloud each contributed additional growth from new client wins, higher platform utilization, and subscription-based offerings. These increases were partially offset by reduced client spending in the Middle East related to the ongoing conflict.
The increase in net acquisitions (divestitures) was impacted by the prior year acquisitions of Jetfuel, Create Group Holding Limited ("Create"), and ADK, and current year acquisition of Wavelength, which expanded the Company's capabilities in experiential marketing, digital communications, and integrated marketing in 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 Net revenue for the six months ended June 30, 2026 and 2025 was as follows:
Six Months Ended June 30,
2026 2025
(dollars in thousands)
United States $ 951,038 $ 905,523
United Kingdom 81,703 72,859
Other 183,466 183,934
Total $ 1,216,207 $ 1,162,316
Expenses
Cost of services increased by $105.3 million, or 12.1%. Excluding the increase in Billable costs of $78.0 million and the addition of $5.2 million of expenses from acquired entities, Cost of services increased $22.1 million, or 3.3%, which is in line with the increase in Organic net revenue of 3.3%. The increase was driven by increases in Unbillable and other costs, net and staff costs to support the growth of Net revenue.
Office and general expenses increased by $42.0 million. Excluding the addition of expenses of acquired entities of $4.7 million, Office and general expenses increased $37.2 million, primarily attributable to a non-cash adjustment to Deferred acquisition consideration, as discussed below, and due to higher software licensing fees from investments in automation and AI intended to improve workflow efficiency and support future margin expansion.
Deferred acquisition consideration increased by $15.7 million, primarily attributable to strong performance at certain acquired Brands, which increased the fair value of the related deferred acquisition consideration liabilities, partially offset by a reduction in the fair value of the liabilities associated with certain other Brands driven by performance timing.
Operating Income
Operating income decreased by $20.3 million, or 48.9%, and operating margin decreased to 1.7% from 3.6%. The decrease was driven by a $21.9 million increase in a non-cash adjustment explained above and a $20.2 million increase in Other items, net, related to non-recurring tax and insurance adjustments in 2026 and a non-recurring gain on lease termination in 2025. These increases were partially offset by Net revenue growth of $53.9 million, or 4.6%, while Staff, Administrative, and Unbillable and other costs, net increased only by $32.1 million, or 3.3%, resulting in a 1.1 percentage point improvement in those costs as a percentage of Net revenue.
Interest Expense, Net
Interest expense, net for the six months ended June 30, 2026 was $45.6 million, compared to $46.8 million for the six months ended June 30, 2025, a decrease of $1.2 million. This decrease was primarily attributable to a lower average interest rate, partially offset by higher levels of debt outstanding under the Credit Agreement used to support the growth in working capital attributable to the growth of Net revenue of the business.
Foreign Exchange, Net
The foreign exchange loss for the six months ended June 30, 2026, was $2.4 million, compared to a loss of $0.1 million for the six months ended June 30, 2025. The $2.3 million unfavorable change was largely attributable to foreign exchange losses incurred by our European Brands, partially mitigated by foreign exchange gains realized by our Canadian Brands relative to the prior-year period.
Income Tax (Benefit) Expense
For the six months ended June 30, 2026, the Company had an income tax benefit of $3.2 million (on a pre-tax loss of $26.0 million resulting in an effective tax rate of 12.5%) compared to income tax expense for the six months ended June 30, 2025 of $4.4 million (on a pre-tax loss of $5.6 million resulting in an effective tax rate of (78.7)%).
The effective tax rate increased by 91.2 percentage points compared to the prior-year period, primarily due to (i) a 57.7 percentage point increase from additional pre-tax losses, which were not subject to valuation allowances, for which we recorded a $5.3 million additional tax benefit; (ii) a 19.2 percentage point increase related to a reduction in interest and penalties for which we recorded $1.1 million less tax expense; (iii) an 11.6 percentage point increase related to a reduction in shortfall of deductions for stock-based compensation expense vested during the year for which we recorded $0.5 million less tax expense and (iv) a 2.7 percentage point increase related to a corporate restructure for which we recorded a $0.7 million tax benefit in 2026.
Noncontrolling and Redeemable Noncontrolling Interests
The effect of Noncontrolling and redeemable noncontrolling interests for the six months ended June 30, 2026 was a loss of $1.6 million, compared to a loss of $1.8 million for the six months ended June 30, 2025. The amounts were driven by the mix of income and loss derived from entities not entirely owned by the Company. Additionally, the change was driven by the Class C Exchange during the second quarter of 2025, which increased the loss allocated to Stagwell Inc.'s common shareholders.
Net Loss Attributable to Stagwell Inc. Common Shareholders
As a result of the foregoing, Net loss attributable to Stagwell Inc. common shareholders for the six months ended June 30, 2026 was $21.1 million, compared to a net loss of $8.2 million for the six months ended June 30, 2025.
Adjusted EBITDA
Adjusted EBITDA increased by $21.8 million, or 12.3% and Adjusted EBITDA margin as a percentage of Net revenue expanded to 16.3% from 15.2%. The increase was driven by Net revenue growth of $53.9 million, or 4.6%, while Staff costs increased only $15.0 million, resulting in a 1.6 percentage point improvement in Staff costs as a percentage of Net revenue. These benefits were partially offset by an increase of $8.9 million in Administrative costs and $8.2 million in Unbillable and other costs, net as explained above.
Earnings Per Share
Diluted EPS and Adjusted Diluted EPS for the six months ended June 30, 2026 were as follows:
GAAP
Adjustments
Non-GAAP
(amounts in thousands, except per share amounts)
Net income (loss) attributable to Stagwell Inc. common shareholders
$ (21,089) $ 125,775 $ 104,686
Diluted - Weighted average number of common shares outstanding
248,328 - 248,328
Diluted EPS and Adjusted Diluted EPS (1)
$ (0.08) $ 0.42
Adjustments to Net income (loss)
Amortization $ 77,270
Stock-based compensation 32,815
Deferred acquisition consideration 19,091
Other items, net (2)
36,992
$ 166,168
Adjustment to GAAP income tax expense (3)
(40,393)
$ 125,775
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
(2) Other items, net, primarily includes restructuring, certain system implementation costs, working capital administrative fees, acquisition-related expense, and other non-recurring expenses.
(3) Represents the difference between the income tax benefit of $3.2 million at an effective tax rate of 12.5% on a GAAP basis and the income tax expense of $37.2 million at an effective tax rate of 26.5% on a non-GAAP basis. The difference reflects the tax impact of non-GAAP adjustments.
Diluted EPS and Adjusted Diluted EPS for the six months ended June 30, 2025 were as follows:
GAAP
Adjustments
Non-GAAP
(amounts in thousands, except per share amounts)
Net income (loss) attributable to Stagwell Inc. common shareholders
$ (8,178) $ 95,596 $ 87,418
Net income (loss) attributable to Class C shareholders
(6,637) - (6,637)
Net income (loss) attributable to Stagwell Inc. and Class C shareholders and adjusted net income
$ (14,815) $ 95,596 $ 80,781
Diluted - Weighted average number of common shares outstanding
186,843 - 186,843
Weighted average number of shares of Class C Common Stock outstanding 78,757 - 78,757
Diluted - Weighted average number of shares outstanding
265,600 - 265,600
Diluted EPS and Adjusted Diluted EPS (1)
$ (0.06) $ 0.30
Adjustments to Net income (loss)
Amortization
$ 68,574
Stock-based compensation 31,497
Deferred acquisition consideration 3,437
Other items, net (2)
16,818
$ 120,326
Adjustment to GAAP income tax expense (3)
(24,730)
$ 95,596
(1) Adjusted Diluted EPS is defined within the Non-GAAP Financial Measures section of the Executive Summary.
(2) Other items, net, primarily includes restructuring, certain system implementation costs, working capital administrative fees, acquisition-related expense, and other non-recurring expenses.
(3) Represents the difference between the income tax expense of $4.4 million at an effective tax rate of (78.7)% on a GAAP basis and the income tax expense of $29.1 million at an effective tax rate of 26.5% on a non-GAAP basis. The difference reflects the tax impact of non-GAAP adjustments.
Marketing Services
The components of operating results for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Six Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 528,034 $ 524,940 $ 3,094 0.6 %
Operating expenses
Cost of services 355,883 343,552 12,331 3.6 %
Office and general expenses 98,847 99,895 (1,048) (1.0) %
Depreciation and amortization 24,908 26,736 (1,828) (6.8) %
$ 479,638 $ 470,183 $ 9,455 2.0 %
Operating income $ 48,396 $ 54,757 $ (6,361) (11.6) %
Six Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue
$ 528,034 $ 524,940 $ 3,094 0.6 %
Billable costs 76,216 73,406 2,810 3.8 %
Net revenue
451,818 100.0 % 451,534 100.0 % 284 0.1 %
Staff costs 263,543 58.3 % 262,726 58.2 % 817 0.3 %
Administrative costs 48,731 10.8 % 56,503 12.5 % (7,772) (13.8) %
Unbillable and other costs, net 49,353 10.9 % 43,571 9.6 % 5,782 13.3 %
Adjusted EBITDA 90,191 20.0 % 88,734 19.7 % 1,457 1.6 %
Stock-based compensation 12,932 2.9 % 10,592 2.3 % 2,340 22.1 %
Depreciation and amortization 24,908 5.5 % 26,736 5.9 % (1,828) (6.8) %
Deferred acquisition consideration (1,969) (0.4) % (4,284) (0.9) % 2,315 (54.0) %
Other items, net 5,924 1.3 % 933 0.2 % 4,991 534.9 %
Operating income $ 48,396 10.7 % $ 54,757 12.1 % $ (6,361) (11.6) %
Revenue
Revenue for the six months ended June 30, 2026 was $528.0 million, compared to $524.9 million for the six months ended June 30, 2025, an increase of $3.1 million.
Net Revenue
The components of the fluctuations in Net revenue for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Six Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Six Months Ended June 30, 2026 Organic Total
(dollars in thousands)
Marketing Services $ 451,534 $ 3,263 $ (3,744) $ 765 $ 284 $ 451,818 0.2 % 0.1 %
Component % change 0.7 % (0.8) % 0.2 % 0.1 %
Organic net revenue increased by $0.8 million, or 0.2%, as growth in Research and Social was largely offset by the declines in Creative and Experiential. Research benefited by new client wins and expanded client relationships across the technology, financial services and professional services sectors, including increased demand related to AI adoption. Creative declined as billable costs increased while Revenue remained relatively flat although several significant new client engagements began ramping up during the year. Experiential declined where reduced beverage and spirits client spending was partially offset by demand for large-scale activations through the Sport Beach business. The impact of acquisitions and divestitures primarily reflected the divestiture of an experiential brand, partially offset by the prior year acquisition of Jetfuel.
Expenses
Cost of services increased by $12.3 million or 3.6%. Excluding $2.8 million increase in Billable costs and a $1.8 million decrease related to acquired and divested entities, Cost of services increased $11.3 million or 4.3%. The increase was primarily driven by $5.8 million of higher Unbillable and other costs, net, and a $5.7 million increase in staff costs, primarily attributable to Research where Unbillable and other costs, net and staff costs increased a combined $5.9 million, or 10.6% compared to 10.7% increase in Organic net revenue growth. Additionally, Creative and Experiential contributed $3.6 million in Unbillable and other costs, net due to outsourced Creative costs and the expansion of Sport Beach within Experiential.
Other items, net increased $5.0 million, primarily attributable to a lease termination during the first quarter of 2025 as part of the real estate consolidation initiatives resulting in a gain of $3.5 million, and an increase in severance of $0.8 million.
Operating Income
Operating income decreased $6.4 million, or 11.6%, and operating margin decreased to 10.7% from 12.1%. The decrease was driven by an increase of $5.0 million in Other items, net and $2.8 million increase in non-cash expenses for Stock-based compensation, Deferred acquisition consideration, and Depreciation and amortization, resulting in a 1.7 percentage point deterioration in those costs as a percentage of Net revenue. These expenses were partially offset by a decrease in Staff, Administrative, and Unbillable and other costs, net of $1.2 million and an increase in Net revenue of $0.3 million.
Adjusted EBITDA
Adjusted EBITDA increased by $1.5 million, or 1.6%, and Adjusted EBITDA margin as a percentage of Net revenue increased to 20.0% from 19.7%. The increase was driven by a decrease in Staff, Administrative, and Unbillable and other costs, net of $1.2 million and an increase in Net revenue of $0.3 million, or 0.1%. The decreases in expense resulted in a 0.3 percentage point improvement in Staff, Administrative, and Unbillable and other costs, net as a percentage of Net revenue.
Digital Transformation
The components of operating results for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Six Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 219,138 $ 188,479 $ 30,659 16.3 %
Operating expenses
Cost of services 130,312 114,796 15,516 13.5 %
Office and general expenses 47,591 39,288 8,303 21.1 %
Depreciation and amortization 11,755 11,318 437 3.9 %
$ 189,658 $ 165,402 $ 24,256 14.7 %
Operating income $ 29,480 $ 23,077 $ 6,403 27.7 %
Six Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue
$ 219,138 $ 188,479 $ 30,659 16.3 %
Billable costs 15,205 8,875 6,330 71.3 %
Net revenue
203,933 100.0 % 179,604 100.0 % 24,329 13.5 %
Staff costs 131,883 64.7 % 122,764 68.4 % 9,119 7.4 %
Administrative costs 14,108 6.9 % 12,617 7.0 % 1,491 11.8 %
Unbillable and other costs, net 292 0.1 % 765 0.4 % (473) (61.8) %
Adjusted EBITDA 57,650 28.3 % 43,458 24.2 % 14,192 32.7 %
Stock-based compensation 4,693 2.3 % 2,146 1.2 % 2,547 118.7 %
Depreciation and amortization 11,755 5.8 % 11,318 6.3 % 437 3.9 %
Deferred acquisition consideration 10,102 5.0 % 5,855 3.3 % 4,247 72.5 %
Other items, net 1,620 0.8 % 1,062 0.6 % 558 52.5 %
Operating income $ 29,480 14.5 % $ 23,077 12.8 % $ 6,403 27.7 %
Revenue
Revenue for the six months ended June 30, 2026 was $219.1 million, compared to $188.5 million for the six months ended June 30, 2025, an increase of $30.7 million.
Net Revenue
The components of the fluctuations in Net revenue for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Six Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Six Months Ended June 30, 2026 Organic Total
(dollars in thousands)
Digital Transformation $ 179,604 $ (385) $ 3,227 $ 21,487 $ 24,329 $ 203,933 12.0 % 13.5 %
Component % change (0.2) % 1.8 % 12.0 % 13.5 %
Organic net revenue increased by $21.5 million, or 12.0%. The increase was led by a $14.5 million increase in Strategy and Design, driven by increased demand for AI-related services, expanded marketing-technology transformation work with technology-sector clients, additional scope on existing engagements and new client wins, including several large enterprise engagements. Development and Implementation increased by $4.0 million, reflecting revenue synergies from the integration of recently combined agencies, growth in recurring retainers, higher renewal rates, and continued demand for staff-augmentation services. Digital Activation increased by $5.1 million, driven by expanded enterprise software activation engagements, additional work with existing enterprise clients, and new program activity, partially offset by the completion of certain prior-year engagements. The impact of acquisitions and divestitures primarily reflected the prior year acquisition of Create.
Expenses
Cost of services increased $15.5 million or 13.5%. Excluding a $6.3 million increase in Billable costs and $1.8 million in expenses from acquired entities, Cost of services increased $7.4 million, or 7.1%, approximately half the 12.0% increase in Organic net revenue. This resulted in operating leverage as higher staff costs supported Net revenue growth and were partially offset by cost reduction initiatives and labor market conditions.
Office and general expenses increased by $8.3 million primarily due to non-cash expenses resulting from an increase in Deferred acquisition consideration expense and an increase in Stock-based compensation. Deferred acquisition consideration increased by $4.2 million, primarily attributable to strong performance in a certain acquired Brand in 2026, causing an increase in the fair value of the deferred acquisition consideration liability of that Brand. Stock-based compensation increased by $2.5 million, primarily due to a greater proportion of the annual incentive compensation being allocated to stock-based awards compared to last year.
Operating Income
Operating income increased $6.4 million, or 27.7%, and operating margin increased to 14.5% from 12.8%. The increase was driven by Net revenue growth of $24.3 million, or 13.5%. This increase was partially offset by an increase in Staff, Administrative, and Unbillable and other costs, net of $10.1 million and non-cash expenses as explained above of $7.2 million, resulting in a 1.8 percentage point improvement in those costs as a percentage of Net revenue.
Adjusted EBITDA
Adjusted EBITDA increased by $14.2 million, or 32.7%, and Adjusted EBITDA margin as a percentage of Net revenue increased to 28.3% from 24.2%. The increase was driven by Net revenue growth of $24.3 million, or 13.5%. This increase was partially offset by an increase in Staff, Administrative, and Unbillable and other costs, net of $10.1 million, resulting in a 4.1 percentage point improvement in those costs as a percentage of Net revenue.
Media & Commerce
The components of operating results for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, were as follows:
Six Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 354,454 $ 324,447 $ 30,007 9.2 %
Operating expenses
Cost of services 225,751 197,592 28,159 14.3 %
Office and general expenses 115,455 109,096 6,359 5.8 %
Depreciation and amortization 15,909 14,686 1,223 8.3 %
$ 357,115 $ 321,374 $ 35,741 11.1 %
Operating income (loss) $ (2,661) $ 3,073 $ (5,734) NM
Six Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue
$ 354,454 $ 324,447 $ 30,007 9.2 %
Billable costs 50,289 27,295 22,994 84.2 %
Net revenue
304,165 100.0 % 297,152 100.0 % 7,013 2.4 %
Staff costs 195,935 64.4 % 192,986 64.9 % 2,949 1.5 %
Administrative costs 47,911 15.8 % 46,738 15.7 % 1,173 2.5 %
Unbillable and other costs, net 28,812 9.5 % 28,890 9.7 % (78) (0.3) %
Adjusted EBITDA 31,507 10.4 % 28,538 9.6 % 2,969 10.4 %
Stock-based compensation 1,641 0.5 % 2,191 0.7 % (550) (25.1) %
Depreciation and amortization 15,909 5.2 % 14,686 4.9 % 1,223 8.3 %
Deferred acquisition consideration 8,638 2.8 % 1,530 0.5 % 7,108 464.6 %
Other items, net 7,980 2.6 % 7,058 2.4 % 922 13.1 %
Operating income (loss) $ (2,661) (0.9) % $ 3,073 1.0 % $ (5,734) NM
Revenue
Revenue for the six months ended June 30, 2026 was $354.5 million, compared to $324.4 million for the six months ended June 30, 2025, an increase of $30.0 million.
Net Revenue
The components of the fluctuations in Net revenue for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Six Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Six Months Ended June 30, 2026 Organic Total
(dollars in thousands)
Media & Commerce $ 297,152 $ 2,286 $ 4,185 $ 542 $ 7,013 $ 304,165 0.2 % 2.4 %
Component % change 0.8 % 1.4 % 0.2 % 2.4 %
Organic net revenue increased by $0.5 million or 0.2%, primarily due to a $4.0 million increase in Media Platforms. The increase reflected higher connected television advertising for the World Cup, expansion of in-flight connectivity products across additional airline partners and growth in travel media publications. These increases were partially offset by reduced marketing spend in the Middle East due to ongoing conflict. The impact of acquisitions and divestitures reflected the prior year acquisition of ADK.
Expenses
Cost of services increased by $28.2 million or 14.3%. Excluding the $23.0 million increase in Billable costs and $3.8 million of expenses from acquired entities, Cost of services increased $1.3 million, or 0.8%.
Office and general expenses increased $6.4 million. Excluding $2.4 million of expenses from acquired entities, Office and general expenses increased $4.0 million primarily due to higher Deferred acquisition consideration, partially offset by cost discipline across the service lines. Deferred acquisition consideration increased $7.1 million, primarily due to the 2026 performance of a certain acquired brand, which raised the fair value of the related liability.
Operating Income (Loss)
Operating loss for the six months ended June 30, 2026 was $2.7 million, compared to income of $3.1 million for the six months ended June 30, 2025, representing a decrease of $5.7 million. Operating margin decreased to (0.9)% from 1.0% driven by the increase in Staff, Administrative, and Unbillable and other costs, net of $4.0 million and non-cash expenses including the Deferred acquisition consideration discussed above, of $7.8 million, resulting in a 1.7 percentage point deterioration in those costs as a percentage of Net revenue. These increases were partially offset by an increase in Net revenue of $7.0 million, or 2.4%.
Adjusted EBITDA
Adjusted EBITDA increased $3.0 million, or 10.4%, and Adjusted EBITDA margin as a percentage of Net revenue increased to 10.4% from 9.6%. The increase was driven by Net revenue growth of $7.0 million, or 2.4%, while Staff, Administrative, and Unbillable and other costs, net increased only $4.0 million, resulting in a 0.8 percentage point improvement in those costs as a percentage of Net revenue.
Communications
The components of operating results for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Six Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 341,528 $ 275,268 $ 66,260 24.1 %
Operating expenses
Cost of services 239,943 192,912 47,031 24.4 %
Office and general expenses 51,812 44,621 7,191 16.1 %
Depreciation and amortization 13,047 12,986 61 0.5 %
$ 304,802 $ 250,519 $ 54,283 21.7 %
Operating income $ 36,726 $ 24,749 $ 11,977 48.4 %
Six Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue
$ 341,528 $ 275,268 $ 66,260 24.1 %
Billable costs 132,665 86,655 46,010 53.1 %
Net revenue
208,863 100.0 % 188,613 100.0 % 20,250 10.7 %
Staff costs 118,147 56.6 % 115,623 61.3 % 2,524 2.2 %
Administrative costs 26,926 12.9 % 24,526 13.0 % 2,400 9.8 %
Unbillable and other costs, net 3,843 1.8 % 4,665 2.5 % (822) (17.6) %
Adjusted EBITDA 59,947 28.7 % 43,799 23.2 % 16,148 36.9 %
Stock-based compensation 4,910 2.4 % 5,166 2.7 % (256) (5.0) %
Depreciation and amortization 13,047 6.2 % 12,986 6.9 % 61 0.5 %
Deferred acquisition consideration 1,760 0.8 % (1,163) (0.6) % 2,923 NM
Other items, net 3,504 1.7 % 2,061 1.1 % 1,443 70.0 %
Operating income $ 36,726 17.6 % $ 24,749 13.1 % $ 11,977 48.4 %
Revenue
Revenue for the six months ended June 30, 2026 was $341.5 million compared to $275.3 million for the six months ended June 30, 2025, an increase of $66.3 million.
Net Revenue
The components of the fluctuations in Net revenue for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Six Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Six Months Ended June 30, 2026 Organic Total
(dollars in thousands)
Communications $ 188,613 $ 969 $ 2,613 $ 16,668 $ 20,250 $ 208,863 8.8 % 10.7 %
Component % change 0.5 % 1.4 % 8.8 % 10.7 %
Organic net revenue increased by $16.7 million, or 8.8%, primarily due to growth in corporate public affairs consulting and the transition into an on-cycle U.S. election year. Compared with the prior year off-cycle period, increased demand for corporate public affairs consulting, political fundraising, and early primary-campaign activity generated higher volumes of digital, texting, advertising, and direct-mail production work. New client wins and expanded engagements with existing clients also contributed to the increase. These benefits were partially offset by lower activity in the international strategic advisory practice due to geopolitical uncertainty in the Middle East and lower demand for certain integrated communications and research offerings, partially mitigated by growth in influencer and event-based work. The impact of acquisitions and divestitures reflected Wavelength.
Expenses
Cost of services increased $47.0 million or 24.4%, primarily due to a $46.0 million increase in Billable costs associated with higher activity. Excluding Billable costs and $1.4 million of expenses from acquired entities, Cost of services decreased $0.4 million or 0.3% compared to Organic net revenue growth of 8.8%, reflecting ongoing cost reduction initiatives, including the transition of certain functions to shared services and AI-enabled workflow efficiencies.
Office and general expenses increased $7.2 million, primarily due to Staff and Administrative costs associated with Net revenue growth and a $2.9 million increase in a non-cash adjustment to deferred acquisition consideration. The increase reflected a current year increase in the fair value of a certain Brand in 2026 due to 2026 performance and a prior year decrease in the fair value of the related liability for a certain Brand due to timing of its 2025 performance.
Operating Income
Operating income increased $12.0 million, or 48.4%, and operating margin increased to 17.6% from 13.1%. The increase was driven by Net revenue growth of $20.3 million, or 10.7%, partially offset by the increase in Staff, Administrative, and Unbillable and other costs, net of $4.1 million and the non-cash adjustments to deferred consideration, as explained above, and others of $2.7 million, resulting in a 5.0 percentage point improvement in those costs as a percentage of Net revenue.
Adjusted EBITDA
Adjusted EBITDA increased by $16.1 million, or 36.9% and Adjusted EBITDA margin as a percentage of Net revenue increased to 28.7% from 23.2%. The increase was driven by Net revenue growth of $20.3 million, or 10.7%, partially offset by the increase in Staff, Administrative, and Unbillable and other costs, net of $4.1 million, resulting in a 5.5 percentage point improvement in those costs as a percentage of Net revenue.
The Marketing Cloud
The components of operating results for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Six Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Revenue $ 53,895 $ 49,382 $ 4,513 9.1 %
Operating expenses
Cost of services 30,535 25,550 4,985 19.5 %
Office and general expenses 32,780 30,648 2,132 7.0 %
Depreciation and amortization 12,950 10,981 1,969 17.9 %
$ 76,265 $ 67,179 $ 9,086 13.5 %
Operating loss $ (22,370) $ (17,797) $ (4,573) 25.7 %
Six Months Ended June 30,
2026 % of Net Revenue 2025 % of Net Revenue Change
(dollars in thousands)
$ %
Revenue
$ 53,895 $ 49,382 $ 4,513 9.1 %
Billable costs 18 11 7 63.6 %
Net revenue
53,877 100.0 % 49,371 100.0 % 4,506 9.1 %
Staff costs 34,888 64.8 % 34,033 68.9 % 855 2.5 %
Administrative costs 12,391 23.0 % 8,514 17.2 % 3,877 45.5 %
Unbillable and other costs, net 14,252 26.5 % 10,473 21.2 % 3,779 36.1 %
Adjusted EBITDA (7,654) (14.2) % (3,649) (7.4) % (4,005) 109.8 %
Stock-based compensation 506 0.9 % 343 0.7 % 163 47.5 %
Depreciation and amortization 12,950 24.0 % 10,981 22.2 % 1,969 17.9 %
Deferred acquisition consideration 560 1.0 % 1,499 3.0 % (939) (62.6) %
Other items, net 700 1.3 % 1,325 2.7 % (625) (47.2) %
Operating loss $ (22,370) (41.5) % $ (17,797) (36.0) % $ (4,573) 25.7 %
Revenue
Revenue for the six months ended June 30, 2026 was $53.9 million compared to $49.4 million for the six months ended June 30, 2025, an increase of $4.5 million.
Net Revenue
The components of the fluctuations in Net revenue for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Net Revenue - Components of Change Change
Six Months Ended June 30, 2025 Foreign Currency Net Acquisitions (Divestitures) Organic Total Change Six Months Ended June 30, 2026 Organic Total
(dollars in thousands)
The Marketing Cloud $ 49,371 $ 2,540 $ - $ 1,966 $ 4,506 $ 53,877 4.0 % 9.1 %
Component % change 5.1 % - % 4.0 % 9.1 %
Organic net revenue increased by $2.0 million or 4.0%, driven primarily by growth in Research. The increases reflected higher demand from new and existing consumer products and financial and business services clients, increased platform utilization and the introduction of additional subscription-based service offerings. These increases were partially offset by a reduced marketing spend in the Middle East in Communications Technology due to the ongoing conflict.
Expenses
Cost of services increased $5.0 million due to higher Unbillable and other costs, net of $3.8 million due to higher Net revenue and higher staff costs to support the expansion in the business.
Operating Loss
Operating loss increased $4.6 million or 25.7%, and operating margin decreased to (41.5)% from (36.0)%. The decrease was driven by an increase of $8.5 million, or 16.0%, in Staff, Administrative, and Unbillable and other costs, net. This increase was partially offset by an increase in Net Revenue of $4.5 million, or 9.1%, resulting in a 6.8 percentage point deterioration in those costs as a percentage of Net revenue.
Adjusted EBITDA
Adjusted EBITDA decreased by $4.0 million, or 109.8%, and Adjusted EBITDA margin as a percentage of Net revenue decreased to (14.2)% from (7.4)%. The decrease was driven by an increase of $8.5 million, or 16.0%, in Staff, Administrative, and Unbillable and other costs, net. This increase was partially offset by an increase in Net Revenue of $4.5 million, or 9.1%, resulting in a 6.8 percentage point deterioration in those costs as a percentage of Net revenue.
Corporate
The components of operating results for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 were as follows:
Six Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Staff costs $ 31,988 $ 24,875 $ 7,113 28.6 %
Administrative costs 8,134 (1,062) 9,196 NM
Adjusted EBITDA (40,122) (23,813) (16,309) 68.5 %
Stock-based compensation 8,133 11,059 (2,926) (26.5) %
Depreciation and amortization 9,625 6,668 2,957 44.3 %
Other items, net 9,949 4,379 5,570 127.2 %
Operating loss $ (67,829) $ (45,919) $ (21,910) 47.7 %
Expenses
Staff costs increased by $7.1 million, primarily attributable to an increase in headcount to support the implementation of a standardized shared services platform to optimize cost structures and support future growth and higher healthcare-related insurance claims.
Administrative costs increased $9.2 million, primarily due to a $17.3 million increase in computer software and licensing fees reflecting investments in automation and AI intended to improve workflow efficiency and support future margin expansion, partially offset by a $7.3 million decrease resulting from a higher allocation of Corporate's administrative costs to the Brands through the implementation of the shared services platform, which leverages Stagwell's scale and buying power to reduce overall costs and drive centralized service efficiencies reflected in the Brands' income statements. These costs include rent, IT services, accounting services, financial operations services, and business applications.
Operating Loss
Operating loss for the six months ended June 30, 2026 was $67.8 million compared to $45.9 million for the six months ended June 30, 2025, representing an increase of $21.9 million, primarily attributable to higher expenses, as discussed above.
Liquidity and Capital Resources:
The following table provides summary information about the Company's liquidity position and capital resources:
Six Months Ended June 30,
2026 2025 Change
(dollars in thousands)
$ %
Net cash provided by operating activities $ 63,717 $ 54,738 $ 8,979 16.4 %
Net cash used in investing activities (89,672) (34,936) (54,736) 156.7 %
Net cash provided by financing activities 30,082 21,062 9,020 42.8 %
The Company had cash and cash equivalents of $109.5 million and $104.5 million as of June 30, 2026, and December 31, 2025, respectively.
Operating Activities
Net cash provided by operating activities for the six months ended June 30, 2026 was $63.7 million, an increase of $9.0 million, or 16.4%, compared to the prior-year period. The increase was primarily driven by higher non-cash expenses, which contributed to the higher net loss but did not affect operating cash flows, partially offset by an $11.6 million increase in working capital usage.
Changes in non-cash items consisted primarily of a $15.7 million increase in the adjustment to deferred acquisition liabilities, driven by the performance timing of certain acquisitions, a $4.9 million increase in depreciation and amortization, from investments in AI and automation technologies, including increased capital investment during the latter half of 2025, and a $1.3 million increase in stock-based compensation.
First-half working capital usage reflects the seasonal settlement of costs incurred during the prior-year back-to-school and holiday marketing periods, as well as the funding of annual incentive compensation and tax obligations. The $11.6 million year-over-year increase primarily reflected unfavorable changes of $41.3 million in accounts payable, $21.9 million in expenditures billable to clients and $17.5 million in other current assets due to increased prepaid media assets. These changes were partially offset by favorable changes of $60.6 million in accruals, primarily from improved payment terms with significant service providers, and $3.5 million in advance billings.
Investing Activities
Net cash used in investing activities for the six months ended June 30, 2026 was $89.7 million, an increase of $54.7 million, or 156.7%, compared to the prior-year period. The increase was driven primarily by higher capital expenditures and capitalized software spending of $3.5 million and $33.2 million, respectively, reflecting continued investment in AI and process automation technologies. In addition, there was an $18.6 million unfavorable change in acquisitions, net of cash acquired, primarily attributable to net cash proceeds received from the acquisition of ADK in the prior-year period.
Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2026 was $30.1 million, an increase of $9.0 million, or 42.8%, compared to the prior-year period. The improvement was primarily attributable to a $15.8 million reduction in payments of deferred consideration, $1.7 million decline in distribution to noncontrolling interest holders and an increase in the net proceeds from the borrowings under the Credit Agreement of $11.0 million. The prior-year period also included $3.6 million of debt financing costs that did not recur in the current period. These favorable movements were partially offset by a $20.5 million increase in share repurchases.
Liquidity
The Company expects to maintain sufficient cash and/or available borrowings to fund operations for the next twelve months and subsequent periods. The Company has historically maintained and expanded its business using cash generated from operating activities, funds available under the Credit Agreement, and other initiatives, such as obtaining additional debt, equity and receivable financing. The Credit Agreement provides revolving commitments of up to $750 million and permits restricted payments for share repurchases or redemptions from certain of its stockholders. On March 27, 2026, the Company entered into Amendment No. 2 to the Second Amended and Restated Credit Agreement that modified certain provisions of the Credit Agreement to expand the Company's ability to borrow under its revolving credit facility in non-U.S. dollar currencies. Under the prior terms, borrowings denominated in British pounds sterling and Euros were each subject to individual sub-limits of $50.0 million, with an aggregate foreign currency sub-limit of $100.0 million. The amendment eliminated those individual currency sub-limits, allowing borrowings in U.S. dollars, British pounds sterling, Euros, and Canadian dollars up to the full revolving commitment, subject to overall facility availability. The amendment also established a framework for adding other currencies by mutual agreement among the Company and the lenders, subject to a sub-limit of $100.0 million. In addition, the amendment increased the annual limit on permitted restricted payments for repurchases or redemptions of the Company's stock to $175.0 million per fiscal year from $100.0 million and increased the annual limit on permitted repurchases of equity interests from employees of the Company to $50.0 million per fiscal year from $15.0 million. As of June 30, 2026, the Company had $360.0 million of borrowings outstanding and $15.8 million of issued and undrawn letters of credit, resulting in $374.2 million of unused borrowing capacity under the Credit Agreement.
The Company transfers certain of its trade receivable assets to third parties under certain agreements. Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer.
The trade receivables transferred to the third parties were $165.9 million, and $335.0 million for the three and six months ended June 30, 2026, respectively, and were $114.3 million and $243.5 million for the three and six months ended June 30, 2025, respectively. The amount collected and due to the third parties under these arrangements was $28.9 million, and $21.2 million as of June 30, 2026 and December 31, 2025, respectively, and was included as a component of Accruals and other liabilities on the Unaudited Consolidated Balance Sheets. Fees for these arrangements were recorded in Office and general expenses in the Unaudited Consolidated Statements of Operations and totaled $1.8 million, and $3.6 million for the three and six months ended June 30, 2026, respectively, and totaled $1.3 million, and $2.8 million for the three and six months ended June 30, 2025, respectively.
The Company may purchase shares of outstanding Class A Common Stock under its Repurchase Program. Under the Repurchase Program, share repurchases may be made at our discretion from time to time in open market transactions at prevailing market prices, including through trading plans that may be adopted in accordance with Rule 10b5-1 of the Exchange Act, as amended, in privately negotiated transactions, or through other means, provided they are determined to be in the best interests of our Company and our stockholders and subject to compliance with the provisions of applicable law, including the Delaware General Corporate Law and securities laws. The timing and number of shares repurchased under the Repurchase Program will depend on a variety of factors, including the performance of our stock price, general market and economic conditions, regulatory requirements, the availability of funds, dilution, including from our equity incentive plans and employee stock purchase plan, and other considerations we deem relevant, such as any disproportionate impact such repurchases may have on our shareholders. The Repurchase Program may be suspended, modified, or discontinued at any time without prior notice. Our Board of Directors will review the Repurchase Program periodically and may authorize adjustments of its terms.
During the six months ended June 30, 2026, 11.8 million shares of Class A Common Stock were repurchased pursuant to the Repurchase Program at an average price of $6.18 per share, for an aggregate value, excluding fees, of $73.0 million. The repurchased shares included 6.2 million shares of Class A Common Stock repurchased from executive officers and other employees at a price of $6.17 per share, for an aggregate purchase price of $38.2 million. Additionally, during the six months ended June 30, 2026, 2.6 million shares in the amount of $14.9 million were withheld for taxes from the Class A Common Stock vested during the period.
The remaining value of shares of Class A Common Stock permitted to be repurchased under the Repurchase Program was $328.0 million as of June 30, 2026.
The Company's obligations extending beyond twelve months primarily consist of deferred acquisition consideration payments, purchases of redeemable noncontrolling interests, subsidiary awards, capital expenditures, scheduled lease obligation payments, and interest payments on borrowings under the Company's 5.625% Notes (as defined in Note 7 of the Notes to the Unaudited Consolidated Financial Statements included herein) and Credit Agreement. The Company expects to make estimated cash payments in the future to satisfy obligations under our Tax Receivables Agreement ("TRA"), which remains in effect after the final exchange of Class C Common Stock (see Note 13 of the Notes included herein for additional details). The amount and timing of any payments under the TRA are contingent on the Company achieving certain tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize. Based on the current outlook, the Company believes future cash flows from operations, together with the Company's existing cash balance and availability of funds under the Credit Agreement, will
be sufficient to meet the Company's anticipated cash needs for the next twelve months and subsequent periods. The Company's ability to make payments will depend on future performance, which is subject to general economic conditions, the competitive environment and other factors, including those described in this Form 10-Q and in the Company's other SEC filings.
Total Debt
As of June 30, 2026, Debt, net of debt issuance costs, was $1,450.1 million, compared to $1,326.0 million outstanding as of December 31, 2025. See Note 7 of the Notes to the Unaudited Consolidated Financial Statements included herein for information regarding the Company's 5.625% Notes and the Credit Agreement.
As of June 30, 2026, the Company was in compliance with all of the terms and conditions of the Credit Agreement, and management believes, based on its current financial projections, that the Company will be in compliance with its covenants over the next twelve months.
If the Company loses all or a substantial portion of its lines of credit under the Credit Agreement, or if the Company uses the maximum available amount under the agreement, it will be required to seek other sources of liquidity. If the Company were unable to find these sources of liquidity, for example, through an equity offering or access to the capital markets, the Company's ability to fund its working capital needs and any contingent obligations with respect to acquisitions and redeemable noncontrolling interests would be adversely affected.
Pursuant to the Credit Agreement, the Company must maintain a Total Leverage Ratio (as defined in the Credit Agreement) below an established threshold. For the period ended June 30, 2026, the Company's calculation of this ratio, and the maximum permitted under the Credit Agreement, respectively, were calculated based on the trailing twelve months as follows:
June 30, 2026
Total Leverage Ratio 3.09
Maximum per covenant 4.25
These ratios and measures are not based on GAAP and are not presented as alternative measures of operating performance or liquidity. Some of these ratios and measures include, among other things, pro forma adjustments for acquisitions, one-time charges, and other items, as defined in the Credit Agreement. They are presented here to demonstrate compliance with the covenants in the Credit Agreement, as non-compliance with such covenants could have a material adverse effect on the Company.
Material Cash Requirements
To the extent required under a particular client engagement, Stagwell's Brands enter into contractual commitments with media providers, production companies and other third parties on behalf of their clients at levels that exceed the revenue from the services. In most of these transactions, the Brands act as the clients' "Agent for a Disclosed Principal" where the Brands' risk is mitigated by sequential payment liability, i.e., the Brands' obligation to pay a third party is tolled until the Brand receives the underlying payment from the client, thereby safeguarding the Brand in the event of a client default. To further protect against client default, Stagwell takes additional precautions, including the procurement of credit insurance. While Stagwell has historically had a very low incidence of default, Stagwell is still exposed to the risk of significant uncollectible receivables from its clients, and the risk of a material loss could significantly increase in periods of severe economic downturn.
Deferred acquisition consideration on the balance sheet consists of deferred obligations related to contingent purchase price payments and retention payments tied to continued employment of specific personnel. See Note 6 of the Notes included herein for additional information regarding contingent deferred acquisition consideration.
When acquiring less than 100% ownership of an entity, the Company may enter into agreements that give the Company an option to purchase, or require the Company to purchase, the incremental ownership interests under certain circumstances. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity. See Note 8 of the Notes included herein for additional information regarding noncontrolling interests and redeemable noncontrolling interests.
Certain of the Company's subsidiaries grant awards to their employees providing them with an equity interest in the respective subsidiary (the "profits interests awards"). The awards generally provide the employee with the right, but not the obligation, to sell their profits interest in the subsidiary to the Company on a performance-based formula and, in certain cases, receive a profit share distribution. The profits interests awards are primarily settled in cash, with certain awards having stock-settlement provisions at the Company's discretion. The corresponding liability associated with these profits interests awards is included as a component of Accruals and other liabilities and Other liabilities on the Consolidated Balance Sheets. See Note 12 of the Notes included herein for additional information regarding these material commitments.
The Company enters into certain long-term non-cancellable contracts for services such as revenue or profit share arrangements, cloud-based services, or software licensing. See Note 9 of the Notes included herein for additional information regarding these material commitments.
Critical Accounting Estimates
See Note 2 of the Company's 2025 Form 10-K for information regarding the Company's critical accounting estimates.
Website Access to Company Reports and Information
Stagwell Inc.'s Internet website address is www.stagwellglobal.com. The Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to the Exchange Act, will be made available free of charge through the Company's website as soon as reasonably practical after those reports are electronically filed with, or furnished to, the SEC. The Company announces material information to the public through a variety of means, including filings with the SEC, press releases, public conference calls, and its website. The Company uses these channels, as well as social media, including X (formerly Twitter) (@stagwell) and (@Mark_Penn), Instagram (@stagwellglobal) and its LinkedIn page (https://www.linkedin.com/company/stagwell/), to communicate with investors and the public about the Company, its products and services, and other matters. Therefore, investors, the media, and others interested in the Company are encouraged to review the information the Company makes public in these locations, as such information could be deemed to be material information. Information on or that can be accessed through the Company's websites or these social media channels is not part of this Form 10-Q, and the Company's website addresses and social media channels are included herein as inactive textual references only.
Stagwell Inc. published this content on July 31, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 31, 2026 at 19:41 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]