Stagwell's Adjusted EBITDA Climbs 25% To $144.8 Million, But Operating Income Falls To $48.1 Million
Stock pay and acquisition-payment charges rose $41.9 million in the third quarter, enough to push operating income below last year's.
Stagwell, the marketing and communications network, grew adjusted EBITDA about 25% to $144.8 million in the third quarter, yet operating income fell to $48.1 million from $60.9 million a year earlier. The gap comes from a $41.9 million jump in stock-based pay and acquisition-payment charges, which the adjusted figures add back, according to the company's 10-Q filed Thursday.
Where the $41.9 million went
The company said operating gains from higher net revenue, lower staff costs and leaner administrative spending were more than offset by the extra expense. Deferred acquisition consideration accounted for $21.0 million of it and stock-based compensation for $16.3 million, with $4.0 million from depreciation and amortization and $0.6 million from impairment and other losses.
Stock-based compensation reached $28.9 million, from $12.6 million a year earlier. Stagwell attributes the rise to performance-based awards making up a larger share of annual incentive pay. Deferred acquisition consideration, the estimated cost of earnout payments to sellers of acquired businesses, swung to a $7.7 million expense from a $13.3 million credit, reflecting updated performance expectations at certain acquired businesses.
Both items are added back in the adjusted measures. Third-quarter adjusted earnings per share were $0.34, against $0.07 on a standard-accounting basis. For the first nine months, the company posted a loss of $0.01 per share, against adjusted earnings of $0.77.
Software and AI work carry the growth
Stagwell sells creative, research, digital, media and public relations services, plus software and data tools for in-house marketers. Net revenue rose 8.1% to $664.0 million in the quarter, with organic growth of 7.4%.
The Marketing Cloud, its software and data segment, grew $28.8 million, or 108.4%, on sales tied to its AI product The Machine and demand for research products. Digital Transformation grew 23.1% organically, and Communications grew 20.0%, helped by election-cycle work.
Marketing Services, the legacy core, went the other way. Its organic net revenue fell 7.5%, blamed on beverage clients cutting spend, a handoff between finished and newly won engagements, and prior-year one-off projects not repeating. Media & Commerce slipped 2.1% organically.
Freestar adds an earnout
Stagwell acquired Freestar, which helps online publishers monetize their sites, on October 23. The $50.0 million price was $20.0 million in cash plus $30.0 million in 3,442,043 Class A shares. An additional $60.0 million earnout is possible, partly payable in stock.
The company says it is still evaluating the purchase price allocation. The filing also shows $27.5 million of short-term cash advances to certain employees outstanding at September 30, due within one year.
Stagwell is still working out how it will account for Freestar, and the fair value of that earnout will feed the deferred acquisition consideration line in future quarters.
Sources
- 10-Q Filing — Stagwell (STGW) — SEC EDGAR
- 10-Q Filing — Stagwell (STGW), Q2 FY2026 filed 2026-07-31 (comparison basis) — SEC EDGAR
- Earnings release (8-K Item 2.02, stgw2026930pr.htm) — Stagwell, filed 2026-10-29 — SEC EDGAR
- Stagwell Non-GAAP EPS of $0.34 beats by $0.03, revenue of $816M misses by $18.21M (STGW:NASDAQ) | Seeking Alpha — seekingalpha.com
- Stagwell (STGW) Q3 Earnings Top Estimates — Yahoo Finance
- Stagwell: Q3 Earnings Snapshot | wusa9.com — Associated Press
- Stagwell: Q3 Earnings Snapshot – WTOP News — wtop.com
- Stagwell: Q3 Earnings Snapshot | king5.com — Associated Press
