Stagwell (STGW) risk factors, FY2024 10-K

Risks Related to Our Business and Industry

1. 01Our revenues are highly susceptible to declines as a result of unfavorable economic conditions
2. 02Our business depends on generating and maintaining ongoing, profitable client demand for our services and solutions
3. 03Our business could be adversely affected if we fail to retain our existing clients
4. 04We face significant competition
5. 05In addition, our competitors may compete for client engagements by significantly discounting their services. Price competition could force us to choose between lowering our prices (and suffering reduced operating margins) or losing a client’s business
6. 06We are making investments in new product offerings and technologies that are inherently risky
7. 07development or operating experience. They may also involve additional claims and liabilities (including intellectual property claims), expenses, regulatory challenges, and other risks that we do not currently anticipate
8. 08We are subject to risks related to our use of AI, including generative AI
9. 09Our international operations are exposed to a number of risks
10. 10We are exposed to the risk of client defaults
11. 11We are impacted by geopolitical events, international hostilities, terrorist attacks and natural disasters
12. 12We are impacted by seasonal fluctuations in marketing, research, communications and advertising activity

Risks Related to Strategic Transactions

1. 13We may not realize the expected benefits from strategic transactions
2. 14Strategic transactions may result in dilution to our stockholders and consume resources that are necessary to sustain our business

Risks Related to Our Employees and Human Resources

1. 15Our business is highly dependent on the services of Mark Penn, our CEO and Chairman
2. 16Our business is dependent on our ability to keep our supply of skills and resources in balance with client demand

Risks Related to Data Privacy and Cybersecurity

1. 17We face legal, reputational and financial risks from any failure to protect client data from security incidents or cyberattacks
2. 18We are subject to extensive data privacy laws and regulations

Risks Related to Litigation and Regulation

1. 19Litigation, investigations or other legal proceedings could expose us to significant liabilities and have a negative impact on our reputation or business
2. 20respond to regulatory inquiries and may be subject to regulatory or other government investigations, the outcomes of which are inherently uncertain
3. 21We are subject to industry regulations and other legal or reputational risks that could restrict our activities or negatively impact our performance or financial condition
4. 22We are subject to export restrictions, economic sanctions, the FCPA, and similar anti-corruption laws

Risks Related to Intellectual Property

1. 23Our business operations could suffer if we fail to adequately protect and enforce our intellectual property and other proprietary rights
2. 24We may be subject to intellectual property infringement or misappropriation claims
3. 25Our products and services use open source software

Risks Related to Our Capital Structure and Financing

1. 26We may need additional capital in the future, which may not be available to us. The raising of any additional capital may dilute holders’ ownership percentage in our stock
2. 27If our available liquidity is insufficient, our financial condition could be adversely affected and we may be unable to fund contingent deferred acquisition liabilities, and any put options if exercised
3. 28Our Up-C structure places significant limitations on our cash flow and, accordingly, we depend on distributions from OpCo to pay our taxes and expenses, including payments under the Tax Receivables Agreement
4. 29Receivables Agreement to be significant. Any payments made to Stagwell Media under the Tax Receivables Agreement will generally reduce the amount of overall cash flow that may have otherwise been available to us

Risks Related to Accounting and Tax Issues

1. 30Our results of operations are subject to foreign currency exchange fluctuation risks
2. 31Our goodwill, intangible assets and right-of-use lease assets may become impaired
3. 32We previously identified and remediated material weaknesses in our internal control over financial reporting and there can be no assurance that additional material weaknesses will not be identified in the future
4. 33Our disclosure controls and procedures and internal controls may not prevent or detect all errors or acts of fraud
5. 34Our judgments or estimates relating to our critical accounting policies are based on assumptions that could change or be incorrect
6. 35We may be subject to adverse tax consequences
7. 36We may face material adverse tax consequences resulting from the Transactions in Canada, the United States or other jurisdictions

Risks Related to Ownership of Our Class A Common Stock and Our Status as a Public Company

1. 37Our stock price may be volatile
2. 38If our operating and financial performance in any given period does not meet any guidance that we provide to the public, the market price for our Class A Common Stock may decline
3. 39A significant portion of our Class A Common Stock may be sold into the market in the future, which could negatively affect our stock price
4. 40We are a “controlled company” within the meaning of the applicable rules of Nasdaq