Income Taxes |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure | 13. Income Taxes Our tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in interim periods. 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. 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. Tax Receivables Agreement In connection with the Company’s Tax Receivable Agreement (“TRA”), the Company is required to make cash payments to Stagwell Media equal to 85% of certain U.S. federal, state and local income tax or franchise tax savings, if any, that we actually realize, or in certain circumstances are deemed to realize, as a result of (i) increases in the tax basis of the assets of Stagwell Global LLC (“OpCo”), the Company’s only operating subsidiary, resulting from exchanges of Paired Units (each share of Class C Common Stock is paired with a corresponding common unit of OpCo, a “Paired Unit”) for shares of Class A Common Stock or cash, as applicable, and (ii) certain other tax benefits related to us making payments under the TRA. Effective April 4, 2025, all Paired Units were exchanged for Class A Shares. As a result of the Class C Exchange, the Company recorded an increase to its deferred tax asset balance by $237.9 million and an increase to its TRA liability balance by $229.7 million. The total TRA liability and the associated deferred tax balances, net of amortization, in connection with the exchange of Paired Units and the projected obligations under the TRA were as follows:
(1) TRA liability as of December 31, 2025 includes $2.6 million short-term liability included under Accruals and other liabilities on the Unaudited Consolidated Balance Sheets. The Company paid $2.6 million of TRA liability during the six months ended June 30, 2026. As a result, no short-term TRA liability remained outstanding as of June 30, 2026. (2) Deferred tax asset balances, net of deferred tax liabilities, on the Unaudited Consolidated Balance Sheets were $280.2 million and $281.1 million as of June 30, 2026 and December 31, 2025, respectively, principally due to jurisdictional netting.
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