Noncontrolling and Redeemable Noncontrolling Interests

9 Months Ended

Sep. 30, 2022

Noncontrolling and Redeemable Noncontrolling Interests

9. Noncontrolling and Redeemable Noncontrolling Interests

Noncontrolling Interests

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 option to purchase the incremental ownership is within the Company’s control, the amounts are recorded as noncontrolling interests in the equity section of the Company’s Unaudited Condensed Consolidated Balance Sheets. Where the incremental purchase may be required of the Company, the amounts are recorded as redeemable noncontrolling interests in mezzanine equity at their estimated acquisition date redemption value and adjusted at each reporting period for changes to their estimated redemption value through Retained earnings (but not less than their initial redemption value), except for foreign currency translation adjustments.

Changes in the Company’s ownership interests in its less than 100% owned subsidiaries during the three and nine months ended September 30, 2022 and 2021 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss) attributable to Stagwell Inc. common shareholders	$	10,609	$	(2,071)	$	33,747	$	20,199
Transfers from the noncontrolling interest:
Change in Stagwell Inc. Paid-in capital for purchase of redeemable noncontrolling interests and noncontrolling interests	—		9,679		(1,000)		9,679
Net transfers from noncontrolling interests	—		9,679		(1,000)		9,679
Change from net income attributable to Stagwell Inc. and transfers to noncontrolling interests	$	10,609	$	7,608	$	32,747	$	29,878

The following table presents net income attributable to noncontrolling interests between holders of Class C shares and other equity interest holders for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income attributable to Class C shareholders	$	19,286	$	2,110	$	51,027	$	2,110
Net income attributable to other equity interest holders	2,287		7,210		4,083		9,833
Net income attributable to noncontrolling interests	$	21,573	$	9,320	$	55,110	$	11,943

The following table presents noncontrolling interests between holders of Class C shares and other equity interest holders as of September 30, 2022 and December 31, 2021:


	September 30, 2022		December 31, 2021
Noncontrolling interest of Class C shareholders	$	502,912	$	475,373
Noncontrolling interest of other equity interest holders	31,564		32,914
NCI attributable to noncontrolling interests	$	534,476	$	508,287

Redeemable Noncontrolling Interests

The following table presents changes in redeemable noncontrolling interests:


	September 30, 2022		December 31, 2021
Beginning Balance	$	43,364	$	604
Redemptions	(3,511)		(15,231)
Acquisitions (1)	—		53,270
Changes in redemption value	20,546		3,834

Net income (loss) attributable to redeemable noncontrolling interests	4,558		(412)
Other	860		1,299
Ending Balance	$	65,817	$	43,364

(1) As of December 31, 2021, approximately $26,000 represents redeemable noncontrolling interests acquired in connection with the acquisition of MDC. Approximately $27,000 represents redeemable noncontrolling interests acquired in connection with the purchase of the noncontrolling interest of Targeted Victory. See Note 3 of the Notes included herein for additional information related to the purchase of Targeted Victory.

The noncontrolling shareholders’ ability to exercise any such option right is subject to the satisfaction of certain conditions, including conditions requiring notice in advance of exercise and specific employment termination conditions. In addition, these rights cannot be exercised prior to specified staggered exercise dates. The exercise of these rights at their earliest contractual date would result in obligations of the Company to fund the related amounts during 2022 to 2025. It is not determinable, at this time, if or when the owners of these rights will exercise all or a portion of these rights.

The redeemable noncontrolling interest of $65,817 as of September 30, 2022, consists of $62,197, assuming that the subsidiaries perform over the relevant periods at their current profit levels, and $3,620 upon termination of such owner’s employment with the applicable subsidiary or death.

These adjustments will not impact the calculation of earnings (loss) per share if the redemption values are less than the estimated fair values. There is no related impact on the Company’s income per share calculations.