Revenue

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Revenue

3. Revenue

Disaggregated Revenue Data

The Company provides a broad range of services to a large base of clients across the full spectrum of verticals globally. The primary source of revenue is from Brand arrangements in the form of fees for services performed, commissions, and from performance incentives or bonuses. Certain clients may engage with the Company in various geographic locations, across multiple disciplines, and through multiple Brands. Representation of a client rarely means that Stagwell handles marketing communications for all Brands or product lines of the client in every geographical location. The Company’s Brands often cooperate with one another through referrals and the sharing of both services and expertise, which enables Stagwell to service clients’ varied marketing needs by crafting custom integrated solutions. Additionally, the Company maintains separate, independent operating companies to enable it to effectively manage potential conflicts of interest by representing competing clients across the Stagwell network.

The following table presents revenue disaggregated by our principal capabilities for the three months ended March 31, 2023 and 2022:

		Three Months Ended March 31,
Principal Capabilities	Reportable Segment	2023		2022
		(dollars in thousands)
Digital Transformation	All segments	$	190,319	$	210,809
Creativity and Communications	All segments	261,354		279,242
Performance Media and Data	Brand Performance Network, All Other	109,488		99,776
Consumer Insights and Strategy	Integrated Agencies Network, All Other	61,283		53,076
		$	622,444	$	642,903

Stagwell has historically largely focused where the Company was founded in North America, the largest market for its services in the world. The Company has expanded its global footprint to support clients in international markets. Stagwell’s Brands are located in the United States and United Kingdom, and more than 32 other countries around the world. Historically, some clients have responded to weakening economic conditions with reductions to their marketing budgets, which included discretionary components that are easier to reduce in the short term than other operating expenses.

The following table presents revenue disaggregated by geography for the three months ended March 31, 2023 and 2022:

		Three Months Ended March 31,
Geographical Location	Reportable Segment	2023		2022
		(dollars in thousands)
United States	All	$	507,092	$	537,231
United Kingdom	All	41,271		39,813
Other	All	74,081		65,859
		$	622,444	$	642,903

Contract Assets and Liabilities

Contract assets consist of fees and reimbursable outside vendor costs incurred on behalf of clients when providing advertising, marketing and corporate communications services that have not yet been invoiced to clients. Unbilled service fees were $170.8 million and $116.4 million at March 31, 2023 and December 31, 2022, respectively, and are included as a component of Accounts receivable, net on the Unaudited Consolidated Balance Sheets. Outside vendor costs incurred on behalf of clients which have yet to be invoiced were $97.6 million and $93.1 million at March 31, 2023 and December 31, 2022, respectively, and are included on the Unaudited Consolidated Balance Sheets as Expenditures billable to clients. Such amounts are invoiced to clients at various times over the course of providing services.

Contract liabilities represent advanced billings to customers for fees and reimbursements of third-party costs, whether we act as principal or agent. Such fees and reimbursements of third-party costs are classified as Advance billings on the Company’s Unaudited Consolidated Balance Sheets. In arrangements in which we are acting as an agent, the recognition related to the contract liability is presented on a net basis within the Unaudited Consolidated Statements of Operations. Advance billings at March 31, 2023 and December 31, 2022 were $334.9 million and $337.0 million, respectively. The decrease in Advance billings of $2.1 million for the three months ended March 31, 2023 was primarily driven by $234.0 million of revenues recognized that were included in the Advance billings balances as of December 31, 2022 and reductions due to the incurrence of third-party costs, partially offset by cash payments received or due in advance of satisfying our performance obligations.

Changes in the contract asset and liability balances during the three months ended March 31, 2023 were not materially impacted by write offs, impairment losses or any other factors.

Unsatisfied Performance Obligations

The majority of our contracts are for periods of one year or less. For those contracts with a term of more than one year, we had approximately $90.8 million of unsatisfied performance obligations as of March 31, 2023 of which we expect to recognize approximately 61% in 2023, 33% in 2024 and 6% in 2025.