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Income Taxes | 3 Months Ended
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Mar. 31, 2025
Income Tax Disclosure [Abstract] |
Income Tax Disclosure | 14. 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. The Company had an income tax expense for the three months ended March 31, 2025 of $1.7 million (on a pre-tax loss of $3.6 million resulting in an effective tax rate of (47.8)%) primarily due to the tax benefit of the small pre-tax loss being more than offset by the current losses subject to valuation allowance and withholding taxes recorded in the period. The Company had income tax expense for the three months ended March 31, 2024 of $2.6 million (on pre-tax income of $1.4 million resulting in an effective tax rate of 189.5%) primarily driven by nominal pre-tax profit, current losses subject to valuation allowance and a shortfall in deductions for share based compensation expense vested during the period. The OECD (Organisation for Economic Co-operation and Development) has proposed a global minimum tax of 15% of reported profits (Pillar 2) that has been agreed upon in principle by over 140 countries. Many countries have taken steps to incorporate Pillar 2 model rule concepts into their domestic laws. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar 2. Accordingly, we have included an estimate of the impact of Pillar 2 in our estimated annual effective tax rate and continue to evaluate the potential consequences of Pillar 2 on our longer-term financial position. Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within the next 12 months, based on the information currently available, we do not expect any change to be material to our unaudited consolidated financial statements. Tax Receivables Agreement In connection with the 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 OpCo’s assets resulting from exchanges of Paired Units (defined in Note 11) 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. The TRA liability is an estimate and actual amounts payable under the TRA could differ from this estimate. There were no exchanges of Paired Units for shares of Class A Common Stock for the three months ended March 31,2025. As of March 31, 2025, the Company has recorded a TRA liability of $25.6 million, and an associated deferred tax asset, net of amortization, of $26.9 million, in connection w ith the exchange of Paired Units and the projected obligations under the TRA. Effective April 2, 2025, all Paired Units were exchanged for Class A Shares. See Note 1 of the Notes included herein for additional information regarding the TRA following the Class C Exchange.

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